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, growth, initiatives, strategies, products, ingredients, product introductions and offerings, product portfolio optimization, restructuring and exit activities, acquisitions, the integration and performance of acquired companies, divestitures, opportunities and risks; statements of management’s expectations, plans and beliefs regarding global economic conditions and our markets (including India), sales force, sales compensation plan and customer base; 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; statements regarding tariffs and trade policies; statements regarding the outcome of litigation, audits, investigations, and other legal or regulatory matters; statements of projections and expectations regarding future sales, expenses, operating results, taxes, duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements regarding the payment of future dividends and stock repurchases; 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,” “enable,” “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 important 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 2025 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, growth, initiatives, strategies, products, ingredients, product introductions and offerings, product portfolio optimization, restructuring and exit activities, acquisitions, the integration and performance of acquired companies, divestitures, opportunities and risks; statements of management’s expectations, plans and beliefs regarding global economic conditions and our markets (including India), sales force, sales compensation plan and customer base; 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; statements regarding tariffs and trade policies; statements regarding the outcome of litigation, audits, investigations, and other legal or regulatory matters; statements of projections and expectations regarding future sales, expenses, operating results, taxes, duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements regarding the payment of future dividends and stock repurchases; 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,” “enable,” “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. Forward-looking statements speak only as of the date of this Quarterly Report, and 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 important 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 2025 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 June 30, 2026 decreased 17.1% to $320.1 million, compared to $386.1 million in the prior-year period, and revenue for the six-month period ended June 30, 2026 decreased 14.6% to $640.7 million, compared to $750.6 million in the prior-year period. Our revenue in the second quarter of 2026 was negatively impacted by 1.0% from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined 14%, 8% and 9%, respectively, on a year-over-year basis.

Current wording

Revenue for the three-month period ended September 30, 2026 decreased 14.6% to $311.0 million, compared to $364.2 million in the prior-year period, and revenue for the nine-month period ended September 30, 2026 decreased 14.6% to $951.7 million, compared to $1,114.8 million in the prior-year period. Our revenue in the third quarter and first nine months of 2026 was negatively impacted by 1.1% and 0.3%, respectively, from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined 18%, 10% and 13%, respectively, on a year-over-year basis.

Previous wording

The declines for the three- and six-month periods ended June 30, 2026 were largely driven by the continued macroeconomic challenges we have been facing in our markets, which have negatively impacted consumer spending and customer acquisition. Our priorities for 2026 focus on business model optimization, driven by the continued rollout of enhancements to our sales performance plan, the continued launch of our Prysm iO intelligent wellness platform and business expansion into India. Our early learnings from the Prysm iOhave resulted in a shift in the strategy from a device placement focus to an assessment model that is more conducive to in-person engagement. In addition, from our preview in India we have identified the need to simplify the model in advance of our full market opening, which is now slated for the first half of 2027.

Current wording

The declines for the three- and nine-month periods ended September 30, 2026 were largely driven by the continued macroeconomic challenges we have been facing in our markets, which have negatively impacted consumer spending and customer acquisition. Our priorities for 2026 focus on business model optimization, driven by the continued rollout of enhancements to our sales performance plan, the continued launch of our Prysm iO intelligent wellness platform and business expansion into India. Our early learnings from the Prysm iOhave resulted in a shift in the strategy from a device placement focus to an assessment model that is more conducive to in-person engagement. In addition, from our preview in India we have identified the need to simplify the model in advance of our full market opening, which is slated for the first half of 2027.

Previous wording

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

Current wording

Earnings per share for the third quarter of 2026 decreased to $(0.02), compared to $0.34 in the prior-year period. Earnings per share for the first nine months of 2026 decreased to $(5.13), compared to $2.91 in the prior-year period. Our third quarter 2026 earnings per share were negatively impacted by severance charges, as well as the decline in revenue. Our earnings per share for the first nine months of 2026 were negatively impacted by the second quarter impairment charge of $78.9 million, second quarter valuation allowance of $167.5 million associated with our U.S. deferred tax assets, charges associated with our first quarter of 2026 wind down of our separate BeautyBio business and decline in revenue. In addition, our 2025 earnings per share benefited from the January 2025 sale of our Mavely business, which generated a pre-tax gain of approximately $176.2 million, partially offset by the associated taxes, an intangible asset group impairment of $25.1 million in our Rhyz Other segment and a non-cash loss on equity investment of $28.1 million.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

