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

During the past several years, settlements and other judicial orders between the U.S. Federal Trade Commission (“FTC”) and other direct selling companiescompanies, andas well as guidance from the FTCFTC, have addressed inappropriate inappropriate earnings and lifestyle claims, problematic compensation structures and the importance of focusing on consumers. These developments have created ambiguity as to the proper interpretation of the law and related court decisions. The FTC has been active and aggressive in its enforcement activities,activities taking actionand, in some casescases, tohas requiretaken action that required other multi-level marketing companies to cease engaging in multi-level marketing or to modify their business models. Any adverse rulings or legal actions actions could impact our business if direct selling laws or anti-pyramid laws are interpreted more narrowly or in a manner that results in additional burdens or restrictions on direct selling companies. For example:

Although we take steps to educate our sales force on proper claims, if members of our sales force might make improper claims, or ifregulators regulatorsmight determine we are making any improper claims,claims. thisEither of these actions could lead to an FTC investigation and could harm our business. The FTC’s increased scrutiny of earnings claims, as reflected in the NPR and ANPR, could lead to moreadditional FTC actions regarding improper claims,claims. asIt wellcould asalso contribute to new industry standards or new rules that could potentially limit our ability, and the ability of our sales force, to make earnings claims, which could harm our ability to grow our sales force.

Various government agencies throughout the world regulate direct sales practices. Laws and regulations in the United States, Japan, South Korea, VietnamVietnam, India and Mainland China are particularly stringent and subject to broad discretion in enforcement by regulators. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid schemes,” that compensate participants primarily for recruiting additional additional participants without significant emphasis on product sales to consumers. The laws and regulations in our current markets often:

Social media platforms have decided, and could in the future decide, to prohibit, block or decrease the prominence of our sales force’s content for any reason, which harms our business, particularly as our business is becoming increasingly dependent on social commerce. For example, due to concerns with multi-level marketing, the TikTok and WhatsApp Business platforms’ community guidelines prohibit content related to multi-level marketing. In addition, Pinterest and Facebook prohibit ads that promote multi-level marketing opportunities, and Pinterest has also imposed restrictions on weight loss products, claims and photos. Also, Douyin prohibits specific words or claims, particularly relating to health and wellness, during livestreaming. Moreover, some social marketplacemedia platforms reduce visibility of product offers or posts based on pricing, degree of brand awareness or other factors that could apply to our products. Additional social media platforms’ adoption of similar or stricter policies could significantly hamper our sales force’s ability to promote our products and attract consumers, which could cause our revenue to decline. Restrictions, suspensions or bans of our company accounts or our sales force’s accounts could also disrupt our marketing activities with little or no advance notice and with limited ability to appeal or obtain timely relief. Our reputation could also be harmed if our sales force violates any social media platform’s community guidelines.

If our business practices or policies or the actions of our sales force are deemedfound to be in violation of applicable local regulations regarding foreigners, then we could be sanctioned and/or required to change our business model, which could significantly harm our business.

Our sales force is required to comply with our residency and work authorization policies and other local legal requirements prior to working in a market. Some markets, including Mainland ChinaChina, Vietnam and Vietnam,India, also also prohibit or restrict participation of overseas personnel or foreigners in direct selling activities. We have implemented policies that are designed to comply with these regulations and inform our sales force regarding the types of activities that are not permitted. However, we cannot assure that actions of our sales force will not violate local laws or regulations or our policies.regulations. If our business practices or policies or the actions of our sales force are deemedfound to be in violation of applicable regulations as they may be interpreted or enforced, then we could be sanctioned and/or required to change our business model, which could result in adverse publicity and significantly harm our business.

Over the past several years, the environment for direct selling has become increasingly difficult due to customer trends, increased competition from other affiliate marketingmarketing, influencer and gig economy businesses, and a stricter regulatory environment across many of our markets. Our ability to improve our financial performance largely depends on our ability to anticipate and/or react in a timely and effective manner to changes in consumer spending patterns and preferences regarding products, platforms, and business opportunities in the affiliate gig and sharing economy.economy, including changes in how consumers discover, evaluate and purchase products. For example, we have observed an increasing shift in certain markets (including Mainland China) toward third-party online product marketplaces and other digital commerce channels. Our operating results have been and could be adversely affected if our business opportunities, platforms, products and other initiatives do not generate sufficient enthusiasm and economic benefit to retain our existing consumers and sales force or to attract new consumers and sales force members.

Factors affecting the attractiveness of our business opportunities, platforms, products and other initiatives include, among other things, shifting consumer demands, perceived product quality and value, similarities similarities to other products, product exclusivity or effectiveness, growth of the gig economy,economy and influencer marketing, disruption of retail commerce and e-commerce by social commerce, the increasing prominence of third-party online product marketplaces, demographic trends, the strength of our brand and public image, growth of connected commerce, sustainability factors, diversity and inclusion initiatives, economic competitiveness of our business opportunity in the marketplace, perceived ability of potential affiliates to succeed in our business opportunity, accepted methods of selling products to customers in the affiliate and member-based platform environment, the quality and accuracy of the data we use in running our business, our technology infrastructure and capabilities, restrictions in social or digital media for sharing products and attracting consumers, adverse media attention andattention, regulatory restrictions on claims.claims and the ease of new startup entrepreneurship via artificial intelligence platforms. If we are unable to anticipate or adapt to changes in consumer preferences and trends, our business, financial condition and operating results could be materially adversely affected. Likewise, if we are unable to anticipate or adapt to changes in the affiliate marketing, gig and sharing economies,economies or the artificial intelligence landscape, our ability to capture growth trends in the social commerce commerce marketplace could be materially adversely affected.

In addition, in our more mature markets, one of the challenges we face is keeping Sales Leaders with established businesses and high-income levels motivated and actively engaged in business building activities and in in developing new Sales Leaders. We also face challenges retaining our sales force as the population of our markets transitions to a younger, millennial/Gen Z demographic, with its associated new and different dynamics of connection through social social media platforms, gratification and loyalty behaviors, particularly as this segment becomes a greater share of our revenue. It is possible that, over time, increasing negative perceptions about business opportunities that involve multi-level multi-level compensation programs, particularly as affiliate marketing programs gain greater prominence in the gig economy, could develop and increase among these younger demographics, which would be detrimental to our business if we are unable to adapt and offer similar opportunities and rewards while still differentiating our business. In addition, as affiliate marketing programs gain greater market share, our competition for participants from our target market becomes more intense. Moreover, when sales through social sharing do not generate repeat purchases or subscriptions at the same rate as other sales, this creates revenue volatility and/or declines. Many in the younger demographic aregroups particularlyactively savvy withuse social sharing across multiple business opportunity platforms. Some of our initiatives have not generated lasting excitement and engagement among our sales force in the long term, and at times, our initiatives have not sufficiently sufficiently generated sales force activity and productivity or motivated Sales Leaders to remain engaged in business building and developing new Sales Leaders. These outcomes could recur in the future. Some initiatives have had, and could continue to have, unanticipated negative impacts on our sales force, particularly changes to our sales compensation plans, incentive rewards, and recognition practices. The introduction of a new product or key initiative can also negatively impact other product lines to the extent our Sales Leaders focus their efforts on the new product or initiative.

Difficult economic conditions, such as high unemployment levels, inflation, deflation, or recession, have in the past, and could continue to, adversely affect our business by causing a decline in demand for our products, particularly if the economic conditions are prolonged or worsen. In addition, economic conditions may adversely impact access to capital for us and our suppliers, may decrease the ability of our sales force and consumers to obtain or maintain credit cards, may cause governments to increase their regulatory enforcement activity to alleviate budget shortfalls, and may otherwise adversely impact our operations and overall financial condition. For example, we believe inflation had had a negative impact on our 2022 and 2023 sales by curbing the discretionary spending of our consumers. Inflation also has increased the cost of our inventory and shipping expenses. Higher interest rates have increased our interest expense, as our credit facility entails variable-rate interest; moreover, our interest rate swap arrangements are currently scheduled to expire in July 2025, at which time our interest expense could further increase. In addition, the economy in Mainland China continued to be challenging during 2024,2025, including withdeflationary deflationaryand international trade pressures, capital markets, and tangible asset markets. All of these conditions could continue in 2025.2026.

