NU SKIN ENTERPRISES INC

Previous wording

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent our current expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and include, but are not limited to, statements of management’s expectations regarding our performance, initiatives, strategies, product introductions and offerings, growth of our Rhyz business, acquisitions, and the integration of acquisition targets, growth, opportunities and risks; statements of projections regarding future sales, expenses, operating results, taxes and duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements of management’s expectations and beliefs regarding our markets and global economic conditions; statements regarding the payment of future dividends and stock repurchases; statements regarding the outcome of litigation, audits, investigations or other regulatory actions; statements regarding government policies and regulations relating to our industry, including government policies and regulations in or related to the United States and Mainland China; accounting estimates and assumptions; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “optimistic,” “project,” “anticipate,” “determine,” “estimate,” “intend,” “plan,” “goal,” “objective,” “targets,” “become,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. We caution and advise readers that these statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results to differ materially from the expectations and beliefs contained herein. For a summary of these risks, see the risk factors included in our Annual Report on Form 10-K for the 2023 fiscal year and in any of our subsequent Securities and Exchange Commission filings, including this Quarterly Report.

Current wording

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent our current expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and include, but are not limited to, statements of management’s expectations regarding our performance, initiatives, strategies, product introductions and offerings, growth of our Rhyz business, acquisitions and the integration of acquired companies, growth, opportunities and risks; statements of projections regarding future sales, expenses, operating results, taxes and duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements of management’s expectations and beliefs regarding our markets and global economic conditions; statements regarding the payment of future dividends and stock repurchases; statements regarding the outcome of litigation, audits, investigations or other regulatory actions; statements regarding government policies and regulations relating to our industry, including government policies and regulations in or related to the United States and Mainland China; accounting estimates and assumptions; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “optimistic,” “project,” “anticipate,” “determine,” “estimate,” “intend,” “plan,” “goal,” “objective,” “targets,” “become,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. We caution and advise readers that these statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results to differ materially from the expectations and beliefs contained herein. For a summary of these risks, see the risk factors included in our Annual Report on Form 10-K for the 2023 fiscal year and in any of our subsequent Securities and Exchange Commission filings, including this Quarterly Report.

Previous wording

Revenue for the three-month period ended March 31, 2024 decreased 13.3% to $417.3 million, compared to $481.5 million in the prior-year period. Our revenue in the first quarter of 2024 was negatively impacted 3.8% from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined 19%, 30% and 12%, respectively, on a year-over-year basis.

Current wording

Revenue for the three-month period ended June 30, 2024 decreased 12% to $439.1 million, compared to $500.3 million in the prior-year period, and revenue for the six-month period ended June 30, 2024 decreased 13% to $0.9 billion, compared to $1.0 billion in the prior-year period. Our revenue in the second quarter and first six months of 2024 was negatively impacted 4.2% and 4.0%, respectively, from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined 14%, 17% and 16%, respectively, on a year-over-year basis.

Previous wording

The declines for the three-month period ended March 31, 2024 were largely driven by the continued macroeconomic challenges we’ve 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. During the first quarter of 2024, we continued our launch process of our newest smart connected device system, ageLOC WellSpa iO, which generated approximately $23.7 million in revenue. We remain optimistic for the remainder of 2024 with our third quarter Global Nu Skin Live!, which for 2024 will be held in South Korea for our eastern markets and the United States for our western markets. In addition, we are expecting to start the launch process for MYND360, our new brand taking a holistic approach to cognitive health. The decline in our core Nu Skin segments was partially offset by 57.5% growth in our Rhyz segments, partially from acquisitions during the second quarter of 2023 as well as organic growth. Rhyz is a key component of our business, and we anticipate its continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers where they shop, and create synergies for our owned and partner brands.