Americas. The results in our Americas segment primarily reflect a continued decline in our North America markets. For the third quarter of 2026, our Latin America markets’ revenue declined 2.2% on a reported basis, while on a constant-currency basis revenue increased 0.5%. For the first nine of months of 2026, our Latin America markets’ revenue increased 1.7% on a reported basis and 8.8% on a constant-currency basis. As our Sales Leaders prioritized Prysm iOand associated wellness products during the first nine months of 2026, we experienced switching costs as many of our Sales Leaders began adapting to a greater focus on wellness products than previously. During the second quarter of 2026, we released enhancements to our sales compensation plan, with a higher focus on aligning incentives around Sales Leader development and retention. In addition, our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 1.1% and 2.4% for the third quarter and first nine months of 2026, respectively.

Previous wording

The year-over-year decrease in segment contribution for the second quarter and first half of 2026 primarily reflects the overall decline in revenue, as well as a 3.1 and 3.3 percentage-point increase for the second quarter and first half of 2026, respectively, in selling expenses from additional incentives aimed at assisting the transition associated with the sales compensation plan enhancements.

Current wording

The year-over-year decrease in segment contribution for the third quarter and first nine months of 2026 primarily reflects the overall decline in revenue, as well as a 1.6 and 2.8 percentage-point increase for the third quarter and first nine months of 2026, respectively, in selling expenses from additional incentives aimed at assisting the transition associated with the sales compensation plan enhancements, partially offset by a 2.1 and 1.1 percentage-point increase in gross margin for the third quarter and first nine months of 2026, respectively, partially attributable to fewer sales promotions and improvements in cost saving initiatives in fulfillment and freight.

Previous wording

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

Current wording

Mainland China. Our Mainland China market continued to be challenged during the third quarter and first nine months of 2026, with ongoing macroeconomic factors, the associated decrease in consumer spending and a continued shift of market consumer awareness and demand to online product marketplaces. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 5.2% and 4.9% for the third quarter and first nine months of 2026, respectively. During the second quarter of 2026, we released enhancements to the business model, as well as additional incentives for our sales force, which were designed to stabilize sales force in the market.

Previous wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for the second quarter and first half of 2026 is primarily attributable to slowing momentum from the general macroeconomic factors in the markets. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 1.4% and 2.6% for the second quarter and first half of 2026, respectively.

Current wording

Southeast Asia/Pacific. The decline in revenue, Customers, Paid Affiliates and Sales Leaders for the third quarter and first nine months of 2026 is primarily attributable to ongoing softness in consumer demand driven by the general macroeconomic factors in the markets. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 1.5% for the first nine months of 2026.

Previous wording

The year-over-year decrease in segment contribution for the second quarter and first half of 2026 primarily reflects the decline in revenue as well as an increase in selling expenses and general and administrative cost associated with our pre-market activities in India in preparation for the full market opening in the first half of 2027.

Current wording

The year-over-year decrease in segment contribution for the third quarter and first nine months of 2026 primarily reflects the decline in revenue as well as an increase in selling expenses and general and administrative cost associated with our pre-market activities in India in preparation for the full market opening in the first half of 2027.

Previous wording

Japan. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders is partially attributable to consumer inflationary pressures which depressed spending. In addition, our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 8.8% and 5.9% for the second quarter and first half of 2026.

Current wording

Japan. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders is partially attributable to consumer inflationary pressures which depressed spending. In addition, our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 6.8% and 6.1% for the third quarter and first nine months of 2026.

Previous wording

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects continued softness in these markets, as well as the macroeconomic factors that have led to a decline in the purchasing power of our customers. In addition, our reported revenue reflects a benefit from favorable foreign currency fluctuations of 1.8% and 5.3% for the second quarter and first half of 2026, respectively.

Current wording

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects continued softness in these markets, as well as the macroeconomic factors that have led to a decline in the purchasing power of our customers. In addition, our reported revenue for the third quarter of 2026 reflects negative impact from unfavorable foreign currency fluctuations of 1.2% while for the first nine months of 2026 our reported revenue reflects a benefit of 3.1%.

