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What changed in HERBALIFE LTD.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of HERBALIFE LTD.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+539 added−552 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-14)

Top changes in HERBALIFE LTD.'s 2024 10-K

539 paragraphs added · 552 removed · 418 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

110 edited+25 added−46 removed71 unchanged
Biggest changeWe believe a gradual qualification approach is important to the success and retention of new sales leaders and benefits the business in the long term as it allows new Members to obtain product and customer experience as well as additional training and education on Herbalife products, daily consumption based business methods, and the business opportunity prior to becoming a sales leader. 8 The basis for calculating Marketing Plan payouts varies depending on product and market: for 2023, we utilized on a weighted-average basis approximately 90% of suggested retail price, to which we applied discounts of up to 50% for distributor allowances and payout rates of up to 15% for royalty overrides, up to 7% for production bonuses, and approximately 1% for a cash bonus known as the Mark Hughes bonus.
Biggest changeThe basis for calculating Marketing Plan payouts varies depending on product and market: for 2024, we utilized on a weighted-average basis approximately 90% of suggested retail price, to which we applied discounts of up to 50% for distributor allowances and payout rates of up to 15% for royalty overrides, up to 7% for production bonuses, and approximately 1% for a cash bonus known as the Mark Hughes bonus.
Products In the United States, the formulation, manufacturing, packaging, holding, labeling, promotion, advertising, distribution, and sale of our products are subject to regulation by various federal governmental agencies, including: (1) the FDA; (2) the FTC; (3) the Consumer Product Safety Commission, or CPSC; (4) the United States Department of Agriculture, or USDA; (5) the Environmental Protection Agency, or EPA; (6) the United States Postal Service; (7) United States Customs and Border Protection; and (8) the Drug Enforcement Administration.
In the United States, the formulation, manufacturing, packaging, holding, labeling, promotion, advertising, distribution, and sale of our products are subject to regulation by various federal governmental agencies, including: (1) the FDA; (2) the FTC; (3) the Consumer Product Safety Commission, or CPSC; (4) the United States Department of Agriculture, or USDA; (5) the Environmental Protection Agency, or EPA; (6) the United States Postal Service; (7) United States Customs and Border Protection; and (8) the Drug Enforcement Administration.
In Xinjiang province, where we do not have a direct selling license, we have a Company-operated retail store that can directly serve customers and preferred customers. With online orderings throughout China, there has been a declining demand in Company-operated retail stores. Sales representatives receive scaled rebates based on the volume of products they purchase.
In Xinjiang province, where we do not have a direct selling license, we have a Company-operated retail store that can directly serve customers and preferred customers. With online orderings throughout China, there has been a declining demand in Company-operated retail stores. 9 Sales representatives receive scaled rebates based on the volume of products they purchase.
Food and Drug Administration, or FDA, and strict Current Good Manufacturing Practice regulations, or CGMPs, for food, acidified foods, and dietary supplements. We also work closely with our third-party manufacturers to ensure high quality products are produced and tested through a vigorous quality control process at approved contract manufacturer labs or third-party labs.
Food and Drug Administration, or FDA, and strict Current Good Manufacturing Practice regulations, or CGMPs, for food, acidified foods, and dietary supplements. We also work closely with our third-party manufacturers to ensure high quality products are produced and tested through a vigorous quality control process at approved qualified contract manufacturer labs or third-party labs.
The NLEA regulates health claims, ingredient labeling and nutrient content claims characterizing the level of a nutrient in the product. The ingredients in conventional foods must either be generally recognized as safe by experts for the purposes to which they are put in foods, or be approved as food additives under FDA regulations.
The NLEA regulates health claims, ingredient labeling and nutrient content claims characterizing the level of a nutrient in the product. The ingredients in conventional packaged foods must either be generally recognized as safe by experts for the purposes to which they are put in foods, or be approved as food additives under FDA regulations.
All HIM quality control labs contain modern analytical equipment and are backed by the expertise in testing and methods development of our scientists. In our U.S. HIM facilities, which manufacture products for the U.S. and most of our international markets, we operate and adhere to the regulations established by the U.S.
All HIM quality control labs contain similar modern analytical equipment and are backed by the expertise in testing and methods development of our scientists. In our U.S. HIM facilities, which manufacture products for the U.S. and most of our international markets, we operate and adhere to the regulations established by the U.S.
We believe that our network marketing program satisfies federal and other applicable state statutes and case law. In some countries, regulations applicable to the activities of our Members also may affect our business because in some countries we are, or regulators may assert that we are, responsible for our Members’ conduct.
We believe that our network marketing program satisfies federal and other applicable state statutes and case law. 14 In some countries, regulations applicable to the activities of our Members also may affect our business because in some countries we are, or regulators may assert that we are, responsible for our Members’ conduct.
We provide base pay that aligns with employee positions, skill levels, experience, contributions, and geographic location. In addition to base pay, we seek to reward employees with annual incentive awards, recognition programs, and equity awards for employees at certain job grades.
We provide competitive base pay that aligns with employee positions, skill levels, experience, contributions, and geographic location. In addition to base pay, we seek to reward employees with annual incentive awards, recognition programs, and equity awards for employees at certain job grades.
On July 18, 2002, we entered into an agreement with our Members that provides that we will continue to distribute Herbalife products exclusively to and through our Members and that, other than changes required by applicable law or necessary in our reasonable business judgment to account for specific local market or currency conditions to achieve a reasonable profit on operations, we will not make any material changes to certain aspects of our Marketing Plan that are adverse to our Members without the support of our Member leadership.
To strengthen our relationship with our Members, on July 18, 2002, we entered into an agreement with our Members that provides that we will continue to distribute Herbalife products exclusively to and through our Members and that, other than changes required by applicable law or necessary in our reasonable business judgment to account for specific local market or currency conditions to achieve a reasonable profit on operations, we will not make any material changes to certain aspects of our Marketing Plan that are adverse to our Members without the support of our Member leadership.
We believe that personal and professional development is key to our Members’ success and, therefore, we and our sales leader Members – those that achieve certain levels within our Marketing Plan – have meetings and events to support this important objective.
We also believe that personal and professional development is key to our Members’ success and, therefore, we and our sales leader Members – those that achieve certain levels within our Marketing Plan – have meetings and events to support this important objective.
Such laws, regulations and other constraints exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions, and include regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our products; (2) product claims and advertising, including direct claims and advertising by us, as well as claims and advertising by Members, for which we may be held responsible; (3) our network marketing program; (4) transfer pricing and similar regulations that affect the level of U.S. and foreign taxable income and customs duties; (5) taxation of our Members (which in some instances may impose an obligation on us to collect the taxes and maintain appropriate records); (6) our international operations, such as import/export, currency exchange, repatriation and anti-bribery regulations; (7) antitrust issues; and (8) privacy and data protection.
Such laws, regulations and other constraints exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions, and include regulations pertaining to: (1) the formulation, manufacturing, packaging, labeling, distribution, importation, sale, and storage of our products; (2) product claims and advertising, including direct claims and advertising by us, as well as claims and advertising by Members, for which we may be held responsible; (3) our network marketing program; (4) transfer pricing and similar regulations that affect the level of U.S. and foreign taxable income and customs duties; (5) taxation of our Members (which in some instances may impose an obligation on us to collect the taxes and maintain appropriate records); (6) our international operations, such as import/export, currency exchange, repatriation and anti-bribery regulations; (7) antitrust issues; (8) privacy and data protection; and (9) the independent contractor status of our Members.
Apart from DSHEA, the agency permits companies to use FDA-approved full and qualified health claims for food and supplement products containing specific ingredients that meet stated requirements. 13 U.S. law also requires that all serious adverse events occurring within the United States involving dietary supplements or OTC drugs be reported to the FDA.
Apart from DSHEA, the agency permits companies to use FDA-approved full and qualified health claims for food and supplement products containing specific ingredients that meet stated requirements. U.S. law also requires that all serious adverse events occurring within the United States involving OTC drugs, cosmetics, or dietary supplements be reported to the FDA.
Subject to certain terms and conditions that may vary by market, the buyback program generally permits a Member to return unopened products or sales materials in marketable condition purchased within the prior twelve-month period in exchange for a refund of the net price paid for the product and, in most markets, the cost of returning the products and materials to us.
Subject to certain terms and conditions that may vary by market, the buyback program generally permits a distributor to return unopened products or sales materials in marketable condition purchased within the prior twelve-month period in exchange for a refund of the net price paid for the product and, in most markets, the cost of returning the products and materials to us.
Our employee wellness program is a critical part of our employer brand and aligns with our identity as a leader in the health and wellness industry. In 2023, our “Wellness For Life” program offered employees a suite of activities to achieve wellness through quarterly fitness challenges and movement conditioning routines, nutrition, intellectual well-being and financial literacy.
Our employee wellness program is a critical part of our employer brand and aligns with our identity as a leader in the health and wellness industry. In 2024, our “Wellness For Life” program offered employees a suite of activities to achieve wellness through quarterly fitness challenges and movement conditioning routines, nutrition, intellectual well-being and financial literacy.
Our activities also are regulated by various agencies of the states, localities and foreign countries in which our products are manufactured, distributed, or sold. The FDA, in particular, regulates the formulation, manufacture, and labeling of over-the-counter, or OTC, drugs, conventional foods, dietary supplements, and cosmetics such as those distributed by us.
Our activities also are regulated by various state agencies, localities and foreign countries in which our products are manufactured, distributed, or sold. The FDA, in particular, regulates the formulation, manufacture, and labeling of over-the-counter, or OTC, drugs, conventional foods, dietary supplements, and cosmetics such as those distributed by us.
Unless expressly noted, the information on our website, including our investor relations website, or any other website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K or any other filing we make with the SEC. 18
Unless expressly noted, the information on our website, including our investor relations website, or any other website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K or any other filing we make with the SEC. 17
We believe attracting, developing, and retaining a talented and diverse workforce are critical factors that contribute to the success and growth of our business. We have operations globally, requiring investment to assess local labor market conditions and recruit and retain the appropriate workforce.
We believe attracting, developing, engaging, and retaining a qualified talented and diverse workforce are critical factors that contribute to the success and growth of our business. We have operations globally, requiring investment to assess local labor market conditions and recruit and retain the appropriate workforce.
These tools allow our Members to manage their business and communicate with their customers more efficiently and effectively. During 2022, we also commenced our Herbalife One program to develop a new enhanced platform to provide enhanced digital capabilities and experiences to our Members.
These tools allow our Members to manage their business, communicate with their customers and place orders more efficiently and effectively. During 2022, we also commenced our Herbalife One program to develop a new enhanced platform to provide enhanced digital capabilities and experiences to our Members.
See the Our Network Marketing Program – Member Compensation and Sales Leader Retention and Requalification section above for sales leader and requalification metrics and further discussion on our sales leaders. Available Information Our Internet website address is www.herbalife.com and our investor relations website is ir.herbalife.com.
See the Our Network Marketing Program – Our Marketing Plan and Member Compensation section above for sales leader and requalification metrics and further discussion on our sales leaders. Available Information Our Internet website address is www.herbalife.com and our investor relations website is ir.herbalife.com.
To become a sales leader, or qualify for a higher level within our Marketing Plan, Members must achieve specified Volume Point thresholds of product sales or earn certain amounts of royalty overrides during specified time periods and generally must re-qualify once each year. Qualification criteria vary somewhat by market.
To qualify for a higher level within our Marketing Plan, Members must achieve specified Volume Point thresholds of product sales or earn certain amounts of royalty overrides during specified time periods and generally must re-qualify each year. Qualification criteria vary somewhat by market.
In addition, in substantially all markets, we maintain a buyback program pursuant to which we will purchase back unsold products from a Member who decides to leave the business.
In addition, in substantially all markets, we maintain a buyback program pursuant to which we will purchase back unsold products from a distributor who decides to leave the business.
Although questions regarding the legality of our network marketing program have come up in the past and may come up from time to time in the future, we believe, based in part upon guidance to the general public from the FTC, that our network marketing program is compliant with applicable law.
Although questions regarding the legality of our network marketing program have come up in the past and may come up from time to time in the future, we believe, based in part upon guidance to the general public from regulatory bodies, including the FTC, that our network marketing program is compliant with applicable law.
We believe that we are in compliance with this law having implemented a worldwide procedure governing adverse event identification, investigation and reporting. As a result of reported adverse events, we may from time to time elect, or be required, to remove a product from a market, either temporarily or permanently.
We believe that we are in compliance with these laws having implemented a worldwide procedure governing adverse event identification, investigation and reporting. As a result of reported adverse events, we may from time to time elect, or be required, to remove a product from a market, either temporarily or permanently.
Intellectual Property and Branding Marketing foods and supplement products on the basis of sound science means using ingredients in the composition and quantity as demonstrated to be effective in the relevant scientific literature.
Intellectual Property and Branding Marketing foods and supplement products on the basis of sound science means using ingredients in the composition and quantity reported to be effective in the relevant scientific literature.
Nutrition products are sold through a number of distribution channels, including direct selling, online retailers, specialty retailers, and the discounted channels of food, drug and mass merchandise. Our competitors include companies such as BellRing Brands, Inc., Conagra Brands, Inc., The Hain Celestial Group, Inc., Post Holdings, Inc., and The Simply Good Foods Company.
COMPETITION The nutrition industry is highly competitive. Nutrition products are sold through a number of distribution channels, including direct selling, online retailers, specialty retailers, and the discounted channels of food, drug and mass merchandise. Our competitors include companies such as BellRing Brands, Inc., Conagra Brands, Inc., The Hain Celestial Group, Inc., Post Holdings, Inc., and The Simply Good Foods Company.
FDA regulations govern the preparation, packaging, labeling, holding, and distribution of foods, OTC drugs, cosmetics, and dietary supplements. Among other obligations, they require us and our contract manufacturers to meet relevant CGMP regulations for the preparation, packaging, holding, and distribution of OTC drugs and dietary supplements.
Among other obligations, FDA regulations require us and our contract manufacturers to meet relevant CGMP regulations for the preparation, packaging, holding, and distribution of OTC drugs, cosmetics, and dietary supplements.
As of December 31, 2023, we had approximately 6.5 million Members, including 3.5 million preferred members and 2.0 million distributors in the markets where we have established these two categories and 0.2 million sales representatives and independent service providers in China.
As of December 31, 2024, we had approximately 6.2 million total Members, including 3.0 million preferred members and 2.1 million distributors in the markets where we have established these two categories and 0.2 million sales representatives and independent service providers in China.
Additionally, we compete for the recruitment of Members from other network marketing organizations, including those that market nutrition products and other entrepreneurial opportunities. Our direct-selling competitors include companies such as Medifast, Inc., Nu Skin Enterprises, Inc., Tupperware Brands Corporation, USANA Health Sciences Inc., and Amway Corp.
Additionally, we compete for the recruitment of Members from other direct selling companies, including those that market nutrition products and other entrepreneurial opportunities. Our direct-selling competitors include companies such as Medifast, Inc., Nu Skin Enterprises, Inc., USANA Health Sciences, Inc., and Amway Corp.
Disclosure of these formulas, in redacted form, is also necessary to obtain product registrations in many countries. We also make efforts to protect certain unique formulations under patent law. We strive to protect all new product developments as the confidential trade secrets of the Company.
Disclosure of these formulas, in redacted form, to government offices is also necessary to obtain product registrations in many countries or to respond to regulatory inquiries. We also make efforts to protect certain unique formulations under patent law. We strive to protect all new product developments as the confidential trade secrets of the Company.
We monitor the talent needs of our departments and functions with particular focus on the areas where human capital resources are important to daily operations to ensure we can timely manufacture, distribute, and sell products to our Members. As of December 31, 2023, we had approximately 9,200 employees, of which approximately 2,500 were located in the United States.
We monitor the talent needs of our departments and functions with particular focus on the areas where human capital resources are important to daily operations to ensure we can timely manufacture, distribute, and sell products to our Members. As of December 31, 2024, we had approximately 8,600 employees, of which approximately 2,300 were located in the United States.
We believe that we and our contract manufacturers are compliant with the FDA’s CGMPs and other applicable manufacturing regulations in the United States. The U.S. Dietary Supplement Health and Education Act of 1994, or DSHEA, revised the provisions of FFDCA concerning the composition and labeling of dietary supplements.
We believe that we and our contract manufacturers are compliant with the CGMPs and other applicable manufacturing regulations in the United States. The U.S. Dietary Supplement Health and Education Act of 1994, or DSHEA, regulates the composition and labeling of dietary supplements.
Segmentation In many of our markets, including certain of our largest markets such as the United States, Mexico, and India, we have segmented our Member base into two categories: “preferred members” – who are consumers who wish to purchase product for their own household use, and “distributors” – who are Members who also wish to resell products or build a sales organization.
Segmentation In many of our markets, including our largest markets of United States, India and Mexico, we have segmented our Member base into two categories: "preferred members" – who are consumers who wish to purchase product for their own household use, and "distributors" – who are Members who also wish to resell products or build a sales organization.
The Consent Order also requires distributors to meet certain conditions before opening Nutrition Clubs and/or entering into leases for their Herbalife business in the United States.
The Consent Order also requires distributors to meet certain conditions before entering into leases for their Herbalife business in the United States, including leases used to open Nutrition Clubs.
This is a multi-year program and we expect our capital expenditures to increase in 2024 and future years as result of our investments in this Herbalife One program as described further in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K.
This is a multi-year program and our expenditures have increased as result of our investments in this Herbalife One program as described further in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K.