The markets for our products are intensely competitive. The success of our products is dependent on our ability to anticipate and respond to market trends and changes in consumer preferences and to maintain a product product offering and pipeline that is relevant and priced accessibly to consumers.consumers and compelling to affiliates who have a desire to use our products to build an independent business opportunity. Our products compete directly with branded, premium retail products and with the products of other direct selling companies, and many of our competitors have much greater name recognition and financial resources than we have, which may give them a competitive advantage. Because of regulatory restrictions concerning claims about the efficacy of beauty and wellness products, we may have difficulty differentiating our products from our competitors’ products, and competing products entering the beauty and wellness market could harm our revenue. In addition, our business may be negatively impacted if we fail to adequately adapt to trends in consumer behavior and technologies to meet consumers’ needs and demands and reach a wider audience or if we fail to provide a competitive product price to value proposition to consumers.

We also compete with other direct selling companies, affiliate marketing companies and gig economy companies to attract and retain our sales force and consumers. Some of these these competitors have longer operating histories and greater visibility, name recognition and financial resources than we do. Some of our competitors have also adopted and could continue to adopt some of our successful business strategies, including our global sales compensation plan.plan and our product development philosophy and focus. Moreover, certain companies in the affiliate marketing and gig economy are growing rapidly and enable seamless product sharing via social media platforms. In some of our markets, these social media platforms are integrated into product marketplaces to enable even faster affiliation of product offerings to potential customers. These companies have disrupted and continue to disrupt the traditional direct selling space. Consequently, to successfully compete in this industry, and attract and retain our sales force and consumers, we must ensure that our business opportunities and sales compensation plans are financially rewarding and innovative. Successfully marketing our sales compensation plan in a way that differentiates it from our competitors could become more difficult as the FTC increases its scrutiny of earnings claims.claims and compensation structures. Likewise, continued tightening of social media platform policies could limit our sales force’s ability to differentiate our products and business opportunities. Although we believe we have significant competitive advantages, we cannot assure that we will be able to continue to successfully compete in this industry.

These issues have previously resulted in negative publicity and have harmedharmed, and could continue to harm, our business.

We seehave observed instances of our products being soldoffered throughfor sale on online marketplace sitesplatforms and through other unauthorized distribution channels in certainvarious markets. AlthoughDespite weour continuallyongoing take stepsefforts to reduce and control product diversion, thissuch activityactivities continuescontinue to bepresent a challenge,challenges. and we believe that changesChanges to our global sales compensation plan,structure, divergencedifferences ofin product pricing acrossamong markets, orand increasedthe expanded use of online channels for conducting sales transactions have contributed, and may continue to leadcontribute, to increasedproduct product diversion. Product diversion causesmay create confusion regarding our authorized distribution channels and may negatively impactsimpact the ability of our sales force to sell our products. ItDiversion may also createsadversely aaffect negative impressionperceptions regarding the viability of the business opportunity forwe offer and undermine confidence in our salesauthorized force,distribution channels, which cancould harmimpair our ability to recruit newand peopleretain tomembers joinof our sales force. ProductIn addition, product diversion may also causeerode brand erosion equity and negativelyadversely impactaffect theconsumer brandperceptions valueof perception.our Productproducts. Certain diversion schemesactivities may also involve illegalunauthorized importation, investmentinvestment, or other activitiespotentially unlawful conduct, and harmmay ouralso increase brandthe ifrisk graythat marketgray-market or counterfeit goods are passed offmisrepresented as our own.products, which could further harm our brand and reputation. If we are unable to effectively addressmitigate thisor issueprevent product diversion, or if diversion activity increases, our businessbusiness, financial condition, results of operations, and reputation could be harmed.adversely affected.

Our operations in Mainland China are subject to significant government scrutiny, and we could be subject to finesfines, operational restrictions or other penalties.

Our operations in Mainland China are subject to significant regulatory scrutiny. The legal system in Mainland China provides government authorities broad latitude to conduct investigations, and many Chinese regulations, including those governing our business, are subject to significant interpretation, which may vary from jurisdiction to jurisdiction. Accordingly, regulatory expectations and enforcement priorities may change quickly and with limited notice. Because of significant government concerns in Mainland China regarding improper direct selling activities, government regulators closely scrutinize activities of direct selling companies and activities that resemble direct selling. The government in Mainland China continues to inspect and review companies in the direct selling industry on a regular basis. We believe the regulatory environment in Mainland China continues to be challenging and restrictive.

The government’s scrutiny of activities within the health products and direct selling industries has been at higher levels since 2019, when the government conducted a 100-day campaign to review and inspect the health products and direct selling industries following negative media coverage generated by healthcare-related product claims made by another direct selling company in Mainland China. Since 2019, we have been receiving and addressingreceived an increased number of government reviews, inspections, and inquiries and consumer complaints in Mainland China; our ability to hold certain business meetings has been limited; and negative media coverage has spread to include additional companies, including ours.

Government regulators frequently make inquiries into our business activities and investigate complaints from consumers and others regarding our business. Some of these inquiries and investigations in the past have resulted in the payment of fines by us or members of our sales force, interruption of sales activitiesactivities, changes to aspects of our business model, and warnings. Any determination byIf government regulators determine in thesefuture inquiries or investigations that our operations or activities, or the activities of our sales force, are not in compliance with applicable regulationsregulations, we could resultface ina range of outcomes, including substantial fines, extended interruptions of business, and termination of necessary licenses and permits, including our direct selling and other licenses, all of which could harm our business.

The government of Mainland China has adopted direct selling and anti-pyramiding regulations that impose significant restrictions and limitations on businesses in our industry. Most notably, the regulations prohibit multi-level compensation, which is the basis of how we compensate our sales force outside of Mainland China. The regulations also prohibit the recruitment of overseas personnel from participating inas direct sellingsellers in Mainland China. They are subject to interpretation by regulators who exercise broad discretion in enforcement under applicable laws and regulations. We have structured our business model in Mainland China based on several factors: the guidance we have received from government officials, our interpretation of applicable regulations, our understanding of the practices of other international direct selling companies operating in Mainland China, and our understanding as to how regulators are interpreting and enforcing the regulations. The regulatory environment in Mainland China continues to be challenging and restrictive. WeFrom willtime to time, we evaluate potential changes to the structure of our sales compensation in Mainland China to address the evolving commercial environment and, as the need arises, the evolving regulatory environment. Any such changes could have a negative impact on our sales in that market.

Other than our direct selling subsidiary, we also have a separate subsidiary in Mainland China that isoperates a registeredan independent entity that engages in cross-border e-commerce,e-commerce business, through which one of our U.S. subsidiaries can sell a limited selection of products to consumers in Mainland China for their personal consumption. Cross-border e-commerce is separated from the direct selling sales channel in Mainland China. Our Sales Leaders can contract with the China entity, promote this cross-border e-commerce platform to introduce consumers to place orders on this platform, and receive limited compensation in return. Through this entity, the U.S. subsidiary sells ageLOC Meta, ageLOC Youth and certain other overseas products, which are neither registered for retail sale in Mainland China nor registered specifically as direct selling products and, therefore, can only be sold to local consumers for their personal consumption, cannot be sold through the direct selling channel, and cannot be resold. We also plan to begin selling additional overseas products through this channel. Although we take measures (1) to maintain legal separation between our cross-border e-commerce entity and our direct selling entity; and (2) to ensure the products sold on our cross-border e-commerce platform are for consumers’ personal consumption consumption only, our business in Mainland China could be negatively impacted if regulatory authorities elect to attribute these cross-border e-commerce sales activities and related product claims, or the accompanying actions of our sales force, to our direct selling business, and make a determination they are in violation of direct selling, customs or other applicable laws.

