NU SKIN ENTERPRISES INC

Previous wording

Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2023, our revenue of $2.0 billion was primarily generated byour three primary brands: our beauty brand, Nu Skin; our wellness brand, Pharmanex; and our anti-aging brand, ageLOC. 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.

Current wording

Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2024, our revenue of $1.7 billion was primarily generated byour three primary brands: our beauty brand, Nu Skin; our wellness brand, Pharmanex; and our anti-aging brand, ageLOC. 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.

Previous wording

In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses primarily consist of consumer, technology and manufacturing companies. In 2023, the Rhyz companies generated $216.6 million, or 11% of our 2023 reported revenue (excluding sales to our core Nu Skin business). 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

In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses primarily consist of consumer, technology and manufacturing companies. In 2024, the Rhyz companies generated $286.6 million, or 17% of our 2024 reported revenue (excluding sales to our core Nu Skin business). Rhyz is a key component of our business, and these companies enable us to reduce our cost of goods, improve lead times, diversify our revenue mix, and create synergies for our owned and partner brands.

Previous wording

In 2023, we generated approximately 26% of our revenue from the United States (consisting of our Nu Skin United States and Rhyz businesses) and the remainder from our international markets. Given the size of our international operations, our results, as reported in U.S. dollars, are often impacted by foreign-currency fluctuations; in 2023, our revenue was negatively impacted 3% from foreign-currency fluctuations compared to 2022. In addition, our results can be impacted by global economic, political, demographic and business trends and conditions.

Current wording

In 2024, we generated approximately 30% of our revenue from the United States (consisting of our Nu Skin United States and Rhyz businesses) and the remainder from our international markets. Given the size of our international operations, our results, as reported in U.S. dollars, are often impacted by foreign-currency fluctuations; in 2024, our revenue was negatively impacted 4% from foreign-currency fluctuations compared to 2023. Our results also can be impacted by global economic, political, demographic and business trends and conditions.

Previous wording

As of December 31, 2023, we had 977,039 persons who purchased directly from the company during the previous three months (“Customers”). Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force. We believe a significant majority of Customers purchase our products primarily for personal or family consumption but are not actively pursuing the opportunity to generate supplemental income by actively and consistently marketing and reselling products.

Current wording

As of December 31, 2024, we had 831,972 persons who purchased directly from the company during the previous three months (“Customers”). Our Customer numbers include members of our sales force who made such a purchase, including Paid Affiliates and those who qualify as Sales Leaders, but they do not include consumers who purchase directly from members of our sales force. We believe a significant majority of Customers purchase our products primarily for personal or family consumption but are not actively pursuing the opportunity to generate supplemental income by actively and consistently marketing and reselling products.

Previous wording

Our sales force markets and sells our products, and attracts others to the opportunity, based on the distinguishing benefits and innovative characteristics of our products. As a result, we leverage our scientific expertise and product development resources to introduce innovative beauty, wellness and anti-aging products. Our sales force is increasingly using social media to market and sell our products. To continue to leverage social media, it is imperative that we develop demonstrable products that are unique and engaging to younger consumers.

Current wording

Our sales force markets and sells our products, and attracts others to the opportunity, based on the distinguishing benefits and innovative characteristics of our products. As a result, we leverage our scientific expertise and product development resources to introduce innovative beauty, wellness and anti-aging products. Our sales force is increasingly using social media to market and sell our products. To continue to leverage social media, it is imperative that we develop demonstrable products that are unique and engaging to younger consumers. We strive to strike a balance between the expenses associated with our scientific expertise and sales compensation with a competitive price point.

Previous wording

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. We refer to the entire process, beginning with the introductory offering through general availability of the product, as a product launch or our product launch process. The timing of the launch of a particular product often varies from market to market depending on such factors as customer demand, product registration or other local legal requirements, and product availability in our supply chain.

Current wording

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. We refer to the entire process, beginning with the introductory offering through general availability of the product, as a product launch or our product launch process. The timing of the launch of a particular product often varies from market to market depending on such factors as customer demand, affiliate brand focus, product registration or other local legal requirements, and product availability in our supply chain.

Previous wording

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 revenue during the quarter and can 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.

