NATR 10-K & 10-Q changes, risk factors and insider trading

Our global operations are subject to numerous trade and economic sanctions and other restrictions imposed by the U.S., the EU and other governments and organizations. The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws and other federal statutes and regulations, including those established by the Office of Foreign Assets Control (“OFAC”). Under these laws and regulations, as well as other anti-corruption laws, anti-money-laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices,practices (including cessation of business activities in sanctioned countries or with sanctioned persons or entities) and modifications to compliance programs, which may increase compliance costs and may subject us to fines, penalties and other sanctions. A violation of these laws, regulations, policies or procedures could adversely impact our business, results of operations and financial condition.

For example, in November 2024 we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made an initial voluntary disclosuresself-disclosure of apparent trade controls violations to the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”). In addition, in April 2025 we filed an initial voluntary self-disclosure with the Office of Foreign Asset Control (“OFAC”) relating to the same internal investigation. Following our internal investigation, we filed final voluntary self-disclosures with BIS and OFAC on September 5, 2025. We estimate that such potential violations being investigated represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this investigation may include fines or penalties imposed in response to our voluntary disclosures. While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation, we are unable to predict the outcome or to reasonably estimate the timetiming itof mayresolution take to resolveof these matters.

Although we have implemented policies and procedures in these areas, we cannot assure you that our policies and procedures are sufficient or that directors, officers, employees, representatives, manufacturers, suppliers and agents have not engaged and will not engage in conduct in violation of such policies and procedures.

Direct selling companies are subject to laws and regulations by various government agencies throughout the world. These laws and regulations are generally intended to prevent fraudulent or deceptive practices, to ensure that sales are made to consumers of the products and that compensation is based primarily upon bone fide sale of products to consumers and not primarily upon the recruitment of other persons as participants in the compensation program. Regulations in some countries in which we operate, including South Korea and China, limit the amount of compensation we can pay to our independent consultants. Failure to comply with these laws and regulations could result in significant penalties, which could have a material adverse effect on our results of operations and financial condition. Violations could result from misconduct by an independent consultant, ambiguity in statutes, changes or new laws and regulations affecting our business andbusiness, court-related decisions.decisions, or changes in regulatory interpretation or enforcement.

In recent years, FTC settlements with direct selling companies have required those companies to make material changes to their business model, including basing sales compensation and qualification only on sales to retail and preferred customers and on purchases by a consultant for personal consumption within allowable limits. If the requirements in FTC settlements or judicial cases lead to new industry standards or rules, our business could be impacted, and we may need to amend one or more of our global sales compensation plan.plans. If we are required to make such changes, or if the FTC seeks to enforce similar measuresrequirements inare the industry, eitherimposed through rulemaking or an enforcement action against our company,actions, our business could be materially harmed.

In the future, we may be subject to additional laws or regulations administered by the FDA or other federal, state, local or foreign regulatory authorities, the repeal or amendment of laws or regulations which we consider favorable and/or more stringent interpretations of current laws or regulations. Additionally, regulatory standards governing dietary supplements continue to evolve, and regulatory authorities may adopt more restrictive interpretations of existing laws and regulations. Such changes could, among other things, require reformulation of certain products to meet new standards, cause us to recall or discontinue certain of our products, impose additional record-keeping or registration requirements, expand documentation of the properties of certain products and expand or alter labeling and/or scientific substantiation requirements. Any or all such requirements could increase our costs of operating the business and have a material adverse effect on our results of operations and financial condition.

The FTC and states’ attorneys general have in the past instituted enforcement actions against cosmetic, dietary supplement and food companies and manufacturers for false and misleading advertising of some of their products. Improper or unsubstantiated product or earnings claims by independent consultants, even where contrary to our policies, may subject us to regulatory investigations, enforcement actions, fines, penalties, product relabeling requirements or reputational harm. The FTC and states’ attorneys general from time to time have initiated investigations and enforcement actions against direct selling companies alleging that the companies operated a pyramid scheme. Although the FTC and states’ attorneys general exercise a substantial degree of subjectivity in determining whether a company is operating a pyramid scheme, the FTC and states’ attorneys general consider whether the compensation received by independent consultants is based primarily on recruitment of other persons as participants in the compensation program and not on bona fide sales of products to consumers. An enforcement action brought by a government agency, like the FTC in the United States, or a class action lawsuit, could adversely affect our reputation and potentially result in significant penalties and costs, either of which could have a material adverse effect on our results of operations and financial condition.

Legal and regulatory requirements concerning the direct selling industry generally do not include “bright line” rules and are inherently fact-based and subject to interpretation. As a result, regulators and courts often have discretion in their application of these laws and regulations. The enforcement or interpretation of these laws and regulations by government agencies or courts change from time to time and force us to make appropriate changes to our direct selling system. We periodically become aware of investigations and enforcement actions against other companies in the direct selling industry. Additionally, we could also be subject to challenges by private parties in civil actions, including class action cases brought by plaintiffs’ lawyers. An investigation, adverse judgment or significant settlement from an enforcement actingagency or a civil class action lawsuit,lawsuit brought against us,us could have a material adverse effect on our results of operations and financial condition.