Current wording

The declines in our second quarter and first six months of 2024 revenue were largely driven by continued macroeconomic pressures we’ve been facing in our core Nu Skin segments, which has negatively impacted consumer spending and customer acquisition. The declines in our core Nu Skin segments were partially offset by 32.3% and 43.3% revenue growth for the second quarter and first half of 2024, respectively, in our Rhyz segments, partially from acquisitions in the second quarter of 2023 as well as organic growth. Rhyz is a key component of our business, and we anticipate its continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers where they shop, and create synergies for our owned and partner brands. For our core Nu Skin segments, we remain optimistic for the remainder of the year with our third quarter Global Nu Skin L!VE, which was held in July 2024 in the United States for our Western markets and will be held in South Korea for our Eastern markets in September 2024. In addition, we expect to start the launch process for MYND360, our new brand taking a holistic approach to support cognitive health, in the third quarter of 2024.

Previous wording

Earnings per share for the first quarter of 2024 decreased 104% to $(0.01), compared to $0.23 in the prior-year period. The decrease in earnings per share for the quarter is primarily driven by the decline in revenue.

Current wording

Earnings per share for the second quarter of 2024 decreased 541% to $(2.38), compared to $0.54 in the prior-year period. Earnings per share for the first six months of 2024 decreased 414% to $(2.39), compared to $0.76 in the prior-year period. The decrease in earnings per share for the second quarter and first six months of 2024 is primarily driven by second quarter of 2024 restructuring and impairment charges of $149.4 million, along with the overall decline in revenue.

Previous wording

The following table sets forth revenue for the three-month periods ended March 31, 2024 and 2023 for each of our reportable segments (U.S. dollars in thousands):

Current wording

The following table sets forth revenue for the three- and six-month periods ended June 30, 2024 and 2023 for each of our reportable segments (U.S. dollars in thousands):

Previous wording

The following table sets forth segment contribution for the three-month periods ended March 31, 2024 and 2023 for each of our reportable segments (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. Consolidated financial information was not affected. For additional information regarding our segments and the calculation of segment contribution, see Note 10 to the consolidated financial statements contained in this report.

Current wording

The following table sets forth segment contribution for the three- and six-month periods ended June 30, 2024 and 2023 for each of our reportable segments (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 10 to the consolidated financial statements contained in this report.

Previous wording

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 March 31, 2024 and 2023.

Current wording

The following tables provide information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business for the three-month periods ended June 30, 2024 and 2023.

Previous wording

The following is a narrative discussion of our results in each segment, which supplements the tables above.

Current wording

Following is a narrative discussion of our results in each segment, which supplements the tables above.

Previous wording

Americas. The decline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment is attributable to the decline in momentum in our North America markets, while our Latin America markets continue to be challenged by macroeconomic issues. In connection with our transformation efforts, we experienced disruptions to our subscription sales in North America, which negatively impacted revenue. In the first quarter of 2024, we launched our new connected device, which generated approximately $10.6 million in revenue.

Current wording

Americas. The decline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment is attributable to the decline in momentum in our North America markets, while our Latin America markets continue to be challenged by macroeconomic issues. In connection with our transformation efforts, we experienced disruptions to our subscription sales in North America, which negatively impacted revenue. In the first quarter of 2024, we launched our new connected device, which generated approximately $21.7 million in revenue for the first half of 2024. In the third quarterof 2024 we expect tostart the launch process for our newageLOC TruFace Peptide Retinol Complex with advanced peptide technology. Our revenue for the second quarter and first half of 2024 was negatively impacted 6% by unfavorable foreign currency fluctuations.

Previous wording

Mainland China. Our Mainland China market continued to be challenged during the first quarter of 2024, with ongoing macroeconomic factors and the associated decrease in consumer spending leading to declines in revenue. While we continue to believe in the potential of this market, we anticipate the current deflationary pressures and other economic challenges persisting as the economy works to recover.

Current wording

Mainland China. Our Mainland China market continued to be challenged during the second quarter and first half of 2024, with ongoing macroeconomic factors and the associated decrease in consumer spending leading to declines in revenue. We anticipate issues related to the current Chinese-American relations and regulatory pressures as well as deflationary and other economic challenges persisting as the economy works to recover.

Previous wording

The year-over-year decrease in segment contribution for the first quarter of 2024 primarily reflects lower revenue.