Current wording

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 revenue 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.

Previous wording

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 is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with revenue 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 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.

Current wording

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 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.

Previous wording

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 October 2019, as our 2021 global convention was held virtually due to the COVID-19 pandemic. We are currently planning to hold a global convention in 2024 to celebrate our 40 th anniversary. In addition, we hold regional conventions and conventions in our major markets at different times during the year. 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 sales materials. 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.

Current wording

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. 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.

Previous wording

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 2023 were 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 2023, and we pay taxes in multiple states within the United States at various tax rates. Our overall effective tax rate was 67.7% for the year ended December 31, 2023.

Current wording

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 2024 were 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, and we pay taxes in multiple states within the United States at various tax rates. Our overall effective tax rate was 16.3% 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.

Previous wording

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, 2023, we had net deferred tax assets of $105.0 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation 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, 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’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 credits, the 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.

Current wording

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, we had net deferred tax assets of $173.9 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation 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 income 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'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 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.

Previous wording

The company operates in and files 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. The IRS has developed a new pilot phase 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. The company was selected for Bridge Plus for the 2022, 2023 and 2024 tax years. As of December 31, 2023, all open tax years except 2021 have been audited and are effectively closed to further examination. For the tax year 2021, the Company was 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. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years before 2020. 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.

Current wording

The company operates in and files 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. The company was selected for the Bridge Plus phase for the 2023, 2024, and 2025 tax years. As of December 31, 2024, all open tax years except 2021 have been audited and are effectively closed to further examination. For the tax year 2021, the Company was 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. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years before 2021. 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.

Previous wording

Our unrecognized tax benefits are related to multiple foreign and domestic jurisdictions. Due to potential changes in unrecognized tax benefits from the multiple jurisdictions in which we operate, as well as the expiration of various statutes of limitation, it is reasonably possible that our gross unrecognized tax benefits, net of foreign currency adjustments, may increase within the next 12 months by a range of approximately $2.0 to $3.0 million.

Current wording

Our unrecognized tax benefits are related to multiple foreign and domestic jurisdictions. Due to potential changes in unrecognized tax benefits from the multiple jurisdictions in which we operate, as well as the expiration of various statutes of limitation, it is reasonably possible that our gross unrecognized tax benefits, net of foreign currency adjustments, may decrease within the next 12 months by a range of approximately $1.0 to $2.0 million.

Previous wording

At December 31, 2023, we had $22.0 million in unrecognized tax benefits of which $22.0 million, if recognized, would affect the effective tax rate. In comparison, at December 31, 2022, we had $23.1 million in unrecognized tax benefits of which $23.1 million, if recognized, would affect the effective tax rate. We recognized an increase of approximately $0.6 million in interest and penalties expense during the year ended December 31, 2023 and $5.7 million in interest and penalties during the year ended December 31, 2022. We had approximately $13.0 million, $12.4 million and $6.7 million of accrued interest and penalties related to uncertain tax positions at December 31, 2023, 2022 and 2021, respectively. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

Current wording

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

Previous wording

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. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to perform 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 that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. We elected to perform the quantitative assessment for fiscal years 2022 and we used the qualitative assessment for fiscal years 2023 and 2021.

Current wording

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. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to perform 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 that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. We elected to perform the quantitative assessment for fiscal year 2022 and we used the qualitative assessment for fiscal year 2023.

Previous wording

During 2022, we recognized an impairment charge of $1.7 million associated with determinable-lived intangibles. During 2021, we recognized an impairment charge associated with our exit of the Grow Tech segment. We did not recognize any impairment charges for goodwill or intangible assets during 2023.

Current wording

During 2022, we recognized an impairment charge of $1.7 million associated with determinable-lived intangibles. We did not recognize any impairment charges for goodwill or intangible assets during 2023.

Previous wording

Revenue in 2023 decreased 12% to $1.97 billion from $2.23 billion in 2022. Our 2023 revenue was negatively impacted 3% from foreign-currency fluctuations. As of the end of the fourth quarter of 2023, Customers decreased 15%, Paid Affiliates decreased 30% and Sales Leaders decreased 10% compared to the prior year.