The advertisement of our products is subject to extensive regulations in most of the markets in which we do business, including the United States. Our independent consultants may fail to comply with such regulations governing the advertising of our products or business opportunity, and regulators may hold us responsible for the violations of our independent consultants. In the U.S., our products are sold principally as dietary supplements and cosmetics and are subject to rigorous FDA regulations limiting the types of therapeutic claims that can be made relating to the products. The treatment or cure of disease, for example, isare not a permitted claimclaims for our products. In the U.S., the FTC and states’ attorneys general are primarily responsible for providing consumer protection by, among other things, investigating and initiating enforcement actions against business practices it deems deceptive or fraudulent. We cannot ensure that all marketing materials used by our independent consultants comply with applicable regulations, including bans on false and misleading product and earnings potential related claims. If ourregulators independentdetermine consultantsthat failwe toare complyresponsible withfor thesesuch restrictions, thenviolations, we could be subjected to claimsinvestigations, ofenforcement false advertising, misrepresentation,actions, significant financial penalties, costly mandatory product recalls andor relabeling requirements, any of which could have a material adverse effect on our results of operations and financial condition.

We are subject to anti-bribery laws, including the Foreign Corrupt Practices Act (“FCPA”).Act.

As a direct selling company, our revenue depends primarily on the number and productivity of our independent consultants. We, like most direct selling companies, experience high levels of turnover among our independent consultants from year to year,year who may terminate their service at any time. Generally,Generally we need to increase the productivity of our independent consultants and/or retain existing independent consultants and attract additional independent consultants to maintain and/or increase future sales.

A significant amount of our net sales,sales in some of our markets,markets is dependent on a few independent consultants and their extensive sales networks. The loss or inactivity of one of these independent consultants who, together with their extensive sales network, generate a significant amount of our net sales could have a material adverse effect on our results of operations and financial condition.

Our expansionbusiness in China is subject to risks associated with operatingintegration, acompliance, jointpurchase venture.price obligations, and general China-related laws and regulations.

On August 25, 2014, we completed a transaction with Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (“Fosun Pharma”), which created a joint venture owned 80 percent by us and 20 percent by a wholly owned subsidiary of Fosun Pharma. Effective operation of the joint venture depends on good relations between us and Fosun Pharma, active synergies between the two companies and positive legal and regulatory recognition of the joint venture. Any disruption in relations, inability to work efficiently or disadvantageous treatment of the joint venture by the Chinese or other authorities could have a material adverse effect on our results of operations and financial condition.

In 2024,2025, we recognized approximately 71.872.2 percent of our net sales in markets outside the United States, the majority of which were recognized in each market’s respective local currency. We purchase inventory from companies in foreign markets and in the United States, primarily in U.S. dollars. In preparing our financial statements, we translate net sales and expenses in foreign countries from their local currencies into U.S. dollars using average exchange rates. Because a majority of our sales are in foreign countries, exchange rate fluctuations may have a significant effect on net sales and earnings. Our reported earnings have in the past been, and are likely to continue to be, significantly affected by fluctuations in currency exchange rates,rates with net sales and earnings generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar.

We manufacture a significant portion of theour products sold at our manufacturing facility located in Spanish Fork, Utah. As a result, we are dependent uponon the uninterrupted and efficient operation of our manufacturing facility in Spanish Fork and our distribution facilities throughout the country. Our manufacturing facilities and distribution facilities are subject to the risk of catastrophic loss due to, among other things, earthquake, fire, flood, epidemic, terrorism or other natural or man-made disasters, as well as the occurrence of significant equipment failures. If any of these facilities were to experience a catastrophic loss, it would be expected to disrupt our operations and could have a material adverse effect on our results of operations and financial condition. We source many of our ingredients and some of our finished products through third-party suppliers. If any of our third-party suppliers were to suffer a catastrophic loss, it would cause delays in our manufacturing and could have a material effect on our results of operations and financial condition.

A•a widespread pandemic and measures taken in response by governments and businesses worldwide to contain its spread, including quarantines, facility closures, travel and logistics restrictions, border controls and shelter in place or stay at home and social distancing orders, may adversely impact our supply chain, manufacturing, logistics, workforce and operations, as well as the operations of our customers and suppliers globally. Such adverse impacts on our supply chain could limit our ability to manufacture and sell our products on a timely and cost-effective basis, which could adversely affect our business and results of operations.orders.

We are vulnerable to risks associated with importing and exporting materials and products manufactured both at our manufacturing facility and third-party manufacturing facilities,facilities including, among other things: (a) risks of damage, destruction, or confiscation of products while in transit to our distribution centers; and (b) transportation and other delays in shipments, including as a result of heightened security screening, port congestion and inspection processes or other port- of-entry limitations or restrictions in the United States. Failure to procure materials needed to manufacture our products and to deliver merchandise to our independent consultants and customers in a timely, effective and economically viable manner could reduce our sales and gross margins, damage our brand and harm our business.

We also rely on the timely and free flow of goods through open and operational ports from our suppliers and manufacturers and to our independent consultants and customers. Labor shortages at our own facilities, ports, our common carriers,carriers or our suppliers or manufacturers could harm our business, particularly if labor shortages occur during periods of significant importing or manufacturing, potentially resulting in delayed or canceled orders by customers and unanticipated inventory accumulation or shortages. These and similar disruptions could result in harm to our business, results of operations and financial condition.

In addition, we rely uponon independent land-based and air freight carriers for product shipments to our independent consultants and customers who purchase our products. We may not be able to obtain sufficient freight capacity on a timely basis or at favorable shipping rates and, therefore, may not be able to receive products from suppliers or deliver products to retail partners or customers in a timely and cost-effective manner.