Current wording

The year-over-year decrease in segment contribution for the second quarter and first half of 2024 primarily reflects lower revenue. In addition, our segment contribution was impacted by a 2.7 percentage point and 2.6 percentage point decrease in gross margin for the second quarter and first half of 2024, respectively, attributable to increased sales promotions as well as pressure from the new manufacturing plant that went live in the fourth quarter of 2023. Our segment contribution was also impacted by a 2.7 percentage point and 2.5 percentage point increase in selling expenses as a percent of revenue for the second quarter and first half of 2024, respectively, from increased transitional sales force incentives.

Previous wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for the first quarter of 2024 is partially attributable to slowing momentum from the general macroeconomic factors in the markets along with price increases that we implemented in 2022 and 2023 to address inflation.

Current wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for the second quarter and first half of 2024 is partially attributable to slowing momentum from the general macroeconomic factors in the markets along with price increases that we implemented in 2022 and 2023 to address inflation. During the second quarter of 2024, we began to see year-over-year improvements in many of our markets, but our Indonesia market remains challenging. Our revenue for the second quarter and first half of 2024 was negatively impacted 5% and 4%, respectively, by unfavorable foreign currency fluctuations. Our Paid Affiliates were negatively impacted by a change in eligibility requirements in our Pacific markets for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately one thousand Paid Affiliates for the three months ended June 30, 2024.

Previous wording

Japan. The decline in revenue is primarily attributable to a 10.3% negative impact from unfavorable foreign-currency fluctuations. The increase in Sales Leaders is primarily from a modification we made to the compensation plan starting in the second quarter of 2023. Our Paid Affiliates were negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 14 thousand Paid Affiliates for the three months ended March 31, 2024.

Current wording

Japan. The decline in revenue is primarily attributable to an 11.3% and 10.8% negative impact from unfavorable foreign-currency fluctuations for the second quarter and first half of 2024, respectively. The increase in Sales Leaders is primarily from a modification we made to the compensation plan starting in the second quarter of 2023. Our Paid Affiliates were negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 14 thousand Paid Affiliates for the three months ended June 30, 2024.

Previous wording

South Korea. Our South Korea market was challenged by difficult macroeconomic trends, including inflationary pressures, and our associated price increases which negatively impacted our revenue, Customers, Paid Affiliates and Sales Leaders for the quarter ended March 31, 2024. In addition, in the first quarter of 2023 we launched TRMe in our South Korea market, which generated approximately $19.4 million in revenue, while we did not have any comparable launch in the first quarter of 2024. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 13 thousand Paid Affiliates for the three months ended March 31, 2024.

Current wording

South Korea. Our South Korea market was challenged by difficult macroeconomic trends, including inflationary pressures, and our associated price increases which negatively impacted our revenue, Customers, Paid Affiliates and Sales Leaders for the second quarter and first half of 2024.

Previous wording

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects the softening of momentum, as well as the macroeconomic factors that have led to a decline in the purchasing power of our customers. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 5 thousand Paid Affiliates for the three months ended March 31, 2024.

Current wording

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects the softening of momentum, as well as the macroeconomic factors that have led to a decline in the purchasing power of our customers for the second quarter and first half of 2024.

Previous wording

Hong Kong/Taiwan. The declines in our Hong Kong/Taiwan segment for the first quarter of 2024 are attributable to macroeconomic issues, which are resulting in less purchasing power for our consumers. In addition, we experienced some transformational pressures with new technology in Taiwan. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 3 thousand Paid Affiliates for the three months ended March 31, 2024.

Current wording

Hong Kong/Taiwan. The declines in our Hong Kong/Taiwan segment for the second quarter and first half of 2024 are attributable to macroeconomic issues, which are resulting in less purchasing power for our consumers. In addition, we experienced some pressures with the introduction of new technology in Taiwan. The increase in Paid Affiliates for the second quarter of 2024 is primarily attributable to recent incentive programs aimed at driving increased affiliates.

Previous wording

Manufacturing. Our Manufacturing segment revenue increased 40.6% for the first quarter of 2024, primarily driven by our Wasatch Manufacturing entity. During the first quarter of 2024, Wasatch revenue increased 70.6%, primarily from onboarding new customers and continued automation efforts to increase efficiencies and capacity.