Current wording

Revenue in 2024 decreased 12% to $1.73 billion from $1.97 billion in 2023. Our 2024 revenue was negatively impacted 4% from foreign-currency fluctuations. As of the end of the fourth quarter of 2024, Customers decreased 15%, Paid Affiliates decreased 13% and Sales Leaders decreased 16% compared to the prior year.

Previous wording

Earnings per share in 2023 decreased 92% to $0.17 from $2.07 in 2022. The decrease in earnings per share was primarily driven by a third quarter of 2023 inventory write-off charge of $65.7 million, a $19.8 million restructuring charge and the overall decline in revenue, partially offset by our 2022 $48.5 million restructuring charge and $26.9 million third quarter of 2022 inventory write-off charge. In addition, our Earnings per share was impacted by an increase in our effective tax rate for 2023.

Current wording

Earnings per share in 2024 decreased to $(2.95) from $0.17 in 2023. The decrease in earnings per share was primarily driven by $202.4 million of restructuring and impairment charges, an inventory write-off charge of $38.8 million as well as the overall decline in revenue, partially offset by the 2023 $65.7 million inventory write-off charge and the $19.8 million restructuring charges. Our earnings per share was also impacted by a decrease in our effective tax rate for 2024.

Previous wording

We report our business in nine segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Americas, Mainland China, Southeast Asia/Pacific, South Korea, Japan, Europe & Africa, 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 business arm, which were entered into during 2021 and 2023. Our Europe & Africa segment was previously Europe, Middle East and Africa (“EMEA”), but was changed following the June 2023 closure of the Israel market.

Current wording

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 business 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.

Previous wording

The table below sets forth segment contribution for the years ended December 31, 2023 and 2022 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 15 to the consolidated financial statements contained in this report.

Current wording

The tables below set forth summarized financial information for each of our reportable segments for the years ended December 31, 2024 and 2023 (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 16 to the consolidated financial statements contained in this report.

Previous wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for 2023 is partially attributable to slowing momentum from the general macroeconomic factors in the markets along with price increases that we implemented to address inflation. In addition, in the first half of 2022 we launched ageLOC Meta (locally referred to as ageLOC Reset in our Southeast Asia markets), which generated $48.1 million in revenue for fiscal year 2022, respectively, compared to $22.2 million for fiscal year 2023.

Current wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for 2024 is partially attributable to slowing momentum from the general macroeconomic factors in the markets along with price increases that we implemented to address inflation. During the second half of 2024, we began to see year-over-year improvements in many of our markets, but our Indonesia market remains challenging. 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 1,500 Paid Affiliates for the three months ended December 31, 2024.

Previous wording

Mainland China. Our Mainland China market continued to be challenged during 2023. Although we saw certain improving trends during the second quarter, ongoing macroeconomic factors in the third quarter and the associated decrease in consumer spending led to declines in revenue. The year-over-year increases in our Paid Affiliates reflect the second quarter growth in these metrics from promotional activities and ourageLOC TRMe preview. Our Customers increased from promotions in the fourth quarter of 2023. Our revenue for fiscal year 2023 was negatively impacted 4% by unfavorable foreign currency fluctuations. While we continue to believe in the potential of this market, we anticipatethe 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 2024, with ongoing macroeconomic factors and the associated decrease in consumer spending leading to declines in revenue, Customers, Paid Affiliates and Sales Leaders. We anticipate the current regulatory pressures as well as other economic challenges persisting as the economy works to recover.

Previous wording

Japan. The decline in revenue is primarily attributable to a 7% negative impact from unfavorable foreign-currency fluctuations. On a local currency basis, revenue decreased less than 1%. The increase in Sales Leaders is primarily from a modification we made to the compensation plan starting in June 2023. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements made in the fourth quarter of 2023 for receiving certain rewards within our compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 15 thousand Paid Affiliates for the fourth quarter of 2023.

Current wording

Japan. The decline in revenue is primarily attributable to a 6.7% negative impact from unfavorable foreign-currency fluctuations as well as consumer inflationary pressures which depressed spending. On a local currency basis, revenue decreased 5.9%.

Previous wording

The year-over-year decline in segment contribution reflects the decline in revenue, partially offset by cost savings generated from the 2022 restructuring plan, and a decrease in selling expenses due to a reduction in the incentive trips accrual.