Accordingly, we are subject to risks,risks including treaties, tariffs, sanctions, labor disputes, union organizing activity, inclement weather, public health crises such as pandemics or epidemics and increased transportation costs,costs associated with our third-party contract manufacturers’ and carriers’ ability to provide products and services to meet our requirements. In addition, if the cost of fuel rises,rises the cost to deliver products may rise, which could harm our profitability.

The accuracy of our financial reporting and safeguarding of our assets depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect financial loss or misstatements. Failure to maintain effective internal control over financial reporting or lapses in disclosure controls and procedures,procedures could undermine the ability to provide accurate disclosure (including with respect to financial information) on a timely basis or prevent or timely detect unauthorized wire transfers, which could cause investors to lose confidence in our internal controls (including with respect to financial information), require significant resources to remediate the lapse or deficiency and expose us to legal or regulatory proceedings.

Maintaining compliance with these evolving regulations and requirements could be difficult and may increase costs. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of company, employee, consultant or guest data which could adversely affect our reputation, disrupt our operations,operations or result in remedial and other costs, fines or lawsuits, which could have a material adverse effect on our results of operations and financial condition. Although we take measures to protect the security, integrity and confidentiality of our data systems, we experience cyber-attackscybersecurity threats of varying degrees and types on a regular basis.types. Our infrastructure may be vulnerable to these attacks, and in some cases, it could take time to discover them. Breaches of our data systems, or those of our vendors, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical breaches or other actions, could result in material interruptions or malfunctions in our or such vendors’ websites, applications, data processing, or disruption of other business operations. For example, in February 2023 we were targeted by a sophisticated social engineering attack, in which a third party fraudulently induced personnel at our wholly owned subsidiary in Japan to make wire transferstransfers. totalingSimilar $4.8incidents million.could Theseoccur in the future and other attacks could result in additional losseslosses, andregulatory harminquiries, ourlitigation businessor andreputational results of operations.harm.

For various reasons or circumstances, our employees may work remotely from time to time.remotely. During such times, remote access heightens the risk of a cyber-attack. Additionally, outside parties may attempt to fraudulently induce employees, users,users or customers to disclose sensitive information to gain access to our data or our users’ or customers’ data. Any such breach or unauthorized access could result in the unauthorized disclosure, misuse or loss of sensitive information and lead to significant legal and financial exposure, regulatory inquiries or investigations, loss of confidence by our sales force, disruption of our operations and damage to our reputation. These risks are heightened as we work with third-party partners and as our sales force uses social media, as the partners and social media platforms could be vulnerable to the same types of breaches.

Some data we store, process and use,use contains personal information,information which subjects us to a variety of privacy, rights of publicity, data protection, content, protection of minors and consumer protection laws and regulations in the United States and other countries. Such laws and regulations may impose significant fines or penalties and can be particularly restrictive. The application and interpretation of these laws and regulations are often uncertain and could result in investigations, claims, changes to our business practices, increased cost of operations and declines in growth, retention or engagement, any of which could have a material adverse effect on our results of operations and financial condition.

We cannot guarantee that the privacy policies and other statements regarding our practices will be found to be sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information. Whether and how existing domestic and international privacy and consumer protection laws and regulations apply is still uncertain and may take years to resolve.uncertain. If privacy laws and regulations are drafted or interpreted broadly, they could be deemed to apply to the technology we use and could restrict our information collection methods or decrease the utility of information we would be permitted to store, process or use. The costs of compliance with these and other laws or regulatory actions may prevent us from selling our products, or increase the costs of doing so, and may affect our ability to invest in or develop products. In addition, a determination by a court or government agency that any of our practices, or those of our independent consultants, do not meet these standards could result in liability or adverse publicity, which could have a material adverse effect on our results of operations and financial condition.

Like many companies, our business is highly dependent upon our information technology infrastructure (websites, accounting and manufacturing applications and product and customer information databases) to manage effectively and efficiently manage our operations, including order entry, customer billing, accurate tracking of purchases and volume incentives and managing accounting, finance and manufacturing operations. The occurrence of a natural disaster, security breach or other unanticipated problem could result in interruptions in our day-to-day operations that could adversely affect our business. A long-term failure or impairment of any of our information systems could have a material adverse effect on our results of operations and financial condition.

We are a naturalglobal healthleader in manufacturing and wellnessmarketing companyhigh-quality primarily engaged in the manufactureherbal and sale of nutritional and personal care products.supplements. We are a Utah corporation with our principal place of business in Lehi, Utah, and sell our products directly to customers and to a sales force of independent consultants who resell our products to consumers.

In 2024,2025, we experienced an increase in our consolidated net sales of 2.05.7 percent (or 3.85.3 percent in local currencies) compared to 2023.2024. Asia net sales increased approximately 3.36.7 percent (or 7.56.4 percent in local currencies) compared to 2023.2024. Europe net sales increased approximately 4.69.8 percent (or 3.37.8 percent in local currencies) compared to 2023.2024. North America net sales decreasedincreased approximately 0.73.4 percent (or 0.63.6 percent in local currencies) compared to 2023.2024. Latin America and Other net sales decreased approximately 1.25.5 percent (or 0.94.2 percent in local currencies) compared to 2023.2024. The strengthening of the U.S. dollar versus the local currencies, primarily in our AsianEurope and Asia markets, resulted in an approximate 1.80.4 percent, or $7.7$1.8 million, decreaseincrease of our net sales during the year ended December 31, 2024.2025.

