Technology Spend

What the technology programme cost

Herbalife has spent approximately $357 million of a planned $400 million rebuilding its member-facing technology since 2022. None of that cost has ever reduced adjusted EBITDA: the part capitalised into equipment is amortised inside depreciation and added back, the part capitalised as cloud-software implementation is added back on its own line, and the part expensed outright was added back as programme costs. Over the same years the capital expenditure line halved — which is where most of the recent free-cash-flow improvement came from.

Where $357 million went

The $400 million multi-year Digital Technology Program — Herbalife One — began in 2022 and was described as a rebuild of the member-facing technology platform and web-based member tools [1]. By 31 December 2023 the company had incurred about half the expected implementation cost [2]; by the end of 2024, approximately $330 million [3]; by the end of 2025, approximately $357 million [4].

The spend arrives in two places. Capital expenditure was $159.1 million in 2021 against $116.8 million in 2020 [5], peaked at $164.1 million in 2022 [6], and fell to $80.5 million in 2025 [7]. Separately, the then-CFO told the February 2024 call that the company had "strategically pivoted in 2023 to more SaaS-based arrangements" and capitalised about $35 million of cloud-software implementation costs that sit in other assets rather than in property, plant and equipment — putting total 2023 capital spend at roughly $170 million against roughly $165 million in 2022 [8].

2026 shown at the midpoint of guidance (capex $50M-$80M; cloud-software implementation $35M-$55M). Sources: FY2025 10-K, Consolidated Statements of Cash Flows [9]; Q4 FY2023 call [10]; FY2024 and FY2025 results presentations [11] [12]; Q1 FY2026 10-Q [13]; 2021 and 2022 capital expenditure from the FY2023 10-K, Consolidated Statements of Cash Flows [14].

Total capital spend on that combined basis ran $170 million in 2023, $138 million in 2024 and $105.4 million in 2025 — a real decline, but a shallower one than the capital expenditure line alone shows.

Capital expenditure has also undershot its own guidance in each of the last four years.

Sources: FY2021 [15], FY2022 [16], FY2023 [17], FY2024 [18] and FY2025 [19] Forms 10-K.

The free cash flow arithmetic

Free cash flow was $252.9 million in 2025, against $163.4 million in 2024. This section separates that figure into the operating cash flow it came from and the capital spending it is measured after.

Sources: FY2025 Form 10-K, Consolidated Statements of Cash Flows, for 2023 to 2025 [20]; FY2023 Form 10-K, Consolidated Statements of Cash Flows, for 2021 and 2022 [21]; free cash flow derived as operating cash flow less purchases of property, plant and equipment.

Between 2023 and 2025, free cash flow rose $30.4 million. Operating cash flow over the same two years fell $24.2 million, from $357.5 million to $333.3 million; capital expenditure fell $54.6 million [22]. All of the two-year improvement, and more, came from spending less on capital. The single-year step from 2024 to 2025 is more evenly split: of the $89.5 million gain, $47.9 million came from operating cash flow and $41.6 million from lower capital expenditure. An analyst put the pattern to the CFO on the November 2025 call in exactly those terms — "cash from operations going up, you've got CapEx going down" — and asked whether it created room for buybacks; the answer was that buybacks are not a priority and gross debt of $1.4 billion by 2028 is [23].

Capital spend is now below the depreciation it replaces. Depreciation and amortisation was $121.2 million in 2025, with a further $21.3 million of cloud-software amortisation charged outside that line — $142.5 million of asset consumption against $105.4 million of capitalised spend [24] [25]. The balance sheet shows it: net computer hardware and software fell from $286.0 million to $267.1 million during 2025, and net property, plant and equipment from $460.2 million to $447.7 million [26]. That is arithmetically expected while a freshly built platform amortises on three-to-ten-year lives, and it is not by itself underinvestment. It does mean the capital line has limited room to fall further without shrinking the asset base.

What adjusted EBITDA has not been charged

Herbalife's reconciliation runs from net income to EBITDA, then to adjusted EBITDA. Three separate lines in that second step carry the technology programme.

Technology add-backs are the cloud-software amortisation, digital technology programme costs and Technology Realignment Program lines; other add-backs are the Transformation, Restructuring, India GST, tax-settlement and debt-extinguishment items. Sources: Q4 FY2023 results release [27]; FY2024 [28] and FY2025 [29] results presentations.

In 2025 the three technology lines were cloud-software amortisation of $21.3 million, Technology Realignment Program expenses of $9.1 million and digital technology programme costs of $6.2 million — $36.6 million, or two-thirds of the entire $54.9 million gap between EBITDA of $602.7 million and adjusted EBITDA of $657.6 million [30]. Across 2022 to 2025 the same lines total $135.6 million. On the trailing twelve months to March 2026 they run $35.7 million against adjusted EBITDA of $668.4 million [31].

The remainder of the programme cost never enters the reconciliation at all, because it was capitalised into equipment. That portion began amortising in the first quarter of 2024 and ran approximately $35 million in 2024 and $43 million in 2025 [32] — inside depreciation and amortisation, which EBITDA removes by construction.

Those same lines are what the covenant stack is measured on, and Debt and Covenants traces the effect through the documents. Every leverage ratio in Herbalife's covenant stack is struck on Credit Agreement EBITDA of $744.0 million for the twelve months to March 2026 — $75.6 million above the company's own adjusted EBITDA of $668.4 million, which itself excludes $36.6 million of FY2025 technology cost while the capitalised remainder of the same $357 million programme amortises inside a depreciation line EBITDA removes by construction — and the 2.49 times ratio that measure produces is what cleared the 3.00:1.00 gate the ninth amendment installed for the restored $400.0 million restricted-payments basket, on a base whose FY2026 India GST mismatch is now guided to cost $20-25 million.