We face lengthy timelines with respect to product registrations in Mainland China. The process for obtaining product permits and licenses may require extended periods of time that may prevent us from launching new product initiatives in Mainland China on the same timelines as other markets around the world. For example, a vast majority of products marketed in Mainland China as “health foods” are subject to extensive laboratory and clinical analysis by government authorities, and with a few exceptions, the product registration process in Mainland China takes a minimum of two years and may be substantially longer. We market both “health foods” and “general foods” in Mainland China. There is some risk associated with the common practice in Mainland China of marketing a product as a “general food” without any health food claims while applying to the authorities for “health food” classification.classification after localizing the product formula to meet applicable health food claims. If government officials feel the categorization of our products is inconsistent with product claims, form of delivery, ingredients or function, we could be prohibited or limited in marketing such products in Mainland China in their current form.

The outbreak of COVID-19 in 2020 and ensuing pandemic resulted in significant contraction of economies around the world and interrupted global supply chains as many governments issued stay-at-home orders to combat COVID-19. Government-imposed restrictions and public hesitance regarding in-person gatherings, travel and visiting public places reduced our sales force’s ability to hold sales meetings, resulted in cancellations of key sales leader events and incentive trips, and required us to temporarily close our walk-in and fulfillment locations in some markets where we had such properties. Our supply chain and logistics also incurred some interruptions and cost impacts, such as difficulties in obtaining some ingredients and in shipping products in some markets. All of these factors and other events related to COVID-19 negatively impacted our sales and operationsoperations, and similar adverse impacts could repeatoccur in the event of future epidemics or other crises.

It is unpredictable what impact, if any, the recent changechanges in politicalU.S. administrationsgovernment inleadership, thetrade Unitedpolicy, Statesor enforcement priorities will have on the above risks. If actions by the United States or other jurisdictions cause any of the above risks to materialize, our financial position and results of operations could be negatively affected.

In 2024,2025, approximately 70%74% of our sales occurred in markets outside of the United States and were denominated in each market’s respective local currency. Foreign-currency fluctuations affect our financial position and results of operations. We purchase inventory primarily in the United States in U.S. dollars. In preparing our financial statements, we translate revenue and expenses in our markets outside the United States from their local currencies into U.S. dollars using weighted-average exchange rates. If the U.S. dollar strengthens relative to local currencies, our reported revenue, gross profit and net income will likely be reduced. Foreign-currency fluctuations also cause losses and gains resulting from translation of foreign-currency-denominated balances on our balance sheet.

Changes to tariff and import/export regulations, and trade disputes between the United States and other jurisdictions mayhave havehad a negative effect on global economic conditions and could negatively affect our business, financial results and financial condition.

Our products are primarily marketed by our sales force, and we depend on them to generate virtually all of our revenue. OurMembers of our sales force may terminate their servicesrelationship with us at any time, and like most direct selling companies, we experience high turnover among our sales force from year to year. PeopleIndividuals who join our company to purchase our products for personal consumption or forto pursue short-term income goals frequentlyoften only stay with usparticipate for a shortlimited time timeperiod or areparticipate less consistent in their participation.inconsistently. Sales Leaders who have committed time and effort to build a sales organization will generally stay for longer periods. To increase our revenue, we must increase the number of and/or the sales productivity of our sales force. We must also expand our outreach and outbound efforts to attract, connect and nurture new customers for a wider consumer base who purchase products and whom we can foster along a consumer journey to promote retention and higher lifetime value.

We have experienced fluctuations in Sales Leaders, Paid Affiliates and Customers in the past and will likely continue to experience such fluctuations in the future. For example, from December 31, 2024 to December 31, 2025, our Customers in MainlandSouth China Korea declined 27% from December 31, 2023 to December 31, 2024,28% and during the two-year period from December 31, 2022 to December 31, 2024, our global Customers, Paid Affiliates and Sales Leaders in Mainland China declined 27%, 39% and 24%, respectively.32%. If our business, products and initiatives do not drive growth and/or sales productivity in Sales Leaders, Paid Affiliates and Customers, our operating results could be further harmed.

In addition, we and manufacturers in our supply chain acquire ingredients, components, products and packaging from third-party suppliers and manufacturers. AThe loss of any of these suppliers and any difficulties in finding or transitioning to alternative suppliers could harm our business. In addition, weWe obtain some products and ingredients from sole suppliers that own or control the product formulations, ingredients or other intellectual property rights associated with such products. We also license the right to distribute some of our products from third parties. In the event we are unable to maintain or renew our contracts with any of these suppliers, manufacturers or other third parties, we may need to discontinue some products or develop substitute products, which could harm our revenue. In addition, if we experience supply shortages, price increases or regulatory impediments with respect to the raw materials, ingredients, components or packaging we use for our products, we may need to seek alternative supplies or suppliers and may experience difficulties in finding replacements that are comparable in quality and price. For example, some of our products, including ageLOC Meta and ageLOC Youth (Youthspan or Y-Span in some markets), incorporate unique unique natural ingredients that may only be harvested once per year and/or may have limited global supplies. If demand exceeds forecasts, we may have difficulties in obtaining additional supplies to meet the excess demand until the next growing season. If we are unable to successfully respond to such issues, our business could be harmed.

As a company engaged in manufacturing, distribution, and research and development on a global scale, we are subject to the risks inherent in such activities, including industrial accidents, climate or environmental events, fires, floods, earthquakes, labor shortages, strikes and other labor or industrial disputes, disruptions in logistics or information systems, loss or impairment of key manufacturing or distribution sites, import and export restrictions or delays, product quality control, safety, licensing requirements and other regulatory or government issues, as well as natural disasters, pandemics, border disputes, global uncertainties, acts of terrorism, and other external or macroeconomic factors over which we have no control. For example, physical environmental events or changing weather patterns may affect facility operations, logistics, or the long-termavailability of certain products or ingredients, including by disrupting third-party manufacturers, logistics providers, utilities, or transportation infrastructure, and may contribute to volatility in energy, transportation, or insurance costs; the timing, severity, and location of any such impacts ofare climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) may be widespread and unpredictable.uncertain. Certain impacts of physical risk may include temperature changes that increase the heating and cooling costs at our facilities; extreme weather patterns that affect the production or sourcing of certain components; flooding and storms that damage or destroy our buildings and buildings, inventory or transportation channels; and heat and extreme weather events that cause long-term disruption or threats to the habitability of our customers’ communities. These risks may be heightened if we consolidate certain of our manufacturing, distribution, or supply facilities or if we are unable to successfully enhance our disaster recovery planning. These risks also increase as we pursue our current strategy ofcontinue acquiring manufacturing companies and thereby conductingconduct more of our manufacturing in-house. The loss of, or disruption or damage to, any of our facilities or centers or those of our third-party manufacturers could have a material adverse effect on our business, reputation, results of operations and financial condition. Also, if we are unable to maximize our production output (whether through internal or external customer orders) inoperate our owned manufacturing facilities,facilities thisat efficient utilization levels, including due to demand variability or capacity constraints, our manufacturing variance could increase our manufacturing variance and harm our business.

Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction or promotion. These offerings sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenuerevenue, Customers, Paid Affiliates and Sales Leaders during the quarter and skew year-over-year and sequential comparisons. These offerings may also increase our product return rate. We have,have experienced, and may in the future,future experiencedexperience, difficulty effectively managing growth associated with these offerings andwhich maycould faceincrease increasedthe risk of improper sales force activities and related government and regulatory scrutiny.

As our sales force increases its use of social platforms to interact with customers, our business results could be adversely affected if our implementation of new platforms and processes to support support our sales force is delayed. In addition, we are dependent on third parties for testing and delivery of portions of these and other of our information system platforms. Unanticipated changes or system failures by third parties could harm our ability to meet the expectations of our sales force,force thusand resultingcould result in harm to our revenue, reputation and sales force confidence in our systems.

IfDifficulties we are unable to effectively managemanaging our entry or growth in certain markets,markets could cause our business and operations couldto be harmed.

At times, we can experience significant growth in one or more of our markets. For example, during 2020 we experienced significant growth in some of the markets in the Americas and Europe. Growth can strain our abilityoperations to effectively manage our operations, as itand requires usexpansion toof expandmanagement, our management team, labor force,labor, technology bandwidth and capabilities,capacity, and manufacturing operations.capabilities. Insufficient management executionFailure to supportexecute growtheffectively could result in, among other things, product delays or shortages, decreases in product quality, service level challenges, operating mistakes and errors, inadequate customer service, inappropriate claims or promotions by our sales force, and governmental inquiresinquiries andor investigations, all of which could harm our revenue and ability to generate sustained growth and result in unanticipated expenses. In addition, we need to continue to attract and develop qualified management personnel to sustain growth. If we are not able to successfully retain existing personnel and identify, hire and integrate new personnel, our business and growth prospects could be harmed.

