UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________

Commission File Number: 001-12421

	NU SKIN ENTERPRISES, INC.
	(Exact name of registrant as specified in its charter)

Delaware		87-0565309
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

	75 West Center Street Provo, Utah 84601
	(Address of principal executive offices, including zip code)

	(801) 345-1000
	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $.001 par value		NUS		New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~April 30,~~October 31, 2022, ~~50,208,228~~49,420,202 shares of the registrant’s Class A common stock, $.001 par value per share, were outstanding.

NU SKIN ENTERPRISES, INC.

QUARTERLY REPORT ON FORM 10-Q – ~~FIRST~~THIRD QUARTER 2022

TABLE OF CONTENTS

			Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited):
		Consolidated Balance Sheets	1
		Consolidated Statements of Income	2
		Consolidated Statements of Comprehensive Income	3
		Consolidated Statements of Stockholders’ Equity	4
		Consolidated Statements of Cash Flows	5 6
		Notes to Consolidated Financial Statements	6 7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17 18
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25 27
	Item 4.	Controls and Procedures	25 27

Part II.	Other Information
	Item 1.	Legal Proceedings	26 28
	Item 1A.	Risk Factors	26 28
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26 29
	Item 3.	Defaults Upon Senior Securities	2629
	Item 4.	Mine Safety Disclosures	2629
	Item 5.	Other Information	2629
	Item 6.	Exhibits	2730

	Signature		28 31

In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States (“U.S.”) dollars.

Nu Skin, Pharmanex, and ageLOC are our trademarks. The italicized product names used in this Quarterly Report on Form 10-Q are product names and also, in certain cases, our trademarks.

Table of ~~contents~~Contents

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.

Consolidated ~~Consolidated~~ Balance Sheets (Unaudited)

(U.S. dollars in thousands)

	March 31, 2022			December 31, 2021			September 30, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	302,216		$	339,593		$	294,136		$	339,593
Current investments		15,313			15,221			13,868			15,221
Accounts receivable, net		52,171			41,299			47,991			41,299
Inventories, net		381,585			399,931			327,481			399,931
Prepaid expenses and other		97,923			76,906			94,366			76,906
Total current assets		849,208			872,950			777,842			872,950

Property and equipment, net		448,822			453,674			433,367			453,674
Operating lease right-of-use assets		132,949			120,973			105,103			120,973
Goodwill		206,432			206,432			206,432			206,432
Other intangible assets, net		74,874			76,991			68,743			76,991
Other assets		179,964			175,460			171,685			175,460
Total assets	$	1,892,249		$	1,906,480		$	1,763,172		$	1,906,480

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	40,719		$	49,993		$	41,620		$	49,993
Accrued expenses		343,737			372,201			281,418			372,201
Current portion of long-term debt		110,000			107,500			42,500			107,500
Total current liabilities		494,456			529,694			365,538			529,694

Operating lease liabilities		100,844			88,759			78,053			88,759
Long-term debt		258,995			268,781			382,323			268,781
Other liabilities		103,754			106,474			95,324			106,474
Total liabilities		958,049			993,708			921,238			993,708
			��
Commitments and contingencies (Notes 5 and 11)		0			0

Stockholders’ equity:
Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued		91			91			91			91
Additional paid-in capital		599,258			601,703			609,886			601,703
Treasury stock, at cost – 40.4 million and 40.7 million shares		(1,526,778	)		(1,526,860	)
Treasury stock, at cost – 40.9 million and 40.7 million shares								(1,559,967	)		(1,526,860	)
Accumulated other comprehensive loss		(69,528	)		(73,896	)		(109,385	)		(73,896	)
Retained earnings		1,931,157			1,911,734			1,901,309			1,911,734
Total stockholders’ equity		934,200			912,772			841,934			912,772
Total liabilities and stockholders’ equity	$	1,892,249		$	1,906,480		$	1,763,172		$	1,906,480

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~contents~~Contents

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

(U.S. dollars in thousands, except per share amounts)

	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021		2022			2021
Revenue	$	604,899		$	677,026	$	537,805		$	641,152	$	1,703,319		$	2,022,233
Cost of sales		161,499			170,566		173,500			158,907		483,099			501,448
Gross profit		443,400			506,460		364,305			482,245		1,220,220			1,520,785