Our Nutrition Advisory Board and Dieticians Advisory Board are comprised of leading experts around the world in the fields of nutrition and health who educate our Members on the principles of nutrition, physical activity, diet, and healthy lifestyle.
Our Global Advisory Boards are comprised of leading experts around the world in the fields of nutrition and health who educate our Members on the principles of nutrition, physical activity, diet, and healthy lifestyle. These include the Nutrition Advisory Board, The Dietetic Advisory Board, The Fitness Advisory Board, and The Outer Nutrition Advisory Board.
Other programs to drive daily consumption, whether for weight management or for improved physical fitness, include Member-conducted weight loss contests, or Weight Loss Challenges, Member-led fitness programs, or Fit Camps, and Member-led Wellness Evaluations.
Other programs to drive daily consumption, whether for weight management or for improved physical fitness, include Member-conducted weight loss contests, or Weight Loss Challenges, Member-led fitness programs, or Fit Camps, and Member-led Wellness Evaluations. We call these strategies Daily Methods of Operations, or DMOs.
We consented to the entry of this injunction without in any way admitting the allegations of the complaint. The injunction prevents us from making specified claims in advertising of our products, but does not prevent us from continuing to make specified claims concerning our products, provided that we have a reasonable basis for making the claims.
The injunction prevents us from making specified claims in advertising of our products, but does not prevent us from continuing to make specified claims concerning our products provided that we have a reasonable basis for making the claims.
The Consent Order also prohibits us and other persons who act in active concert with us from misrepresenting that participation in the network marketing program will result in a lavish lifestyle and from using images or descriptions to represent or imply that participation in the program is likely to result in a lavish lifestyle.
The Consent Order also prohibits us and our distributors from misrepresenting that participation in the network marketing program will result in a lavish lifestyle and from using images or descriptions to represent or imply that participation in the program is likely to result in a lavish lifestyle.
As of December 31, 2023, prior to our February re-qualification process, approximately 760,000 of our Members have attained the level of sales leader, of which approximately 716,000 have attained this level in the 94 markets where we use our Marketing Plan and 44,000 independent service providers operating in our China business.
As of December 31, 2024, prior to our February re-qualification process, as described in more detail below, approximately 733,000 of our Members have attained the level of sales leader, of which approximately 705,000 have attained this level in the 94 markets where we use our Marketing Plan and 28,000 have attained this level as independent service providers operating in our China business.
Herbalife sponsorships of and partnerships with featured athletes, teams, and events promote brand awareness and the use of Herbalife products. We continue to build brand awareness with a goal towards becoming the most trusted brand in nutrition. We also work to leverage the power of our Member base as a marketing and brand-building tool.
We continue to build brand awareness with a goal towards becoming the most trusted brand in nutrition. We also work to leverage the power of our Member base as a marketing and brand-building tool.
The table below reflects the number of sales leaders as of the end of February of the year indicated (subsequent to the annual re-qualification process) and by region: Number of Sales Leaders 2023 2022 2021 North America 69,586 80,278 95,402 Latin America 118,605 125,726 131,359 EMEA 170,202 183,056 158,153 Asia Pacific 223,714 201,137 173,582 Total sales leaders 582,107 590,197 558,496 China 38,317 33,486 68,301 Worldwide total sales leaders 620,424 623,683 626,797 9 The number of sales leaders as of December 31 will exceed the number immediately subsequent to the preceding re-qualification period because sales leaders qualify throughout the year but sales leaders who do not re-qualify are removed from the rank of sales leader the following February.
The table below reflects the number of sales leaders as of the end of February of the year indicated (subsequent to the annual re-qualification process) and by region: Number of Sales Leaders 2024 2023 2022 North America 58,782 69,586 80,278 Latin America 107,247 118,605 125,726 EMEA 162,424 170,202 183,056 Asia Pacific 242,792 223,714 201,137 Total sales leaders 571,245 582,107 590,197 China 22,794 38,317 33,486 Worldwide total sales leaders 594,039 620,424 623,683 The number of sales leaders as of December 31 will exceed the number immediately subsequent to the preceding re-qualification period because sales leaders qualify throughout the year but sales leaders who do not re-qualify are removed from the rank of sales leader the following February.
Our objective is sustainable growth in the sales of our products to our Members and their customers by increasing the productivity, retention and recruitment of our Member base through the structure of our network marketing program.
We aim to drive sustainable growth in the sales of our products by increasing the productivity, retention and recruitment of our Member base through the structure of our network marketing program.
We believe that direct selling is ideally suited for our business because the distribution and sales of our products with personalized support, coaching, and education provide a supportive and understanding community of like-minded people who prioritize health and nutrition.
We believe that direct selling is ideally suited for our business because our Members provide personalized support, coaching, and education to their customers, and also join a supportive and understanding community of like-minded people who prioritize health and nutrition.
In addition, we might be required to make labeling changes. We also are subject to regulations in various foreign markets pertaining to social security assessments and employment and severance pay requirements.
We also are subject to regulations in various foreign markets pertaining to social security assessments and employment and severance pay requirements.
On January 4, 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing, or MLM Guidance. The MLM Guidance explains, among other things, lawful and unlawful compensation structures, the treatment of personal consumption by participants in determining if an MLM’s compensation structure is unfair or deceptive, and how an MLM should approach representations to current and prospective participants.
The MLM Guidance explains, among other things, lawful and unlawful compensation structures, the treatment of personal consumption by participants in determining if an MLM’s compensation structure is unfair or deceptive, and how an MLM should approach representations to current and prospective participants.
The following table summarizes our products by product category: Percentage of Net Sales 2023 2022 2021 Description Representative Products Weight Management 56.3% 56.8% 58.1% Meal replacement, protein shakes, drink mixes, weight loss supplements, healthy snacks, and metabolism boosting teas Formula 1 Healthy Meal, Herbal Tea Concentrate, Protein Drink Mix, Personalized Protein Powder, Total Control ® , Formula 2 Multivitamin Complex, Prolessa ™ Duo , and Protein Bars Targeted Nutrition 29.2% 29.1% 28.2% Functional beverages and dietary and nutritional supplements containing quality herbs, vitamins, minerals and other natural ingredients Herbal Aloe Concentrate, Active Fiber Complex, Niteworks ® , and Herbalifeline ® Energy, Sports, and Fitness 11.1% 10.6% 9.5% Products that support a healthy active lifestyle Herbalife24 ® product line, N-R-G Tea, and Liftoff ® energy drink Outer Nutrition 1.7% 1.6% 1.9% Facial skin care, body care, and hair care Herbalife SKIN line and Herbal Aloe Bath and Body Care line Literature, Promotional, and Other 1.7% 1.9% 2.3% Start-up kits, sales tools, and educational materials Herbalife Member Packs and BizWorks 5 Product returns and buyback policies We offer a customer satisfaction guarantee in substantially all markets where our products are sold.
As of December 31, 2024, we sold approximately 140 product types, which fall into the following categories: Percentage of Net Sales 2024 2023 2022 Description Representative Products Weight Management 55.4% 56.3% 56.8% Meal replacement, protein shakes, drink mixes, weight loss supplements, healthy snacks, and metabolism boosting teas Formula 1 Healthy Meal, Herbal Tea Concentrate, Protein Drink Mix, Personalized Protein Powder, Total Control ® , Formula 2 Multivitamin Complex, Prolessa ™ Duo , and Protein Bars Targeted Nutrition 29.7% 29.2% 29.1% Functional beverages and dietary and nutritional supplements containing quality herbs, vitamins, minerals and other natural ingredients Herbal Aloe Concentrate, Active Fiber Complex, Niteworks ® , and Herbalifeline ® Energy, Sports, and Fitness 11.5% 11.1% 10.6% Products that support a healthy active lifestyle Herbalife24 ® product line, N-R-G Tea, and Liftoff ® energy drink Outer Nutrition 1.7% 1.7% 1.6% Facial skin care, body care, and hair care Herbalife SKIN line and Herbal Aloe Bath and Body Care line Literature, Promotional, and Other 1.7% 1.7% 1.9% Start-up kits, sales tools, and educational materials Herbalife Member Packs and BizWorks 5 Our Formula 1 Nutritional Shake Mix, our best-selling product line, approximated 26% of our net sales for the year ended December 31, 2024.
During 2023, we purchased approximately 18% of our products from our top three third-party manufacturers. Infrastructure and Technology Our direct-selling business model enables us to grow our business with moderate investment in infrastructure and fixed costs. We incur no direct incremental cost to add a new Member in our existing markets, and our Member compensation varies directly with product sales.
Infrastructure and Technology Our direct-selling business model enables us to grow our business with moderate investment in infrastructure and fixed costs. We incur no direct incremental cost to add a new Member in our existing markets, and our Member compensation varies directly with product sales.
Ingredients Our seed to feed strategy is rooted in using quality ingredients from traceable sources. Our procurement process for many of our botanical products now stretches back to the farms and includes self-processing of teas and herbal ingredients into finished raw materials at our own facilities.
Our procurement process for many of our botanical products now stretches back to the farms and includes self-processing of teas and herbal ingredients into finished raw materials at our own facilities.
We believe our focus on nutrition and botanical science and the combination of our internal efforts with the scientific expertise of outside resources, including our ingredient suppliers, major universities, and our Nutrition Advisory Board, have resulted in product differentiation that has given our Members and consumers increased confidence in our products.
Product development We believe our focus on nutrition and botanical science has been a differentiator. We also believe that the combination of our internal research and development and scientific affairs teams, with the scientific expertise of outside resources, including major universities, our Global Advisory Boards and our ingredient suppliers, have given our Members and consumers increased confidence in our products.
First, Members may earn profits by purchasing our products at wholesale prices, discounted depending on the Member’s level within our Marketing Plan, and reselling those products at prices they establish for themselves to generate retail profit.
First, Members may earn a retail profit by purchasing our products at wholesale prices, discounted depending on the Member’s level within our Marketing Plan, and reselling those products at a higher retail price.
For information relating to our people and communities, please see the Human Capital section below. REGULATION General In our United States and foreign markets, we are affected by extensive laws, governmental regulations, administrative determinations and guidance, court decisions and similar constraints that regulate the conduct of our business.
REGULATION General In our United States and foreign markets, we are affected by extensive laws, governmental regulations, administrative determinations and guidance, court decisions and similar constraints that regulate the conduct of our business.
The number of preferred members and distributors may change as a result of segmentation and/or conversion, and do not necessarily represent a change in the total number of Members. Any future change in the number of preferred members or distributors is not necessarily indicative of our future expected financial performance.
The number of preferred members and distributors do not necessarily represent the total number of Members as the numbers may change due to conversions and as we introduce segmentation in additional markets. Any future change in the number of preferred members or distributors is not necessarily indicative of our future expected financial performance.
Our general policy is to reject Member applications from individuals who do not reside in one of our approved markets. 16 In order to comply with regulations that apply to both us and our Members, we research the applicable regulatory framework prior to entering any new market to identify necessary licenses and approvals and applicable limitations relating to our operations in that market and then work to bring our operations into compliance with the applicable limitations and to maintain such licenses.
In order to comply with regulations that apply to both us and our Members, we research the applicable regulatory framework prior to entering any new market to identify necessary licenses and approvals and applicable limitations relating to our operations in that market and then work to bring our operations into compliance with the applicable limitations and to maintain such licenses.
We rely on the scientific contributions from members of our Nutrition Advisory Board and our in-house scientific team to continually upgrade existing products or introduce new products as new scientific studies become available and are accepted by regulatory authorities around the world. COMPETITION The nutrition industry is highly competitive.
We rely on the scientific contributions from members of our Advisory Boards and our in-house scientific team members including both research and development and scientific affairs. Together our experts work to continually upgrade existing products or introduce new products as new scientific studies become available and are accepted by regulatory authorities around the world.
These events are opportunities to showcase and disseminate our Members’ evolving best marketing practices and DMOs from around the world and to introduce new or upgraded products. A variety of training and development tools are also available through online and mobile platforms.
These events are opportunities to showcase and disseminate our Members’ evolving best marketing practices and DMOs from around the world and to introduce new or upgraded products.
Second, Members who sponsor other Members and establish, maintain, coach, and train their own sales organizations may earn additional income based on the sales of their organization, which may include royalty overrides, production bonuses, and other bonuses. Members earning such compensation have generally attained the level of sales leader as described below.
Second, Members who build a sales team may earn additional income based on the sales activity of their team, which may include commissions and bonuses that we call royalty overrides, production bonuses, and other bonuses. Members earning such compensation have generally attained the level of sales leader as described below.
We have initial qualification methods of up to 12 months to encourage a more gradual qualification.
We have initial qualification methods of up to 12 months to encourage a more gradual qualification, which we believe has helped create sustainable growth.
Together, our HIM manufacturing facilities produce approximately 47% of our inner nutrition products sold worldwide. Self-manufacturing also enables us greater control to reduce negative environmental impacts of our operations and supply chain.
Together, our HIM facilities produce approximately 47% of our inner nutrition products sold worldwide. Self-manufacturing also allows us to maintain control over our efforts to reduce the negative environmental impact of our operations and supply chain and to help mitigate climate risk.
The Transformation Program is still ongoing and expected to be completed in 2024 as described further in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K and 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.
The Transformation Program was substantially completed in 2024 as described further in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K and 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. 11 In addition, many Members rely on the use of technology to support their goals and businesses.
As our business operations evolve, including the segmentation of our Member base in certain markets and changes in sales leader re-qualification thresholds for other markets, management continues to evaluate the importance of sales leader retention rate information.
As our business operations evolve, including the segmentation of our Member base in certain markets and changes in sales leader re-qualification thresholds for other markets, management continues to evaluate the importance of sales leader retention rate information. Product returns and buyback policies We offer a customer satisfaction guarantee in substantially all markets where our products are sold.
The types of regulated conduct include: (1) representations concerning our products; (2) income representations made by us and/or Members; (3) public media advertisements, which in foreign markets may require prior approval by regulators; (4) sales of products in markets in which the products have not been approved, licensed or certified for sale; and (5) classification by government agencies of our Members as employees of the Company. 15 In some markets, it is possible that improper product claims by Members could result in our products being reviewed by regulatory authorities and, as a result, being classified or placed into another category as to which stricter regulations are applicable.
The types of regulated conduct include: (1) representations concerning our products; (2) income representations made by us and/or Members; (3) public media advertisements, which in foreign markets may require prior approval by regulators; (4) sales of products in markets in which the products have not been approved, licensed or certified for sale; and (5) classification by government agencies of our Members as employees of the Company.
For instance, to accommodate growing customer demand for plant-based products, in 2023 we launched a new vegan product line in North America, Herbalife V, which is certified vegan, organic, and non-GMO.
For instance, to accommodate growing customer demand for plant-based products, in 2023 we launched a new vegan product line in North America, Herbalife V, which is certified vegan, organic, and non-GMO. In 2024, we introduced two chewable gel supplements in Europe that are gluten-free, sugar-free, and use natural colors and flavors.
However, since May 2017, a Member does not receive Volume Points for a transaction in the United States until that product is sold to a customer at a profit and it is documented in compliance with the consent order, or Consent Order, we entered into with the Federal Trade Commission, or the FTC, in 2016.
In the United States, however, pursuant to a consent order we entered into with the Federal Trade Commission (FTC) in 2016 (“the Consent Order”), a Members does not receive Volume Points for a transaction until the product is sold to a customer at a profit and certain information is collected regarding the sale.
Accordingly, we revised affected product labels to ensure regulatory compliance. We are subject to a permanent injunction issued in October 1986 pursuant to the settlement of an action instituted by the California Attorney General, the State Health Director and the Santa Cruz County District Attorney.
We are subject to a permanent injunction issued in October 1986 pursuant to the settlement of an action instituted by the California Attorney General, the State Health Director and the Santa Cruz County District Attorney. We consented to the entry of this injunction without in any way admitting the allegations of the complaint.
In addition to our distribution points, we contract third party-run drop-off locations where we can ship to and Members can pick up ordered products. 11 We leverage our technology infrastructure in order to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in technology, evolving industry and regulatory standards, emerging data security risks, and changing user patterns and preferences.
We leverage our technology infrastructure in order to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in technology, evolving industry and regulatory standards, emerging data security risks, and changing user patterns and preferences.
Examples of these programs include the following: • Training Programs – We provide our employees access to an internal learning management system, Herbalife University, which provides professional development courses, technical training, and compliance training to all employees globally. 17 • Mentorship Programs – The principle of servant leadership is a crucial part of our culture.
Examples of these programs include the following: • Training Programs – We provide our employees access to an internal learning management system, Herbalife University, which provides professional development courses, technical training, and compliance training to all employees globally. • Educational Assistance – Another way we support employees’ professional development is by offsetting a portion of the cost of higher education.
Compensation and Benefits Our Board of Directors and its Compensation Committee establish our general compensation philosophy and oversee and approve the development, adoption, and implementation of compensation policies and programs, which are set at a global level, but also adapted to meet local country requirements as needed.
Program offerings and eligibility vary by region and may include partial reimbursement of tuition fees incurred for undergraduate and graduate degrees, certificate programs, or skills-based courses. 16 Compensation and Benefits Our Board of Directors and its Compensation Committee establish our general compensation philosophy and oversee and approve the development, adoption, and implementation of compensation policies and programs, which are set at a global level, but also adapted to meet local country requirements as needed.
As part of our program to better ensure the procurement of high-quality ingredients, we also test our incoming raw materials for compliance to potency, identity, and adherence to strict specifications. 10 Manufacturing The next key component of our seed to feed strategy involves the high-quality manufacturing of these ingredients into finished products, which are produced at both third-party manufacturers and our own manufacturing facilities.