Values shown are FY2025, the last row of the bridge above: EBITDA of $602.7 million, technology add-backs of $36.6 million — amortization of SaaS implementation costs, expenses related to the Technology Realignment Program and digital technology program costs — and adjusted EBITDA of $657.6 million. Source: Q4 and FY2025 results presentation [33].

Adjusted EBITDA is the denominator of the trading multiple set out in Valuation Arithmetic, the base from which the Credit Agreement EBITDA in Debt and Covenants is built, and one of the two metrics on which both the annual bonus and the reinstated performance stock units pay, per Pay and Capital Allocation. At the 4.3 times enterprise value to adjusted EBITDA used in Valuation Arithmetic, $36.6 million of technology add-backs is roughly $157 million of enterprise value, or about $1.52 per share against a $12.18 price.

The newest of the three lines is worth naming. The Technology Realignment Program was initiated in April 2025 as a process and organisational redesign of the global technology infrastructure; $11.5 million of pre-tax expense had been incurred through 31 March 2026, all of it employee retention and separation costs [34], against approximately $13 million of expected annual savings from 2026 [35]. The $13 million of expected annual savings exceeds the $11.5 million incurred to date, and 2025 is the fourth consecutive year in which a technology cost has been presented as non-recurring.

What the capital expenditure line now measures

The FY2025 10-K withdrew the separate Herbalife One disclosure: because the company plans to keep investing broadly in digital technology, "it is no longer relevant to separately disclose costs associated with Herbalife One" [36]. The same filing guided 2026 capital expenditure to $50 million to $80 million, and said nothing in that discussion about the cloud-software bucket.

The Q1 2026 10-Q filled the gap. Capitalised implementation costs for cloud-based software applications were $10.0 million in the first quarter of 2026 against $4.7 million a year earlier, recorded in prepaid expenses and other current assets and in other assets, with amortisation charged to general and administrative expenses; full-year 2026 costs of that kind are expected at $35 million to $55 million [37]. The CFO put it plainly on the May 2026 call: those costs "are incremental to CapEx" [38].

The two lines move in opposite directions. First-quarter capital expenditure fell 45%, from $20.0 million to $11.0 million; capitalised cloud-software costs more than doubled, from $4.7 million to $10.0 million [39]. Combined, the two fell 15%, from $24.7 million to $21.0 million — the $11 million and $10 million the May 2026 results deck reports side by side [40].

For the full year, the guided ranges sum to $85 million to $135 million against $105.4 million of combined spend in 2025 — a midpoint of $110 million, slightly above last year. The capital expenditure line alone is guided at $50 million to $80 million against $80.4 million: down 19% at the midpoint and as much as 38% at the low end. Set against guided 2026 adjusted EBITDA of $675 million to $705 million, up $17.4 million to $47.4 million on 2025 [41], the top of the capital range would absorb $29.6 million of that increase.

The read, and what would change it

The evidence points to the 2025 free-cash-flow step-up being the back end of an investment cycle at least as much as an operating improvement: since 2023, free cash flow is up $30.4 million while operating cash flow is down $24.2 million, and the entire difference is lower capital expenditure. On the 2026 guidance, that source of improvement stops — combined capitalised spend of $85 million to $135 million brackets the $105.4 million spent in 2025, with a midpoint slightly above it, and what changes is mainly its allocation between two disclosure lines.

The strongest fact against that read is the first quarter of 2026, when operating cash flow was $113.8 million against $0.2 million a year earlier. Most of it is timing rather than trading: the company attributes $99.0 million of the $113.6 million swing to favourable changes in operating assets and liabilities, mainly employee bonus payments made in the second quarter of 2026 but in the first quarter of 2025, and only $14.6 million to higher net income excluding non-cash items [42]. The $99.0 million reverses in the second quarter.

A second fair objection: a platform rebuild genuinely is a one-time cost, $357 million of the planned $400 million is spent, and combined 2025 capital spend of $105.4 million on $5,037.5 million of net sales is 2.1% — close to the $116.8 million Herbalife spent in 2020, before the programme began [43]. On that reading the company has simply returned to a normal spending level with a rebuilt platform to show for it, and the SaaS line is an accounting consequence of buying cloud licences instead of owning software, not a place to hide money.

Two things would settle it. The first is whether 2026 free cash flow rises on operating cash flow with combined capitalised spend landing near the bottom of the $85 million to $135 million range, rather than on the capital line falling again. The second is whether the technology add-backs shrink: cloud-software amortisation of $20.4 million on the trailing twelve months to March 2026 is running level with the $16 million to $25 million of annual cloud-software spend disclosed for 2024 and 2025, so the add-back should fade unless the 2026 spend guidance of $35 million to $55 million is met at the top of the range. A fifth consecutive year of technology costs presented outside adjusted EBITDA would say the programme is a run-rate, not a project.

One limitation is worth stating. The corpus discloses combined capital spend only from 2023 onward, when the cloud-software split began; the 2021 and 2022 figures in the first chart are capital expenditure alone, and no separate cloud-software figure exists for those years. The full-year 2025 cloud-software figure of $25 million comes from the results presentation rather than the 10-K, which does not disclose it.