Current wording

The year-over-year decline in segment contribution reflects the decreased revenue, partially offset by a 1.3 percentage point decline in general and administrative expenses for 2024 attributable to savings from our restructuring plan.

Previous wording

The year-over-year decrease in segment contribution is primarily attributable to the decline in revenue, along with a 1.7 percentage point decline in gross margin due to product mix, and a 1.0 percentage point increase in selling expenses as a percent of revenue from incremental cost associated with our Sales Leader growth program, which is aimed at channel development efforts.

Current wording

The year-over-year increase in segment contribution is primarily attributable to a 2.1 percentage-point increase in gross margin from less sales discounts, as well as a 0.50 percentage-point decrease in general and administrative expenses as a percent of revenue from cost saving efforts, all partially offset by the decline in revenue.

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 year ended December 31, 2023. 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 14 thousand Paid Affiliates for the three months ended December 31, 2023.

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 year ended December 31, 2024. During the fourth quarter of 2024, we introducedour enhancementsto the sales performance plan in South Korea. 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 1,000 Paid Affiliates for the three months ended December 31, 2024.

Previous wording

Manufacturing. Our Manufacturing segment revenue increased 21%, primarily driven by our Wasatch Manufacturing entity. During 2023, Wasatch revenue increased approximately 46%, primarily from onboarding new customers and continued automation efforts to increase efficiencies, enabling an increase in production capacity.

Current wording

Manufacturing. Our Manufacturing segment revenue increased 11.0%, primarily driven by our Wasatch Manufacturing entity. During 2024, Wasatch revenue increased approximately 20.6%, primarily from onboarding new customers and expansion in capabilities.

Previous wording

Revenue for the year ended December 31, 2023 decreased 12% to $1.97 billion, compared to $2.23 billion in the prior-year period. For a discussion and analysis of this increase in revenue, see “Overview” and “Segment Results,” above.

Current wording

Revenue for the year ended December 31, 2024 decreased 12% to $1.73 billion, compared to $1.97 billion in the prior-year period. For a discussion and analysis of this decline in revenue, see “Overview” and “Segment Results,” above.

Previous wording

Gross profit as a percentage of revenue decreased to 68.9% in 2023, compared to 71.7% in 2022. Gross profit as a percentage of revenue for core Nu Skin decreased 2.2 percentage points to 73.2%, primarily driven byour third quarter of 2023 strategic decision to re-balance and narrow our product portfolio, which resulted in an incremental $65.7 million inventory write-off, compared to an incremental $26.9 million write-off in the third quarter of 2022. 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 year ended December 31, 2023 than in the prior-year.

Current wording

Gross profit as a percentage of revenue decreased to 68.2% in 2024, compared to 68.9% in 2023. Gross profit as a percentage of revenue for core Nu Skin increased 1.1 percentage points to 74.3%. 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 year ended December 31, 2024 than in the prior-year. In the fourth quarter of 2024, we recorded an incremental inventory write-off charge of $38.8 million as we continue to accelerate and expand our product portfolio optimization, compared to a $65.7 million charge in 2023.

Previous wording

Selling expenses as a percentage of revenue decreased to 37.7% in 2023, compared to 39.5% for 2022. Our core Nu Skin business’s selling expense as a percentage of revenue decreased 1.2 percentage points to 41.1% for 2023, compared to 42.3% for 2022. 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. Our selling expenses is also impacted by the growth within our Manufacturing segment, which has minimal selling expenses. We expect to see future fluctuations in our selling expenses as a result of growth in the Rhyz segments and varying level of selling expenses by entity. For example, as discussed above, Manufacturing has minimal selling expenses, and within Rhyz other, Mavely has selling expenses of approximately 80% and BeautyBio and LifeDNA are minimal.