Previous wording

The year-over-year decline in segment contribution for the second quarter of 2026 primarily reflects the decline in revenue, partially offset by a 1.4 percentage point increase in gross margin from a favorable product mix. The decline in segment contribution for the first half of 2026 is primarily from the decline in revenue.

Current wording

The year-over-year decline in segment contribution for the third quarter of 2026 primarily reflects the decline in revenue and the fixed cost pressures on general and administrative expenses, partially offset by a 1.2 percentage point increase in gross margin from a favorable product mix. The decline in segment contribution for the first nine months of 2026 is primarily from the decline in revenue and the fixed cost pressures on general and administrative expenses.

Previous wording

Hong Kong/Taiwan. The declines in our Hong Kong/Taiwan segment for the second quarter and first half of 2026 are attributable to macroeconomic issues, which are resulting in less purchasing power for our consumers. Our Taiwan market has shown indicators of stabilization with local currency growth for the second quarter and first half of 2026.

Current wording

Hong Kong/Taiwan. The declines in our Hong Kong/Taiwan segment for the third quarter and first nine months of 2026 are attributable to macroeconomic issues, which are resulting in less purchasing power for our customers. In addition, our reported revenue for the third quarter and first nine months of 2026 reflects negative impact from unfavorable foreign currency fluctuations of 3.9% and 1.2%, respectively.

Previous wording

The decrease in segment contribution for the second quarter of 2026 is primarily attributable to the decline in revenue. The decrease in segment contribution for the first half of 2026 is primarily from the decline in revenue as well as a 1.5 percentage-point increase in selling expenses associated with our recent compensation plan enhancements, as well as the decline in revenue paired with the fixed nature of general and administrative expenses, partially offset by a 1.3 percentage point improvement in gross margin from less product write-offs and product promotions.

Current wording

The decrease in segment contribution for the third quarter and first nine months of 2026 is primarily attributable to the decline in revenue as well as a 1.2 and 1.4 percentage-point increase in selling expenses associated with our recent compensation plan enhancements.

Previous wording

South Korea. Our South Korea market was challenged by difficult macroeconomic trends, including inflationary pressures, political instability, and our associated price increases which negatively impacted our revenue, Customers, Paid Affiliates and Sales Leaders for the second quarter and first half of 2026. In addition, in the first quarter of 2026, we lowered our commission to remain in compliance with the local law. Our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 5.8% and 3.3% for the second quarter and first half of 2026, respectively.

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 third quarter and first nine months of 2026. In addition, in the first quarter of 2026, we lowered our commission to remain in compliance with the local law. Our reported revenue reflects negative impacts from unfavorable foreign currency fluctuations of 1.4% and 2.7% for the third quarter and first nine months of 2026, respectively.

Previous wording

Manufacturing. Our Manufacturing segment revenue decreased 23.2% and 21.1% for the second quarter and first half of 2026, respectively. The decrease is partially due to a challenging comparison with a strong first half of 2025, as well as customer order delays related to the tariff and associated economic uncertainty.

Current wording

Manufacturing. Our Manufacturing segment revenue increased 19.3% for the third quarter of 2026 and declined 9.3% for the first nine months of 2026. We experienced a decline in orders for the first half of 2026 partially attributable to the challenging comparison with a strong first half of 2025, as well as customer order delays related to the tariff and associated economic uncertainty. Our third quarter revenue benefited from normalization of orders across our entities.

Previous wording

Rhyz Other. The decrease in revenue for the second quarter and first half of 2026 is primarily from our decision to wind down our separate BeautyBio business. In addition, for the second quarter of 2026, our LifeDNA, Inc. (“LifeDNA”) entity, a DNA assessment and recommendation technology company, was challenged by elevated customer acquisition cost.

Current wording

Rhyz Other. The decrease in revenue for the third quarter and first nine months of 2026 is primarily from our decision to wind down our separate BeautyBio business. In addition, for the third quarter of 2026, our LifeDNA, Inc. (“LifeDNA”) entity, a DNA assessment and recommendation technology company, was challenged by elevated customer acquisition cost.