Operating expenses:
Selling expenses		242,699			275,965		216,478			260,333		678,603			816,887
General and administrative expenses		148,556			167,582		137,987			156,528		428,105			490,225
Restructuring and impairment expenses							30,124			—		30,124			—
Total operating expenses		391,255			443,547		384,589			416,861		1,136,832			1,307,112

Operating income		52,145			62,913
Operating income (loss)							(20,284	)		65,384		83,388			213,673
Other income (expense), net		(1,453	)		1,582		(8,680	)		2,781		(18,773	)		351

Income before provision for income taxes		50,692			64,495
Provision for income taxes		11,976			17,065
Income (loss) before provision for income taxes							(28,964	)		68,165		64,615			214,024
Provision (benefit) for income taxes							(3,574	)		18,436		17,052			57,527

Net income	$	38,716		$	47,430
Net income (loss)						$	(25,390	)	$	49,729	$	47,563		$	156,497

Net income per share (Note 6):
Net income (loss) per share (Note 6):
Basic	$	0.77		$	0.94	$	(0.51	)	$	0.99	$	0.95		$	3.11
Diluted	$	0.76		$	0.91	$	(0.51	)	$	0.97	$	0.94		$	3.03

Weighted-average common shares outstanding (000s):
Basic		49,991			50,706		50,199			50,098		50,187			50,304
Diluted		51,066			52,172		50,199			51,260		50,822			51,629

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~contents~~Contents

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(U.S. dollars in thousands)

Three Months Ended
March 31,

2022 2021
Net income $ 38,716 $ 47,430

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, net of taxes of $(7) and $(2) for the three months ended March 31, 2022 and 2021, respectively
(1,960 ) (9,919 )
Net unrealized gains/(losses) on foreign currency cash flow hedges, net of taxes of $(1,743) and $(839) for the three months ended March 31, 2022 and 2021, respectively
6,314 3,040
Reclassification adjustment for realized losses/(gains) in current earnings, net of taxes of $(4) and $(6) for the three months ended March 31, 2022 and 2021, respectively
14 21
4,368 (6,858 )
Comprehensive income $ 43,084 $ 40,572

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income (loss)	$	(25,390	)	$	49,729		$	47,563		$	156,497

Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment, net of taxes of $(10) and $(1) for the three months ended September 30, 2022 and 2021, respectively, and $19 and $1 for the nine months ended September 30, 2022 and 2021, respectively		(22,502	)		(7,165	)		(46,914	)		(13,431	)
Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(1,262) and $(7) for the three months ended September 30, 2022 and 2021, respectively and $(3,441) and $(678) for the nine months ended September 30, 2022 and 2021, respectively		4,570			25			12,462			2,455
Reclassification adjustment for realized losses/(gains) in current earnings on cash flow hedges, net of taxes of $225 and $(10) for the three months ended September 30, 2022 and 2021, respectively and $286 and $(24) for the nine months ended September 30, 2022 and 2021, respectively		(815	)		35			(1,037	)		86
		(18,747	)		(7,105	)		(35,489	)		(10,890	)
Comprehensive income (loss)	$	(44,137	)	$	42,624		$	12,074		$	145,607

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~contents~~Contents

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

(U.S. dollars in thousands)

For the Three Months Ended March 31, 2022

Class A
Common
Stock

Additional
Paid-in
Capital

Treasury
Stock

Accumulated
Other
Comprehensive
Loss

Retained
Earnings
Total
Balance at January 1, 2022 $ 91 $ 601,703 $ (1,526,860 ) $ (73,896 ) $ 1,911,734 $ 912,772

Net income 0 0 0 0 38,716 38,716
Other comprehensive income, net of tax 0 0 0 4,368 0 4,368
Repurchase of Class A common stock (Note 6) 0 0 (10,006 ) 0 0 (10,006 )
Exercise of employee stock options (0.4 million shares)/vesting of stock awards
0 (6,572 ) 10,088 0 0 3,516
Stock-based compensation 0 4,127 0 0 0 4,127
Cash dividends 0 0 0 0 (19,293 ) (19,293 )
Balance at March 31, 2022
$ 91 $ 599,258 $ (1,526,778 ) $ (69,528 ) $ 1,931,157 $ 934,200

	For the Three Months Ended September 30, 2022
	Class A Common Stock		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at July 1, 2022	$	91	$	606,349	$	(1,520,769	)	$	(90,638	)	$	1,946,002		$	941,035