Current wording

Selling expenses as a percentage of revenue decreased to 37.6% in 2024, compared to 37.7% for 2023. Our core Nu Skin business’s selling expense as a percentage of revenue increased 0.8 percentage points to 41.9% for 2024, compared to 41.1% for 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 fluctuate plus or minus approximately 100 basis points from period to period. Our selling expenses are also impacted by the growth within our Manufacturing segment, which has minimal selling expenses. We expect to see future fluctuations in our selling expenses as a result of growth in the Rhyz segments and varying level of selling expenses by entity. For example, as discussed above, Manufacturing has minimal selling expenses, and within Rhyz Other, the Mavely business that we sold in January 2025 had selling expenses of approximately 80% of revenue, and the selling expenses of the other two entities in Rhyz Other are minimal. In the third quarter of 2024, we held 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 these events, we incurred approximately $10.2 million of incremental expenditures, which contributed to our elevated selling expenses.

Previous wording

General and administrative expenses decreased to $546.9 million in 2023, compared to $555.8 million in 2022. The $8.9 million decrease primarily was from contraction in labor expense and occupancy related expenses, both attributable to our 2022 restructuring in which we reduced our physical footprint and headcount. As a percentage of revenue, general and administrative increased 2.8 percentage points to 27.8% for 2023, compared to 25.0% for 2022.

Current wording

General and administrative expenses decreased to $479.0 million in 2024, compared to $546.9 million in 2023. The $67.9 million decrease primarily was from a $48.1 million reduction in labor expense and $16.0 million reduction in occupancy related expenses, both attributable to our recent restructuring plans, in which we reduced our physical footprint and headcount. As a percentage of revenue, general and administrative decreased 0.1 percentage points to 27.7% for 2024, compared to 27.8% for 2023.

Previous wording

In the third quarter of 2022, we adopted a strategic plan to focus resources on our strategic priorities and optimize future growth and profitability. The global program included workforce reductions and footprint optimization. Total charges incurred under the program were approximately $53.3 million, with $40.8 million in cash charges of severance and lease termination cost and approximately $12.5 million of non-cash charges of impairment of fixed assets, acceleration of depreciation and impairment of other intangibles related to our footprint optimization. During 2022, we incurred charges to be settled in cash of $20.1 million in severance charges, $7.4 million in lease termination cost, and $5.2 million in other associated cost, and non-cash charges of $8.2 million in fixed asset impairments, $0.9 million in accelerated depreciation and $1.7 million in impairment of other intangibles. During 2023, we incurred charges to be settled in cash of $4.0 million in severance charges, $1.9 million in lease termination cost, and $2.2 million in other associated cost, and non-cash charges of $1.7 million in accelerated depreciation.

Current wording

2022 restructuring plan. In the third quarter of 2022, we adopted a strategic plan to focus resources on our strategic priorities and optimize future growth and profitability. The global program included workforce reductions and footprint optimization. Total charges incurred under the program were approximately $53.3 million, with $40.8 million in cash charges of severance and lease termination cost and approximately $12.5 million of non-cash charges of impairment of fixed assets, acceleration of depreciation and impairment of other intangibles related to our footprint optimization. During 2022, we incurred charges to be settled in cash of $20.1 million in severance charges, $7.4 million in lease termination cost, and $5.2 million in other associated cost, and non-cash charges of $8.2 million in fixed asset impairments, $0.9 million in accelerated depreciation and $1.7 million in impairment of other intangibles. During 2023, we incurred charges to be settled in cash of $4.0 million in severance charges, $1.9 million in lease termination cost, and $2.2 million in other associated cost, and non-cash charges of $1.7 million in accelerated depreciation.

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 $15–$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.

Current wording

2023 restructuring plan. 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 and fixed asset impairments associated with our consolidation of technology assets. Total charges under the program included approximately $27.9 million in cash charges of severance, approximately $1.0 million in other cash charges and approximately $38.8 million in non-cash charges, including approximately $36.6 million in fixed asset impairments. We have incurred all expected charges under the 2023 plan and anticipate making the remaining payments in the first half of 2025. During the fourth quarter of 2023, we incurred charges to be settled in cash of $10.0 million in severance charges. During 2024, we incurred charges to be settled in cash of $17.9 million in severance charges and $1.0 million of other associated cost, and non-cash charges of $36.6 million of fixed asset impairments and $2.2 million of other non-cash charges.

Previous wording

As a result of the foregoing factors, net income in 2023 decreased to $8.6 million, compared to $104.8 million in 2022.