Previous wording

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

Current wording

The increase in segment contribution for the third quarter is primarily from the decision to wind down our separate BeautyBio business, which was historically operating at a loss. The decrease in segment contribution for the first nine months of 2026 is primarily due to our decision to wind down our separate BeautyBio business and the associated $3.1 million inventory charge, $1.8 million of intangible impairment and $1.0 million in other associated costs recorded in the first quarter of 2026, as well as elevated customer acquisition costs for LifeDNA.

Previous wording

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

Current wording

Revenue for the three-month period ended September 30, 2026 decreased 14.6% to $311.0 million, compared to $364.2 million in the prior-year period. Revenue for the nine-month period ended September 30, 2026 decreased 14.6% to $951.7 million compared to $1,114.8 million in the prior-year period. Our revenue in the third quarter and first nine months of 2026 was negatively impacted by 1.1% and 0.3%, respectively, from foreign-currency fluctuations. For a discussion and analysis of these decreases in revenue, see “Overview” and “Segment Results,” above.

Previous wording

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

Current wording

Selling expenses decreased $27.1 million, or 20.8%, to $103.2 million for the third quarter of 2026 and decreased $55.9 million, or 14.8%, to $321.2 million for the first nine months of 2026. Selling expenses as a percentage of revenue decreased to 33.2% for the third quarter of 2026, compared to 35.8% for the prior-year period, and decreased to 33.7% for the first nine months of 2026, compared to 33.8% for the prior-year period. Core Nu Skin selling expenses as a percentage of revenue decreased 0.8 percentage points to 40.9% for the third quarter of 2026 and increased 0.3 percentage points to 40.4% for the first nine months of 2026. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders. Given the size of our sales force and the various components of our compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period. In the third quarter of 2026, we held our global Nu Skin LIVE! event in Japan. As a result of the global LIVE! event, we spent an approximate incremental $5.4 million in selling expenses for the third quarter of 2026. The third quarter of 2026 decline in the consolidated selling expenses reflects the increase in Rhyz revenue in proportion to the core Nu Skin business, as our Rhyz segment carries lower selling expenses than the core business.

Previous wording

General and administrative expenses decreased to $90.8 million in the second quarter of 2026, compared to $106.7 million in the prior-year period, and decreased to $189.4 million in the first six months of 2026, compared to $219.9 million in the prior-year period. The $15.9 million decline for the second quarter is primarily from a $8.6 million contraction in labor expenses primarily from lower incentive compensation from a decline in performance and a $2.5 million decline in software and related contracts from continued cost management. The $30.5 million decline for the first half of 2026 is primarily from a $14.3 million reduction in labor expense and a $7.9 million decline in software and related contracts. General and administrative expenses as a percentage of revenue increased to 28.4% for the second quarter of 2026, from 27.6% for the prior-year period, and increased to 29.6% for the first six months of 2026, from 29.3% for the prior-year period. In the third quarter of 2026, we anticipate beginning to implement a re-alignment of our organizational resources. As a result of these changes, we are anticipating an approximate incremental $5.0 million in transition cost in the third quarter of 2026, primarily consisting of cash severance charges.

Current wording

General and administrative expenses decreased to $93.9 million in the third quarter of 2026, compared to $104.8 million in the prior-year period, and decreased to $283.3 million in the first nine months of 2026, compared to $324.7 million in the prior-year period. The $10.9 million decline for the third quarter is primarily from an $8.0 million contraction in labor expenses primarily from lower incentive compensation from a decline in performance and a $4.0 million decline in software and related contracts from continued cost management, partially offset by a $5.1 million increase in cash severance expense in the period associated with recent cost saving efforts. The $41.5 million decline for the first nine months of 2026 is primarily from a $22.3 million reduction in labor expense and an $11.8 million decline in software and related contracts, partially offset by a $6.7 million increase in cash severance expense in the period associated with recent cost saving efforts. General and administrative expenses as a percentage of revenue increased to 30.2% for the third quarter of 2026, from 28.8% for the prior-year period, and increased to 29.8% for the first nine months of 2026, from 29.1% for the prior-year period.