Current wording

Manufacturing. Our Manufacturing segment revenue increased 13.0% and 25.2% for the second quarter and first half of 2024, respectively, primarily driven by our Wasatch Manufacturing entity. During the second quarter of 2024 and first half of 2024, Wasatch revenue increased 29.6% and 47.1%, respectively, primarily from onboarding new customers and continued automation efforts to increase efficiencies and capacity.

Previous wording

Rhyz Other. The increase in revenue of our Rhyz other segment is partially driven by 76.7% growth at our Mavely entity. In addition, we recognized $5.2 million of revenue in the first quarter of 2024, from our entities we acquired in the second quarter of 2023.

Current wording

Rhyz Other. The increase in revenue of our Rhyz other segment is partially driven by 146.8% and 115.4% growth at our Mavely entity, for the second quarter and first half of 2024.

Previous wording

The decline in segment contribution is primarily from our recent acquisitions, which we are continuing to invest in to enable future growth, as well as the impacts of purchase accounting, which resulted in $1.2 million of incremental amortization of intangible assets.

Current wording

The decline in segment contribution is primarily from the companies we acquired in the second quarter of 2023, which we are continuing to invest in to enable future growth, as well as the impacts of purchase accounting, which resulted in $0.8 million and $2.1 million of incremental amortization of intangible assets for the second quarter and first half of 2024. This was partially offset by improving profitability at our Mavely entity.

Previous wording

Revenue for the three-month period ended March 31, 2024 decreased 13.3% to $417.3 million, compared to $481.5 million in the prior-year period. For a discussion and analysis of this decrease in revenue, see “Overview” and “Segment Results,” above.

Current wording

Revenue for the three-month period ended June 30, 2024 decreased 12% to $439.1 million, compared to $500.3 million in the prior-year period. Revenue for the six-month period ended June 30, 2024 decreased 13% to $0.9 billion compared to $1.0 billion. Our reported revenue was negatively impacted 4.2% and 4.0% from foreign-currency fluctuations for the three- and six-month periods ended June 30, 2024, respectively. For a discussion and analysis of these decreases in revenue, see “Overview” and “Segment Results,” above.

Previous wording

Gross profit as a percentage of revenue was 70.5% for the first quarter of 2024 compared to 72.3% for the prior-year period. The gross margin of our core Nu Skin business increased 0.5 percentage points to 76.9%. Our gross margin was also impacted by the gross margin of our owned manufacturing entities, which as previously disclosed, is significantly lower than the gross margin of our core Nu Skin business. With the year-over-year growth within our Manufacturing segment, their revenue represented a higher proportion of our overall consolidated revenue for the quarter.

Current wording

Gross profit as a percentage of revenue was 70.0% for the second quarter of 2024, compared to 72.9% for the prior-year period, and 70.2% for the first six months of 2024, compared to 72.6% for the prior-year period. Gross profit as a percentage of revenue forour core Nu Skin segments decreased 1.1 percentage points to 76.1% for the second quarter of 2024 and decreased 0.3 percentage points to 76.5% for the first six months of 2024. The second quarter of 2024 decline in our core Nu Skin segments gross margin is primarily attributable to sales promotions in our Americas and Mainland China segments during the quarter. Our gross margin for the three- and six-month periods ended June 30, 2024, was also impacted by the gross margin of our owned manufacturing entities, which as previously disclosed, is significantly lower than the gross margin of our core Nu Skin business. With the year-over-year growth within our Manufacturing segment, their revenue represented a higher proportion of our overall consolidated revenue for the three- and six-month periods ended June 30, 2023 than in the prior-year periods.

Previous wording

Selling expenses as a percentage of revenue was 36.8% for the first quarter of 2024, compared to 39.1% for the prior-year period. Selling expenses for our core Nu Skin business as a percentage of revenue remained flat at 41.7% for the first quarter of 2024 and 2023. 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 fluctuates plus or minus approximately 100 basis points from period to period. In the third quarter of 2024, we are holding our global Nu Skin Live! event with an east Live! in South Korea and a west Live! in United States. As a result of the global Live! we are anticipating higher selling expense for the third quarter of 2024 by approximately $8 million.