In addition, to the extentas we expand into newIndia markets,and other markets in the future, our efforts might not be successful in driving growth. New markets may have competitive conditions, consumer tastes and discretionary spending patterns that are more difficult to predict or satisfy than our existing markets. We may have difficulty attracting Brand Affiliates to our business opportunity due to our lack of name recognition, growing competition in the affiliate gig and sharing economies, or other reasons, and it may be difficult to find and retain qualified employees and vendors. We also might be unable to successfully navigate the risks inherent in international operations, such as differing legal and regulatory requirements that may apply to our products and/or operations, including those that pertain to privacy and data protection, direct selling, employment and intellectual property. If we do not successfully execute plans to enter new markets, these new markets may not generate growth and may be unprofitable, causing our business, financial condition or results of operations to be adversely affected.

Our business operations, spanningoperations across global markets and involving intricate sales compensation systems, heavily depend on a variety of interconnected technology platforms.systems, Theseincluding include our websites, mobile apps,applications, cloud services, data centers, databases, and networks. These systems aresupport criticalorder for accepting and processing orders, managing ourprocessing, sales force and customer support, calculatingcompensation calculations and distributingpayments, compensation, running corporate and regional operations, generating accurateand financial reports, and other aspects of our business.reporting. Ensuring their functionality and reliability is essential for maintaining our reputation, sustaining operations, and supporting our sales force and customer base.

The shift to cloud-based and outsourced solutions further heightens our reliance on third-party providers, including Worldpay for payment services, Amazon Web Services for core computing needs and Infosys Limited for managed services and digital channel operations. Disruptions in these partnerships or challenges in transitioning services could delay critical business processes and increase operational costs.

In summary, whileour we are committedinitiatives to evolvingevolve and enhancingenhance our technology systems, these initiativessystems involve considerable risks. Any failure to address these challenges effectively could disrupt our operations, erode stakeholder confidence, and adversely affect our financial results.

We have acquired certain businesses, and we plan to continue to do so in the future as we encounter acquisition prospects that would complement our current product offerings, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. At any particular time, we may be in various stages of assessment, discussion and/or negotiation with regard toregarding one or more potential acquisitionsacquisitions, divestitures, or investments, not all of which will be consummated. Acquisitions involve numerous risks and uncertainties, and some of our past acquisition targets have been in industries in which we lack operational or market experience. Our past acquisitions have entailed, and future acquisitions could entail, numerous risks, including:

The expansion of our Rhyz business into new businesses has been viewed negatively by some of our Sales Leaders as some of these new companies sell products that are similar to those of our core business and are viewed as using our resources for non-core businesses. These perspectives of our Sales Leaders could have a material negative impact on the number or productivity of our Sales Leaders and result in a reduction in our revenue.

Our failure to successfully completeintegrate the integration of anyan acquired business, a failure to adjust our fixed costs quickly enoughsufficiently or sufficiently to adapt to rapidly changing market conditions,timely, or anymanage the other of the risks discusseddescribed above could have a material adverse effect on our business, financial condition and operating results. In addition, there can be no assurance that we will be able to identify suitable acquisition candidates, consummate acquisitions on favorable terms or realize the anticipated benefits of an acquisition.

Our products are subject to extensive government regulation by numerous international, federal, provincial, state, and local government agencies and authorities. Many of these laws and regulations involve a high level of subjectivity, are subject to interpretation, and vary significantly from market to market. These laws and regulations can, and often do, have several impacts on our business, including but not limited to:

We have observed a general increase in regulatory activity and activismenforcement scrutiny in the United States and across many markets globally where we operate, and the regulatory landscape is becoming more complex with increasingly increasingly strict requirements. In particular, the requirements are impacting the ingredients we can include in our products, the accepted quantities of those ingredients, and the quality and characterization of the ingredients. GlobalIn recent years, global regulators have in recent years become overall more restrictive onregarding the accepted levels of active ingredients that we can use in our product,products, in some cases banning them outright. They have also become more restrictive onregarding the permitted contaminant levels in ingredients and, in many cases, have forced complete removal of such contaminants. In certain cases, such as regarding some pesticides which are virtually ubiquitous in nature, it has proven difficult to comply with the requirements. Further, many of the restrictions regarding ingredient quality are not directly applicable to our products, leaving the possibility that our interpretation of compliance may not match that of the enforcing authorities. Often there is a lack of an equivalent active ingredient present in the marketplace. In other cases, the removal or reduction of a technical ingredient, such as various types of parabens, leads to a significant change toin the character of the product that may make it no longer desirable or safe to the consumer. If this trend in new regulations continues, we may find it necessary to alter some of the ways we have traditionally marketed our products in order to stay in compliance with a changing regulatory landscape and this could add to the costs of our operations and/or have an adverse impact on our business.

Many laws and regulations govern the registration, pre-market approval or other aspects of regulatory oversight of our products. For example, in the United States, some legislators and industry critics have pushed for years to increase the regulatory authority byof the FDA over nutritional supplements. In 2011, the FDA proposed draft guidance to clarify the FDA’s interpretation of the dietary ingredient notification requirements, and in 2016, the FDA issued revised draft guidance that superseded the 2011 version. In April 2024, the FDA issued new draft guidance replacing and expanding on the 2016 revised guidance. This draft guidance is not yet final but indicates that the FDA is expanding its definition of what is considered a “new dietary ingredientingredient.”. While still in flux, if enactedfinalized substantially as proposed, this guidance could impose new and significant regulatory barriers for our nutritional supplement products or unique ingredients, which could delay or inhibit our ability to formulate, introduce and sell nutritional supplements as we have in the past. Similarly, from time to time, efforts are made by some individuals or groups to repeal the Dietary Supplement Health and Education Act of 1994 (“DSHEA”), the U.S. law that provides a separate body of regulations for dietary supplements as compared to drugs. Such a repeal would result in significant burdens to our product development, and the costs of running our business would increase significantly. We face similar pressures in our other markets, which continue to set restrictions on ingredients and their acceptable maximum levels, as well as on ingredient characterization, quality and levels. In Europe, for example, we are unable to market supplements that contain ingredients that were not marketed in Europe prior to May 1997 (“novel foods”) without going through an extensive registration and pre-market approval process.

In the United States, the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”) require disclosure of material connections between an endorser and the company they are endorsing, endorsing, and they generally do not allow marketing using atypical results. Our sales force has historically used testimonials and “before and after” photos to market and sell some of our popular products such as our spa devices and ageLOC Tru TransformationFace anti-aging skin care system. We intend to continue to use testimonials for our popular products, including weight management products and beauty products. In highly regulated and scrutinized product categories such as weight management, if we or our sales force fails to comply with the Guides or makes improper product claims, the FTC could bring an enforcement action against usus, and we could be fined and/or forced to alter our marketing materials. In addition, during 2023, the FTC sent notices of penalty offense to nearly 700 companies, including us, regarding the requirement of sufficient substantiation for product claims. Pursuant to the FTC’s “penalty offense authority,” companies that received the notice are expected to comply with the standards set in the FTC’s prior administrative cases on this topic, and they could incur significant civil penalties if the FTC were to determine that they or their representatives failengaged toin doconduct so.inconsistent with those standards.

One of our strategies is to market unique and innovative products that allow our sales force to distinguish our products. As we pursue this strategy with our current and future device products, there there is a risk that regulatory authorities in our markets could determine that these products must receive clearance or be registered as medical devices. Such a determination could restrict our ability to import or sell the product in such a market until registration or clearance is obtained. The process for obtaining such registrations and clearances could require us to provide documentation concerning product manufacturing and clinical utility; to make design, specification and manufacturing manufacturing process modifications to meet standards imposed on medical device companies; and to modify our marketing claims regarding the registered product.