Net loss		—		—		—			—			(25,390	)		(25,390	)
Other comprehensive loss, net of tax		—		—		—			(18,747	)		—			(18,747	)
Repurchase of Class A common stock (Note 6)		—		—		(40,028	)		—			—			(40,028	)
Exercise of employee stock options (0.1 million shares)/vesting of stock awards		—		366		830			—			—			1,196
Stock-based compensation		—		3,171		—			—			—			3,171
Cash dividends		—		—		—			—			(19,303	)		(19,303	)
Balance at September 30, 2022	$	91	$	609,886	$	(1,559,967	)	$	(109,385	)	$	1,901,309		$	841,934

	For the Three Months Ended March 31, 2021																	For the Three Months Ended September 30, 2021
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total			Class A Common Stock		Additional Paid-in Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2021	$	91	$	579,801		$	(1,461,593	)	$	(64,768	)	$	1,840,740		$	894,271
Balance at July 1, 2021																		$	91	$	586,976	$	(1,509,867	)	$	(68,553	)	$	1,909,179		$	917,826

Net income		0		0			0			0			47,430			47,430			—		—		—			—			49,729			49,729
Other comprehensive loss, net of tax		0		0			0			(6,858	)		0			(6,858	)
Other comprehensive income, net of tax																			—		—		—			(7,105	)		—			(7,105	)
Repurchase of Class A common stock (Note 6)		0		0			(50,406	)		0			0			(50,406	)		—		—		(10,005	)		—			—			(10,005	)
Exercise of employee stock options (0.3 million shares)/vesting of stock awards		0		(7,400	)		6,923			0			0			(477	)
Exercise of employee stock options (0.1 million shares)/vesting of stock awards																			—		609		1,337			—			—			1,946
Stock-based compensation		0		6,803			0			0			0			6,803			—		3,093		—			—			—			3,093
Cash dividends		0		0			0			0			(19,289	)		(19,289	)		—		—		—			—			(19,007	)		(19,007	)
Balance at March 31, 2021	$	91	$	579,204		$	(1,505,076	)	$	(71,626	)	$	1,868,881		$	871,474
Balance at September 30, 2021																		$	91	$	590,678	$	(1,518,535	)	$	(75,658	)	$	1,939,901		$	936,477

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~contents~~Contents

NU SKIN ENTERPRISES, INC.

Consolidated Statements of ~~Cash Flows~~ Stockholders’ Equity (Unaudited)

(U.S. dollars in thousands)

Three Months Ended
March 31,

2022 2021
Cash flows from operating activities:
Net income $ 38,716 $ 47,430
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization 17,130 18,344
Non-cash lease expense 10,581 13,298
Stock-based compensation 4,127 6,803
Foreign currency losses 370 970
Loss on disposal of assets 517 506
Deferred taxes 3,292 3,363
Changes in operating assets and liabilities:
Accounts receivable, net (12,463 ) 436
Inventories, net 17,212 (53,776 )
Prepaid expenses and other (18,110 ) (19,241 )
Other assets 941 (2,786 )
Accounts payable (5,663 ) 1,869
Accrued expenses (40,270 ) (36,779 )
Other liabilities (8,839 ) 707
Net cash provided by/(used in) operating activities 7,541 (18,856 )

Cash flows from investing activities:
Purchases of property and equipment (10,279 ) (19,373 )
Proceeds on investment sales 4,076 7,550
Purchases of investments (3,930 ) (6,973 )
Net cash used in investing activities (10,133 ) (18,796 )

Cash flows from financing activities:
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards 3,516 (477 )
Payment of cash dividends (19,293 ) (19,289 )
Repurchases of shares of common stock (10,006 ) (50,406 )
Finance lease principal payments (476 ) (483 )
Payments of debt (7,500 ) (17,500 )
Proceeds from debt 0 70,000
Net cash used in financing activities (33,759 ) (18,155 )

Effect of exchange rate changes on cash (1,026 ) (7,777 )

Net increase (decrease) in cash and cash equivalents (37,377 ) (63,584 )

Cash and cash equivalents, beginning of period 339,593 402,683

Cash and cash equivalents, end of period $ 302,216 $ 339,099

	For the Nine Months Ended September 30, 2022
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2022	$	91	$	601,703		$	(1,526,860	)	$	(73,896	)	$	1,911,734		$	912,772

