Annual report pursuant to Section 13 and 15(d)

Segment Information

v3.25.0.1
Segment Information
 12 Months Ended
Dec. 31, 2024
Segment Reporting [Abstract]  
Segment Information

10. Segment Information

The Company is a nutrition company that sells a wide range of weight management; targeted nutrition; energy, sports, and fitness; and outer nutrition products. The Company’s products are manufactured by the Company in its Changsha, Hunan, China extraction facility; Suzhou, China facility; Nanjing, China facility; Lake Forest, California facility; and Winston-Salem, North Carolina facility, as well as by third-party providers, and then are sold to Members who consume and sell Herbalife products to retail consumers or other Members. Revenues reflect sales of products by the Company to its Members and are categorized based on geographic location.

As of December 31, 2024, the Company sold products in 95 markets throughout the world and was organized and managed by five geographic regions: North America, Latin America, EMEA, Asia Pacific, and China. The Company defines its operating segments as those geographical operations. The Company aggregates its operating segments, excluding China, into a reporting segment, or the Primary Reporting Segment, as management believes that the Company’s operating segments have similar operating characteristics and similar long-term operating performance. In making this determination, management believes that the operating segments are similar in the nature of the products sold, the product acquisition process, the types of customers to whom products are sold, the methods used to distribute the products, the nature of the regulatory environment, and their economic characteristics. China has been identified as a separate reporting segment as it does not meet the criteria for aggregation. The Company determined the Chief Operating Decision Maker (CODM) as its Chief Executive Officer. The CODM reviews financial information, including net sales and contribution margin by operating segment, in order to determine how to allocate the Company's resources across its operating segments, and reviews its assets and capital expenditures on a consolidated basis and not by operating segment. Therefore, net sales and contribution margin are presented by reportable segment and assets and capital expenditures by segment are not presented.

Operating information for the two reportable segments, sales by product line, and sales by geographic area are as follows:

 

 

 

Year Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

 

 

(in millions)

 

Net sales:

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

4,695.5

 

 

$

4,735.0

 

 

$

4,813.4

 

China

 

 

297.6

 

 

 

327.4

 

 

 

391.0

 

Total net sales

 

$

4,993.1

 

 

$

5,062.4

 

 

$

5,204.4

 

Significant segment expenses

 

 

 

 

 

 

 

 

 

Cost of Sales (4)(5):

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

1,060.9

 

 

$

1,141.0

 

 

$

1,121.2

 

China

 

 

43.4

 

 

 

50.0

 

 

 

52.4

 

Total cost of sales

 

$

1,104.3

 

 

$

1,191.0

 

 

$

1,173.6

 

Royalty Overrides and service fees to China independent service providers(1)(3)(4)(5):

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

1,630.3

 

 

$

1,656.2

 

 

$

1,686.9

 

China

 

 

152.5

 

 

 

168.0

 

 

 

199.4

 

Total royalty overrides and service fees to China independent service providers

 

$

1,782.8

 

 

$

1,824.2

 

 

$

1,886.3

 

Contribution margin(1)(3):

 

 

 

 

 

 

 

 

 

Primary Reporting Segment

 

$

2,004.3

 

 

$

1,937.8

 

 

$

2,005.3

 

China

 

 

101.7

 

 

 

109.4

 

 

 

139.2

 

Total contribution margin

 

$

2,106.0

 

 

$

2,047.2

 

 

$

2,144.5

 

Selling, general, and administrative expenses excluding service fees to China independent service providers(1)(2)(3)

 

 

1,725.6

 

 

 

1,701.0

 

 

 

1,614.2

 

Other operating income

 

 

(5.5

)

 

 

(10.2

)

 

 

(14.9

)

Interest expense

 

 

218.3

 

 

 

165.9

 

 

 

139.3

 

Interest income

 

 

12.3

 

 

 

11.5

 

 

 

6.1

 

Other expense (income), net

 

 

10.5

 

 

 

(1.0

)

 

 

(12.8

)

Income before income taxes

 

 