Manufacturing The next key component of our seed to feed strategy involves the high-quality manufacturing of these ingredients and raw materials into finished products, which are produced at both third-party manufacturers and our own manufacturing facilities. As part of our long-term strategy, we seek to expand and increase our self-manufacturing capabilities.
We use the umbrella trademarks Herbalife® , Herbalife Nutrition® , the Tri-Leaf, and the Rising Leaf designs worldwide, and protect several other trademarks and trade names related to our products and operations, such as Niteworks® and Liftoff® . Our trademark registrations are issued through the United States Patent and Trademark Office, or USPTO, and comparable agencies in the foreign countries.
We use the umbrella trademarks Herbalife® , Herbalife Nutrition® , the Tri-Leaf device, and the Rising Leaf designs worldwide, and protect several other trademarks and trade names related to our products and operations, such as Niteworks® and Liftoff® .
We have two quality control laboratories in Southern California and Changsha, China (including a Center of Excellence in both locations). In addition, we also have a Center of Excellence laboratory in Bangalore, India, and a quality control laboratory in Winston-Salem, North Carolina, Suzhou, China, and Nanjing, China.
We have a total of eight laboratories, including five quality control laboratories located in Southern California; Changsha, China; Winston-Salem, North Carolina; Suzhou, China; and Nanjing, China, as well as three Centers of Excellence laboratories located in Southern California, Changsha, China, and Bangalore, India.
The CGMPs are designed to ensure that OTC drugs and dietary supplements are not adulterated with contaminants or impurities, and are labeled to accurately reflect the active ingredients and other ingredients in the products.
The CGMPs are designed to ensure that OTC drugs, cosmetics, and dietary supplements are not adulterated with contaminants or impurities and are labeled to accurately reflect the ingredients in the products and the products’ intended use. The FDA also generally requires identity testing of all incoming dietary ingredients used in dietary supplements.
Further, the content and impact of regulations to which we are subject may be influenced by public attention directed at us, our products, or our network marketing program, so that extensive adverse publicity about us, our products, or our network marketing program may increase the likelihood regulatory scrutiny or action.
Further, the content and impact of regulations to which we are subject may be influenced by public attention directed at us, our products, or our network marketing program, so that extensive adverse publicity about us, our products, or our network marketing program may increase the likelihood regulatory scrutiny or action. 15 Income Tax, Transfer Pricing, and Other Taxes In many countries, including the United States, we are subject to income tax, transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned by our U.S. and local entities and are taxed accordingly.
We assign point values, known as Volume Points, to each of our products to determine a Member’s level within the Marketing Plan. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K for a further description of Volume Points.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Annual Report on Form 10-K for a further description of Volume Points and royalty overrides.
In China, we sell our products to and through independent service providers and sales representatives to customers and preferred customers, as well as through Company-operated retail platforms when necessary. In China, while multi-level marketing is not permitted, direct selling is permitted. Chinese citizens who apply and become Members are referred to as sales representatives.
In China, while multi-level marketing is not permitted, direct selling is permitted. Chinese citizens who apply and become Members are referred to as sales representatives.
We believe that the opportunity for Members to earn royalty overrides and production bonuses contributes significantly to our ability to retain our most active and productive Members.
We believe that the opportunity for Members to earn royalty overrides and production bonuses contributes significantly to our ability to retain our most active and productive Members. Our Marketing Plan uses point values, known as Volume Points, to each of our products to determine a Member’s level.
Under DSHEA, dietary supplement labeling may display structure/function claims that the manufacturer can substantiate, which are claims that the products affect the structure or function of the body, without prior FDA approval, but with notification to the FDA. They may not bear any claim that they can prevent, treat, cure, mitigate or diagnose disease (a drug claim).
Under DSHEA, dietary supplement may only make substantiated structure/function claims, which are claims that the product affects the structure or function of the body. They may not bear any claim that the product can prevent, treat, cure, mitigate or diagnose disease as that would be a drug claim.
Investment in our employees' professional growth and development is important and helps establish a strong foundation for long-term success. At our Company, we strive to create a learning culture, one in which development is an ongoing focus for all employees and managers. We invest in our employees’ development through a variety of programs.
At our Company, we strive to create a learning culture, one in which development is an ongoing focus for all employees and managers. We invest in our employees’ development through a variety of programs. These programs are designed to help our employees grow professionally and strengthen their skills throughout their careers.
We use a direct-selling business model to distribute and market our nutrition products to and through a global network of independent members, or Members. Members include consumers who purchase products for their own personal use and distributors who wish to resell products or build a sales organization.
Members include consumers who purchase products for their own personal use and distributors who wish to resell products or build a sales organization. We further discuss the segmentation of our Members in Our Network Marketing Program – Segmentation, section below.
Our ability to remain competitive depends on many factors, including having relevant products that meet consumer needs, a rewarding compensation plan, enhanced education and tools, innovation in our products and services, competitive pricing, a strong reputation, and a financially viable company. 6 We have differentiated ourselves from our competitors through our Members’ focus on the consultative sales process, which includes ongoing personal contact, coaching, behavior motivation, education, and the creation of supportive communities.
Our ability to remain competitive depends on many factors, including having relevant products that meet consumer needs, a rewarding compensation plan, enhanced education and tools, innovation in our products and services, competitive pricing, a strong reputation, and a financially viable company.
There are also many Members, which include distributors, who have not sponsored another Member. Members who have not sponsored another Member are generally considered discount buyers or small retailers. While a number of these Members have also attained the level of sales leader, they do not receive additional income as do Members who have sponsored other Members.
There are also many Members, which include distributors, who do not sponsor others and are generally considered discount buyers or small retailers as they do not receive additional income based on the sales activity of their team.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurthermore, the court will only approve a scheme of arrangement if it is satisfied that: • the company is not proposing to act illegally or beyond the scope of its corporate authority and the statutory provisions as to majority vote have been complied with; • the shareholders who voted at the meeting in question fairly represent the relevant class of shareholders to which they belong; • the scheme of arrangement is such as a businessman would reasonably approve; and • the scheme of arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act or that would amount to a “fraud on the minority.” If the scheme of arrangement is approved, dissenting shareholders would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Biggest changeFurthermore, the court will only approve a scheme of arrangement if it is satisfied that: • the company is not proposing to act illegally or beyond the scope of its corporate authority and the statutory provisions as to majority vote have been complied with; • the shareholders who voted at the meeting in question fairly represent the relevant class of shareholders to which they belong; • the scheme of arrangement is such as a businessman would reasonably approve; and • the scheme of arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act or that would amount to a “fraud on the minority.” If the scheme of arrangement is approved, dissenting shareholders would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of U.S. corporations, providing rights to receive payment in cash for the judicially determined value of the shares. 38 In addition, if an offer by a third party to purchase shares has been approved by the holders of at least 90% of the issued and outstanding shares (not including shares held by such third party) within four months of the third party making such offer, the third party may, during the two months following expiration of the four-month period, require the holders of the remaining shares to transfer their shares on the same terms on which the purchaser acquired the first 90% of the issued and outstanding shares.
The principal factors, events, and uncertainties that make an investment in our securities risky include the following: Risks Related to Our Business and Industry • Our failure to establish and maintain Member and sales leader relationships could negatively impact sales of our products and materially harm our business, financial condition, and operating results. • Because we cannot exert the same level of influence or control over our Members as we could if they were our employees, our Members could fail to comply with applicable law or our rules and procedures, which could result in claims against us that could materially harm our business, financial condition, and operating results. • Adverse publicity associated with our Company or the direct-selling industry could materially harm our business, financial condition, and operating results. • Our failure to compete successfully could materially harm our business, financial condition, and operating results. • Our contractual obligation to sell our products only through our Member network and to refrain from changing certain aspects of our Marketing Plan may limit our growth. • Our failure to appropriately respond to changing consumer trends, preferences, and demand for new products and product enhancements could materially harm our Member relationships, Members’ customer relationships, and product sales or otherwise materially harm our business, financial condition, and operating results. • If we fail to further penetrate existing markets, the growth in sales of our products, along with our operating results, could be negatively impacted. • Since one of our products constitutes a significant portion of our net sales, significant decreases in consumer demand for this product or our failure to produce a suitable replacement could materially harm our business, financial condition, and operating results. • Our business could be materially and adversely affected by natural disasters, other catastrophic events, acts of war or terrorism, cybersecurity incidents, pandemics, and/or other acts by third parties. • We depend on the integrity and reliability of our information technology infrastructure, and any related interruptions or inadequacies may have a material adverse effect on our business, financial condition, and operating results. • Disruption of supply, shortage, or increases in the cost of ingredients, packaging materials, and other raw materials as well as climate change could materially harm our business, financial condition, and operating results. • If any of our manufacturing facilities or third-party manufacturers fail to reliably supply products to us at required levels of quality or fail to comply with applicable laws, our financial condition and operating results could be materially and adversely impacted. • If we lose the services of members of our senior management team, our business, financial condition, and operating results could be materially harmed. • Our share price may be adversely affected by third parties who raise allegations about our Company. 19 • ESG matters, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, and operating results and may damage our reputation.
The principal factors, events, and uncertainties that make an investment in our securities risky include the following: Risks Related to Our Business and Industry • Our failure to establish and maintain Member and sales leader relationships could negatively impact sales of our products and materially harm our business, financial condition, and operating results. • Because we cannot exert the same level of influence or control over our Members as we could if they were our employees, our Members could fail to comply with applicable law or our rules and procedures, which could result in claims against us that could materially harm our business, financial condition, and operating results. • Adverse publicity associated with our Company or the direct-selling industry could materially harm our business, financial condition, and operating results. • Our failure to compete successfully could materially harm our business, financial condition, and operating results. • Our contractual obligation to sell our products only through our Member network and to refrain from changing certain aspects of our Marketing Plan may limit our growth. • Our failure to appropriately respond to changing consumer trends, preferences, and demand for new products and product enhancements could materially harm our Member relationships, Members’ customer relationships, and product sales or otherwise materially harm our business, financial condition, and operating results. • If we fail to further penetrate existing markets, the growth in sales of our products, along with our operating results, could be negatively impacted. • Since one of our products constitutes a significant portion of our net sales, significant decreases in consumer demand for this product or our failure to produce a suitable replacement could materially harm our business, financial condition, and operating results. • Our business could be materially and adversely affected by natural disasters, other catastrophic events, acts of war or terrorism, cybersecurity incidents, pandemics, and/or other acts by third parties. • We depend on the integrity and reliability of our information technology infrastructure, and any related interruptions or inadequacies may have a material adverse effect on our business, financial condition, and operating results. • Disruption of supply, shortage, or increases in the cost of ingredients, packaging materials, and other raw materials as well as climate change could materially harm our business, financial condition, and operating results. • If any of our manufacturing facilities or third-party manufacturers fail to reliably supply products to us at required levels of quality or fail to comply with applicable laws, our financial condition and operating results could be materially and adversely impacted. • If we lose the services of members of our senior management team, our business, financial condition, and operating results could be materially harmed. 18 • Our share price may be adversely affected by third parties who raise allegations about our Company. • ESG matters, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, and operating results and may damage our reputation.
No assurances can be given that future legislative, administrative, or judicial developments will not result in an increase in the amount of U.S. taxes payable by an investor in our shares. If any such developments occur, such developments could have a material and adverse effect on an investment in our shares. Item 1B. Unresolv ed Staff Comments None. 40
No assurances can be given that future legislative, administrative, or judicial developments will not result in an increase in the amount of U.S. taxes payable by an investor in our shares. If any such developments occur, such developments could have a material and adverse effect on an investment in our shares. Item 1B. Unresolv ed Staff Comments None.
In addition, even if holders do not elect to convert their 2024 Convertible Notes or 2028 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal amount of our 2024 Convertible Notes or 2028 Convertible Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital.
In addition, even if holders do not elect to convert their 2028 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal amount of our 2028 Convertible Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital.
For more information regarding the conversion features of our 2024 Convertible Notes and 2028 Convertible Notes, including the events that allow for early conversion and the current conversion rate, 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 more information regarding the conversion features of our 2028 Convertible Notes, including the events that allow for early conversion and the current conversion rate, 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.
However, the FTC or ICA may not agree now or in the future. In the event we are found to be in violation of the Consent Order, the FTC could take corrective actions such as initiating enforcement actions, seeking an injunction or other restrictive orders and imposing civil monetary penalties against us and our officers and directors.
However, the FTC may not agree now or in the future. In the event we are found to be in violation of the Consent Order, the FTC could take corrective actions such as initiating enforcement actions, seeking an injunction or other restrictive orders and imposing civil monetary penalties against us and our officers and directors.
As we continue to focus on expanding our existing international operations, these and other risks associated with international operations will likely increase, which could materially harm our business, financial condition, and operating results. We are subject to the anti-bribery laws, rules, and regulations of the United States and the other foreign jurisdictions in which we operate.
As we continue to focus on expanding our existing international operations, these and other risks associated with international operations will likely increase, which could materially harm our business, financial condition, and operating results. 33 We are subject to the anti-bribery laws, rules, and regulations of the United States and the other foreign jurisdictions in which we operate.
This perception is dependent upon opinions concerning a number of factors, including: • the safety, quality, and efficacy of our products, as well as those of similar companies; • our Members; • our network marketing program or the attractiveness or viability of the financial opportunities it may provide; • the direct-selling business generally; • actual or purported failure by us or our Members to comply with applicable laws, rules, and regulations, including those regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing program, the registration of our products for sale in our target markets, or other aspects of our business; • our commitment to ESG matters and our ESG practices; 21 • the security of our information technology infrastructure; and • actual or alleged impropriety, misconduct, or fraudulent activity by any person formerly or currently associated with our Members or us.
This perception is dependent upon opinions concerning a number of factors, including: • the safety, quality, and efficacy of our products, as well as those of similar companies; • our Members; • our network marketing program or the attractiveness or viability of the financial opportunities it may provide; • the direct-selling business generally; • actual or purported failure by us or our Members to comply with applicable laws, rules, and regulations, including those regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing program, the registration of our products for sale in our target markets, or other aspects of our business; 20 • our commitment to ESG matters and our ESG practices; • the security of our information technology infrastructure; and • actual or alleged impropriety, misconduct, or fraudulent activity by any person formerly or currently associated with our Members or us.
See the risk factor titled “ We are subject to the anti-bribery, laws, rules, and regulations of the United States and the other foreign jurisdictions in which we operate. ” 33 We are also exposed to risks associated with foreign currency fluctuations, foreign exchange controls, limitations on the repatriation of funds, and changes in currency policies or practices.
See the risk factor titled “ We are subject to the anti-bribery, laws, rules, and regulations of the United States and the other foreign jurisdictions in which we operate. ” We are also exposed to risks associated with foreign currency fluctuations, foreign exchange controls, limitations on the repatriation of funds, and changes in currency policies or practices.
For example, in the past, allegations regarding the legality of our network marketing program have been raised, which led to intense public scrutiny and significant share price volatility. From time to time, we are a party to various regulatory proceedings related to compliance with regulations applicable to our network marketing program.
For example, in the past, allegations regarding the legality of our network marketing program have been raised, which led to intense public scrutiny and significant share price volatility. 28 From time to time, we are a party to various regulatory proceedings related to compliance with regulations applicable to our network marketing program.
If one or more holders elect to convert their 2024 Convertible Notes or 2028 Convertible Notes when conversion is permitted, we would be required to make cash payments, for the respective convertible senior notes, to satisfy the principal amount due at conversion and could elect to make cash payments to satisfy our full conversion obligations, which could adversely affect our liquidity.
If one or more holders elect to convert their 2028 Convertible Notes when conversion is permitted, we would be required to make cash payments, for the respective convertible senior notes, to satisfy the principal amount due at conversion and could elect to make cash payments to satisfy our full conversion obligations, which could adversely affect our liquidity.
Globally, we have over 50 contract manufacturers, with Fine Foods (Italy) being a major supplier for meal replacements, protein powders and nutritional supplements. Our contract manufacturers are also located in countries such as the United States, India, Brazil, South Korea, Taiwan, Germany, and the Netherlands.
Globally, we have over 50 contract manufacturers, with Fine Foods (Italy) being a major supplier for meal replacements, protein powders and nutritional supplements. Our contract manufacturers are also located in countries such as the United States, India, Brazil, South Korea, Germany, and the Netherlands.
If we fail to comply with these privacy and data security laws, rules, and regulations, we could be subject to significant litigation, monetary damages, and regulatory enforcement actions or fines in one or more jurisdictions, which could have a material adverse effect on our operating results.
If we fail to comply with these privacy, data security, and AI laws, rules, and regulations, we could be subject to significant litigation, monetary damages, and regulatory enforcement actions or fines in one or more jurisdictions, which could have a material adverse effect on our operating results.
Further, significant product quality issues can have an adverse effect on sales or result in increased product returns and buybacks. 26 If we lose the services of members of our senior management team, our business, financial condition, and operating results could be materially harmed.
Further, significant product quality issues can have an adverse effect on sales or result in increased product returns and buybacks. If we lose the services of members of our senior management team, our business, financial condition, and operating results could be materially harmed.
Since this is an open-ended commitment, there can be no assurance that we will be able to take advantage of innovative new distribution channels that are developed in the future or appropriately respond to consumer preferences as they continue to evolve. 22 In addition, this agreement with our Members provides that we will not make any material changes adverse to our Members to certain aspects of our Marketing Plan that may negatively impact our Members without their approval as described in further detail below.