Cost of sales increased $5.5$2.7 million during 2024,2025, compared to the same period in 2023,2024, and as a percentage of net salessales, were 27.6 percent and 28.5 percent and 27.9 percent for 20242025 and 2023,2024, respectively. The increasedecrease in cost of sales percentage is primarily due to inflationcost savings initiatives and unfavorablemarket foreign exchange which more than offset our savings initiatives.mix.

In absolute terms, selling, general and administrative expenses decreasedincreased $3.1$14.4 million during 2024,2025, and as a percentage of net salessales, were 37.2 percent and 36.1 percent and 37.5 percent for 20242025 and 2023,2024, respectively. The decreaseincrease was primarily related to the streamliningtiming of ourcompensation globalcosts, overheadincremental expensesinvestment in digital marketing and reducedconsultant events, increased service fees due to China’s lowerhigher net sales.sales, as well as other non-recurring expenses.

On February 24, 2022, Russian forces launched significant military action against Ukraine. There continues to be sustained conflict and disruption in the region, which is expected to endure for the foreseeable future. Our consultants in our Eastern Europe market, a market within our Europe business segment that includes Russia, Ukraine, Belarus and other Common Independent States in the region,impacted regions continue to operate their independent businesses, albeit at a reduced level than prior to the start of the conflict. We expect that this will continue to impact our business for the foreseeable future. We will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia and will consider further actions as appropriate.

In addition, in November 20242024, we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made an initial voluntary disclosuresself-disclosure of apparent trade controls violations to the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”). In addition, in April 2025, we filed an initial voluntary self-disclosure with the Office of Foreign Asset Control (“OFAC”) relating to the same internal investigation. Following our internal investigation, we filed final voluntary self-disclosures with BIS and OFAC on September 5, 2025. We estimate that such potential violations being investigated represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this investigation may include fines or penalties imposed in response to our voluntary disclosures. While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation,operation we are unable to predict the outcome or to reasonably estimate the timetiming itof mayresolution take to resolveof these matters.

We are involved in certain legal proceedings.proceedings and disputes. When a loss is considered probable in connection with litigation or non-income tax contingencies and when such loss can be reasonably estimated,estimated with a range, we recognizerecord a liability within aour best estimate within the range related to the contingency. If there is no best estimate, we record the minimum of the range. As additional information becomes available, we assess the potential liability related to the contingency and revise the estimate.estimates. Revisions in estimates of the potential liabilities could materially affect our results of operations in the period of adjustment. ContingenciesOur contingencies are discussed in further detail in Note 11, “Commitments and Contingencies,” to our Consolidated Financial Statements, in Item 8, Part 2 of this report.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating our ability to recover our deferred tax assets, wemanagement considerconsiders all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, we develop assumptions including the amount of future state, federal and foreign pretax operating income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that we are using to manage the underlying businesses. Valuation allowances are recorded as reserves against net deferred tax assets by us when it is determined that net deferred tax assets are not likely to be realized in the foreseeable future. As of December 31, 20242025 and 2023,2024, we had recorded valuation allowances of $18.9$20.9 million and $18.5$18.9 million, respectively, as offsets to deferred tax assets.

At December 31, 2024,2025, foreign subsidiaries had unused operating loss carryovers for tax purposes of approximately $5.4$5.1 million. The net operating losses will expire at various dates from 20252026 through 2035,2036, with the exception of those in some foreign jurisdictions where there is no expiration. As of December 31, 2024,2025, we had approximately $12.4$14.8 million of foreign tax and withholding credits. Of the $12.4$14.8 million credits, $12.1$14.7 million are foreign tax credits, many of which we do not expect to use before expiration and are offset by a valuation allowance.

Most of our sales to independent consultants outside the United States are made in the respective local currencies. In preparing our consolidated financial statements, sales are translated into U.S. dollars using average exchange rates. Additionally, the majority of our purchases from suppliers are generally made in U.S. dollars. Consequently, a strengthening of the U.S. dollar versus a foreign currency can have a negative impact on our reported sales and contribution margins and can generate transaction losses on intercompany payable balances in the local markets.

The following table summarizes our consolidated net income (loss) from continuing operations results as a percentage of net sales for the periods indicated:

Consolidated net sales for the year ended December 31, 2024,2025, were $454.4$480.1 million compared to $445.3$454.4 million in 2023,2024, or an increase of approximately 2.05.7 percent. The increase was related to product sales increases in our AsiaAsia, Europe and EuropeNorth America operating segments. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the year ended December 31, 20242025 would have increased by 3.85.3 percent from 2023.2024.

Net sales related to Asia for the year ended December 31, 2024,2025, were $207.8$221.8 million compared to $201.3$207.8 million for 2023,2024, an increase of 3.36.7 percent. In local currency, net sales increased by 7.56.4 percent compared to 2023.2024. Fluctuations in foreign exchange rates had an $8.5$0.7 million unfavorablefavorable impact on net sales for the year ended December 31, 2024.2025.

In our Taiwan market, net sales increaseddecreased approximately $8.9$3.3 million, or 14.44.7 percent, for the year ended December 31, 2024,2025, compared to 2023.2024. Fluctuations in foreign exchange rates had a $2.2$2.0 million unfavorablefavorable impact on net sales for the year ended December 31, 2024.2025. In local currency, net sales increaseddecreased 17.97.5 percent for the year ended December 31, 2024,2025, compared to 2023.2024. We attribute the growthdecrease in net sales primarily to strongslower growthcustomer acquisition and a reduction in consultantaverage activityorder and total orders.value.