Current wording

Selling expenses as a percentage of revenue increased to 37.7% for the second quarter of 2024, compared to 37.0% for the prior year period, and decreased to 37.3% for the first six months of 2024, compared to 38.0% for the prior-year period. Core Nu Skin segments selling expenses as a percentage of revenue increased 2.0 percentage points to 42.2% for the second quarter of 2024 and increased 1.0 percentage points to 42.0% for the first six months of 2024. 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. The increases in our selling expenses for the second quarter and first six months of 2024 also reflect changing market revenue mix and increased sales incentives. In the third quarter of 2024, we are holding our global Nu Skin L!VE event with an east L!VE in South Korea and a west L!VE in the United States. As a result of the global L!VE events we are anticipating an increase in selling expense as a percentage of revenue for the third quarter of 2024.

Previous wording

In the fourth quarter of 2023, we adopted another strategic plan to focus resources on our global priorities and optimize future growth and profitability. The global program includes workforce reductions. We estimate total charges under the program will approximate $20–$25 million in severance charges, which will be paid in cash. We expect to substantially complete the program during the first half of 2024. The program may expand as we continue to evaluate our business, including our product portfolio, global processes and organization, and operational footprint. During the fourth quarter of 2023, we incurred charges to be settled in cash of $10.0 million in severance charges. During the first quarter of 2024, we incurred charges to be settled in cash of $4.1 million in severance charges and $2.0 million in other associated cost, and non-cash charges of $1.0 million in write-down of assets.

Current wording

In the fourth quarter of 2023, we adopted another strategic plan to focus resources on our global priorities and optimize future growth and profitability. The global program includes workforce reductions. We estimate total charges under the program will approximate $20.0 million in cash charges of severance, approximately $2.2 million in other cash charges and approximately $8.2 million in non-cash charges, including approximately $6.4 million in fixed asset impairments. We expect to substantially complete the program during the second half of 2024. The program may expand as we continue to evaluate our business, including our product portfolio, global processes and organization, and operational footprint. During the fourth quarter of 2023, we incurred charges to be settled in cash of $10.0 million in severance charges. During the first quarter of 2024, we incurred charges to be settled in cash of $4.1 million in severance charges and $2.0 million in other associated cost, and non-cash charges of $1.0 million in write-down of assets. During the second quarter of 2024, we incurred charges to be settled in cash of $1.0 million in severance charges and $0.1 million on other cash charges, and non-cash charges of $7.2 million in write-down of assets.

Previous wording

Interest expense increased to $7.3 million in the first quarter of 2024, compared to $4.9 million in the prior-year period. The increase in interest expense was primarily due to an increase in borrowings on our revolving credit facility.

Current wording

Interest expense increased to $6.7 million in the second quarter of 2024, compared to $5.8 million in the prior-year period. and $14.0 million for the first six months of 2024 compared to $10.7 million for the prior-year period. The increases in interest expense were primarily due to an increase in borrowings on our revolving credit facility.

Previous wording

Other income (expense), net for the first quarter of 2024 was $0.4 million of expense compared to $3.4 million of income for the first quarter of 2023. The $3.8 million increase in expense is primarily from the impact of foreign currency fluctuations on the valuation of our intercompany receivables/payables.

Current wording

Other income (expense), net was $0.6 million for the second quarter of 2024 compared to $0.4 million for the prior-year period and $0.2 million for the first six months of 2024 compared to $3.8 million for the prior-year period. The decrease in other expense for the six-month period ended June 30, 2024 expense is primarily from the impact of foreign currency fluctuations on the valuation of our intercompany receivables/payables.

Previous wording

As a result of the foregoing factors, net income for the first quarter of 2024 was $(0.5) million compared to $11.4 million in the prior-year period.

Current wording

As a result of the foregoing factors, net income (loss) for the second quarter of 2024 was $(118.3) million, compared to $26.9 million in the prior-year period. Net income (loss) for the first six months of 2024 was $(118.8) million, compared to $38.3 million for the first six months of 2023.