169.4

 

 

 

203.0

 

 

 

424.8

 

Income taxes

 

 

(84.9

)

 

 

60.8

 

 

 

103.5

 

Net income

 

$

254.3

 

 

$

142.2

 

 

$

321.3

 

Net sales by product line:

 

 

 

 

 

 

 

 

 

Weight Management

 

$

2,768.1

 

 

$

2,851.7

 

 

$

2,954.2

 

Targeted Nutrition

 

 

1,484.3

 

 

 

1,480.0

 

 

 

1,512.7

 

Energy, Sports, and Fitness

 

 

572.2

 

 

 

560.3

 

 

 

550.6

 

Outer Nutrition

 

 

83.6

 

 

 

82.5

 

 

 

85.8

 

Literature, Promotional, and Other

 

 

84.9

 

 

 

87.9

 

 

 

101.1

 

Total net sales

 

$

4,993.1

 

 

$

5,062.4

 

 

$

5,204.4

 

Net sales by geographic area:

 

 

 

 

 

 

 

 

 

United States

 

$

1,026.0

 

 

$

1,100.5

 

 

$

1,225.5

 

China

 

 

297.6

 

 

 

327.4

 

 

 

391.0

 

India

 

 

844.8

 

 

 

796.6

 

 

 

677.1

 

Mexico

 

 

538.6

 

 

 

525.0

 

 

 

474.6

 

Others

 

 

2,286.1

 

 

 

2,312.9

 

 

 

2,436.2

 

Total net sales

 

$

4,993.1

 

 

$

5,062.4

 

 

$

5,204.4

 

 

(1)
Contribution margin consists of net sales less cost of sales, Royalty overrides, and service fees to our independent service providers in China. For the China segment, contribution margin includes the portion of service fees to China independent service providers that are currently recorded in selling, general, and administrative expenses within the Company's accompanying consolidated statements of income, which totaled $149.8 million, $165.0 million, and $196.2 million for the years ended December 31, 2024, 2023, and 2022, respectively.
(2)
Selling, general, and administrative expenses exclude the portion of service fees to China independent service providers that are included in selling, general, and administrative expenses within the Company's accompanying consolidated statements of income as described in footnote (1) above.
(3)
In the second quarter of 2024, the Company, as part of its restructuring initiatives, which are described further in Note 14, Restructuring Activities, changed its contribution margin presentation for its China segment which now includes expenses related to service fees to the Company's independent service providers in China as described in the footnotes immediately above. Historically, the China contribution margin did not include the portion of service fees that are recognized in selling, general and administrative expenses in the Company’s accompanying consolidated statements of income. Historical information presented in the table above has been reclassified to conform with the current period contribution margin presentation. This change had no impact on the Company's accompanying consolidated statements of income and only impacts this segment note presentation.
(4)
The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM.
(5)
As a result of adopting ASU 2023-07 during the fourth quarter of 2024, the Company has expanded and updated its disclosures for the current year and prior year periods as further described in Note 2, Basis of Presentation.

As of December 31, 2024 and 2023, goodwill allocated to the Company’s reporting units included in the Company’s Primary Reporting Segment was $84.8 million and $92.4 million, respectively, and goodwill allocated to the China segment was $2.9 million and $3.0 million, respectively.

The following table sets forth property, plant, and equipment and deferred income tax assets by geographic area:

 

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

 

 

(in millions)

 

Property, plant, and equipment, net:

 

 

 

 

 

 

 

 

 

United States

 

$

409.9

 

 

$

437.6

 

 

$

399.9

 

Foreign

 

 

50.3

 

 

 

68.9

 

 

 

86.4

 

Total property, plant, and equipment, net

 

$

460.2

 

 

$

506.5

 

 

$

486.3

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

 

United States

 

$

273.2

 

 

$

209.1

 

 

$

170.0

 

Foreign

 

 

228.6

 

 

 

78.7

 

 

 

73.2

 

Total deferred income tax assets

 

$

501.8

 

 

$

287.8

 

 

$

243.2