In our Japan market, net sales increased approximately $2.9$12.1 million, or 7.127.6 percent, for the year ended December 31, 2024,2025, compared to 2023.2024. Fluctuations in foreign exchange rates had a $3.5$0.6 million unfavorablefavorable impact on net sales for the year ended December 31, 2024.2025. In local currency, net sales increased 15.626.1 percent for the year ended December 31, 2024,2025, compared to 2023.2024. The growthincrease in net sales was primarily the result of improvedstrong consultantfield activityfundamentals that drove greater customer acquisition, total orders and average order growth.value.

In our ChinaSouth Korea market, net sales decreased approximately $7.0$0.5 million, or 16.31.0 percent, for the year ended December 31, 2024,2025, compared to 2023.2024. Fluctuations in foreign exchange rates had a $0.5$2.2 million unfavorable impact on net sales for the year ended December 31, 2024.2025. In local currency, net sales decreasedincreased 15.03.2 percent for the year ended December 31, 2024, compared to 2023.2024. The decreaseincrease in net sales in local currency was primarily the result of challenginggreater macroeconomicaverage factorsorder and lower consultant activity.value.

Net sales related to Europe were $84.8$93.1 million for the year ended December 31, 2024,2025, compared to $81.1$84.8 million for 2023,2024, an increase of 4.69.8 percent. The functional currency for many of these markets is the U.S. dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign exchange rates had a $1.1$1.7 million favorable impact on net sales for the year ended December 31, 2024.2025. We attribute the increase in netNet sales in local currencyincreased primarily dueas toa theresult increasedof focusimproved oncustomer ouracquisition fieldand activationexisting initiatives.customer engagement, as evidenced by expanded total order count and average order size.

Net sales related to North America for the year ended December 31, 2024,2025, were $138.8$143.6 million, compared to $139.8$138.8 million for 2023,2024, aan decreaseincrease of 0.73.4 percent. Fluctuations in foreign exchange rates had a $0.2 million unfavorable impact on net sales for the year ended December 31, 2024.2025. Excluding the impact of fluctuations in foreign exchange rates, local currency net sales in North America decreasedincreased by 0.63.6 percent from 2023.2024.

In the United States, net sales decreasedincreased $2.0$5.5 million, or 1.64.3 percent, for the year ended December 31, 2024,2025, compared to 2023.2024. The decreaseincrease was primarily due to lowerimproved activitycustomer rates.acquisition through our digital channels with a notable increase in subscription sales.

Cost of sales as a percent of net sales increaseddecreased to 27.6 percent in 2025, compared to 28.5 percent in 2024, compared to 27.9 percent in 2023.2024. The increasedecrease in cost of sales percentage is primarily due to inflationcost savings initiatives and unfavorablemarket foreign exchange which more than offset our savings initiatives.mix.

Volume incentives as a percent of net sales increaseddecreased to 30.1 percent in 2025, compared to 30.9 percent in 2024, compared to 30.4 percent in 2023.2024. The increasedecrease was primarily due to changes in market mix and the timing of promotional incentives. These payments are designed to provide incentives for reaching certain sales levels. Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in our various geographies. We do not pay volume incentives in China, instead we pay independent service fees which are included in selling, general and administrative expenses.

Selling, general and administrative expenses decreasedincreased by $3.1$14.4 million to $164.0$178.4 million for the year ended December 31, 2024.2025. Selling, general and administrative expenses were 36.137.2 percent and 37.536.1 percent of net sales for the years ended December 31, 20242025 and 2023,2024, respectively. The dollar decreaseincrease was primarily related to the streamliningtiming of ourcompensation globalcosts, overheadincremental expensesinvestment in digital marketing and reducedconsultant events, increased service fees due to China'sChina’s lowerhigher net sales.sales, as well as other non-recurring expenses.

Other income (loss), net, for the years ended December 31, 20242025 and 2023,2024, waswere gains of $5.1 million and losses of $1.7 million and gains of $1.5 million, respectively. Other income (loss),income, for the year ended December 31, 20242025 primarily consisted of foreign exchange lossesgains in Latin AmericaEurope and Europe,Asia, partially offset by foreign exchange gainslosses in Asia,North America and Latin America and Other, that resulted from net changes in foreign currencies.

For the year ended December 31, 2024,2025, operating activities provided cash in the amount of $25.3$35.3 million compared to $41.2$25.3 million in 2023.2024. Operating cash flows decreasedincreased primarily due to improved net income, the timing of payments for accrued liabilities, income taxes payable, accrued volume incentives and service fees, lease liabilities and timingdeferred of receipts of accounts receivable,revenue, partially offset by aan reductionincrease in inventories.

We maintain a revolving credit agreement with Bank of America, N.AN.A. (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "“Capital Credit Agreement"”). At December 31, 2024,2025, there were no outstanding balances under the Credit Agreement or the Capital Credit Agreement. Our debt obligations are discussed in greater detail in Note 7, “Revolving Credit Facility and Other Obligations,” to our Condensed Consolidated Financial Statements in Part II, Item 8 of this report.

_______________________________________ (1) At December 31, 2024,2025, there were $1.2$0.9 million of liabilities. We retain a significant portion of the risks associated with certain employee medical benefits and product liability insurance. Recorded liabilities for self-insured risks are calculated using actuarial methods and are not discounted. Amounts for self-insurance obligations are included in accrued liabilities and long-term other liabilities on the consolidated balance sheet.