We have been, and regularly are, a party to litigation, government inquiries or investigations, audits or other legal matters. These legal proceedings canhave included, or could include, among other things, claims alleging violation of the federal securities laws or state corporate laws, or claims related to employment matters, contracts, intellectual property, consumer protection, fair-competition/anti-trust laws, our products, business opportunity or advertising, defamation, negligence, data breaches, privacy compliance, or other matters. Claims have been brought by regulators, investors, members of our sales force, consumers, employees, and other private parties and in some cases have been brought as class action lawsuits. In addition, as we have been more active during the past several years with acquisitions, divestments and other investment-related activities, we have had litigation and threats of litigation with parties involved in these transactions or businesses.

In general, litigation claims, regulatory actions or other legal matters are expensive and time consumingtime-consuming and can result in settlements, adverse rulings or damages that could significantly affect financial results and the conduct of our business. It is not possible to predict the final resolution of any legal proceeding to which we may become party, and the impact of these matters on our business, results of operations and financial condition could be material.

Our international operations are subject to various anti-corruption laws in the jurisdictions where we operate, including principally the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA prohibits companies companies and their agents or intermediaries from offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise for the purpose of obtaining or retaining business. The FCPA also requires public companies to make and keep books and records, which, in reasonable detail, accurately and fairly reflect the transactions of the company and to devise and maintain an an adequate system of internal accounting controls. Significant international regulation of our industry and accordingly our business operations requires our employees, agents, and intermediaries to interact frequently with public officials, including officials of non-U.S. governments, in some highly regulated jurisdictions, including Mainland China. We dedicate time and resources to internal investigations of any allegation that we are not or may not be in compliance with the FCPA or other applicable international anti-corruption laws. Such allegations, even if untrue, may result in a government investigation by a foreign or U.S. regulator, including the U.S. Department of Justice and the Securities and Exchange Commission. Our corporate policies require all employees, agents and intermediaries to comply with the FCPA and other applicable anti-corruption laws, including the FCPA’s books-and-records and internal-accounting-controls requirements. Any regulatory determination, however, that our operations or activities are not in compliance with existing anti-corruption laws or regulations could result in the imposition of substantial fines and other penalties from U.S. or other regulatory entities.

Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2024,2025, our revenue of $1.7$1.5 billion was primarily generated by our threetwo primary brandsproduct categories: our beauty brand,products Nu Skin; ourand wellness brand, Pharmanex; and our anti-aging brand, ageLOC.products. We operate in the direct selling channel, primarily utilizing person-to-person marketing to promote and sell our products, including through the use of social and digital platforms. In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates” because their primary role is to promote our brand and products through their personal and social networks.

In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our businessstrategic investment arm known as Rhyz Inc.Inc., which we formed in 2018. Our Rhyz businesses primarily consist of consumer, technology and manufacturing companies. In 2024,2025, the Rhyz companies generated $286.6$223.6 million, or 17%15%, of our 20242025 reported revenue (excluding sales to our core Nu Skin business). As discussed further in “Rhyz isCompanies,” abelow, keyin componentJanuary 2025 we sold one of our business,Rhyz andbusinesses thesethat accounted for $69.6 million of our 2024 reported revenue. Our Rhyz companies enable us to reduceoptimize our cost of goods, improve lead times, diversify our revenue mix, and create synergies for our owned and partner brands.

To enhance customer retention, we have developed product subscription and loyalty programs that provide incentives for consumers to commit to purchase a specific amount of product on a monthly basis. Several of our products are conducive to subscriptions. For example, Prysm iO and its accompanying mobile application are designed to generate subscription sales. All purchases under these programs are subject to our standard product payment and return policies. We believe these subscription and loyalty programs have improved consumer retention, have had a stabilizing impact on revenue and have helped generate recurring sales.

Sales Leader previews and other product introductions and promotions sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenuerevenue, Customers, Paid Affiliates and Sales Leaders during the quarter and skew year-over-year and sequential comparisons. We believe our product launch process attracts new Customers, Paid Affiliates and Sales Leaders to our business, increases consumer trial, and provides us with important marketing and forecasting information about our products. Please refer to Item 1A. Risk Factors for more information on risks related to our product launch process.

We report revenue in nine segments, and we translate revenue from each market’s local currency into U.S. dollars using weighted-average exchange rates. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products. All revenue associated with a contract is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with revenue primarily recognized at shipping point, the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. In most markets, we offer a return policy that allows our sales force to return unopened and unused product for up to 30 days for a full refund, or 12 months subject to a 10% restocking fee. Reported revenue is net of returns, which have historically been less than 5% of annual revenue. Sales taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.

Selling expenses are our most significant expense and are classified as operating expenses. Selling expenses include sales commissions paid to our sales force, special incentives, costs for incentive trips, cost of sales force conventions and other rewards, as well as salaries, service fees, benefits, bonuses and other labor and unemployment expenses we pay to our sales force in Mainland China. The sales force conventions are held in various markets worldwide, which we generally expense in the period in which they are incurred. Because our various sales force conventions are not held during each fiscal year, or in the same period each year, their impact on our general and administrative expenses may vary from year to year and from quarter to quarter. For example, we currently plan to hold a global convention approximately every other year. We held our last in-person global convention in the third quarter of 2024, with an east event in South Korea and a west event in the United States.States, and we currently plan to hold our next in-person global convention in the third quarter of 2026. These conventions have significant expenses associated with them. Because we have not incurred expenses for these conventions during every fiscal year or in comparable interim periods, year-over-year comparisons have been impacted accordingly. Selling expenses do not include amounts we pay to our sales force based on their personal purchases; rather, such amounts are reflected as reductions to revenue. Our global sales compensation plan, which we employ in all our markets except Mainland China, is an important factor in our ability to attract and retain our Sales Leaders. Under our global sales compensation plan, Sales Leaders can earn “multi-level” compensation, where they earn commissions for product sales to their consumer groups as well as the product sales made through the sales network they have developed and trained. We do not pay commissions on business portfolios. Fluctuations occur in the amount of commissions paid as our numbers of Customers and Sales Leaders change from month to month, but the fluctuation in the overall payout as a percentage of revenue tends to be relatively small. Selling expenses as a percentage of revenue typically increase in connection with a significant product offering, due to growth in the number of Sales Leaders qualifying for increased sales compensation and promotional incentives. From time to time, we make modifications and enhancements to our global sales compensation plan in an effort to help motivate our sales force and develop leadership characteristics, which can have an impact on selling expenses.

Provision for income taxes depends on the statutory tax rates and the withholding taxes in each of the jurisdictions in which we operate. For example, statutory tax rates in 20242025 were approximately approximately 17% in Hong Kong, 20% in Taiwan, 21% in South Korea, 32% in Japan and 25% in Mainland China. We are subject to taxation in the United States at the statutory corporate federal tax rate of 21% in 2024,2025, and we pay taxes in multiple states within the United States at various tax rates. Our overall effective tax rate was 16.3%18.3% for the year ended December 31, 2024, a decrease from the previous fiscal year due to the sale of the Company’s subsidiary Mavely on January 2, 2025.

Income Taxes. We account for income taxes in accordance with the Income Taxes Topic of the Financial Accounting Standards Codification. This Topic establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. We take an asset and liability approach for financial accounting and reporting of income taxes. We pay income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between Nu Skin affiliates around the world. Deferred tax assets and liabilities are created in this process. As of December 31, 2024,2025, we had net deferred tax assets of $173.9$171.4 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. These deferred tax assets assume sufficient future earnings will exist for their realization and are calculated using anticipated tax rates. In certain jurisdictions, valuation allowances have been recorded against the deferred tax assets specifically related to use of foreign tax credits for branch incomeincome, research and development credits, and net operating losses. The valuation allowance assessment requires estimates as to future operating results. These estimates are made on an ongoing basis based upon the Company'sCompany’s business plans and growth strategies in each market and consequently, future material changes in the valuation allowance are possible. The valuation allowance reduces the deferred tax assets to an amount that management determined is more-likely-than-not to be realized. When we determine that there is sufficient taxable income to utilize the foreign tax creditscredits, research and development credits, or the net operating losses, the valuation allowances will be released. In the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination was made. It is reasonably possible that within the next 12 months sufficient negative evidence may exist that will require us to establish additional valuation allowance on our deferred tax assets that we do not expect to realize.