Previous wording

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. 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 due to favorable margins and have generally relied on cash from operations to fund operating activities. In the first three months of 2024, we generated $3.3 million in cash from operations, compared to a net outflow of $22.1 million during the prior-year period. The increase in cash flow from operations primarily reflects less inventory purchases compared to the first quarter of 2023, as we work to right size our balance sheet following the decline in revenue. In addition, our cash from operations benefited from a decrease in accounts receivable driven by a sequential decline in sales, partially offset by a decline in net income for the first quarter of 2024. Cash and cash equivalents, including current investments, as of March 31, 2024 and December 31, 2023 were $221.2 million and $267.8 million, respectively, with the decrease being driven by our quarterly debt payments, and capital expenditures, as discussed below, and payment on liabilities associated with our 2023 restructuring plan.

Current wording

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. 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 due to favorable margins and have generally relied on cash from operations to fund operating activities. In the first six months of 2024, we generated $54.5 million in cash from operations, compared to $13.4 million during the prior-year period. The increase in cash flow from operations primarily reflects less inventory purchases compared to the first half of 2023, as we work to right size our balance sheet following the decline in revenue, partially offset by an increase in cash expenditures for the second quarter of 2024. Cash and cash equivalents, including current investments, as of June 30, 2024 and December 31, 2023 were $232.9 million and $267.8 million, respectively, with the decrease being driven by our quarterly debt payments, $30.0 million paid on our revolving credit facility and capital expenditures, as discussed below, partially offset by $54.5 million in cash from operations.

Previous wording

Working capital. As of March 31, 2024, working capital was $338.0 million, compared to $373.0 million as of December 31, 2023. Our decline in working capital is primarily attributable to cash payments for capital expenditures for the quarter as well as $10.0 million paid on our revolving credit facility.

Current wording

Working capital. As of June 30, 2024, working capital was $345.8 million, compared to $373.0 million as of December 31, 2023. Our decline in working capital is primarily attributable to the decline in cash as discussed above and a lower inventory balance partially offset by an increase in prepaid expenses primarily associated with corporate income tax payments.

Previous wording

Capital expenditures. Capital expenditures for the three months ended March 31, 2024 were $12.3 million. We expect that our capital expenditures in 2024 will be primarily related to:

Current wording

Capital expenditures. Capital expenditures for the six months ended June 30, 2024 were $20.4 million. We expect that our capital expenditures in 2024 will be primarily related to:

Previous wording

Credit Agreement. On June 14, 2022, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400.0 million term loan facility and a $500.0 million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off the previous credit agreement. Both facilities bear interest at the SOFR, plus a margin based on our consolidated leverage ratio. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the subsequent years after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of March 31, 2024 and December 31, 2023, we had $110.0 million and $120.0 million of outstanding borrowings under our revolving credit facility, and $375.0 million and $385.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $1.8 million and $2.0 million as of March 31, 2024 and December 31, 2023, respectively, related to the Credit Agreement. The Credit Agreement requires us to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of March 31, 2024, we were in compliance with all debt covenants under the Credit Agreement.

Current wording

Credit Agreement. On June 14, 2022, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400.0 million term loan facility and a $500.0 million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off the previous credit agreement. Both facilities bear interest at the SOFR, plus a margin based on our consolidated leverage ratio. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the subsequent years after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of June 30, 2024 and December 31, 2023, we had $90.0 million and $120.0 million of outstanding borrowings under our revolving credit facility, and $370.0 million and $385.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $1.7 million and $2.0 million as of June 30, 2024 and December 31, 2023, respectively, related to the Credit Agreement. The Credit Agreement requires us to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of June 30, 2024, we were in compliance with all debt covenants under the Credit Agreement.

Previous wording

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 first quarter of 2024 and 2023 we repurchased no shares of our Class A common stock under the plan. As of March 31, 2024, $162.4 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.

Current wording

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 second quarter of 2024 and 2023 we repurchased no shares of our Class A common stock under the plan. As of June 30, 2024, $162.4 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.

Previous wording

Dividends. In February 2024, our board of directors declared a quarterly cash dividend of $0.06 per share. This quarterly cash dividends of $3.0 million was paid on March 6, 2024 to stockholders of record on February 26, 2024. In May 2024, our board of directors declared a quarterly cash dividend of $0.06 per share to be paid on June 12, 2024 to stockholders of record on May 31, 2024. 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.