Previous wording

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

Current wording

Interest expense decreased to $3.5 million in the third quarter of 2026, compared to $4.1 million in the prior-year period. Interest expense for the first nine months of 2026 increased to $11.1 million compared to $10.0 million for the prior-year period. The increase for the first nine months of 2026 is primarily due to the maturity on July 31, 2025 of our interest rate swap arrangements, which increased our effective interest rate, partially offset by lower average outstanding borrowings. The decrease for the third quarter of 2026 is primarily due to lower average outstanding borrowings, which were $216.7 million compared to $250.0 million in the prior-year period, and lower variable interest rates.

Previous wording

Other income (expense), net was $(0.5) million for the second quarter of 2026 compared to $(0.8) million for the prior-year period, and $2.3 million for the first six months of 2026 compared to $(29.2) million for the prior-year period. In the first quarter of 2025, we recorded a $28.1 million unrealized loss on investment. See Note 8 to the consolidated financial statements contained in this report for more information on the unrealized equity investment and the associated loss.

Current wording

Other income (expense), net was $0.3 million for the third quarter of 2026 compared to $(1.5) million for the prior-year period, and $2.6 million for the first nine months of 2026 compared to $(30.7) million for the prior-year period. In the first quarter of 2025, we recorded a $28.1 million unrealized loss on investment. See Note 8 to the consolidated financial statements contained in this report for more information on the unrealized equity investment and the associated loss.

Previous wording

Provision for income taxes for the three- and six-month periods ended June 30, 2026 was $186.6 million and $187.4 million, respectively, compared to $6.3 million and $33.4 million for the prior-year periods. The effective tax rates for the three- and six-month periods ended June 30, 2026 were (295.4)% and (309.3)% of pre-tax income, respectively, compared to 23.0% and 20.6% in the prior-year periods. The change in the effective tax rate in the second quarter of 2026 is primarily due to the valuation allowance established on our U.S. deferred tax assets.

Current wording

Provision (benefit) for income taxes for the three- and nine-month periods ended September 30, 2026 was $2.6 million and $190.0 million, respectively, compared to $(1.1) million and $32.3 million for the prior-year periods. The effective tax rates for the three- and nine-month periods ended September 30, 2026 were 139.3% and (323.8)% of pre-tax income, respectively, compared to (6.8)% and 18.1% in the prior-year periods. The change in the effective tax rate in the third quarter of 2026 is primarily due to a U.S. consolidated book loss and its impact on the annualized effective tax rate. The change in the effective tax rate in the first nine months of 2026 is primarily due to the valuation allowance established on our U.S. deferred tax assets.

Previous wording

During the second quarter of 2026, we established a $167.5 million valuation allowance against its U.S. deferred tax assets as it was determined to be more likely than not that these assets will not be realized. This determination was made based on weighing all available evidence, positive and negative, including cumulative losses recognized in the U.S. entity over the past three years. These cumulative losses were mainly due to the impairment of goodwill and other intangibles assets. Therefore, we recorded a full valuation allowance against these U.S. deferred tax assets as of June 30, 2026.

Current wording

During the second quarter of 2026, we established a $167.5 million valuation allowance against our U.S. deferred tax assets as it was determined to be more likely than not that these assets will not be realized. This determination was made based on weighing all available evidence, positive and negative, including cumulative losses recognized in the U.S. entity over the past three years. These cumulative losses were mainly due to the impairment of goodwill and other intangibles assets. Therefore, we recorded a full valuation allowance against these U.S. deferred tax assets as of June 30, 2026.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

As a result of the foregoing factors, net income (loss) for the third quarter of 2026 was $(0.7) million compared to $17.1 million in the prior-year period. Net income (loss) for the first nine months of 2026 was $(248.7) million, compared to $145.7 million for the first nine months of 2025.

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 six months of 2026, we generated $6.7 million in cash from operations, compared to $36.2 million in the prior-year period. The decrease in cash flow from operations primarily reflects incremental inventory purchases. Cash and cash equivalents, including current investments, as of June 30, 2026 and December 31, 2025 were $191.4 million and $239.8 million, respectively, with the decrease being primarily driven by $19.4 million of capital expenditures, $10.0 million in net debt payments, $6.5 million for the purchase of noncontrolling interest in LifeDNA, $5.8 million of dividend payments and $5.0 million in share repurchases.