Since this is an open-ended commitment, there can be no assurance that we will be able to take advantage of innovative new distribution channels that are developed in the future or appropriately respond to consumer preferences as they continue to evolve. 21 In addition, this agreement with our Members provides that we will not make any material changes adverse to our Members to certain aspects of our Marketing Plan that may negatively impact our Members without their approval as described in further detail below.
In addition, if we do not introduce new products or make enhancements to meet the changing needs of our Members and their customers in a cost-effective, timely, and commercially appropriate manner, or if our competitors release new products or product enhancements before we do, some of our product offerings could be rendered obsolete, which could cause our market share to decline and negatively impact our business, financial condition, and operating results. 23 If we fail to further penetrate existing markets, the growth in sales of our products, along with our operating results, could be negatively impacted.
In addition, if we do not introduce new products or make enhancements to meet the changing needs of our Members and their customers in a cost-effective, timely, and commercially appropriate manner, or if our competitors release new products or product enhancements before we do, some of our product offerings could be rendered obsolete, which could cause our market share to decline and negatively impact our business, financial condition, and operating results. 22 If we fail to further penetrate existing markets, the growth in sales of our products, along with our operating results, could be negatively impacted.
If we are not able to hire, develop, and retain personnel, our business, financial, condition, and operating results may be adversely affected. Our share price may be adversely affected by third parties who raise allegations about our Company.
If we are not able to hire, develop, and retain personnel, our business, financial, condition, and operating results may be adversely affected. 26 Our share price may be adversely affected by third parties who raise allegations about our Company.
In addition, because the industry in which we operate is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge that will compete with us, including for our Members and their customers. Accordingly, competition may intensify and we may not be able to compete effectively in our markets.
In addition, because the industry in which we operate is not particularly capital intensive or otherwise subject to high barriers to entry, it is relatively easy for new competitors to emerge that will compete with us, including for our Members and their customers. Accordingly, competition may increase and we may not be able to compete effectively in our markets.
However, based on English authorities, which would likely be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle may apply where: • a company is acting or proposing to act illegally or outside the scope of its corporate authority; • the act complained of, although not beyond the scope of the company’s corporate authority, could be effected only if authorized by more than the number of votes of the shareholders of the company actually obtained; or • those who control the company are perpetrating a “fraud on the minority.” Certain provisions in our convertible senior notes and the related indentures, as well as Cayman Islands law and our articles of association, could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
However, based on Cayman Islands authorities together with English authorities, the latter of which would likely be of persuasive authority and be applied by a court in the Cayman Islands, exceptions to the foregoing principle may apply where: • a company is acting or proposing to act illegally or outside the scope of its corporate authority; • the act complained of, although not beyond the scope of the company’s corporate authority, could be effected only if authorized by more than the number of votes of the shareholders of the company actually obtained; or • those who control the company are perpetrating a “fraud on the minority.” 37 Certain provisions in our convertible senior notes and the related indentures, as well as Cayman Islands law and our articles of association, could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
In addition, the 2018 Credit Facility requires us to meet certain financial ratios and financial conditions. These covenants could limit our ability to grow our business, take advantage of attractive business opportunities, successfully compete, obtain future financing, withstand future downturns in our business or the economy in general, or otherwise conduct necessary corporate activities.
In addition, the 2024 Credit Facility requires us to meet certain financial ratios and financial conditions. These covenants could limit our ability to grow our business, take advantage of attractive business opportunities, successfully compete, obtain future financing, withstand future downturns in our business or the economy in general, or otherwise conduct necessary corporate activities.
Tax Reform may adversely impact certain U.S. shareholders of the Company. 20 Risks Related to Our Business and Industry Our failure to establish and maintain Member and sales leader relationships could negatively impact sales of our products and materially harm our business, financial condition, and operating results.
Tax Reform may adversely impact certain U.S. shareholders of the Company. 19 Risks Related to Our Business and Industry Our failure to establish and maintain Member and sales leader relationships could negatively impact sales of our products and materially harm our business, financial condition, and operating results.
On and after March 15, 2028, holders may convert their 2028 Convertible Notes at any time. The 2024 Convertible Notes and 2028 Convertible Notes may be settled, at our option, in cash or a combination of cash and common shares, so long as the principal amount of the 2024 Convertible Notes and 2028 Convertible Notes is settled in cash.
On and after March 15, 2028, holders may convert their 2028 Convertible Notes at any time. 36 The 2028 Convertible Notes may be settled, at our option, in cash or a combination of cash and common shares, so long as the principal amount of the 2028 Convertible Notes is settled in cash.
Because the conversion rate of the 2024 Convertible Notes or 2028 Convertible Notes adjusts upward upon the occurrence of certain events, existing shareholders may experience further dilution if a portion of the 2024 Convertible Notes or 2028 Convertible Notes are converted into common shares and the currently effective adjusted conversion rate is further adjusted.
Because the conversion rate of the 2028 Convertible Notes adjusts upward upon the occurrence of certain events, existing shareholders may experience further dilution if a portion of the 2028 Convertible Notes are converted into common shares and the currently effective adjusted conversion rate is further adjusted.
Our agreement with our Members further provides that we may not vary the criteria for qualification for each Member tier within our Member hierarchy, unless we do so in such a way so as to make qualification easier.
Our agreement with our Members further provides that we may not vary the criteria for qualification in our Marketing Plan for each Member tier within our Member hierarchy, unless we do so in such a way so as to make qualification easier.
At any time, we may also be required to suspend or defer many or all of our current or anticipated business development, capital deployment, and other projects unrelated to compliance with the Consent Order to allow resources to be focused on our compliance efforts, which could cause us to fall short of any guidance or analyst or investor expectations.
At any time, we may also be required to suspend or defer some of our current or anticipated business development, capital deployment, and other projects unrelated to compliance with the Consent Order to allow resources to be focused on our compliance efforts, which could cause us to fall short of any guidance or analyst or investor expectations.
Our senior secured credit facility, or the 2018 Credit Facility, and the indentures governing the senior notes due September 1, 2025, or the 2025 Notes, and the senior notes due June 1, 2029, or the 2029 Notes, have restrictive covenants that limit our and our subsidiaries’ ability to, among other things: • pay dividends, redeem share capital or capital stock, and make other restricted payments and investments; • sell assets or merge, consolidate, or transfer all or substantially all of our subsidiaries’ assets; • incur or guarantee additional debt; • impose dividend or other distribution restrictions on our subsidiaries; and • create liens on our and our subsidiaries’ assets.
Our senior secured credit facility, or the 2024 Credit Facility, and the indentures governing the senior notes due September 1, 2025, or the 2025 Notes, the senior secured notes due April 15, 2029, or the 2029 Secured Notes, and the senior notes due June 1, 2029, or the 2029 Notes, have restrictive covenants that limit our and our subsidiaries’ ability to, among other things: • pay dividends, redeem share capital or capital stock, and make other restricted payments and investments; • sell assets or merge, consolidate, or transfer all or substantially all of our subsidiaries’ assets; • incur or guarantee additional debt; • impose dividend or other distribution restrictions on our subsidiaries; and • create liens on our and our subsidiaries’ assets.
If we are unable to effectively scale our supply chain and manufacturing infrastructure to support future growth in China or other foreign markets, our operations in such markets may be adversely impacted. Therefore, we cannot assure you that our general efforts to increase our market penetration and Member retention in existing markets will be successful.
If we are unable to effectively scale our supply chain and manufacturing infrastructure to support future growth in foreign markets, our operations in such markets may be adversely impacted. Therefore, we cannot assure you that our general efforts to increase our market penetration and Member retention in existing markets will be successful.
A material portion of our assets are located outside of the United States. 39 Herbalife Ltd. has been advised by its Cayman Islands legal counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against Herbalife Ltd. judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Herbalife Ltd. predicated upon the civil liability provisions of the securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. ln those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met.
Herbalife Ltd. has been advised by its Cayman Islands legal counsel, Maples and Calder (Cayman) LLP, that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against Herbalife Ltd. judgments of courts of the United States predicated upon the civil liability provisions of the securities laws of the United States or any state; and (ii) in original actions brought in the Cayman Islands, to impose liabilities against Herbalife Ltd. predicated upon the civil liability provisions of the securities laws of the United States or any state, so far as the liabilities imposed by those provisions are penal in nature. ln those circumstances, although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will recognize and enforce a foreign money judgment of a foreign court of competent jurisdiction without retrial on the merits based on the principle that a judgment of a competent foreign court imposes upon the judgment debtor an obligation to pay the sum for which judgment has been given provided certain conditions are met.
Our Formula 1 Healthy Meal, which is our best-selling product line, approximated 26% of our net sales for the year ended December 31, 2023.
Our Formula 1 Healthy Meal, which is our best-selling product line, approximated 26% of our net sales for the year ended December 31, 2024.
In addition, numerous and evolving cybersecurity threats, including advanced and persistent cyberattacks, such as unauthorized attempts to access, disable, improperly modify, exfiltrate, or degrade our information technology infrastructure, or the introduction of computer viruses, malware, “phishing” emails, and other destructive software, and social engineering schemes, could compromise the confidentiality, availability, and integrity of our information technology infrastructure as well as those of the third parties with which we interact.
In addition, numerous and evolving cybersecurity threats, including advanced and persistent cyberattacks, such as unauthorized attempts to access, disable, improperly modify, exfiltrate, or degrade our information technology infrastructure, or the introduction of computer viruses, malware, “phishing” emails, and other destructive software, social engineering schemes, and emerging cyber threats from advanced AI and quantum computing, could compromise the confidentiality, availability, and integrity of our information technology infrastructure as well as those of the third parties with which we interact.
We have been, and may again be, subjected to various product liability claims, including claims that the products contain contaminants, include inadequate instructions as to their uses, and include inadequate warnings concerning side effects and interactions with other substances.
We have been, and may again be, subjected to various product liability claims regarding our ingestible and other products, including claims that the products contain contaminants, include inadequate instructions as to their uses, and/or include inadequate warnings concerning side effects and interactions with other substances.
The 2018 Credit Facility is secured by the equity interests of certain of our subsidiaries and substantially all of the assets of the domestic loan parties, and the lenders thereunder could proceed to foreclose on such assets if we are unable to repay or refinance any accelerated debt under the 2018 Credit Facility.
The 2024 Credit Facility and 2029 Secured Notes are secured by the equity interests of certain of our subsidiaries and substantially all of the assets of the domestic loan parties, and the lenders thereunder could proceed to foreclose on such assets if we are unable to repay or refinance any accelerated debt under the 2024 Credit Facility or the 2029 Secured Notes.
These demands could require additional transparency, due diligence, and reporting and could cause us to incur additional costs or to make changes to our operations to comply with such demands. We may also determine that certain changes are required in anticipation of further evolution of consumer preferences and demands.
These consumer demands, along with regulatory requirements, could require additional transparency, due diligence, and reporting and could have caused us to incur additional costs or to make changes to our operations to comply with such demands. We may also determine that certain changes are required in anticipation of further evolution of consumer preferences and demands.
Our business and operations in China, which generated approximately 7% of our net sales for the year ended December 31, 2023, are subject to unique risks and uncertainties related to general economic, political, and legal developments.
Our business and operations in China, which generated approximately 6.0% of our net sales for the year ended December 31, 2024, are subject to unique risks and uncertainties related to general economic, political, and legal developments.
See also the risk factor titled “ We depend on the integrity and reliability of our information technology infrastructure, and any related interruptions or inadequacies may have a material adverse effect on our business, financial condition, and operating results. ” In addition, the use and handling of certain types of information, including personal and financial information, is regulated by evolving and increasingly demanding laws, rules, and regulations, such as the European Union General Data Protection Regulation, which became effective in May 2018, the Brazil Law on General Data Protection, which became effective in September 2020, the California Consumer Privacy Act, or the CCPA, which became effective in January 2020 and was amended by the California Privacy Rights Act effective January 2023, the European Union Payment Services Directive 2, which became effective in January 2021 and requires stronger customer authentication for online transactions in that region, and the China Personal Information Protection Law, which became effective in November 2021.
See also the risk factor titled “ We depend on the integrity and reliability of our information technology infrastructure, and any related interruptions or inadequacies may have a material adverse effect on our business, financial condition, and operating results. ” 30 In addition, the use and handling of certain types of information, including personal and financial information, is regulated by evolving and increasingly demanding laws, rules, and regulations, such as the Vietnam Personal Data Protection Decree, the India Digital Personal Data Protection Act, the European Union General Data Protection Regulation, the Brazil Law on General Data Protection, the California Consumer Privacy Act, or the CCPA, as amended by the California Privacy Rights Act, the European Union Payment Services Directive 2, which requires stronger customer authentication for online transactions in that region, and the China Personal Information Protection Law.
If we fail to achieve any goals, targets, or objectives we may set with respect to ESG matters, if we do not meet or comply with new regulations or evolving consumer, investor, industry, or stakeholder expectations and standards, including those related to reporting, or if we are perceived to have not responded appropriately to the growing concern for ESG matters, we may face legal or regulatory actions, the imposition of fines, penalties, or other sanctions, adverse publicity, and decreased demand from consumers who may stop purchasing our products, or the price of our common shares could decline, any of which could materially harm our reputation or have a material adverse effect on our business, financial condition, or operating results. 27 Risks Related to Regulatory and Legal Matters Our products are affected by extensive regulations and our failure or our Members’ failure to comply with any regulations could lead to significant penalties or claims, which could materially harm our financial condition and operating results.
If we fail or succeed, or are perceived to fail or succeed, to achieve any goals, targets, or objectives we may set with respect to ESG matters, if we do not meet or comply with new regulations or evolving consumer, investor, industry, or stakeholder expectations and standards, including those related to reporting, or if we are perceived to have not responded appropriately to the growing concern for ESG matters or are unable to satisfy all stakeholders, we may face legal or regulatory actions, the imposition of fines, penalties, or other sanctions, adverse publicity, and decreased demand from consumers who may stop purchasing our products, or the price of our common shares could decline, any of which could materially harm our reputation or have a material adverse effect on our business, financial condition, or operating results.
The conversion or maturity of our convertible notes may adversely affect our financial condition and operating results, and their conversion into common shares could have a dilutive effect that could cause our share price to go down. We issued convertible senior notes due on March 15, 2024, or the 2024 Convertible Notes, in the aggregate principal amount of $550.0 million.
The conversion or maturity of our convertible notes may adversely affect our financial condition and operating results, and their conversion into common shares could have a dilutive effect that could cause our share price to go down. We issued convertible senior notes due on June 15, 2028, or the 2028 Convertible Notes, in the aggregate principal amount of $277.5 million.
Regulators in China may modify existing, or introduce new, regulations or interpretations. There can be no guarantee that changes in regulations, or their interpretation or enforcement, will not negatively impact our business in China, create industry reputational risk, result in regulatory proceedings, or lead to fines or penalties against us or our independent service providers.
There can be no guarantee that changes in regulations, or their interpretation or enforcement, will not negatively impact our business in China, create industry reputational risk, result in regulatory proceedings, or lead to fines or penalties against us or our independent service providers.
We are contractually prohibited from expanding our business by selling Herbalife products through other distribution channels that may be available to our competitors, such as over the Internet, through wholesale sales, by establishing retail stores, or through mail order systems.
We are contractually prohibited from expanding our business by selling Herbalife products through other distribution channels that may be available to our competitors, such as over third party e-commerce sites, through wholesale sales, by establishing retail stores, or through mail order systems.
The adoption of new regulations or changes in the interpretations of existing regulations, such as those relating to genetically modified foods, may result in significant compliance costs or discontinuation of impacted product sales and may negatively impact the marketing of our products or require us to change or cease aspects of our business, any of which could result in significant loss of sales and harm our business, financial condition, and operating results.
The adoption of new regulations or changes in the interpretations of existing regulations, such as those relating to genetically modified foods, may result in significant compliance costs or discontinuation of impacted product sales and may negatively impact the marketing of our products or require us to change or cease aspects of our business, any of which could result in significant loss of sales and harm our business, financial condition, and operating results. 27 For example, we are subject to the rules of the FDA, including for CGMPs.
ESG matters, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, and operating results and may damage our reputation. Companies across all industries are facing increasing scrutiny relating to their environmental, social, and governance practices.
ESG matters, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition, and operating results and may damage our reputation. Companies across all industries are facing increasing scrutiny relating to their environmental, social, and governance practices. Investors may impose additional standards and expectations on companies in these areas.
The FTC and ICA have the right to inspect Company records and request additional compliance reports for purposes of conducting audits pursuant to the Consent Order. The terms of the Consent Order are described in greater detail in our Current Report on Form 8-K filed on July 15, 2016.
On May 28, 2024, the ICA’s term ended. The FTC continues to have the right to inspect Company records and request additional compliance reports for purposes of conducting audits pursuant to the Consent Order. The terms of the Consent Order are described in greater detail in our Current Report on Form 8-K filed on July 15, 2016.
While we do not believe that Herbalife Ltd. is classified as a CFC, such entity and one or more of our non-U.S. corporate subsidiaries not already classified as CFCs could become classified as CFCs either as a result of (i) additional changes to tax laws, rules, or regulations, including future pronouncements or other guidance from the IRS or (ii) an increase in the percentage ownership of our common shares by shareholders who hold, or in the future may hold, 10% or more of our common shares, whether as a result of future share acquisitions, the impact of any share repurchases we may undertake, or otherwise.