(3) At December 31, 2024,2025, there were $0.6$0.4 million of liabilities. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, if any, we are unable to estimate the years in which cash settlement may occur with the respective tax authorities.authorities, aside from the current portion.

We have entered into long-term agreements with third-parties in the ordinary course of business, in which we have agreed to pay a percentage of net sales in certain regions in which we operate or royalties on certain products. In 2024 and 2023, the aggregate amounts of these payments were $8,000 and $8,000, respectively.

For example, in November 2024 we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made an initial voluntary self-disclosure of apparent trade controls violations to the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”). In addition, in April 2025 we filed an initial voluntary self-disclosure with OFAC relating to the same internal investigation. Following our internal investigation, we filed final voluntary self-disclosures with BIS and OFAC on September 5, 2025. We received a response from BIS on November 3, 2025 closing the matter without further action. The VSDvoluntary self-disclosure with OFAC remains pending. We estimate that such potential violations represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this matter may include fines or penalties imposed in response to our voluntary self-disclosures. While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation, we are unable to predict the outcome or to reasonably estimate the time it may take to resolve these matters.

FirstSecond Quarter Performance

In the firstsecond quarter of 2026, we experienced an increase in our consolidated net sales of 8.51.9 percent (or 6.93.8 percent in local currencies) compared to the same period in 2025. Asia net sales increased approximately 7.30.6 percent (or 5.95.3 percent in local currencies) compared to the same period in 2025. Europe net sales increased approximately 9.54.4 percent (or 6.03.7 percent in local currencies) compared to the same period in 2025. North America net sales increased approximately 9.42.8 percent (or 9.12.8 percent in local currencies) compared to the same period in 2025. Latin America and Other net sales increaseddecreased approximately 9.70.5 percent (or 5.63.7 percent in local currencies) compared to the same period in 2025. The strengtheningweakening of the U.S.local dollarcurrencies versus the localU.S. currencies,dollar, primarily in our Asian markets, resulted in an approximate 1.61.9 percent, or $1.8$2.1 million, increasedecrease of our net sales during the quarter.

Cost of sales increaseddecreased $1.3$1.6 million during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, and as a percentage of net sales were 26.826.3 percent and 27.928.3 percent for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease in cost of sales percentage is primarily due to cost savings initiatives and market mix.

In absolute terms, selling, general and administrative expenses increased $3.0$1.2 million during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, and as a percentage of net sales were 35.438.4 percent and 35.838.1 percent for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease as a percent of net salesincrease was primarily related to reductionsconsultant in professional fees, digital marketingevents and othervariable non-recurringselling expenses.expenses, partially offset by compensation costs.

Despite the war in Ukraine, net sales related to Eastern Europe for the three and six months ended MarchJune 31,30, 2026 and 2025,2026, were $17.6$15.1 million and $15.8$32.7 million, respectively.respectively, compared to $13.5 million and $29.3 million for the same periods in 2025. Operating income related to Eastern Europe for the three and six months ended MarchJune 31,30, 2026 and 2025, was $2.0$1.6 million and $1.4$3.6 million, respectively.respectively, compared to $1.0 million and $2.4 million for the same periods in 2025. As of MarchJune 31,30, 2026, Eastern Europe had assets of $6.3$7.1 million, net of working capital reserves related to inventories.

In November 2024, we began an internal investigation regarding our past compliance with relevant U.S. trade controls and made an initial voluntary self-disclosure of apparent trade controls violations to the U.S. Department of Commerce's Bureau of Industry and Security (“BIS”). In addition, in April 2025 we filed an initial voluntary self-disclosure with the Office of Foreign Asset Control (“OFAC”) relating to the same internal investigation. Following our internal investigation, we filed final voluntary self-disclosures with BIS and OFAC on September 5, 2025. We received a response from BIS closing the matter without further action. The voluntary self-disclosure with OFAC remains pending. We estimate that such potential violations represented less than one percent of our net revenue in each of our last three fiscal years. An unfavorable outcome of this investigation may include fines or penalties imposed in response to our voluntary disclosures. While we believe the amount of any fines or penalties would not be material to our financial condition and results of operation, we are unable to predict the outcome or the timing of resolution of these matters.

While we did not experience material impacts as a result of tariffs for the threesix months ended MarchJune 31,30, 2026 and 2025, we continue to monitor the additional pressure that tariff-related price increases may have on our business, including the price, availability and quality of raw materials and other ingredients. We expect that tariffs may adversely affect our costs in the remainder of 2026.

The following table summarizes our unaudited consolidated operating results from continuing operations in U.S. dollars and as a percentage of net sales for the three months ended MarchJune 31,30, 2026 and 2025 (dollar amounts in thousands):

The following table summarizes the changes in net sales by operating segment with a reconciliation to net sales,sales excluding the impact of currency fluctuations for the three months ended MarchJune 31,30, 2026 and 2025 (dollar amounts in thousands):

Consolidated net sales for the three and six months ended MarchJune 31,30, 2026 and 2025,2026, were $122.9$117.0 million and $113.2$239.9 million, respectively, compared to $114.8 million and $228.0 million for the same period in 2025, which represents an increase of 8.51.9 percent.percent and 5.2 percent, respectively. The increase was primarily related to product sales increases in eachour ofAsia, ourEurope and North America operating segments. Excluding the impact of foreign currency exchange rate fluctuations, consolidated net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 6.93.8 percent and 5.3 percent, respectively, from the same periodperiods in 2025.