Net income		—		—			—			—			47,563			47,563
Other comprehensive loss, net of tax		—		—			—			(35,489	)		—			(35,489	)
Repurchase of Class A common stock (Note 6)		—		—			(60,038	)		—			—			(60,038	)
Exercise of employee stock options (1.2 million shares)/vesting of stock awards		—		(1,137	)		26,931			—			—			25,794
Stock-based compensation		—		9,320			—			—			—			9,320
Cash dividends		—		—			—			—			(57,988	)		(57,988	)
Balance at September 30, 2022	$	91	$	609,886		$	(1,559,967	)	$	(109,385	)	$	1,901,309		$	841,934

	For the Nine Months Ended September 30, 2021
	Class A Common Stock		Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance at January 1, 2021	$	91	$	579,801		$	(1,461,593	)	$	(64,768	)	$	1,840,740		$	894,271

Net income		—		—			—			—			156,497			156,497
Other comprehensive loss, net of tax		—		—			—			(10,890	)		—			(10,890	)
Repurchase of Class A common stock (Note 6)		—		—			(70,415	)		—			—			(70,415	)
Exercise of employee stock options (0.6 million shares)/vesting of stock awards		—		(5,599	)		13,473			—			—			7,874
Stock-based compensation		—		16,476			—			—			—			16,476
Cash dividends		—		—			—			—			(57,336	)		(57,336	)
Balance at September 30, 2021	$	91	$	590,678		$	(1,518,535	)	$	(75,658	)	$	1,939,901		$	936,477

The accompanying notes are an integral part of these consolidated financial statements.

Table of ~~contents~~Contents

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Cash Flows (Unaudited)

(U.S. dollars in thousands)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income	$	47,563		$	156,497
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		53,935			57,858
Non-cash lease expense		33,250			40,703
Stock-based compensation		9,320			16,476
Foreign currency losses		7,077			5,501
Loss on disposal of assets		568			13,210
Deferred taxes		2,483			3,846
Impairment of fixed assets and other intangibles		9,916			—
Unrealized gain on equity investments		—			(18,077	)
Changes in operating assets and liabilities:
Accounts receivable, net		(15,523	)		8,377
Inventories, net		48,422			(109,371	)
Prepaid expenses and other		(6,801	)		(29,311	)
Other assets		8,030			(18,438	)
Accounts payable		(1,224	)		(11,182	)
Accrued expenses		(95,928	)		(89,993	)
Other liabilities		(18,551	)		5,977
Net cash provided by operating activities		82,537			32,073

Cash flows from investing activities:
Purchases of property and equipment		(45,274	)		(50,384	)
Proceeds on investment sales		5,535			11,171
Purchases of investments		(13,955	)		(14,973	)
Acquisitions, net of cash acquired		—			(18,963	)
Net cash used in investing activities		(53,694	)		(73,149	)

Cash flows from financing activities:
Exercise of employee stock options and taxes paid related to the net shares settlement of stock awards		25,794			7,874
Payment of cash dividends		(57,988	)		(57,336	)
Repurchases of shares of common stock		(60,038	)		(70,415	)
Finance lease principal payments		(1,401	)		(1,409	)
Payment of debt issuance costs		(5,077	)		—
Payments of debt		(410,000	)		(77,500	)
Proceeds from debt		460,000			130,000
Net cash used in financing activities		(48,710	)		(68,786	)

Effect of exchange rate changes on cash		(25,590	)		(10,409	)

Net increase (decrease) in cash and cash equivalents		(45,457	)		(120,271	)

Cash and cash equivalents, beginning of period		339,593			402,683

Cash and cash equivalents, end of period	$	294,136		$	282,412

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

NU SKIN ENTERPRISES, INC.

Notes to Consolidated Financial Statements

1.	The Company

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin, being the primary operating unit. Nu Skin develops and distributes premium-quality, innovative beauty and wellness products that are sold worldwide under the Nu Skin, Pharmanex and ageLOC brands and a small number of other products and services. The Company reports revenue from 9nine segments, consisting of its 7seven geographic Nu Skin ~~segments—Mainland China;~~ segments—Americas, which includes Canada, Latin America and the United States; ~~South Korea;~~Mainland China; Southeast Asia/Pacific, which includes Australia, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam; South Korea; Japan; Europe, Middle East and Africa (“EMEA”), which includes markets in Europe as well as Israel and South Africa; ~~Japan;~~ and Hong Kong/Taiwan, which also includes Macau—and 2two Rhyz Investments segments—Manufacturing, which includes manufacturing and packaging subsidiaries it has acquired; and Rhyz other, which includes other investments by its Rhyz strategic investment arm (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”).