Current wording

As a result of the foregoing factors, net income in 2024 decreased to $(146.6) million, compared to $8.6 million in 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, debt repayment and the development of operations in new markets. 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. We generated $118.6 million in cash from operations during 2023, compared to $108.1 million in cash from operations during 2022. The increase in cash flow from operations primarily reflects higher payout of our accruals in 2022, attributable to our 2021 restructuring and higher commission charges incurred during the fourth quarter of 2021, partially offset by a lower net income in 2023.

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, debt repayment and the development of operations in new markets. 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. We generated $111.7 million in cash from operations during 2024, compared to $118.6 million in cash from operations during 2023.

Previous wording

As of December 31, 2023, cash and cash equivalents, including current investments, were $267.8 million compared to $278.5 million as of December 31, 2022. Thedecrease was primarily driven by our second quarter of 2023 acquisitions of BeautyBio and LifeDNA, quarterly dividend payments, capital expenditures, as discussed below, and payment on liabilities associated with our 2022 restructuring plan, partially offset by borrowings on our revolving credit facility, a substantial portion of which was to fund our acquisition of BeautyBio. Working capital as of December 31, 2023 was $373.0 million compared to $400.6 million as of December 31, 2022. The decrease in working capital is attributable to the decline in inventory, primarily from our third quarter of 2023 $65.7 million write-off, partially offset by an increase in accounts receivable from the growth in our Rhyz segments.

Current wording

As of December 31, 2024, cash and cash equivalents, including current investments, were $198.0 million compared to $267.8 million as of December 31, 2023. Thedecrease was primarily driven by our quarterly debt payments, $85.0 million paid on our revolving credit facility and capital expenditures, as discussed below, partially offset by$111.7 million in cash from operations. Working capital as of December 31, 2024 was $242.0 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 a decrease in accrued expenses associated with lower employee-related cost and commissions.

Previous wording

Capital expenditures. Capital expenditures in 2023 totaled $58.5 million. We expect thatour capital expenditures in 2024 will be primarily related to:

Current wording

Capital expenditures. Capital expenditures in 2024 totaled $41.6 million. As with 2024, we expect that the capital expenditures in 2025 will be primarily related to:

Previous wording

We estimate that capital expenditures for the uses listed above will total approximately $40-60 million for 2024. The construction of the new manufacturing plant in Mainland China was substantially completed during 2023; production began in the fourth quarter of 2023. As of December 31, 2023, we had spent approximately $53.9 million on this project, including $9.2 million in 2023.

Current wording

We estimate that capital expenditures for the uses listed above will total approximately $45-65 million for 2025.

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 Secured Overnight Financing Rate (“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 December 31, 2023 and 2022, we had$120.0 million and $10.0 million of outstanding borrowings under our revolving credit facility, and$385.0 million and $395.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of$2.0 million and $2.5 million as of December 31, 2023 and 2022, respectively, related to the Credit Agreement. The Credit Agreement requires us 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 December 31, 2023, 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 Secured Overnight Financing Rate ("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 December 31, 2024 and 2023, we had $35.0 million and $120.0 million of outstanding borrowings under our revolving credit facility, and $360.0 million and $385.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $1.4 million and $2.0 million as of December 31, 2024 and 2023, respectively, related to the Credit Agreement. The Credit Agreement requires us 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 December 31, 2024, we were in compliance with all debt covenants under the Credit Agreement. In January 2025, we made a $115.0 million payment on our term loan using a portion of the proceeds from the Mavely sale.

Previous wording

Derivative instruments. As of December 31, 2023, we had four interest rate swaps, with a total notional principal amount of $200 million and a maturity date of July 31, 2025. We entered into these interest rate swap arrangements during the third quarter of 2020 to hedge the variable cash flows associated with our variable-rate debt under the Credit Agreement.

Current wording

Derivative instruments. As of December 31, 2024, we had four interest rate swaps, with a total notional principal amount of $200 million and a maturity date of July 31, 2025. We entered into these interest rate swap arrangements during the third quarter of 2020 to hedge the variable cash flows associated with our variable-rate debt under the Credit Agreement. Our interest expense may increase after our interest rate swaps expire in July 2025.