Shareholders are subject to current U.S. federal income tax with respect to the foregoing income items, even if the CFC has not made an actual distribution to such shareholders. 39 While we do not believe that Herbalife Ltd. is classified as a CFC, such entity and one or more of our non-U.S. corporate subsidiaries not already classified as CFCs could become classified as CFCs either as a result of (i) additional changes to tax laws, rules, or regulations, including future pronouncements or other guidance from the IRS or (ii) an increase in the percentage ownership of our common shares by shareholders who hold, or in the future may hold, 10% or more of our common shares, whether as a result of future share acquisitions, the impact of any share repurchases we may undertake, or otherwise.
Disruption of supply, shortage, or increases in the cost of ingredients, packaging materials, and other raw materials as well as climate change could materially harm our business, financial condition, and operating results.
These cost overruns and delays and disruptions could adversely impact our business, financial condition, and operating results. 24 Disruption of supply, shortage, or increases in the cost of ingredients, packaging materials, and other raw materials as well as climate change could materially harm our business, financial condition, and operating results.
The majority of our products are classified as foods, dietary supplements, and cosmetics. In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale, and storage of our products are subject to extensive government regulation.
In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, advertising, importation, exportation, licensing, sale, and storage of our products are subject to extensive government regulation.
As part of the Consent Order, we agreed to make a payment of $200 million and to implement, and continue to enhance, certain procedures in the United States.
As part of the Consent Order, we agreed to implement, and continue to enhance, certain procedures in the United States.
Our financial condition and operating results could be materially harmed if we fail to comply with the Consent Order, if costs related to compliance exceed our estimates, if it has a negative impact on net sales, or if it leads to further legal, regulatory, or compliance claims, proceedings, or investigations or litigation. 30 Our actual or perceived failure to comply with privacy and data protection laws, rules, and regulations could materially harm our business, financial condition, and operating results.
Our financial condition and operating results could be materially harmed if we fail to comply with the Consent Order, if costs related to compliance exceed our estimates, if it has a negative impact on net sales, or if it leads to further legal, regulatory, or compliance claims, proceedings, or investigations or litigation.
Furthermore, we rely on certain key personnel in China, including to assist us during the approval process and to maintain our licenses, and the loss of any such key personnel could delay or hinder our ability to obtain or maintain licenses or related approvals or otherwise negatively impact our operations in China.
Furthermore, we rely on certain key personnel in China, including to assist us during the approval process and to maintain our licenses, and the loss of any such key personnel could delay or hinder our ability to obtain or maintain licenses or related approvals or otherwise negatively impact our operations in China. 35 Additionally, there continues to be uncertainty regarding the interpretation and enforcement of Chinese regulations.
In addition, catastrophic events may result in significant cancellations or cessations of Member orders; contribute to a general decrease in local, regional, or global economic activity; directly impact our marketing, manufacturing, financial, or logistics functions; impair our ability to meet Member demands; harm our reputation; and expose us to significant liability, losses, and legal proceedings, any of which could materially and adversely affect our business, financial condition, and operating results.
In addition, catastrophic events may result in significant cancellations or cessations of Member orders; contribute to a general decrease in local, regional, or global economic activity; directly impact our marketing, manufacturing, financial, or logistics functions; impair our ability to meet Member demands; harm our reputation; and expose us to significant liability, losses, and legal proceedings, any of which could materially and adversely affect our business, financial condition, and operating results. 23 We depend on the integrity and reliability of our information technology infrastructure, and any related interruptions or inadequacies may have a material adverse effect on our business, financial condition, and operating results.
While we continue to invest in our information technology infrastructure, there can be no assurance that there will not be any significant interruptions to such systems, that the systems will be adequate to meet all of our business needs, or that the systems will keep pace with continuing 24 changes in technology, legal and regulatory standards.
While we continue to invest in our information technology infrastructure, including leveraging artificial intelligence (AI) to enhance operational efficiency and improve services for our Members, there can be no assurance that there will not be any significant interruptions to such systems, that the systems will be adequate to meet all of our business needs, or that the systems will keep pace with continuing changes in technology, legal and regulatory standards.
Our information technology infrastructure, as well as that of our Members and the other third parties with which we interact, may be damaged, disrupted, or breached or otherwise fail for a number of reasons, including power outages, computer and telecommunication failures, internal design, manual or usage errors, workplace violence or wrongdoing, or catastrophic events such as natural disasters, severe weather conditions, or acts of war or terrorism.
Our information technology infrastructure, including our digital technology platforms like Herbalife One discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , as well as that of our Members and the other third parties with which we interact, may be damaged, disrupted, or breached or otherwise fail for a number of reasons, including power outages, computer and telecommunication failures, internal design, manual or usage errors, workplace violence or wrongdoing, or catastrophic events such as natural disasters, severe weather conditions, or acts of war or terrorism.
While we have business continuity programs for our manufacturing facilities which plan for such events, any event resulting in the temporary, partial, or complete shutdown of one of these manufacturing facilities, could require us to transfer manufacturing to a surviving facility and/or third-party contract manufacturers if suitable, although no such alternatives may be available.
For example, during the COVID-19 pandemic, our suppliers experienced some delays in receiving and delivering certain ingredients and packaging components. 25 While we have business continuity programs for our manufacturing facilities which plan for such events, any event resulting in the temporary, partial, or complete shutdown of one of these manufacturing facilities, could require us to transfer manufacturing to a surviving facility and/or third-party contract manufacturers if suitable, although no such alternatives may be available.
Our policies mandate compliance with these anti-bribery laws, rules, and regulations, including the requirements to maintain accurate information and internal controls. We operate in many parts of the world that have experienced governmental corruption to some degree and in certain circumstances, strict compliance with anti-bribery laws, rules, and regulations may conflict with local customs and practices.
We operate in many parts of the world that have experienced governmental corruption to some degree and in certain circumstances, strict compliance with anti-bribery laws, rules, and regulations may conflict with local customs and practices.
Furthermore, our efforts to support growth in such foreign markets could be hampered to the extent that our infrastructure in such markets is deficient when compared to our infrastructure in our more developed markets, such as the United States.
Furthermore, our efforts to support growth in such foreign markets could be hampered to the extent that our infrastructure in such markets is deficient when compared to our infrastructure in our more developed markets, such as the United States. For example, managing the expansion of manufacturing operations in foreign markets remains uncertain.
A license may not be available on reasonable terms, or at all, and we may be required to develop alternative non-infringing products or marks or discontinue use of such products or marks. Any development efforts could require significant effort and expense.
A license may not be available on reasonable terms, or at all, and we may be required to develop alternative non-infringing products or marks or discontinue use of such products or marks. Any development efforts could require significant effort and expense. Any of the foregoing could have a material adverse effect on our business, financial condition, and operating results.
Any of the foregoing could have a material adverse effect on our business, financial condition, and operating results. 32 We may be held responsible for additional compensation, certain taxes, or assessments relating to the activities of our Members, which could materially harm our financial condition and operating results.
We may be held responsible for additional compensation, certain taxes, or assessments relating to the activities of our Members, which could materially harm our financial condition and operating results.
Finally, even if our insurance covers a claim, given the level of self-insured retentions that we have accepted under our current product liability insurance policies, which is $12.5 million, in certain cases we may be subject to the full amount of liability associated with any claims, which could be substantial. 31 If we fail to protect our intellectual property, our ability to compete could be negatively affected, which could materially harm our financial condition and operating results.
Finally, even if our insurance covers a claim, given the level of self-insured retentions that we have accepted under our current product liability insurance policies, which is $12.5 million, in certain cases we may be subject to the full amount of liability associated with any claims, which could be substantial.
For example, tariffs enacted by the United States and other foreign governments, such as China or Mexico, that apply to our products or our ingredients may have an adverse impact on the costs and future sales of our products, particularly if we deem it necessary to increase product prices.
For example, tariffs and counter tariffs enacted by foreign governments, such as China, Canada or Mexico, that apply to our products or our ingredients may have an adverse impact on the cost and availability of certain ingredients, any of which could adversely affect future sales of our products, particularly if we deem it necessary to increase product prices.
For example, currency restrictions enacted by the Venezuelan government continue to impact the ability of our subsidiary in Venezuela, or Herbalife Venezuela, to obtain U.S. dollars in exchange for Venezuelan Bolivars at the official foreign exchange rate and limit Herbalife Venezuela’s ability to import U.S. dollar denominated raw materials and finished goods, both of which have significantly negatively impacted our Venezuelan operations.
For example, currency restrictions enacted by the Venezuelan, Argentinian, and Bolivian governments continue to impact the ability of our subsidiaries in such countries to obtain U.S. dollars in exchange for local currencies at the official foreign exchange rate and limit our ability to import U.S. dollar denominated raw materials and finished goods, both of which have significantly negatively impacted our operations.
Further, these initiatives may be subject to cost overruns and delays, may not operate as designed and may cause disruptions in our operations. These cost overruns and delays and disruptions could adversely impact our business, financial condition, and operating results.
Further, these initiatives may be subject to cost overruns and delays, may not operate as designed and may cause disruptions in our operations.
In December 2022, the EU member states agreed to implement the OECD framework in their domestic tax laws with a target effective date for the 15% global minimum tax rate in 2024.
In December 2022, the EU member states agreed to implement the OECD framework in their domestic tax laws with a target effective date for the 15% global minimum tax rate in 2024. The OECD has issued additional guidance in 2023 and 2024, and intends to issue more rules in 2025.
Any failure to comply with these agreements, or any resulting further government action, could result in a material and adverse impact to our business, financial condition, and operating results. 34 If we do not comply with transfer pricing, income tax, customs duties, VAT, and similar regulations, we may be subject to additional taxes, customs duties, interest, and penalties in material amounts, which could materially harm our financial condition and operating results.
If we do not comply with transfer pricing, income tax, customs duties, VAT, and similar regulations, we may be subject to additional taxes, customs duties, interest, and penalties in material amounts, which could materially harm our financial condition and operating results.
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 a more specific discussion of contingencies related to the activities of our Members.
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 a more specific discussion of contingencies related to the activities of our Members. 32 Risks Related to Our International Operations A substantial portion of our business is conducted in foreign jurisdictions, exposing us to the risks associated with international operations.
Our business in China is subject to general, as well as industry-specific, economic, political, and legal developments and risks and requires that we utilize a modified version of the business model we use elsewhere in the world.
If any such developments occur, our business, financial condition, and operating results could be materially and adversely affected. 34 Our business in China is subject to general, as well as industry-specific, economic, political, and legal developments and risks and requires that we utilize a modified version of the business model we use elsewhere in the world.
Further, concern over climate change and other environmental sustainability matters, has and may in the future result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment, including greenhouse gas emissions regulations, alternative energy policies, and sustainability initiatives, such as single use plastics.
We operate in 95 markets worldwide, and concern over climate change and other environmental sustainability matters, has and may in the future result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment, including greenhouse gas emissions regulations, alternative energy policies, and sustainability initiatives, such as single use plastics, which may cause disruptions in the supply and manufacture of our products or an increase in operating and compliance costs.
Additionally, there continues to be uncertainty regarding the interpretation and enforcement of Chinese regulations. The regulatory environment in China continues to evolve, and officials at all levels of the Chinese, provincial, and local government exercise broad discretion in deciding how to interpret, apply, and enforce regulations as they deem appropriate.
The regulatory environment in China continues to evolve, and officials at all levels of the Chinese, provincial, and local government exercise broad discretion in deciding how to interpret, apply, and enforce regulations as they deem appropriate. Regulators in China may modify existing, or introduce new, regulations or interpretations.
Monitoring infringement or misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect every infringement or misappropriation of our proprietary rights or to prevent third parties from infringing upon or misappropriating our proprietary rights or from independently developing non-infringing products that are competitive with, equivalent to, or superior to our products.
However, our products are generally not patented domestically or abroad, and the legal protections afforded by common law and contractual proprietary rights in our products provide only limited protection. 31 Monitoring infringement or misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect every infringement or misappropriation of our proprietary rights or to prevent third parties from infringing upon or misappropriating our proprietary rights or from independently developing non-infringing products that are competitive with, equivalent to, or superior to our products.
To operate under these regulations, we created and introduced a modified business model specific to China based on our understanding of how Chinese regulators interpret and enforce these regulations, our own interpretation of applicable regulations and the enforcement thereof, and our understanding of the practices of other licensed direct-selling organizations in China. 35 In China, we sell our products to and through independent service providers and sales representatives, to preferred customers and other customers, as well as through Company-operated retail platforms when necessary.
To operate under these regulations, we created and introduced a modified business model specific to China based on our understanding of how Chinese regulators interpret and enforce these regulations, our own interpretation of applicable regulations and the enforcement thereof, and our understanding of the practices of other licensed direct-selling organizations in China.
Payment of cash upon conversion of the 2024 Convertible Notes or 2028 Convertible Notes, or any adverse change in the accounting treatment of the 2024 Convertible Notes or 2028 Convertible Notes, may adversely affect our financial condition and operating results, each of which could in turn adversely impact the amount or timing of future potential share repurchases or the payment of dividends to our shareholders. 37 In addition, if a portion of the 2024 Convertible Notes or 2028 Convertible Notes are converted into common shares, our existing shareholders will experience immediate dilution of voting rights and our share price may decline.
Payment of cash upon conversion of the 2028 Convertible Notes, or any adverse change in the accounting treatment of the 2028 Convertible Notes, may adversely affect our financial condition and operating results, each of which could in turn adversely impact the amount or timing of future potential share repurchases or the payment of dividends to our shareholders.
There is no guarantee the government will not revisit its focus on health products, expand its investigation to cover direct-selling business models, or otherwise launch into a new investigation or multiple investigations that may result in a material adverse effect to our business in China. 36 Risks Related to Our Indebtedness The terms and covenants in our existing indebtedness could limit our discretion with respect to certain business matters, which could harm our business, financial condition, and operating results.
There is no guarantee the government will not revisit its focus on health products, expand its investigation to cover direct-selling business models, or otherwise launch into a new investigation or multiple investigations that may result in a material adverse effect to our business in China.
Regulatory authorities also periodically review legislative and regulatory policies and initiatives and may promulgate new or revised regulations. For example, in 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing, and in December 2021, India’s Ministry of Consumer Affairs, Food and Public Distribution, Government promulgated the Consumer Protection (Direct Selling) Rules, 2021 under the Consumer Protection Act, 2019.
For example, in 2018, the FTC released its nonbinding Business Guidance Concerning Multi-Level Marketing which it further updated in 2024, and in December 2021, India’s Ministry of Consumer Affairs, Food and Public Distribution, Government promulgated the Consumer Protection (Direct Selling) Rules, 2021 under the Consumer Protection Act, 2019.
Moreover, our growth in existing markets will depend upon increased brand awareness and improved training and other activities that enhance Member retention in our markets. While we have recently experienced significant growth in certain of our foreign markets, we cannot assure you that such growth levels will continue in the immediate or long-term future.
While we have recently experienced significant growth in certain of our foreign markets, we cannot assure you that such growth levels will continue in the immediate or long-term future.
We are incorporated as an exempted company with limited liability under the laws of the Cayman Islands.
We are incorporated as an exempted company with limited liability under the laws of the Cayman Islands. A material portion of our assets are located outside of the United States.
If we experience supply shortages, price increases, or supplier or regulatory impediments with respect to any of the materials we use in our products or packaging, we may need to seek alternative supplies or suppliers and may experience difficulties in finding replacements that are comparable in quality and price. 25 Further, the risks related to our ability to adequately source the materials required to meet our needs may be exacerbated by the effects of climate change and the legal, regulatory, or market measures that may be implemented to address climate change.
If we experience supply shortages, price increases, or supplier or regulatory impediments with respect to any of the materials we use in our products or packaging, we may need to seek alternative supplies or suppliers and may experience difficulties in finding replacements that are comparable in quality and price.
Additionally, we may be negatively impacted by conflicts with or disruptions caused or faced by our third-party importers, as well as conflicts between such importers and local governments or regulators. Our operations in some jurisdictions also may be adversely affected by political, economic, legal, regulatory, and social conditions, or instability, as well as by economic and political tensions between governments.
Additionally, we may be negatively impacted by conflicts with or disruptions caused or faced by our third-party importers, as well as conflicts between such importers and local governments or regulators.
For example, a foreign government may impose trade restrictions or increased tariffs, require compliance with trade and economic sanctions laws, rules, or regulations, such as those administered by U.S. Customs and Border Protection, the U.S.
However, there are certain risks inherent in doing business in international markets, particularly in the direct-selling industry, which is regulated in many jurisdictions. For example, a foreign government may impose trade restrictions or increased tariffs, require compliance with trade and economic sanctions laws, rules, or regulations, such as those administered by U.S. Customs and Border Protection and the U.S.
Prior to December 15, 2023, under certain circumstances, holders of our 2024 Convertible Notes may convert their notes at their option. On and after December 15, 2023, holders may convert their 2024 Convertible Notes at any time.
Prior to March 15, 2028, under certain circumstances, holders of our 2028 Convertible Notes may convert their notes at their option.
In addition, while we believe the Consent Order has set new standards within the direct-selling industry, our competitors are not required to comply with the Consent Order and may not be subject to similar actions, which could limit our ability to effectively compete for Members, consumers, and ultimately sales.
In addition, while we believe the Consent Order has set new standards within the direct-selling industry, our competitors are not required to comply with the Consent Order and may not be subject to similar actions, which could limit our ability to effectively compete for Members, consumers, and ultimately sales. 29 Compliance with the Consent Order requires the cooperation of our Members and, while we have updated our training programs and policies to address the Consent Order and expect our Members to cooperate, we do not have the same level of influence or control over our Members as we would if they were our employees.