2.	Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited consolidated financial statements include the accounts of the Company and its Subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial information as of ~~March~~September ~~31,~~30, 2022, and for the three~~-month~~-and nine-month periods ended ~~March~~September ~~31,~~30, 2022 and 2021. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the fiscal year. The consolidated balance sheet as of December 31, 2021 has been prepared using information from the audited financial statements at that date. For further information, refer to the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current presentation. The Company reclassified $~~2.2~~4.6 million and $9.5 million of events and other miscellaneous selling costs from the general and administration expenses line to the selling expenses line on the consolidated statement of income for the three- and nine-month periods ended September 30, ~~first~~ ~~quarter of~~ ~~2021.~~2021, respectively. The Company believes these costs are better reflected in selling expenses. The reclassification had no impact on operating income for the ~~first~~ ~~quarter of~~three- and nine-month periods ended September 30, 2021.

Accounting Pronouncements

In March 2020~~2020,~~, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued, ASU ~~2020~~-~~04,~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for the effects of reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying US GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU ~~2020~~-042020-04 applies only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The amendments in ASU ~~2020~~-042020-04 are elective and are effective upon issuance for all entities. The Company had previously elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. In the second quarter of 2022, the Company elected the hedge accounting expedient that allows an update to the hedged risk in active hedging relationships without de-designation as the Company’s debt transitioned to Secured Overnight Financing Rate (“SOFR”). Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

Table of ~~contents~~Contents

Inventory

Inventories consist of the following (U.S. dollars in thousands):

	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Raw materials	$	163,746	$	179,891	$	141,823	$	179,891
Finished goods		217,839		220,040		185,658		220,040
Total Inventory, net	$	381,585	$	399,931	$	327,481	$	399,931

Revenue Recognition

Contract Liabilities – Customer Loyalty Programs

Contract liabilities, recorded as deferred revenue within the accrued expenses line in the consolidated balance sheets, include loyalty point program deferrals with certain customers which are accounted for as a reduction in the transaction price and are generally recognized as points are redeemed for additional products.

The balance of deferred revenue related to contract liabilities as of ~~March~~September ~~31,~~30, 2022 and December 31, 2021 was $~~20.8~~17.7 million and $22.0 million, respectively. The contract liabilities impact to revenue for the three-month periods ended ~~March~~September ~~31,~~30, 2022, and 2021 was an increase of $~~1.2~~0.7 million and a decrease of ~~$1.6~~$0.7 million, respectively. The impact to revenue for the nine-month periods ended September 30, 2022, and 2021 was an increase of $4.3 million and a decrease of $6.3 million, respectively.

Goodwill

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments.

The following table presents goodwill allocated to the Company’s reportable segments for the periods ended ~~March 31,~~September 30, 2022 and December 31, 2021 (U.S. dollars in thousands):

	March 31, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Nu Skin
Americas					$	9,449	$	9,449
Mainland China	$	32,179	$	32,179		32,179		32,179
Americas		9,449		9,449
Southeast Asia/Pacific		18,537		18,537		18,537		18,537
South Korea		29,261		29,261		29,261		29,261
Japan		16,019		16,019		16,019		16,019
EMEA		2,875		2,875		2,875		2,875
Hong Kong/Taiwan		6,634		6,634		6,634		6,634
Rhyz Investments
Manufacturing		78,875		78,875		78,875		78,875
Rhyz Other		12,603		12,603		12,603		12,603
Total	$	206,432	$	206,432	$	206,432	$	206,432

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Debt

2018 Credit Agreement

On April 18, 2018, the Company entered into a Credit Agreement (the ~~“Credit~~“2018 Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent. The 2018 Credit Agreement ~~provides~~provided for a $400 million term loan facility and a $350 million revolving credit facility, each with a term of five years. Both facilities ~~bear~~bore interest at the LIBOR, plus a margin based on the consolidated leverage ratio. The term loan facility ~~amortizes~~amortized in quarterly installments in amounts resulting in an annual amortization of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year after the closing date of the 2018 Credit Agreement, with the remainder payable at final maturity. The 2018 Credit Agreement ~~requires~~required 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.