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. Historically, we have typically generated positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities; however, our operating activities used cash in the first nine months of 2026, as described below. In the first nine months of 2026, we had a net outflow of $1.4 million in cash from operations, compared to $63.7 million of cash provided by operations in the prior-year period. The decrease in cash flow from operations primarily reflects incremental inventory purchases, lower collections of accounts receivable, and higher payments of accrued expenses. Cash and cash equivalents, including current investments, as of September 30, 2026 and December 31, 2025 were $166.6 million and $239.8 million, respectively, with the decrease being primarily driven by $30.7 million of capital expenditures, $20.0 million in net debt payments, $6.5 million for the purchase of noncontrolling interest in LifeDNA, $8.7 million of dividend payments and $5.0 million in share repurchases.

Previous wording

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

Current wording

Working capital. As of September 30, 2026, working capital was $244.2 million, compared to $284.0 million as of December 31, 2025. Our decrease in working capital is primarily attributable to changes in our cash balance as explained above, as well as a $20.0 million decline in prepaid expenses attributable to timing of prepayments and associated amortization.

Previous wording

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

Current wording

Capital expenditures. Capital expenditures for the nine months ended September 30, 2026 were $30.7 million. Our capital expenditures in 2026 primarily relate to:

Previous wording

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

Current wording

Credit Agreement. On March 27, 2026, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2022 Credit Agreement. The Credit Agreement provides for a $175.0 million term loan facility and a $75.0 million revolving credit facility, each with a term of five years. Both facilities bear interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility amortizes in equal quarterly installments in amounts resulting in an annual amortization of $20.0 million per annum, with the remainder payable at final maturity. The Credit Agreement is guaranteed by certain of the Company’s domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. As of September 30, 2026, we had $40.0 million of outstanding borrowings under our revolving credit facility, and $165.0 million on our term loan facility. The carrying value of the debt also reflected debt issuance costs of $1.3 million as of September 30, 2026, related to the Credit Agreement. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00.

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 second quarter of 2026, we repurchased no shares of our Class A common stock under the plan. As of June 30, 2026, $137.3 million was available for repurchases under the plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

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 third quarter of 2026, we repurchased no shares of our Class A common stock under the plan. As of September 30, 2026, $137.3 million was available for repurchases under the plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

Previous wording

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

Current wording

Dividends. In February 2026, our board of directors declared quarterly cash dividends of $0.06 per share. This quarterly cash dividend of $2.9 million was paid on March 11, 2026 to stockholders of record on February 27, 2026. In May 2026, our board of directors declared quarterly cash dividends of $0.06 per share. This quarterly cash dividend of $2.9 million was paid on June 10, 2026 to stockholders of record on May 29, 2026. In August 2026, our board of directors declared a quarterly cash dividend of $0.06 per share. This quarterly cash dividend of $2.9 million was paid on September 9, 2026 to stockholders of record on August 28, 2026. In November 2026, our board of directors declared a quarterly cash dividend of $0.06 per share to be paid on December 9, 2026 to stockholders of record on November 27, 2026. Currently, we anticipate that our board of directors will continue to declare quarterly cash dividends and we expect that cash flows from operations, together with existing cash balances and available borrowings under our revolving credit facility, 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 June 30, 2026 and December 31, 2025, we held $191.4 million and $239.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $150.2 million and $170.7 million as of June 30, 2026 and December 31, 2025, respectively, held in our operations outside of the U.S. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

Current wording

Cash from foreign subsidiaries. As of September 30, 2026 and December 31, 2025, we held $166.6 million and $239.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include $125.9 million and $170.7 million as of September 30, 2026 and December 31, 2025, respectively, held in our operations outside of the U.S. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

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 June 30, 2026, we had $41.5 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of June 30, 2026 and December 31, 2025, we had $31.1 million and $23.9 million, respectively, in intercompany receivables with our Argentina subsidiary. We also have intercompany loan arrangements in some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line of credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for $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 September 30, 2026, we had $28.2 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of September 30, 2026 and December 31, 2025, we had $30.6 million and $23.9 million, respectively, in intercompany receivables with our Argentina subsidiary. We also have intercompany loan arrangements in some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line of credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for $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

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

Current wording

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