In addition, any failure of these systems to operate as designed could cause us to fail to maintain the records required under, or otherwise violate terms of, the Consent Order. 29 Further, management and our board of directors have been, and may continue to be, required to focus a substantial amount of time on Consent Order compliance activities, which could divert their attention from running and growing our business.
Further, management and our board of directors have been, and may continue to be, required to focus a substantial amount of time on Consent Order compliance activities, which could divert their attention from running and growing our business.
Our ability to increase market penetration may be limited by the finite number of persons in a given country inclined to pursue a direct-selling business opportunity or consumers aware of, or willing to purchase, Herbalife products.
Our ability to increase market penetration may be limited by the finite number of persons inclined to pursue a direct-selling business opportunity or consumers aware of, or willing to purchase, Herbalife products. Moreover, our growth in existing markets will depend upon increased brand awareness and improved training and other activities that enhance Member retention in our markets.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity program also engages a variety of consultants, auditors and other third parties to support and assist with implementing and maintaining appropriate security measures. Any number of third parties may be engaged to assist in response actions, including, among others, intelligence providers, product, software and service providers and advisors.
Biggest changeAny number of third parties may be engaged to assist in response actions, including, among others, intelligence providers, product, software and service providers and advisors. Professional services, or consultants, are engaged as needed to help implement, support or advise on a variety of technical matters. Legal counsel, law enforcement and external auditors are also consulted as needed.
Depending on the nature or severity of the event, the Incident Management Team may escalate the matter to our Executive Leadership Team, which includes the Chief Executive Officer, Chief Operating Officer, Chief Information Security Officer, Chief Information Officer, Chief Financial Officer, General Counsel, and other executives.
Depending on the nature or severity of the event, the Incident Management Team may escalate the matter to our Executive Leadership Team, which includes the Chief Executive Officer, Chief Operating Officer, Chief Information Security Officer, Chief Financial Officer, General Counsel, and other executives.
We conduct vendor security assessments for key service providers as part of our vendor onboarding process and as part of our contract review process. The cybersecurity assessment process includes considerations from an industry leading third-party vendor security ratings company.
We conduct vendor security assessments for key service providers including as part of our vendor onboarding process and as part of our contract review process. The cybersecurity assessment process includes considerations from an industry leading third-party vendor security ratings company.
This statement does not guarantee that future incidents or threats will not have a material impact or that we are not currently the subject of an undetected incident or threat that may have such an impact. 42
This statement does not guarantee that future incidents or threats will not have a material impact or that we are not currently the subject of an undetected incident or threat that may have such an impact.
Risks from Cybersecurity Threats As of December 31, 2023 and as of the date of this filing, we are not aware of any risks from cybersecurity threats, including any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Risks from Cybersecurity Threats As of December 31, 2024 and as of the date of this filing, we are not aware of any risks from cybersecurity threats, including any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
As part of the management oversight structure, the ERM team provides our Management Risk Committee with periodic updates on key risk conditions, strategy and mitigation efforts. 41 Our cybersecurity risk management process, which encompasses continuous monitoring and periodic assessments, is designed to identify and mitigate cybersecurity threats and vulnerabilities.
As part of the management oversight structure, the ERM team provides our Management Risk Committee with periodic updates on key risk conditions, strategy and mitigation efforts. Our cybersecurity risk management process, which encompasses regular monitoring and periodic assessments, is designed to identify and mitigate cybersecurity threats and vulnerabilities.
We have process, controls and technology infrastructure to maintain, protect, and enhance existing systems and develop new systems as needed to keep pace with continuing changes in technology, evolving industry and regulatory standards, and emerging cybersecurity and data security risks. We collect, process, and analyze threat intelligence data from a variety of sources to understand motives, targets, and attack behaviors.
We have process, controls and technology infrastructure to maintain, protect, and enhance existing systems and design new systems to keep pace with continuing changes in technology, evolving industry and regulatory standards, and emerging cybersecurity and data security risks. We collect, process, and analyze threat intelligence data from a variety of sources to understand motives, targets, and attack behaviors.
These efforts are aligned with the broader objectives of our ERM team and are continuously reviewed and refined in consultation with our Technology Risk Committee.
These efforts are aligned with the broader objectives of our ERM team and are regularly reviewed and refined in consultation with our Technology Risk Committee.
For example, our Data Protection and Information Security working group, which includes representation by our Chief Information Security Officer (who reports directly to our COO) and CIO, and our Legal, ERM, Information Governance and Finance departments, among others, meets regularly to discuss key risks, strategies and threats related to information security.
For example, our Data Protection and Information Security working group, which includes representation by our Chief Information Security Officer, and our Legal, ERM, Information Governance and Finance departments, among others, meets regularly to discuss key risks, strategies and threats related to information security.
These audits include an annual technology risk assessment by our Cybersecurity and IT departments. Our Internal Audit team also conducts cybersecurity risk assessments which include, among other things, evaluating governance of our cybersecurity processes and functions, assessing our ability to identify, validate and remediate vulnerabilities, and evaluating penetration studies.
Our Internal Audit team also conducts cybersecurity risk assessments which include, among other things, evaluating governance of our cybersecurity processes and functions, assessing our ability to identify, validate and remediate vulnerabilities, and evaluating penetration studies.
Our cybersecurity risk management process is integrated with our overarching risk management system, led by our ERM team, and further guided by our Technology Risk Committee. Our Technology Risk Committee is responsible for approving the effectiveness of our cybersecurity risk framework and assisting with the oversight of decisions that affect compliance with applicable legal and regulatory matters and corporate policies.
Our Technology Risk Committee is responsible for reviewing and approving the effectiveness of our cybersecurity risk framework and assisting with the oversight of decisions that affect compliance with applicable legal and regulatory matters and corporate policies.
Specialized training is also assigned to certain functions based on job responsibilities. Training content is purchased from multiple well-recognized third parties. In addition to assigned training, Herbalife University offers additional information security related courses available to all employees on demand.
Specialized training is also assigned to certain functions based on job responsibilities. Training content is purchased from multiple well-recognized third parties.
If necessary, the matter could be escalated to our Board of Directors or any appropriate Board committees. This structured governance approach is designed to manage cybersecurity incidents with participation and involvement with the appropriate levels of our organization. External and internal audits are conducted periodically to assess the effectiveness of our cybersecurity measures.
This structured governance approach is designed to manage cybersecurity incidents with participation and involvement with the appropriate levels of our organization. 40 External and internal audits are conducted periodically to assess the effectiveness of our cybersecurity measures. These audits include an annual technology risk assessment by our Cybersecurity and IT departments.
Professional services, or consultants, are engaged as needed to help implement, support or advise on a variety of technical matters. Legal counsel, law enforcement and external auditors are also consulted as needed. We have already identified and, in some cases, engaged, third-party experts to allow for quicker engagement if a cybersecurity incident occurs in the future.
We have identified and, in some cases, engaged, third-party experts to allow for quicker engagement if a cybersecurity incident occurs in the future.
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If necessary, the matter could be escalated to our Board of Directors or any appropriate Board committees, including the Audit Committee, which has oversight responsibility for cybersecurity risk.
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Our cybersecurity risk management process is integrated with our overarching risk management system, led by our ERM team, and further guided by our Technology Risk Committee.
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In addition to assigned training, Herbalife University offers additional information security related courses available to all employees on demand. 41 Our cybersecurity program also engages a variety of consultants, auditors and other third parties to support and assist with implementing and maintaining appropriate security measures.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease approximately 140,000 square feet, with the lease term expiring in 2033, and own approximately 189,000 square feet of general office space in Torrance, California, primarily for our North America regional headquarters, including some of our corporate support functions.
Biggest changeWe also lease approximately 140,000 square feet and 189,000 square feet of general office space in Torrance, California, primarily for our North America regional headquarters, including some of our corporate support functions with the lease term expiring in 2033 and 2025, respectively.
Item 2. Pr operties As of December 31, 2023, we leased the majority of our physical properties. We currently lease approximately 95,000 square feet in downtown Los Angeles, California, including our corporate executive offices located in the LA Live complex with the lease term expiring in 2033.
Item 2. Pr operties As of December 31, 2024, we leased the majority of our physical properties. We currently lease approximately 95,000 square feet in downtown Los Angeles, California, including our corporate executive offices located in the LA Live complex with the lease term expiring in 2033.
See Item 1, Business , for further discussion of the manufacturing facility purchased in Winston-Salem, North Carolina. We believe that our existing facilities are adequate to meet our current requirements and that comparable space is readily available at each of these locations.
See Item 1, Business , for further discussion of the manufacturing facility we own in Winston-Salem, North Carolina. We believe that our existing facilities are adequate to meet our current requirements and that comparable space is readily available at each of these locations.
In Bangalore, India, we lease approximately 155,000 square feet of office space for our Global Business Service Center, which expires in 2026. We also lease office space for Global Business Service Centers in Querétaro, Mexico; Krakow, Poland; and Kuala Lumpur, Malaysia.
In Bangalore, India, we lease approximately 155,000 square feet of office space for our Global Business Service Center, which expires in 2026. We also lease office space for Global Business Service Centers in Querétaro, Mexico; Krakow, Poland; Kuala Lumpur, Malaysia; and Dalian, China.
In Lake Forest, California, we lease warehouse, manufacturing plant, and office space of approximately 166,000 square feet expiring in 2029. In Venray, Netherlands, we lease our European centralized warehouse of approximately 344,000 square feet under an arrangement expiring in 2025.
In Lake Forest, California, we lease warehouse, manufacturing plant, and office space of approximately 166,000 square feet expiring in 2029. In Venray, Netherlands, we lease our European centralized warehouse of approximately 257,000 square feet under an arrangement expiring in 2030 and approximately 87,000 square feet expiring in 2025.
In Nanjing, China, we are leasing an additional manufacturing facility of approximately 372,000 square feet under a lease expiring in 2025. In Guadalajara, Mexico, we lease approximately 234,000 square feet of office space, the majority of which houses a Global Business Service Center that supports worldwide operations, under leases expiring in 2027.
In Nanjing, China, we are leasing an additional manufacturing facility of approximately 372,000 square feet under a lease expiring in 2025. In Guadalajara, Mexico, we lease approximately 158,000 square feet and 76,000 square feet of office space under leases expiring in 2031 and 2027, respectively, the majority of which houses a Global Business Service Center that supports worldwide operations.
In Changsha, Hunan, China we are leasing our botanical extraction facility of approximately 154,000 square feet with the term expiring in 2032. In Suzhou, China we are leasing our manufacturing and warehouse facilities of approximately 81,000 square feet and 121,000 square feet, respectively, under leases expiring in 2025 and 2024, respectively.
In Changsha, Hunan, China we are leasing our botanical extraction facility of approximately 154,000 square feet with the term expiring in 2032. In Suzhou, China we are leasing our manufacturing and warehouse facilities of approximately 122,000 square feet and 87,000 square feet, respectively, under leases expiring in 2034 and 2029, respectively.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information set forth under 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 is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 43 PART II
Biggest changeItem 3. Legal Proceedings The information set forth under 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 is incorporated herein by reference. Item 4. Mine Saf ety Disclosures Not applicable. 42 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2018 2019 2020 2021 2022 2023 Herbalife Ltd. $ 100.00 $ 80.87 $ 81.51 $ 69.43 $ 25.24 $ 25.89 S&P 500 Index $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 New Peer Group(1) $ 100.00 $ 121.80 $ 142.12 $ 143.40 $ 138.96 $ 128.70 Old Peer Group(2) $ 100.00 $ 123.64 $ 140.80 $ 141.27 $ 140.25 $ 110.91 44 (1) The New Peer Group consists of BellRing Brands, Inc., Conagra Brands, Inc., Medifast, Inc., Nu Skin Enterprises, Inc., Post Holdings Inc., The Hain Celestial Group, Inc., Tupperware Brands Corporation, and USANA Health Sciences, Inc.
Biggest changeThe Company updated its peer group during the year ended December 31, 2024 due to one company included in the prior peer group filing for bankruptcy. 43 December 31, 2019 2020 2021 2022 2023 2024 Herbalife Ltd. $ 100.00 $ 100.80 $ 85.86 $ 31.21 $ 32.01 $ 14.03 S&P 500 Index $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 New Peer Group(1) $ 100.00 $ 113.30 $ 117.07 $ 115.06 $ 106.85 $ 115.74 Old Peer Group(2) $ 100.00 $ 116.68 $ 117.73 $ 114.08 $ 105.66 $ 114.10 (1) The New Peer Group consists of BellRing Brands, Inc., Conagra Brands, Inc., Medifast, Inc., Nu Skin Enterprises, Inc., Post Holdings, Inc., The Hain Celestial Group, Inc., and USANA Health Sciences, Inc.
The declaration of future dividends is subject to the discretion of our board of directors and will depend upon various factors, including our earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by our board of directors.
The declaration of future dividends is subject to the discretion of our board of directors and will depend upon various factors, including our earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2024 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by our board of directors.
Performance Graph Set forth below is information comparing the cumulative total shareholder return and share price appreciation plus dividends on our common shares with the cumulative total return of the S&P 500 Index and a market-weighted index of publicly traded peers over the five-year period ended December 31, 2023.
Performance Graph Set forth below is information comparing the cumulative total shareholder return and share price appreciation plus dividends on our common shares with the cumulative total return of the S&P 500 Index and a market-weighted index of publicly traded peers over the five-year period ended December 31, 2024.
(2) The Old Peer Group consists of Conagra Brands, Inc., Nu Skin Enterprises, Inc., Post Holdings, Inc., The Hain Celestial Group, Inc., Tupperware Brands Corporation, and USANA Health Sciences Inc. Information with Respect to Dividends We have not declared or paid cash dividends since 2014.
(2) The Old Peer Group consists of BellRing Brands, Inc., Conagra Brands, Inc., Medifast, Inc., Nu Skin Enterprises, Inc., Post Holdings, Inc., The Hain Celestial Group, Inc., Tupperware Brands Corporation, and USANA Health Sciences, Inc. Information with Respect to Dividends We have not declared or paid cash dividends since 2014.
The 2018 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. We did not repurchase any of our common shares during the three months ended December 31, 2023.
The 2024 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. We did not repurchase any of our common shares during the three months ended December 31, 2024.
For further information on our share repurchases during the year ended December 31, 2023, see Note 8, Shareholders’ Deficit , to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules , of this Annual Report on Form 10-K. Item 6. [Reserved] 45
For further information on our share repurchases during the year ended December 31, 2024, see Note 8, Shareholders’ Deficit , to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules , of this Annual Report on Form 10-K. Item 6. [Reserved] 44
In addition, broad market fluctuations, as well as general economic, business and political conditions may adversely affect the market for our common shares, regardless of our actual or projected performance. The closing price of our common shares on February 7, 2024, was $11.63.
In addition, broad market fluctuations, as well as general economic, business and political conditions may adversely affect the market for our common shares, regardless of our actual or projected performance. The closing price of our common shares on February 12, 2025, was $5.11.
The approximate number of holders of record of our common shares as of February 7, 2024 was 475.
The approximate number of holders of record of our common shares as of February 12, 2025 was 474.
The graph assumes that $100 is invested in each of our common shares, the S&P 500 Index, and the index of publicly traded peers on December 31, 2018 and that all dividends were reinvested. The Company updated its peer group during the year ended December 31, 2023 to be more representative of its product offerings and business model.
The graph assumes that $100 is invested in each of our common shares, the S&P 500 Index, and the index of publicly traded peers on December 31, 2019 and that all dividends were reinvested.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet 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). 51 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.
Biggest changeNet 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).
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 a further discussion of distributor compensation in the U.S. Allowances for product returns, primarily in connection with our buyback program, are provided at the time the sale is recorded.
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 a further discussion of distributor compensation in the U.S. 63 Allowances for product returns, primarily in connection with our buyback program, are provided at the time the sale is recorded.
The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. 64 Our policy is to account for global intangible low-taxed income as a period cost if and when incurred.
The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Our policy is to account for global intangible low-taxed income as a period cost if and when incurred.
However, historically these timing differences generally have been immaterial in the context of using changes in Volume Points as a proxy to explain volume-driven changes in net sales. 47 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.
However, historically these timing differences generally have been immaterial in the context of using changes in Volume Points as a proxy to explain volume-driven changes in net sales. 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.
Our “ other operating income ” consists of government grant income related to China. Our “other (income) expense, net” consists of non-operating income and expenses such as gains or losses on extinguishment of debt. 49 Most of our sales to Members outside the United States are made in the respective local currencies.
Our “ other operating income ” consists of government grant income related to China. Our “other expense (income), net” consists of non-operating income and expenses such as gains or losses on extinguishment of debt. Most of our sales to Members outside the United States are made in the respective local currencies.
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.
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.
In certain other markets that have not been segmented, we use Member data to similarly categorize Members for communication and promotion efforts. 50 DMOs are being generated in many of our markets and are globalized where applicable through the combined efforts of Members and country, regional and corporate management.
In certain other markets that have not been segmented, we use Member data to similarly categorize Members for communication and promotion efforts. DMOs are being generated in many of our markets and are globalized where applicable through the combined efforts of Members and country, regional and corporate management.
See Part I, Item 1, Business , of this Annual Report on Form 10-K for further discussion about the Consent Order and Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K for a discussion of risks related to the settlement with the FTC. 46 Certain Factors Impacting Results 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.
See Part I, Item 1, Business , of this Annual Report on Form 10-K for further discussion about the Consent Order and Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K for a discussion of risks related to the settlement with the FTC. 45 Certain Factors Impacting Results 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.
The majority of these expenditures during the twelve months ended December 31, 2023 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.
The majority of these expenditures during the twelve months ended December 31, 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.