Current wording

Dividends. In February and May 2024, our board of directors declared quarterly cash dividends of $0.06 per share. The quarterly cash dividends of $3.0 and $3.0 million were paid on March 6, 2024 and June 12, 2024 to stockholders of record on February 26, 2024 and May 31, 2024. In August 2024, our board of directors declared a quarterly cash dividend of $0.06 per share to be paid on September 11, 2024 to stockholders of record on August 30, 2024. 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.

Previous wording

Cash from foreign subsidiaries. As of March 31, 2024 and December 31, 2023, we held $221.2 million and $267.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $158.2 million and $213.7 million as of March 31, 2024 and December 31, 2023, 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.

Current wording

Cash from foreign subsidiaries. As of June 30, 2024 and December 31, 2023, we held $232.9 million and $267.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $170.1 million and $213.7 million as of June 30, 2024 and December 31, 2023, 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.

Previous wording

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 March 31, 2024, we had $28.4 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of March 31, 2024 and December 31, 2023, we had $18.3 million and $17.7 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 $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 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 foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes related to the non-U.S. earnings.

Current wording

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 June 30, 2024, we had $26.9 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of June 30, 2024 and December 31, 2023, we had $18.6 million and $17.7 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 $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 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 foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes related to the non-U.S. earnings.

Previous wording

Our revenue and profitability forecasts used in the goodwill impairment assessment considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business.

Current wording

Our revenue and profitability forecasts used in the goodwill impairment assessments considered recent and historical performance, strategic initiatives, industry trends and macroeconomic factors. Assumptions used in the valuations were similar to those that would be used by market participants performing independent valuations of the business.

Previous wording

Key assumptions developed by management and used in the quantitative analysis:

Current wording

Key assumptions developed by management and used in the quantitative analyses:

Previous wording

We performed a sensitivity analysis on the impairment model used to test the reporting units’ goodwill. In doing so, we determined that individual changes of a 5% reduction in our annual earnings before interest and tax, or a 40 basis point increase in the discount rate used in the discounted cash flow models did not cause the estimated fair values of the reporting units to decline below their carrying values. We made our estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. Although we believe the estimates and assumptions used in the impairment testing are reasonable and appropriate, it is possible that the assumptions and conclusions regarding impairment or recoverability of our reporting units’ goodwill could change in future periods. There can be no assurance the estimates and assumptions, particularly our long-term financial projections, used in our goodwill impairment testing will prove to be accurate predictions of the future, if, for example, (i) the business does not perform as projected, (ii) overall economic conditions in the remainder of Fiscal 2024 or future years vary from current assumptions (including changes in discount rates and foreign currency exchange rates), (iii) business conditions or strategies change from current assumptions, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and profitability. A future impairment charge to our reporting units’ goodwill could have a material effect on the consolidated financial position and results of operations.

Current wording

Our BeautyBio reporting unit remains sensitive to future increases in discount rates and changes in our forecast. We performed a sensitivity analysis on the impairment model used to test the manufacturing and Rhyz other reporting units’ goodwill. In doing so, we determined that individual changes of a 5% reduction in our annual earnings before interest and tax, or a 40 basis point increase in the discount rate used in the discounted cash flow models did not cause the estimated fair values of the reporting units to decline below their carrying value. We made our estimates based on information available as of the date of our assessment, using assumptions we believe market participants would use in performing an independent valuation of the business. Although we believe the estimates and assumptions used in the impairment testing are reasonable and appropriate, it is possible that the assumptions and conclusions regarding impairment or recoverability of our reporting units’ goodwill could change in future periods. There can be no assurance the estimates and assumptions, particularly our long-term financial projections, used in our goodwill impairment testing will prove to be accurate predictions of the future, if, for example, (i) the business does not perform as projected, (ii) overall economic conditions in the remainder of Fiscal 2024 or future years vary from current assumptions (including changes in discount rates and foreign currency exchange rates), (iii) business conditions or strategies change from current assumptions, (iv) investors require higher rates of return on equity investments in the marketplace, or (v) enterprise values of comparable publicly traded companies, or actual sales transactions of comparable companies, were to decline, resulting in lower multiples of revenues and profitability. A future impairment charge to our reporting units’ goodwill could have a material effect on the consolidated financial position and results of operations.