Net sales related to Asia for the three and six months ended MarchJune 31,30, 2026 and 2025, were $52.2$53.0 million and $48.7$105.2 million, respectively, compared to $52.7 million and $101.3 million for the same periods in 2025, or an increaseincreases of 7.30.6 percent.percent and 3.8 percent, respectively. In local currencies,currency, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 5.95.3 percent and 5.6 percent, respectively, compared to the same periodperiods in 2025.

In our Japan market, net sales increased $1.4$5.0 million and $6.5 million, or 12.938.3 percent and 26.7 percent, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods in 2025. In local currency,currencies, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 16.050.7 percent and 34.9 percent, respectively, compared to the same periodperiods in 2025. The increase in net sales was primarily the result of strong field fundamentalsmomentum and timing of event qualifications that drove greater consultant activity and an increase in total orders and average order value.

In our South KoreaTaiwan market, net sales increaseddecreased $1.4$3.0 million and $5.9 million, or 13.417.9 percent and 17.0 percent, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods in 2025. In local currency,currencies, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increaseddecreased 14.315.6 percent and 17.5 percent, respectively, compared to the same periodperiods in 2025. The increase in net salesdecrease was primarily the result of anslower increaseconsumer acquisition and a reduction in total orders andas well as average order value.values.

In our ChinaSouth Korea market, net sales decreased $0.5 million and increased $3.5$0.9 million, or 45.7decreased 4.1 percent and increased 4.0 percent, for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods in 2025. In local currency, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 39.72.9 percent and 8.1 percent, respectively, compared to the same periodperiods in 2025. The increase in net sales in local currency was primarily the result of an increase in total orders and average order value and total orders.value.

Net sales related to Europe for the three and six months ended MarchJune 31,30, 2026 and 2025, were $26.4$22.7 million and $24.1$49.1 million, respectively, compared to $21.7 million and $45.9 million for the same periods in 2025, or an increaseincreases of 9.54.4 percent.percent and 7.1 percent, respectively. In local currencies,currency, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 6.03.7 percent and 4.9 percent, respectively, compared to the same periodperiods in 2025. The functional currency for many of these markets is the U.S. Dollar,Dollar which reduces the effect from foreign currency fluctuations. Fluctuations in foreign currency exchange rates had favorable impacts on net sales of $0.8$0.2 million and $1.0 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively. Net sales in local currency increased for the three and six months ended June 30, 2026, primarily as a result of improvedgrowth consumer acquisition and existing consumer engagement, as evidenced by increased active consumer count andin average order size.size and an expanding distributor base.

Net sales related to North America for the three and six months ended MarchJune 31,30, 2026 and 2025, were $38.3$36.0 million and $35.0$74.3 million, respectively, compared to $35.0 million and $70.0 million for the same periods in 2025, or anincreased increase2.8 ofpercent 9.4and percent.6.1 percent, respectively. In local currencies,currency, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased 9.12.8 percent and 6.0 percent, respectively, compared to the same periodperiods in 2025.

In the United States, net sales for the three and six months ended MarchJune 31,30, 2026,2026 increased $3.2$1.1 million and $4.2 million, or 9.73.3 percent and 6.5 percent, respectively, compared to the same periodperiods in 2025. The increase was primarily due to improved consumer acquisition through our digital channels, supported by our strategic focus on field fundamentals for our consultants.channels.

Net sales related to Latin America and Other markets for the three and six months ended MarchJune 31,30, 2026 and 2025, were $6.0$5.3 million and $5.5$11.3 million, respectively, compared to $5.4 million and $10.8 million for the same periods in 2025, or andecreased increase0.5 ofpercent 9.7and increased 4.6 percent. In local currencies,currency, net sales for the three and six months ended MarchJune 31,30, 2026,2026 decreased 3.7 percent and increased 5.61.0 percentpercent, respectively, compared to the same periodperiods in 2025. Fluctuations in foreign currenciescurrency had favorable impacts on net sales of $0.2 million and $0.4 million for the three and six months ended MarchJune 31,30, 2026.2026, respectively.

Further information related to our Asia, Europe, North America and Latin America and Other business segments is set forth in Note 7 to the unaudited Condensed Consolidated Financial Statements in Part 1,I, Item 1 of this report.

Cost of sales as a percent of net sales was 26.826.3 percent and 27.926.6 percent for the three and six months ended MarchJune 31,30, 20262026, compared to 28.3 percent and 2025,28.1 respectively.percent for the same periods in 2025. The decrease in cost of sales percentage is primarily due to cost savings initiatives and market mix.

Volume incentives expense as a percent of net sales was 30.030.6 percent and 30.830.3 percent for the three and six months ended June 30, 2026, respectively, compared to 29.9 percent and 30.4 percent for the same periods in 2025. The increase for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The decrease2026, was primarily due to changes in market mix and the timing of promotional incentives.incentives and market mix. These payments are designed to provide incentives for reaching certain sales levels. Volume incentives vary slightly, on a percentage basis, by product due to pricing policies and commission plans in place in our various geographies. We do not pay volume incentives in China, instead we pay independent service fees which are included in selling, general and administrative expenses.

Selling, general and administrative expenses increased $3.0$1.2 million and $4.2 million, respectively, to $43.5$44.9 million and $88.4 million for the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same periodperiods in 2025. Selling, general and administrative expenses were 35.438.4 percent and 35.836.9 percent of net sales for the three and six months ended MarchJune 31,30, 20262026, compared to 38.1 percent and 2025,37.0 respectively.percent for the same periods in 2025. The decrease as a percent of net salesincrease was primarily related to reductionsconsultant in professional fees, digital marketingevents and othervariable non-recurringselling expenses.expenses, partially offset by compensation costs.