The declaration of future dividends is subject to the discretion of our board of directors and will depend upon various factors, including our earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2018 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects, and other factors deemed relevant by our board of directors.
The declaration of future dividends is subject to the discretion of our board of directors and will depend upon various factors, including our earnings, financial condition, Herbalife Ltd.’s available distributable reserves under Cayman Islands law, restrictions imposed by the 2024 Credit Facility and the terms of any other indebtedness that may be outstanding, cash requirements, future prospects, and other factors deemed relevant by our board of directors.
No goodwill or marketing-related intangibles impairment was recorded during the years ended December 31, 2023 and 2022. 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 a further discussion.
No goodwill or marketing-related intangibles impairment was recorded during the years ended December 31, 2024 and 2023. 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 a further discussion.
The discussion below of net sales details some of the specific drivers of changes in our business and causes of sales fluctuations during the year ended December 31, 2023 as compared to the same period in 2022, as well as the unique growth or contraction factors specific to certain geographic regions or significant markets within a region during these periods.
The discussion below of net sales details some of the specific drivers of changes in our business and causes of sales fluctuations during the year ended December 31, 2024 as compared to the same period 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.
Discussions of 2021 items and year-over-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the year ended December 31, 2022, or the 2022 10-K.
Discussions of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the year ended December 31, 2023, or the 2023 10-K.
The 2018 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. During the year ended December 31, 2023, we did not repurchase any of our common shares through open-market purchases.
The 2024 Credit Facility permits us to repurchase our common shares as long as no default or event of default exists and other conditions, such as specified consolidated leverage ratios, are met. During the year ended December 31, 2024 and 2023, we did not repurchase any of our common shares through open-market purchases.
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 December 31, 2023.
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 December 31, 2024.
Product returns and buybacks were approximately 0.1% of net sales for both of the years ended December 31, 2023 and 2022. We adjust our inventories to lower of cost and net realizable value. Additionally, we adjust the carrying value of our inventory based on assumptions regarding future demand for our products and market conditions.
Product returns and buybacks were approximately 0.1% of net sales for both of the years ended December 31, 2024 and 2023. We adjust our inventories to lower of cost and net realizable value. Additionally, we adjust the carrying value of our inventory based on assumptions regarding future demand for our products and market conditions.
As of December 31, 2023, we sold products in 95 markets throughout the world and we are organized and managed by geographic region. We aggregate our operating segments into one reporting segment, except China, as management believes that our operating segments have similar operating characteristics and similar long-term operating performance.
As of December 31, 2024, we sold products in 95 markets throughout the world and we are organized and managed by geographic region. We aggregate our operating segments into one reporting segment, except China, as management believes that our operating segments have similar operating characteristics and similar long-term operating performance.
An impairment loss is recognized to the extent that the carrying amount of the assets exceeds their fair value. During fiscal year 2023, we performed a quantitative assessment of our marketing-related intangible assets and determined that the fair value of the assets was significantly greater than their carrying value.
An impairment loss is recognized to the extent that the carrying amount of the assets exceeds their fair value. During fiscal year 2024, we performed a quantitative assessment of our marketing-related intangible assets and determined that the fair value of the assets was significantly greater than their carrying value.
The 2024 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2028 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2024 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2025 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2025 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2024 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2029 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2029 Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2024 Credit Facility, to the extent of the value of the assets securing such indebtedness.
In addition, 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 improving but continue to be below pre-pandemic levels.
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 Operating Income 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).
Other Operating Income 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).
The following table sets forth selected results of our operations expressed as a percentage of net sales for the periods indicated: Year Ended December 31, 2023 2022 2021 Operations: Net sales 100.0 % 100.0 % 100.0 % Cost of sales 23.5 22.6 21.4 Gross profit 76.5 77.4 78.6 Royalty overrides(1) 32.8 32.4 31.6 Selling, general, and administrative expenses(1) 36.9 34.8 34.6 Other operating income (0.2 ) (0.3 ) (0.3 ) Operating income 7.0 10.5 12.7 Interest expense 3.2 2.7 2.7 Interest income 0.2 0.2 0.1 Other (income) expense, net — (0.2 ) 0.4 Income before income taxes 4.0 8.2 9.7 Income taxes 1.2 2.0 2.0 Net income 2.8 % 6.2 % 7.7 % (1) 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 following table sets forth selected results of our operations expressed as a percentage of net sales for the periods indicated: Year Ended December 31, 2024 2023 2022 Operations: Net sales 100.0 % 100.0 % 100.0 % Cost of sales 22.1 23.5 22.6 Gross profit 77.9 76.5 77.4 Royalty overrides(1) 32.7 32.8 32.4 Selling, general, and administrative expenses(1) 37.6 36.9 34.8 Other operating income (0.1 ) (0.2 ) (0.3 ) Operating income 7.7 7.0 10.5 Interest expense 4.4 3.2 2.7 Interest income 0.3 0.2 0.2 Other expense (income), net 0.2 — (0.2 ) Income before income taxes 3.4 4.0 8.2 Income taxes (1.7 ) 1.2 2.0 Net income 5.1 % 2.8 % 6.2 % (1) 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.
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.
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.
The capital expenditures relating to Herbalife One, are separate to the Transformation Program described further below. In March 2023, we hosted our annual global Herbalife Honors event where sales leaders from around the world met, shared best practices, and conducted leadership training, and our management awarded Members $77.9 million of Mark Hughes bonus payments related to their 2022 performance.
The capital expenditures relating to Herbalife One, are separate to the Transformation Program described further below. 57 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.
See “Financial Results for the Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022” and “Sales by Geographic Region” for more specific discussion of these and other factors. See Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K for a further discussion of risks related to these matters.
See “Financial Results for the Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023” and “Sales by Geographic Region” for more specific discussion of these and other factors. See Part I, Item 1A, Risk Factors , of this Annual Report on Form 10-K for a further discussion of risks related to these matters.
Generally, gross profit as a percentage of net sales may vary from period to period due to the impact of foreign currency fluctuations, changes in sales mix, price increases, cost changes related to inflation, self-manufacturing and sourcing, and inventory write-downs. Royalty Overrides Royalty overrides were $1,659.2 million and $1,690.1 million for the years ended December 31, 2023 and 2022, respectively.
Generally, gross profit as a percentage of net sales may vary from period to period due to the impact of foreign currency fluctuations, changes in sales mix, price increases, cost changes related to inflation, self-manufacturing and sourcing, and inventory write-downs. Royalty Overrides Royalty overrides were $1,633.0 million and $1,659.2 million for the years ended December 31, 2024 and 2023, respectively.
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.
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.
This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-over-year comparisons between 2023 and 2022.
This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023.
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.
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.
The majority of our purchases from suppliers are generally made in U.S. dollars, while sales to our Members generally are made in local currencies. Consequently, strengthening of the U.S. dollar versus a foreign currency can have a negative impact on net sales and contribution margins and can generate transaction gains or losses on intercompany transactions.
The majority of our purchases from suppliers are generally made in U.S. dollars, while sales to our Members generally are made in local currencies. Consequently, strengthening of the U.S. dollar versus a foreign currency can have a negative impact on gross profit and can generate transaction gains or losses on intercompany transactions.
These prepayments, if any, will be applied against remaining quarterly installments owed under the 2018 Term Loan A and 2018 Term Loan B in order of maturity with the remaining principal due upon maturity, unless directed otherwise by us.
These prepayments, if any, will be applied against remaining quarterly installments owed under the 2024 Term Loan B in order of maturity with the remaining principal due upon maturity, unless directed otherwise by us.
The 2018 Credit Facility also contains affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, declaring and paying dividends and other distributions, redeeming and repurchasing certain other indebtedness, loans and investments, additional indebtedness, liens, mergers, asset sales and transactions with affiliates.
The 2018 Credit Facility also contained affirmative and negative covenants customary for financings of this type, including, among other things, limitations or prohibitions on repurchasing common shares, 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.
The 4.5% increase in net sales for the year ended December 31, 2023 was primarily due to a 10.2% favorable impact of price increases, a 5.0% favorable impact of fluctuations in foreign currency exchange rates and a 1.9% favorable impact of country sales mix, partially offset by a decrease in sales volume, as indicated by a 12.7% decrease in Volume Points.
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.
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 a further discussion on our 2018 Credit Facility.
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 a further discussion on the 2024 Credit Facility, 2018 Credit Facility, and the refinancing thereof.
We have obsolete and slow moving inventories which have been adjusted downward $24.2 million and $31.5 million to present them at their lower of cost and net realizable value in our consolidated balance sheets as of December 31, 2023 and 2022, respectively.
We have obsolete and slow moving inventories which have been adjusted downward $14.4 million and $24.2 million to present them at their lower of cost and net realizable value in our consolidated balance sheets as of December 31, 2024 and 2023, respectively.
We use Volume Points as an indication for changes in sales volume. 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.
We use Volume Points as an indication for changes in sales volume. 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.
As of December 31, 2023, the total amount of cash and cash equivalents held by Herbalife Ltd. and its U.S. entities, inclusive of U.S. territories, was $184.8 million. For earnings not considered to be indefinitely reinvested, deferred taxes have been provided. For earnings considered to be indefinitely reinvested, deferred taxes have not been provided.
As of December 31, 2024, the total amount of cash and cash equivalents held by Herbalife Ltd. and its U.S. entities, inclusive of U.S. territories, was $85.1 million. For earnings not considered to be indefinitely reinvested, deferred taxes have been provided. For earnings considered to be indefinitely reinvested, deferred taxes have not been provided.
We expect that cash and funds provided from operations, available borrowings under the 2018 Credit Facility, and longer-term access to capital markets will provide sufficient working capital to operate our business, to make expected capital expenditures, and to meet foreseeable liquidity requirements for the next twelve months and thereafter.
We expect that cash and funds provided from operations, available borrowings under the 2024 Credit Facility, and longer-term access to capital markets will provide sufficient working capital to operate our business, to make expected capital expenditures, and to meet foreseeable liquidity requirements for the next twelve months and thereafter, including the repayment of the 2025 Notes.
As of December 31, 2023, Herbalife Ltd. had approximately $2.9 billion of permanently reinvested unremitted earnings relating to its operating subsidiaries. As of December 31, 2023, we do not have any plans to repatriate these unremitted earnings to Herbalife Ltd.; therefore, we do not have any liquidity concerns relating to these unremitted earnings and related cash and cash equivalents.
As of December 31, 2024, Herbalife Ltd. had approximately $3.1 billion of permanently reinvested unremitted earnings relating to its operating subsidiaries. As of December 31, 2024, we do not have any plans to repatriate these unremitted earnings to Herbalife Ltd.; therefore, we do not have any liquidity concerns relating to these unremitted earnings and related cash and cash equivalents.
Other (Income) Expense, Net 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).
Other Expense (Income), Net 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). 56 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.
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.
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.
Critical Accounting Policies and Estimates U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year.
GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year.
For a discussion of China’s net sales for the year ended December 31, 2023 as compared to the same period in 2022, see the China section of Sales by Geographic Region below. Contribution Margin by Reporting Segment As discussed above under “Presentation,” contribution margin consists of net sales less cost of sales and Royalty overrides.
For a discussion of China’s net sales for the year ended December 31, 2024 as compared to the same period in 2023, see the China section of Sales by Geographic Region below. 51 Contribution Margin by Reporting Segment 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.
The 2028 Convertible Notes are senior unsecured obligations which rank effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness.
The 2024 Convertible Notes were senior unsecured obligations which ranked effectively subordinate to any of our existing and future secured indebtedness, including amounts outstanding under the 2018 Credit Facility, to the extent of the value of the assets securing such indebtedness.
All obligations under the 2018 Credit Facility are unconditionally guaranteed by certain direct and indirect wholly-owned subsidiaries of Herbalife Ltd. and secured by the equity interests of certain of Herbalife Ltd.’s subsidiaries and substantially all of the assets of the domestic loan parties.
All obligations under the 2024 Credit Facility are unconditionally guaranteed by certain direct and indirect wholly-owned subsidiaries of Herbalife Ltd. and secured on a senior secured basis by the equity interests of certain of Herbalife Ltd.’s subsidiaries and substantially all of the assets of the domestic loan parties.
The impact of increasing or decreasing the valuation allowance could be material to our consolidated financial statements. See Note 12, Income Taxes , to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules , of this Annual Report on Form 10-K for additional information on our net deferred tax assets and valuation allowances.
See Note 12, Income Taxes , to the Consolidated Financial Statements included in Part IV, Item 15, Exhibits, Financial Statement Schedules , of this Annual Report on Form 10-K for additional information on our net deferred income tax assets and valuation allowances.
For the year ended December 31, 2023, we generated $357.5 million of operating cash flow as compared to $352.5 million for the same period in 2022.
For the year ended December 31, 2024, we generated $285.4 million of operating cash flow as compared to $357.5 million for the same period in 2023.
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.
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.
In addition, changes in our business, including acquisitions, changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective income tax rate.
In addition, changes in our business, including acquisitions, changes in our international corporate structure, changes in the geographic location of business functions or assets, changes in the geographic mix and amount of income, as well as changes in our agreements with tax authorities, valuation allowances, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income can affect the overall effective income tax rate. 64 We evaluate the realizability of our deferred income tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary.
As of December 31, 2023 and 2022, we had goodwill of approximately $95.4 million and $93.2 million, respectively. The increase in goodwill during the year ended December 31, 2023 was due to foreign currency translation adjustments. As of both December 31, 2023 and 2022, we had marketing-related intangible assets of approximately $310.0 million.
As of December 31, 2024 and 2023, we had goodwill of approximately $87.7 million and $95.4 million, respectively. The decrease in goodwill during the year ended December 31, 2024 was due to foreign currency translation adjustments. As of both December 31, 2024 and 2023, we had marketing-related intangible assets of approximately $310.0 million.
Because of local country regulatory constraints, we may be required to modify our Member incentive plans as described above. We also pay reduced royalty overrides with respect to certain products worldwide. Consequently, the total Royalty override percentage may vary over time. Our “ contribution margins ” consist of net sales less cost of sales and Royalty overrides.
Because of local country regulatory constraints, we may be required to modify our Member incentive plans as described above. We also pay reduced royalty overrides with respect to certain products worldwide. Consequently, the total Royalty override percentage may vary over time.
In addition, based on the Herbalife One implementation costs incurred thus far, we expect to begin recognizing non-cash amortization expenses of approximately $30 million within our 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.
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 recognized 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.
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.
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.
During the year ended December 31, 2022, we borrowed an aggregate amount of $564.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of $683.0 million on amounts outstanding under the 2018 Credit Facility, which included $654.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility.
During the year ended December 31, 2023, we borrowed an aggregate amount of $199.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of $288.0 million on amounts outstanding under the 2018 Credit Facility, which included $259.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility.
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.
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.
Off-Balance Sheet Arrangements As of December 31, 2023 and 2022, we had no material off-balance sheet arrangements except for those described in Note 5, Long-Term Debt , and 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. 61 Dividends We have not declared or paid cash dividends since 2014.
Off-Balance Sheet Arrangements As of December 31, 2024 and 2023, we had no material off-balance sheet arrangements except for those described in Note 5, Long-Term Debt , and 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.
The majority of the markets in the region instituted price increases to address market-specific conditions during the year ended December 31, 2023. Asia Pacific The Asia Pacific region, which excludes China, reported net sales of $1,713.9 million for the year ended December 31, 2023.
The majority of the markets in the region instituted price increases to address market-specific conditions during the twelve months ended December 31, 2024. Asia Pacific The Asia Pacific region, which excludes China, reported net sales of $1,723.8 million for the year ended December 31, 2024.
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.
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.
In April 2022, our management awarded Members $85.7 million of Mark Hughes bonus payments related to their 2021 performance. 57 In 2021, we initiated a global transformation program to optimize global processes for future growth, or the Transformation Program.
In March 2023, our management awarded Members $77.9 million of Mark Hughes bonus payments related to their 2022 performance. In 2021, we initiated a global transformation program to optimize global processes for future growth, or the Transformation Program.
As of December 31, 2023 and 2022, the U.S. dollar amount outstanding under the 2018 Credit Facility was $886.7 million and $975.7 million, respectively. Of the $886.7 million outstanding under the 2018 Credit Facility as of December 31, 2023, $236.1 million was outstanding under the 2018 Term Loan A and $650.6 million was outstanding under the 2018 Term Loan B.
Of the $886.7 million outstanding under the 2018 Credit Facility as of December 31, 2023, $236.1 million was outstanding under the 2018 Term Loan A and $650.6 million was outstanding under the 2018 Term Loan B.
In local currency, net sales decreased 1.6% for the year ended December 31, 2023 as compared to the same period in 2022.
In local currency, net sales increased 1.2% for the year ended December 31, 2024 as compared to the same period in 2023.
The 1.6% decrease in net sales for the year ended December 31, 2023 was primarily due to a decrease in sales volume, as indicated by a 9.1% decrease in Volume Points, a 0.9% unfavorable impact of fluctuations in foreign currency exchange rates, and a 0.5% unfavorable impact of country sales mix, partially offset by an 8.9% favorable impact of price increases.
The 1.4% increase in net sales for the year ended December 31, 2024 was primarily due to a 6.3% favorable impact of price increases, an increase in sales volume, as indicated by a 0.8% increase in Volume Points (0.6% decrease excluding the impact of the Volume Point adjustments noted above in the Volume Points by Geographic Region section), and a 0.5% favorable impact of country sales mix, partially offset by a 6.4% unfavorable impact of fluctuations in foreign currency exchange rates.