TheWe company operatesoperate in and filesfile income tax returns in the U.S. and numerous foreign jurisdictions, which are subject to examination by tax authorities. Years open to examination contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions, and tax credits. We account for uncertain tax positions in accordance with Accounting Standards Codification ("“ASC"”) 740, Income Taxes. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. In 2009, we entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”). Under the CAP program, the IRS audits the tax position of the Company to identify and resolve any tax issues that may arise throughout the tax year. In 2022, the IRS developed a new phase of CAP called "“Bridge Plus."” Under Bridge Plus the taxpayer is required to provide book-to-tax reconciliations, credit utilization and other supporting documentation shortly after their audited financial statement is finalized. TheWe company washave been selected for the Bridge Plus phase foreach year since the 2023, 2024, and 20252022 tax years.year. As of December 31, 2024,2025, all open tax years except 2021 and 2024 have been audited and are effectively closed to further examination. For the tax year 2021, thewe Company waswere in the Bridge phase of the CAP program, pursuant to which the IRS did not accept disclosures, did not conduct reviews and did not provide letters of assurance for the Bridge year. There are limited circumstances that tax years in the Bridge phase will be opened for examination. For the tax year 2024, the company has provided all required documentation to the IRS and is waiting for the IRS to issue their Full Acceptance Letter to indicate the audit is complete and the period is closed. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years before 2021.2022. Foreign jurisdictions have varying lengths of statutes of limitations for income tax examinations. Some statutes are as short as three years and in certain markets may be as long as ten years. We are currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable.

At December 31, 2024,2025, we had $25.9$21.8 million in unrecognized tax benefitsbenefits, all of which $25.9 million,which, if recognized, would affect the effective tax rate. In comparison, at December 31, 2023,2024, we had $22.0 $25.9 million in unrecognized tax benefitsbenefits, all of which $22.0 million,which, if recognized, would affect the effective tax rate. We recognized an increase of approximately $0.7$1.8 million in interest and penalties expense during the year ended December 31, 20242025 and $0.6 $0.7 million in interest and penalties during the year ended December 31, 2023.2024. We had approximately $13.7$15.5 million, $13.0$13.7 million and $12.4$13.0 million of accrued interest and penalties related to uncertain tax positions at December 31, 2024,2025, 20232024 and 2023, 2022, respectively. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

In 2021, as part of the Organization for Economic Co-operation and Development'sDevelopment’s ("“OECD"”) Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax ("“Pillar Two"”) of 15%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. The company We did not have a tax impact related to Pillar Two in 20242025 and based on current enacted legislation, thewe Company doesdo not anticipate a material impact related to Pillar Two forin 2025.2026.

Intangible Assets. Acquired intangible assets may represent indefinite-lived assets, determinable-lived intangibles or goodwill. Of these, only the costs of determinable-lived intangibles are amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from our impairment testing of indefinite-lived intangibles. WeOur testimpairment evaluation of goodwill forconsists impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to performof a qualitative assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not required to calculate the fair value of a reporting unit unless the entity determines thatif it is more likely than not that itsthe fair value of the reporting unit is less than its carrying amount. IfOur underqualitative assessment considers factors including changes in the competitive market, budget-to-actual performance, trends in market capitalization for us and our peers, turnover in key management personnel and overall changes in the quantitativemacroeconomic environment. If this qualitative assessment indicates it is more likely than not that the estimated fair value of athe reporting unit is less thanexceeds its carrying amount,value, thenno thefurther amountanalysis ofis the impairment loss, if any, must be measured. We elected to perform the quantitative assessment for fiscal year 2022required, and wegoodwill usedis the qualitative assessment for fiscal year 2023.not impaired.

If our qualitative assessments indicate that it is more likely than not that the estimated fair value is less than carrying value, we proceed to a quantitative impairment test which compare the estimated fair value of the reporting unit or indefinite-lived intangible asset to its carrying amount with an impairment loss recognized for the amount, if any, by which carrying value exceeds estimated fair value. Considerable management judgment and assumptions are used in our goodwill impairment assessment, including with respect to the estimated future cash flows, the earnings multiples used in the market approach, the discount rate used to discount such estimated future cash flows to their net present value and the reasonableness of the implied control premium relative to our market capitalization. TheseChanges in these factors could materially increase or decrease the fair value of our reporting units and, accordingly, could result in a related impairment charge. Declines in our market capitalization or in our business performance could also result in a material impairment charge in a future period.

We report our business in nine segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Americas, Southeast Asia/Pacific, Mainland China, Japan, Europe & Africa, South Korea, and Hong Kong/Taiwan—and our two Rhyz segments—Manufacturing and Rhyz Other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments. The Rhyz Other segment includes other investments by our Rhyz businessstrategic investment arm. Our Europe & Africa segment was previously Europe, Middle East and Africa ("EMEA"), but was changed following the June 2023 closure of the Israel market.

The tablestable below setsets forth summarizedsegment financial information for each of our reportable segmentscontribution for the years ended December 31, 20242025 and 20232024 for each of our reportable segments (U.S. dollars in thousands). Segment contribution excludes excludes certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to control for for their respective segments. For additional information regarding our segments and the calculation of segment contribution, see Note 16 to the consolidated financial statements contained in this report.

In the second quarter of 2024, we launched our developing market strategy in Argentina, with a revised operating model with a focused product portfolio and modified business model that has enabled us to reach a broader demographic. During theearly third2025, andwe fourthcontinued quartersto ofroll 2024,out this strategy in additional Latin America markets. For 2025, our ArgentinaLatin marketAmerica revenue,markets revenue increased from $57.8 million to $99.6 million, a 72.3% year-over-year increase; in addition, Latin America Customers increased 46%, Paid Affiliates increased 47%, and Sales Leaders allincreased experienced double-digit growth year-over-year. We plan on leveraging our learnings from this strategy throughout the remainder of Latin America in 2025.25%.

The year-over-year declinedecrease in segment contribution for 2025 primarily reflects the decreaseddecline in revenue, partially offset by aan 1.30.8 percentage point declinedecrease in general and administrativeselling expenses foras 2024a attributablepercentage to savingsof from our restructuring plan.revenue.

EuropeSoutheast & Africa.Asia/Pacific. The reductiondecline in revenue, Customers, Paid Affiliates and Sales Leaders reflectsfor 2025 is partially attributable to slowing momentum from the continuedgeneral softening of momentum, as well as a continuation of the macroeconomic factors thatin the havemarkets. ledIn response to athese declinechallenges, in the2025 purchasingwe powerbegan of our customers. Leveragingleveraging our learnings from Argentina,the wedeveloping planmarket onstrategy, focusingincluding onby alaunching productproducts and pricing strategyspecifically aimed towardsat increasingexpanding accessibilityour andcustomer affordability.base.

The year-over-year increase in segment contribution for 2025 is primarily attributable to a 2.12.2 percentage-pointpercentage point increase into gross margin due to a shift in product mix, and a 1.3 percentage point decrease in selling expenses as a percentage of revenue primarily from lessa lower amount of local sales discounts,force incentives during the period as well as aless 0.50qualifiers percentage-point decrease in general and administrative expenses as a percent of revenue from cost saving efforts, all partially offset byfor the declinesuccess in revenue.trips.

The year-over-year decrease in segment contribution is primarily reflectsattributable to the decline indecreased revenue.

Hong Kong/Taiwan. The declinesdecline in our Hong Kong/Taiwan segment for 20242025 areis attributable to macroeconomic issues, which are resulting in less purchasing power for our consumers. InOur reported addition,revenue wereflects experiencedbenefits some transformationalfrom pressuresfavorable withforeign newcurrency technologyfluctuations inof Taiwan.1.8% for 2025.

The decreaseincrease in segment contribution for 20242025 is primarily from the revenue mix amongst our manufacturing entities as well as product mix, which resulted in lessmore profitability for the periods presented.year.