Other income (expense), net, for the three and six months ended MarchJune 31,30, 2026 and 2025,2026, was expense of $1.4$0.1 million and $1.5 million, respectively, compared to income of $0.9$3.3 million,million and $4.2 million during the same periods in 2025, respectively. Other income (expense), net for the three and six months ended MarchJune 31,30, 2026,2026 primarily consisted of foreign exchange losses in Asia, partially offset by foreign exchange gains in Europe and Latin America, that resulted from net changes in foreign currencies.

For the three months ended MarchJune 31,30, 2026 and 2025, our provision for income taxes, as a percentage of income before income taxes was 37.234.1 percent and 31.326.8 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent. For the six months ended June 30, 2026 and 2025, our provision for income taxes, as a percentage of income before income taxes was 36.0 percent and 29.0 percent, respectively, compared with a U.S. federal statutory rate of 21.0 percent.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and six months ended MarchJune 31,30, 2026, was primarily attributed to recording a valuation allowance on foreign tax credits which are not expected to be utilized before expirationexpiration, non-deductible executive compensation, and to current year foreign losses that presently do not provide a future tax benefits,benefit, partially offset by the deduction allowed for foreign-derived eligible income.income and favorable deductions for share-based compensation.

The difference between the effective tax rate and the U.S. federal statutory tax rate for the three and six months ended MarchJune 31,30, 2025, was primarily attributed to operations in certain foreign countries which are treated as a branch for U.S. tax purposes and current year foreign losses that presently do not provide future tax benefits,purposes, partially offset by favorable adjustments to deferred tax assets, foreign derived intangible income deduction and foreign tax credits and valuation allowances.credits.

The difference between the effective tax rate for the three and six months ended MarchJune 31,30, 2026, compared to MarchJune 31,30, 2025, was primarily caused by an increase in foreign losses year over year that presently do not provide future tax benefit and favorable adjustments to foreigndeferred tax credits and valuation allowancesassets in the prior period thatwhich diddo not repeat in the current period.

As of MarchJune 31,30, 2026 and December 31, 2025, we had accrued $0.5$0.1 million and $0.4 million, respectively, related to unrecognized tax positions.

See Note 7, Segment Information, for a summary of the U.S. dollar amounts from the sale of general health, immune, cardiovascular, digestive, personal care and weight management products for the three and six months ended MarchJune 31,30, 2026 and 2025, by business segment.

We pay sales commissions, or “volume incentives,” to our independent consultants based upon their own product sales and the product sales of their sales organization. As an exception, in China, we do not pay volume incentives; rather, we pay independent service fees, which are included in selling, general and administrative expenses. These volume incentives and independent service fees are recorded as an expense in the year earned. The amounts of volume incentives that we expensed during the quarters ended MarchJune 31,30, 2026 and 2025, are set forth in the unaudited Condensed Consolidated Financial Statements in Item 1 of this report. In addition to the opportunity to receive volume incentives, independent consultants who attain certain levels of monthly product sales are eligible for additional incentive programs including automobile allowances, sales convention privileges and travel awards.

Our principal use of cash is to pay for operating expenses, including volume incentives, inventory and raw material purchases, capital assets, digital investments and funding of international expansion. As of MarchJune 31,30, 2026, working capital was $107.2$109.7 million, compared to $100.3 million as of December 31, 2025. At MarchJune 31,30, 2026, we had $87.6$82.5 million in cash and cash equivalents,cash, of which $3.6$15.7 million was held in the U.S. and $84.0$66.8 million was held in foreign markets and may be subject to various withholding taxes and other restrictions related to repatriation before becoming available to be used along with the normal cash flows from operations to fund any unanticipated shortfalls in future cash flows.

For the threesix months ended MarchJune 31,30, 2026, operating activities used cash of $1.8$1.0 million, compared to provided cash of $2.6$6.9 million in the same period in 2025. Operating cash flows decreased primarily due to reduced net income and the timing of payments and receipts for accrued liabilities, deferred revenue, income taxes payable, accounts receivables, andreceivable, prepaid expensesexpense and other current assets, partially offset by reduceda accrueddecrease volumein incentivesinventories and servicelease fees, and inventories.liabilities.

For the threesix months ended MarchJune 31,30, 2026, investing activities used $2.5$5.3 million, compared to $1.1$2.5 million for the same period in 2025, which consisted of capital expenditures related to the purchase of equipment, computer systems and software.

For the threesix months ended MarchJune 31,30, 2026, financing activities used $1.6$5.0 million, compared to $0.7$12.9 million for the same period in 2025.

During the threesix months ended MarchJune 31,30, 2026, we used cash to repurchase 20,000113,000 shares of our common stock under the share repurchase program for $0.5$2.6 million. At MarchJune 31,30, 2026, the remaining balance available for repurchases under the program was $16.9$14.8 million.

We maintain a revolving credit agreement with Bank of America, N.A. (the “Credit Agreement”), as well as a credit agreement with Banc of America Leasing and Capital, LLC (the "Capital Credit Agreement"). At MarchJune 31,30, 2026, there were no outstanding balances under the Credit Agreement or the Capital Credit Agreement. Our debt obligations are discussed in greater detail in Note 4, “Revolving Credit Facility and Other Obligations,” to our unaudited Condensed Consolidated Financial Statements in Part I, Item 1, Part 1 of this report.