In local currency, net sales increased 0.8% for the year ended December 31, 2023 as compared to the same periods in 2022.
In local currency, net sales increased 7.8% for the year ended December 31, 2024 as compared to the same period in 2023.
In August 2023, we repurchased $65.5 million of our existing 2024 Convertible Notes through open market purchases for an aggregate purchase price of $65.1 million, which included $0.8 million of accrued interest. As of December 31, 2023, the remaining outstanding principal on the 2024 Convertible Notes was $197.0 million.
In August 2023, we repurchased $65.5 million of our existing 2024 Convertible Notes through open market purchases for an aggregate purchase price of $65.1 million, which included $0.8 million of accrued interest.
The primary purpose of the issuance of the 2029 Notes was to repurchase the 2026 Notes as well as for general corporate purposes, which may include shares repurchases and other capital investment projects.
The primary purpose of the issuance of the 2029 Notes was to repurchase the 2026 Notes as well as for general corporate purposes, which may include shares repurchases and other capital investment projects. As of December 31, 2024, the outstanding principal on the 2029 Notes was $600.0 million.
In December 2022, we issued $277.5 million aggregate principal of new convertible senior notes due 2028 as described below, and subsequently used the proceeds, to repurchase $287.5 million of our existing 2024 Convertible Notes from a limited number of holders in privately negotiated transactions for an aggregate purchase price of $274.9 million, which included $1.7 million of accrued interest.
In December 2021, we made an irrevocable election under the indenture governing the 2024 Convertible Notes to require the principal portion of the 2024 Convertible Notes to be settled in cash and any excess in shares or cash. 60 In December 2022, we issued $277.5 million aggregate principal amount of new convertible senior notes due 2028 as described below, and subsequently used the proceeds, to repurchase $287.5 million of our existing 2024 Convertible Notes from a limited number of holders in privately negotiated transactions for an aggregate purchase price of $274.9 million, which included $1.7 million of accrued interest.
Pursuant to the terms of the excess cash flow clause, and based on the 2023 excess cash flow calculation and consolidated leverage ratio as of December 31, 2023, as described and defined under the terms of the 2018 Credit Facility, we will be expecting to make a $66.1 million mandatory prepayment towards the 2018 Term Loan B during the first quarter of 2024. 59 During the year ended December 31, 2023, we borrowed an aggregate amount of $199.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of $288.0 million on amounts outstanding under the 2018 Credit Facility, which included $259.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility.
Pursuant to the terms of the 2018 Credit Facility excess cash flow clause and based on the 2023 excess cash flow calculation and consolidated leverage ratio as of December 31, 2023, as described and defined under the terms of the 2018 Credit Facility, we made a $66.3 million mandatory prepayment towards the 2018 Term Loan B during the first quarter of 2024. 59 During the year ended December 31, 2024, we borrowed an aggregate amount of $1,421.2 million, including $1,221.2 million under the 2024 Credit Facility, which included $821.2 million of borrowings under the 2024 Revolving Credit Facility, and $200.0 million under the 2018 Credit Facility, all of which was under the 2018 Revolving Credit Facility, and repaid a total amount of $1,917.9 million, including $831.2 million on amounts outstanding under the 2024 Credit Facility, which included $821.2 million of repayments on amounts outstanding under the 2024 Revolving Credit Facility, and $1,086.7 million on amounts outstanding under the 2018 Credit Facility, which included $200.0 million of repayments on amounts outstanding under the 2018 Revolving Credit Facility and a $66.3 million mandatory prepayment on amounts outstanding under the 2018 Term Loan B pursuant to the terms of the 2018 Credit Facility excess cash flow clause.
Cash and Cash Equivalents The majority of our foreign subsidiaries designate their local currencies as their functional currencies. As of December 31, 2023, the total amount of our foreign subsidiary cash and cash equivalents was $390.4 million, of which $37.9 million was held in U.S. dollars.
Cash and Cash Equivalents The majority of our foreign subsidiaries designate their local currencies as their functional currencies. As of December 31, 2024, the total amount of our foreign subsidiary cash and cash equivalents was $330.2 million, of which $20.8 million was held in U.S. dollars.
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.
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.
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.
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.
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.
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.
For a further discussion on our debt and operating lease commitments as of December 31, 2023, see the sections above as well as Note 4, Leases and 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.
Our leases generally consist of long-term operating leases, which are payable monthly and relate to our office space, warehouses, distribution centers, manufacturing centers, and equipment. 61 For a further discussion on our debt and operating lease commitments as of December 31, 2024, see the sections above as well as Note 4, Leases and 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.
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.
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.
Net Sales by Reporting Segment The Primary Reporting Segment reported net sales of $4,735.0 million for the year ended December 31, 2023, representing a decrease of $78.4 million, or 1.6%, as compared to the same period in 2022. In local currency, net sales decreased 0.7% for the year ended December 31, 2023 as compared to the same period in 2022.
Net Sales by Reporting Segment The Primary Reporting Segment reported net sales of $4,695.5 million for the year ended December 31, 2024, representing a decrease of $39.5 million, or 0.8%, as compared to the same period in 2023. In local currency, net sales increased 1.8% for the year ended December 31, 2024 as compared to the same period in 2023.
Royalty overrides as a percentage of net sales were 32.8% and 32.4% for the years ended December 31, 2023 and 2022, respectively. 55 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.
Royalty overrides as a percentage of net sales were 32.7% and 32.8% for the years ended December 31, 2024 and 2023, respectively. 55 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.
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.
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 8, Shareholders’ Deficit , 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 share repurchases.
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.
Gross Profit 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.
Gross Profit 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

21 edited+4 added−9 removed14 unchanged
Biggest changeSince our 2018 Credit Facility is based on variable interest rates, if interest rates were to increase or decrease by 1% for the year and our borrowing amounts on our 2018 Credit Facility remained constant, our annual interest expense could increase or decrease by approximately $8.9 million, respectively.
Biggest changeThe 2024 Credit Facility bears variable interest rates, and as of December 31, 2024 the weighted-average interest rate for borrowings under the 2024 Credit Facility was 10.35% and the 2018 Credit Facility bore variable interest rates, and as of December 31, 2023 the weighted-average interest rate for borrowings under the 2018 Credit Facility was 7.62%. 66 Since our 2024 Credit Facility is based on variable interest rates, if interest rates were to increase or decrease by 1% for the year and our borrowing amounts on our 2024 Credit Facility remained constant, our annual interest expense could increase or decrease by approximately $3.9 million, respectively.
See Note 11, Derivative Instruments and Hedging 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 description of foreign currency forward contracts that were outstanding as of December 31, 2023 and 2022, which discussion is incorporated herein by reference.
See Note 11, Derivative Instruments and Hedging 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 description of foreign currency forward contracts that were outstanding as of December 31, 2024 and 2023, which discussion is incorporated herein by reference.
The 2025 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $9.1 million or increase by approximately $9.2 million, respectively.
The 2025 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $1.6 million or increase by approximately $1.7 million, respectively.
The 2029 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $20.6 million or increase by approximately $21.8 million, respectively.
The 2029 Secured Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $26.6 million or increase by approximately $27.8 million, respectively.
As of both December 31, 2023 and 2022, the majority of our outstanding foreign currency forward contracts had maturity dates of less than twelve months with the majority of freestanding derivatives expiring within one month.
As of both December 31, 2024 and 2023, the majority of our outstanding foreign currency forward contracts related to freestanding derivatives had maturity dates of less than twelve months with the majority of freestanding derivatives expiring within one month.
We applied the hedge accounting rules as required by ASC 815 for these hedges. These contracts allow us to buy and sell certain currencies at specified contract rates. As of December 31, 2023 and 2022, the aggregate notional amounts of these contracts outstanding were approximately $76.3 million and $70.6 million, respectively.
We applied the hedge accounting rules as required by ASC 815 for these hedges. These contracts allow us to buy and sell certain currencies at specified contract rates. As of December 31, 2024 and 2023, the aggregate notional amounts of these contracts outstanding were approximately $69.9 million and $76.3 million, respectively.
As of December 31, 2023, we recorded assets at fair value of zero and liabilities at fair value of $3.3 million relating to all outstanding foreign currency contracts designated as cash flow hedges.
As of December 31, 2023, we recorded assets at fair value of zero and liabilities at fair value of $3.3 million relating to all outstanding foreign currency contracts designated as cash flow hedges. These hedges remained effective as of December 31, 2024 and December 31, 2023.
As of December 31, 2022, the fair value of the 2028 Convertible Notes was approximately $305.4 million, and the carrying value was $269.1 million. The 2028 Convertible Notes pay interest at a fixed rate of 4.25% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023.
As of December 31, 2023, the fair value of the 2028 Convertible Notes was approximately $320.9 million, and the carrying value was $270.5 million. The 2028 Convertible Notes pay interest at a fixed rate of 4.25% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2023.
For the forecasted inventory transactions, the forward contracts are used to hedge forecasted inventory transactions over specific months. 65 Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, are recorded as a component of accumulated other comprehensive loss within shareholders’ deficit, and are recognized in cost of sales within our consolidated statement of income during the period which approximates the time the hedged inventory is sold.
Changes in the fair value of these forward contracts designated as cash flow hedges, excluding forward points, are recorded as a component of accumulated other comprehensive loss within shareholders’ deficit, and are recognized in cost of sales within our consolidated statement of income during the period which approximates the time the hedged inventory is sold.
Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2028 Convertible Notes mature on June 15, 2028. As of December 31, 2023, the fair value of the 2025 Notes was approximately $596.8 million and the carrying value was $597.1 million.
Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2028 Convertible Notes mature on June 15, 2028. As of December 31, 2024, the fair value of the 2025 Notes was approximately $263.0 million and the carrying value was $261.8 million.
As of December 31, 2022, the fair value of the 2024 Convertible Notes was approximately $243.3 million and the carrying value was $261.2 million. The 2024 Convertible Notes pay interest at a fixed rate of 2.625% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2018.
The 2024 Convertible Notes paid interest at a fixed rate of 2.625% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2018. As of December 31, 2024, the fair value of the 2028 Convertible Notes was approximately $215.3 million, and the carrying value was $271.9 million.
As of December 31, 2022, the fair value of the 2025 Notes was approximately $534.4 million and the carrying value was $595.6 million. The 2025 Notes pay interest at a fixed rate of 7.875% per annum payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021.
As of December 31, 2023, the fair value of the 2025 Notes was approximately $596.8 million and the carrying value was $597.1 million. The 2025 Notes pay interest at a fixed rate of 7.875% per annum payable semiannually in arrears on March 1 and September 1 of each year, beginning on March 1, 2021.
ASC 815 defines the requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recognized concurrently in earnings. A discussion of our primary market risk exposures and derivatives is presented below.
ASC 815 defines the requirements for designation and documentation of hedging relationships as well as ongoing effectiveness assessments in order to use hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recognized concurrently in earnings.
As of December 31, 2023, the fair values of the 2018 Term Loan A and 2018 Term Loan B were approximately $236.1 million and $650.6 million, respectively, and the carrying values were $235.5 million and $648.2 million, respectively. There were no outstanding borrowings on the 2018 Revolving Credit Facility as of December 31, 2023.
As of December 31, 2023, the fair values of the 2018 Term Loan A and 2018 Term Loan B were approximately $236.1 million and $650.6 million, respectively, and the carrying values were $235.5 million and $648.2 million, respectively.
As of December 31, 2023, the outstanding contracts were expected to mature over the next fifteen months. Our derivative financial instruments are recorded on the consolidated balance sheets at fair value based on quoted market rates.
As of December 31, 2024, the outstanding contracts were expected to mature over the next fifteen months. Our derivative financial instruments are recorded on the consolidated balance sheets at fair value based on quoted market rates. For the forecasted inventory transactions, the forward contracts are used to hedge forecasted inventory transactions over specific months.
Foreign Exchange Risk We transact business globally and are subject to risks associated with changes in foreign exchange rates. Our objective is to minimize the impact to earnings and cash flow associated with foreign exchange rate fluctuations.
A discussion of our primary market risk exposures and derivatives is presented below. 65 Foreign Exchange Risk We transact business globally and are subject to risks associated with changes in foreign exchange rates. Our objective is to minimize the impact to earnings and cash flow associated with foreign exchange rate fluctuations.
As of December 31, 2023, the fair value of the 2029 Notes was approximately $471.6 million and the carrying value was $594.5 million. As of December 31, 2022, the fair value of the 2029 Notes was approximately $412.5 million and the carrying value was $593.6 million.
As of December 31, 2024, the fair value of the 2029 Notes was approximately $421.5 million and the carrying value was $595.4 million. As of December 31, 2023, the fair value of the 2029 Notes was approximately $471.6 million and the carrying value was $594.5 million.
As of December 31, 2022, we recorded assets at fair value of $1.5 million and liabilities at fair value of $3.2 million relating to all outstanding foreign currency contracts designated as cash flow hedges. These hedges remained effective as of December 31, 2023 and December 31, 2022.
As of December 31, 2024, we recorded assets at fair value of $4.1 million and liabilities at fair value of zero relating to all outstanding foreign currency contracts designated as cash flow hedges.
Interest Rate Risk As of December 31, 2023, the aggregate annual maturities of the 2018 Credit Facility were expected to be $94.7 million for 2024 and $792.0 million for 2025.
Interest Rate Risk As of December 31, 2024, the aggregate annual maturities of the 2024 Credit Facility were expected to be $20.0 million for 2025, $20.0 million for 2026, $20.0 million for 2027, $20.0 million for 2028, and $310.0 million for 2029.
Unless redeemed, repurchased or converted in accordance with their terms prior to such date, the 2024 Convertible Notes mature on March 15, 2024. As of December 31, 2023, the fair value of the 2028 Convertible Notes was approximately $320.9 million, and the carrying value was $270.5 million.
On March 15, 2024, the 2024 Convertible Notes matured and were repaid in full. As of December 31, 2023, the fair value of the 2024 Convertible Notes was approximately $196.2 million and the carrying value was $196.8 million.
As of December 31, 2022, the fair values of the 2018 Term Loan A, 2018 Term Loan B, and 2018 Revolving Credit Facility were approximately $250.0 million, $638.8 million, and $60.0 million, respectively, and the carrying values were $257.0 million, $654.3 million, and $60.0 million, respectively.
As of December 31, 2024, the fair value of the 2024 Term Loan B was approximately $387.3 million, and the carrying value was $359.9 million.
Removed
The 2018 Credit Facility bears variable interest rates, and as of December 31, 2023 and 2022, the weighted-average interest rate for borrowings under the 2018 Credit Facility was 7.62% and 4.08%, respectively. During the first quarter of 2020, we entered into various interest rate swap agreements with effective dates ranging between February 2020 and March 2020.
Added
There were no outstanding borrowings on the 2024 Revolving Credit Facility and 2018 Revolving Credit Facility as of December 31, 2024 and December 31, 2023, respectively.
Removed
These agreements collectively provided for us to pay interest at a weighted-average fixed rate of 0.98% on aggregate notional amounts of $100.0 million under the 2018 Credit Facility until their respective expiration dates ranging between February 2022 and March 2023, while receiving interest based on LIBOR on the same notional amounts for the same periods.
Added
As of December 31, 2024, the fair value of the 2029 Secured Notes was approximately $851.3 million and the carrying value was $768.2 million. The 2029 Secured Notes pay interest at a fixed rate of 12.250% per annum payable semiannually in arrears on April 15 and October 15 of each year, beginning on October 15, 2024.
Removed
At inception, these swap agreements were designated as cash flow hedges against the variability in certain LIBOR-based borrowings under the 2018 Credit Facility, effectively fixing the interest rate on such notional amounts at a weighted-average effective rate of, depending on our total leverage ratio, between 2.73% and 3.23%.
Added
The 2029 Secured Notes mature on April 15, 2029, unless redeemed or repurchased in accordance with their terms prior to such date.
Removed
These hedge relationships qualified as effective under FASB ASC Topic 815, Derivatives and Hedging , or ASC 815, and consequently all changes in the fair value of these interest rate swaps were recorded as a component of accumulated other comprehensive loss within shareholders’ deficit, and were recognized in interest expense within our consolidated statement of income during the period when the hedged item and underlying transaction affected earnings.
Added
The 2029 Notes are recorded at their carrying value and their fair value is used only for disclosure purposes, so an increase or decrease in interest rates would not have any impact to our consolidated financial statements; however, if interest rates were to increase or decrease by 1%, their fair value could decrease by approximately $14.3 million or increase by approximately $15.0 million, respectively.
Removed
As of December 31, 2023 and 2022, the aggregate notional amounts of interest rate swap agreements outstanding were approximately zero and $25.0 million, respectively.
Removed
The fair values of the interest rate swap agreements were based on third-party bank quotes, and as of December 31, 2022, we recorded assets at fair value of $0.3 million relating to these interest rate swap agreements.
Removed
The variable interest rates payable under our 2018 Credit Facility were linked to LIBOR as the benchmark for establishing such rates until June 30, 2023, when LIBOR was discontinued as a benchmark rate.
Removed
As a result, our 2018 Credit Facility was amended during the second quarter of 2023, to transition from LIBOR to the alternative benchmark rate, which was set as SOFR starting July 1, 2023. This transition from LIBOR to SOFR may result in interest rates that are higher or lower than those that would have resulted had LIBOR remained in effect.
Removed
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 a further discussion on the 2018 Credit Facility. 66 As of December 31, 2023, the fair value of the 2024 Convertible Notes was approximately $196.2 million, and the carrying value was $196.8 million.

Other HLF 10-K year-over-year comparisons