Revenue for the three-month period ended MarchJune 31,30, 2026 decreased 12.0%17.1% to $320.6$320.1 million, compared to $364.5$386.1 million in the prior-year period, and revenue for the six-month period ended June 30, 2026 decreased 14.6% to $640.7 million, compared to $750.6 million in the prior-year period. Our revenue in the firstsecond quarter of 2026 was positivelynegatively impacted by 1.1% 1.0% from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined 14%, 8% and 13%,9%, respectively, on a year-over-year basis.

The declines for the three-monththree- periodand six-month periods ended MarchJune 31,30, 2026 were largely driven by the continued macroeconomic challenges we have been facing in our markets, which have negatively impacted consumer spending and customer acquisition. In addition, while we continue to make progress on our long-term vision, we have experienced headwinds from the transformation process. Our priorities for 2026 focus on business model optimization, driven by the continued rollout of enhancements to our sales performance plan, the continued launch of our Prysm iO intelligent wellness platform and business expansion into India. Our early learnings from the Prysm iO have resulted in a shift in the strategy from a device placement focus to an assessment model that is more conducive to in-person engagement. In addition, from our preview in India we have identified the need to simplify the model in advance of our full market opening, which is now slated for the first quarterhalf of 2026, we predominately completed the Sales Leader previews of Prysm iO. We remain focused on the associated Sales Leader activation to enable a successful launch.2027.

Earnings per share for the second quarter of 2026 decreased to $(5.14), compared to $0.43 in the prior-year period. Earnings per share for the first quartersix months of 2026 decreased to $0.04, $(5.12), compared to $2.14$2.59 in the prior-year period. Our second quarter 2026 earnings per share were negatively impacted by an impairment charge of $78.9 million and a $167.5 million valuation allowance associated with our U.S. deferred tax assets, as well as the decline in revenue. Our earnings per share for the first quartersix months of 2026 earnings per share waswere negatively impacted by the declinesecond inquarter revenueimpairment andcharge, $5.9second millionquarter ofvaluation allowance, charges associated with our decisionfirst toquarter of 2026 wind down downof our separate BeautyBio business.business and decline in revenue. Our 2025 earnings per share benefited from the January 2025 sale of our Mavely business, which generated a pre-tax gain of approximately $176.2 million, partially offset by the associated taxes, an intangible asset group impairment of $25.1 million in our Rhyz Other segment and a non-cash loss on equity investment of $28.1 million.

The following table sets forth revenue for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025 for each of our reportable segments (U.S. dollars in thousands):

The tables below set forth summarized financial information for each of our reportable segments for the three-monththree- and six-month periods ended MarchJune 31,30, 2026 and 2025 (U.S. dollars in thousands). Segment contribution excludes certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to control for their respective segments. For additional information regarding our segments and the calculation of segment contribution, see Note 11 to the consolidated financial statements contained in this report.

The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business for the three-month periods ended MarchJune 31,30, 2026 and 2025.

Americas. The results in our Americas segment reflect a continued decline in our North America markets,markets. whileFor the second quarter of 2026, our Latin America marketsmarkets’ grewrevenue year-over-year.contracted on a reported currency basis, with growth for the first half of 2026. As our Sales Leaders prioritized Prysm iO and associated wellness products,products during the first half of 2026, we experienced switching costs in the first quarter of 2026 as many of our Sales Leaders began adapting to a greater focus on wellness products than previously. During the second quarter of 2026, we released enhancements to our sales compensation plan, with a higher focus on aligning incentives around Sales Leader development and retention. In addition, our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 3.7%2.3% and 3.0% for the firstsecond quarter and first half of 2026.2026, respectively.

The year-over-year decrease in segment contribution for the second quarter and first quarterhalf of 2026 primarily reflects the overall decline in revenue, as well as a 3.53.1 and 3.3 percentage-point increase for the second quarter and first half of 2026, respectively, in selling expenses from additional incentives aimed at assisting the transition toassociated with the sales performancecompensation plan.plan enhancements.

Mainland China. Our Mainland China market continued to be challenged during the second quarter and first quarterhalf of 2026, with ongoing macroeconomic factors, the associated decrease in consumer spending and a continued shift of market consumer awareness and demand to online product marketplaces. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 4.5%5.0% and 4.8% for the second quarter and first half of 2026, respectively. During the second quarter of 2026, we released enhancements to the business model, as well as additional incentives for our sales force, which we believe helped drive a 2% increase in Sales Leaders as well as a slowing of the decline of Paid Affiliates for the second quarter of 2026.

The decrease in segment contribution for the second quarter and first quarterhalf of 2026 primarily reflects the decline in revenue.revenue and associated fixed cost pressures on general and administrative expenses.

Japan.Southeast Asia/Pacific. The reductiondecline in revenue, Customers, Paid Affiliates and Sales Leaders for the second quarter and first half of 2026 is partiallyprimarily attributable to consumerslowing inflationarymomentum pressuresfrom whichthe depressedgeneral macroeconomic spending.factors in the markets. In addition, our reported revenue reflects negative impactsa benefit from unfavorablefavorable foreign currency fluctuations of 2.8%1.4% and 2.6% for the firstsecond quarter and first half of 2026.2026, respectively.

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects continued softness in these markets, as well as the macroeconomic factors that have led to a decline in the purchasing power of our customers. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 9.3%1.8% and 5.3% for the firstsecond quarter and first half of 2026.2026, respectively.

The year-over-year decline in segment contribution for the second quarter of 2026 primarily reflects the decline in revenue, aspartially welloffset asby a 1.91.4 percentage-pointpercentage decreasepoint increase in gross margin andfrom a 1.5favorable product percentage-pointmix. decreaseThe decline in sellingsegment expensescontribution for the first half of 2026 is primarily from the reduction. decline in revenue.

Manufacturing. Our Manufacturing segment revenue decreased 18.7%23.2% and 21.1% for the firstsecond quarter and first half of 2026.2026, respectively. The decrease is partially due to a tough challenging comparison with a strong first quarterhalf of 2025, as well as customer order delays related to the tariff and associated economic uncertainty.

The decrease in segment contribution for the second quarter and first half of 2026 is primarily due to our decision to wind down our separate BeautyBio business and the associated $3.1 million inventory charge, $1.8 million of intangible impairment and $1.0 million in other associated costs.costs recorded in the first quarter of 2026, as well as elevated customer acquisition cost for LifeDNA.

Revenue for the three-month period ended MarchJune 31,30, 2026 decreased 12.0%17.1% to $320.6$320.1 million, compared to $364.5$386.1 million in the prior-year period. Revenue for the six-month period ended June 30, 2026 decreased 14.6% to $640.7 million compared to $750.6 million in the prior-year period. Our revenue in the firstsecond quarter of 2026 was positivelynegatively impacted by 1.1%, 1.0%, from foreign-currency fluctuations. For a discussion and analysis of these decreases in revenue, see “Overview” and “Segment Results,” above.

Gross profit as a percentage of revenue was 66.9%68.2% for the firstsecond quarter of 2026, compared to 67.8%68.8% for the prior-year period, and 67.5% for the first six months of 2026, compared to 68.3% for the prior-year period. Gross profit as a percentage of revenue for our Nu Skin business increased 0.2 percentage points to 76.9%77.7% for the second quarter of 2026 and increased 0.2 percentage points to 77.3% for the first quartersix months of 2026.

Selling expenses as a percentage of revenue increased to 34.3%33.7% for the firstsecond quarter of 2026, compared to 32.5%33.2% for the prior-year period, and increased to 34.0% for the first six months of 2026, compared to 32.9% for the prior-year period. Core Nu Skin selling expenses as a percentage of revenue increaseddecreased 1.8 0.2 percentage points to 40.5%39.8% for the second quarter of 2026 and increased 0.8 percentage points to 40.1% for the first quartersix months of 2026. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders. Given the size of our sales force and the various components of our compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period. In the third quarter of 2026, we are holding our global Nu Skin LIVE! event in Japan. As a result of the global LIVE! event, we are anticipating an approximate incremental $5.0 million in selling expenses for the third quarter of 2026.

General and administrative expenses decreased to $98.5$90.8 million in the firstsecond quarter of 2026, compared to $113.2$106.7 million in the prior-year period, and decreased to $189.4 million in the first six months of 2026, compared to $219.9 million in the prior-year period. The $14.7$15.9 million decline for the firstsecond quarter is primarily from a $5.5$8.6 million contraction in labor expenses primarily from $5.2lower million of stock-basedincentive compensation expensefrom recordeda decline in the first quarter of 2025 related to profit interest units issued to the Mavely foundersperformance and a $5.4$2.5 million decline in software and related contracts from continued cost management. management.The $30.5 million decline for the first half of 2026 is primarily from a $14.3 million reduction in labor expense and a $7.9 million decline in software and related contracts. General and administrative expenses as a percentage of revenue decreasedincreased to 30.7%28.4% for the firstsecond quarter of 2026, from 31.1%27.6% for the prior-year period, and increased to 29.6% for the first six months of 2026, from 29.3% for the prior-year period. In the third quarter of 2026, we anticipate beginning to implement a re-alignment of our organizational resources. As a result of these changes, we are anticipating an approximate incremental $5.0 million in transition cost in the third quarter of 2026, primarily consisting of cash severance charges.

Interest expense increased to $4.3$3.3 million in the firstsecond quarter of 2026, compared to $3.3$2.5 million in the prior-year period. Interest expense for the first six months of 2026 increased to $7.6 million compared to $5.8 million for the prior-year period. The increase is primarily due to our interest rate swap arrangements that we entered into in 2020 maturing on July 31, 2025, at which time our effective interest rate increased.

Other income (expense), net was $2.8$(0.5) million for the firstsecond quarter of 2026 compared to $(28.40.8) million for the prior-year period, and $2.3 million for the first six months of 2026 compared to $(29.2) million for the prior-year period. In the first quarter of 2025, we recorded a $28.1 million unrealized loss on investment. See Note 8 to the consolidated financial statements contained in this report for more information on the unrealized equity investment and the associated loss.

Provision (benefit) for income taxes

Provision for income taxes for the firstthree- and six-month periods ended June 30, 2026 was $186.6 million and $187.4 million, respectively, compared to $6.3 million and $33.4 million for the prior-year periods. The effective tax rates for the three- and six-month periods ended June 30, 2026 were (295.4)% and (309.3)% of pre-tax income, respectively, compared to 23.0% and 20.6% in the prior-year periods. The change in the effective tax rate in the second quarter of 2026 was $0.8 million, compared to $27.1 million for the prior-year period. The effective tax rate was 29.4% of income before provision for income taxes during the first quarter of 2026 compared to 20.1% in the prior-year period. The first quarter of 2026 effective tax rate is higher than the prior-year periodprimarily due to the valuation allowance established on our U.S. deferred tax rate benefit from the sale of Mavely in the first quarter of 2025.assets.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through through 2027. We completed the initial assessment of the OBBBA corporate tax provisions as they relate to our financial statements in the third quarter of 2025. The enactment of the OBBBA did not have a material impact to our income tax benefit for the three months ended MarchJune 31,30, 2026. We will continue to evaluate the impacts of OBBBA and do not expect the OBBBA to have a material impact to our total tax provision.

As a result of the foregoing factors, net income for the firstsecond quarter of 2026 was $1.8$(249.8) million compared to $107.5$21.1 million in the prior-year period. Net income for the first six months of 2026 was $(248.0) million, compared to $128.6 million for the first six months of 2025.

Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital expenditures, stock repurchases, dividends, and debt repayment. repayment. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock repurchases, capital investments and short-term operating needs. We typically generate positive cash flow from operations operations due to favorable margins and have generally relied on cash from operations to fund operating activities. However, inIn the first threesix months of 2026, we hadgenerated a net outflow of $3.9$6.7 million in cash from operations, compared to $0.4$36.2 million of cash provided by operations in the prior-year period. The decrease in cash flow from operations primarily reflects cashincremental paymentsinventory made in the first quarter of 2026 related to prepaid corporate income taxes.purchases. Cash and cash equivalents, including current investments, as of MarchJune 31,30, 2026 and December 31, 2025 were $200.4$191.4 million and $239.8 million, respectively, with the decrease being primarily driven by $13.7$19.4 million of capital expenditures, $10.0 million in net debt payments, $6.5 million for the purchase of noncontrolling interest in LifeDNALifeDNA, $5.8 million of dividend payments and $5.0 million in share repurchases.

Working capital. As of MarchJune 31,30, 2026, working capital was $265.9$251.8 million, compared to $284.0 million as of December 31, 2025. Our decrease in working capital is primarily attributable to changes in our cash balance as explained above.

Capital expenditures. Capital expenditures for the threesix months ended MarchJune 31,30, 2026 were $13.7$19.4 million. We expect that our capital expenditures in 2026 will be primarily related to:

Credit Agreement. On March 27, 2026, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2022 Credit Agreement. The Credit Agreement provides for a $175.0 million term loan facility and a $75.0 million revolving credit facility, each with a term of five years. Both facilities bear interest at the SOFR, plus a margin based on the Company'sCompany’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility will amortize in equal quarterly installments in amounts resulting in an annual amortization of $20.0 million per annum, with the remainder payable at at final maturity. The Credit Agreement is guaranteed by certain of the Company'sCompany’s domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. As of MarchJune 30, 31, 2026, we had $50.0$45.0 million of outstanding borrowings under our revolving credit facility, and $175.0$170.0 million on our term loan facility. The carrying value of the debt also reflected debt issuance costs of $1.4$1.3 million as of MarchJune 31,30, 2026, related to the Credit Agreement. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00.

As of MarchJune 31,30, 2026, the Company was in compliance with all covenants under the Credit Agreement.

Stock repurchase plan. In 2018, our board of directors approved a stock repurchase plan authorizing us to repurchase up to $500.0 million of our outstanding shares of Class A common stock on the open market or in private transactions. During the firstsecond quarter of 2026, we repurchased 0.5 millionno shares of our Class A common stock under the plan for $5.0 million.plan. As of MarchJune 31,30, 2026, $137.3 million was available for repurchases under the plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

Dividends. In February 2026, our board of directors declared quarterly cash dividends of $0.06 per share. This quarterly cash dividend of $2.9 million was paid on March 11, 2026 to stockholders of record on February 27, 2026. In May 2026, our board of directors declared quarterly cash dividends of $0.06 per share. This quarterly cash dividend of $2.9 million was paid on June 10, 2026 to stockholders of record on May 29, 2026. In August 2026, our board of directors declared a quarterly cash dividend of $0.06 per share to be paid on JuneSeptember 10,9, 2026 to stockholders of record on MayAugust 29,28, 2026. Currently, we anticipate that our board of directors will continue to declare quarterly cash dividends and that the cash flows from operations will be sufficient to fund our future dividend payments. However, the continued declaration of dividends is subject to the discretion of our board of directors and will depend upon various factors, including our net earnings, financial condition, cash requirements, future prospects and other relevant factors.

Cash from foreign subsidiaries. As of MarchJune 31,30, 2026 and December 31, 2025, we held $200.4$191.4 million and $239.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $159.8$150.2 million and $170.7 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively, held in our operations outside of the U.S. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

We typically fund the cash requirements of our operations in the U.S. through intercompany dividends, intercompany loans and intercompany charges for products, use of intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends. For example, in Mainland China, we are unable to repatriate cash from current operations in the form of dividends until we file the necessary statutory financial statements for the relevant period. As of MarchJune 31,30, 2026, we had $32.5$41.5 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of MarchJune 31,30, 2026 and December 31, 2025, we had $28.0$31.1 million and $23.9 million, respectively, in intercompany receivables with our Argentina subsidiary. We also have intercompany loan arrangements in some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line of credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for for $60.0 million of earnings in Mainland China that we designated as indefinitely reinvested during the second quarter of 2018, we currently plan to repatriate undistributed earnings from our non-U.S. operations as necessary, considering the cash needs needs of our non-U.S. operations and the cash needs of our U.S. operations for dividends, stock repurchases, capital investments, debt repayment and strategic transactions. Repatriation of non-U.S. earnings is subject to withholding taxes in certain certain foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes related to the non-U.S. earnings.

There were no significant changes in our critical accounting policies or estimates during the firstsecond quarter of 2026.