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Credit Agreement

On June 14, 2022, 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 2018 Credit Agreement. The Credit Agreement provides for a $400 million term loan facility and a $500 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 quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the second, third, fourth and fifth years after the closing date of the Credit Agreement, 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. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of ~~March 31,~~September 30, 2022, the Company was in compliance with all covenants under the Credit Agreement.

The following table summarizes the Company’s debt facilities as of ~~March 31,~~September 30, 2022 and December 31, 2021:

Facility or Arrangement

Original

Principal Amount

Balance as of

~~March 31,~~September 30, 2022 ⁽¹⁾⁽²⁾

Balance as of

December 31, 2021⁽¹⁾⁽²⁾

Interest Rate

Repayment Terms

2018 Credit Agreement term loan facility

$400.0 million

—

$307.5 million

Variable 30 day: 2.80%

Principal amount was paid in full during June 2022.

2018 Credit Agreement revolving credit facility

—

$70.0 million

Variable 30 day: 2.72%

Principal amount was paid in full during June 2022 and credit line was closed.

Credit Agreement term loan facility

400.0 million

~~300.0~~397.5 million

~~307.5 million~~—

Variable 30 day: ~~2.21%~~4.88%

~~35%~~21% of the principal amount is payable in increasing quarterly installments over a five-year period that began on ~~June~~September 30, ~~2018,~~2022, with the remainder payable at the end of the five-year term.

Credit Agreement revolving credit facility

~~70.0~~30.0 million

$—

~~70.0 million~~

Variable 30 day: ~~2.15%~~4.88%

Revolving line of credit expires ~~April 18, 2023.~~June 14, 2027.

(1)	As of ~~March 31,~~September 30, 2022 and December 31, 2021, the current portion of the Company’s debt (i.e., becoming due in the next 12 months) included ~~$40.0~~$12.5 million and $37.5 million, respectively, of the balance of its term loan under the Credit Agreement and 2018 Credit Agreement.

(2)

The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of ~~$1.0~~$2.7 million and $1.2 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, related to the Credit Agreement and 2018 Credit Agreement, which are not reflected in this table.

Leases

As of ~~March 31,~~September 30, 2022, the weighted average remaining lease term was ~~8.0~~8.4 and ~~3.5~~3.0 years for operating and finance leases, respectively. As of ~~March 31,~~September 30, 2022, the weighted average discount rate was ~~3.7%~~3.5% and 3.8% for operating and finance leases, respectively.

The components of lease expense were as follows (U.S. dollars in thousands):

	Three Months Ended March 31,					Three Months Ended September 30,					Nine Months Ended September 30,
	2022		2021			2022		2021			2022		2021
Operating lease expense
Operating lease cost	$	10,439	$	12,815		$	9,479	$	12,193		$	30,179	$	37,408
Variable lease cost		1,157		1,368			1,572		1,121			4,223		4,145
Short-term lease cost		30		339			84		13			181		590
Sublease income		0		(1,984	)		—		(1,352	)		—		(5,164	)
Finance lease expense
Amortization of right-of-use assets		556		611			530		594			1,632		1,811
Interest on lease liabilities		66		88			53		77			178		248
Total lease expense	$	12,248	$	13,237		$	11,718	$	12,646		$	36,393	$	39,038

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Supplemental cash flow information related to leases was as follows (U.S. dollars in thousands):

	Three Months Ended March 31,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating cash outflow from operating leases	$	10,405	$	14,149	$	28,880	$	40,072
Operating cash outflow from finance leases	$	68	$	89	$	170	$	250
Financing cash outflow from finance leases	$	476	$	483	$	1,401	$	1,409
Right-of-use assets obtained in exchange for operating lease obligations	$	23,730	$	10,891	$	28,785	$	19,120
Right-of-use assets obtained in exchange for finance lease obligations	$	0	$	49	$	203	$	59

Maturities of lease liabilities were as follows (U.S. dollars in thousands):

Year Ending December 31	Operating Leases		Finance Leases		Operating Leases		Finance Leases
2022	$	28,595	$	1,578	$	9,453	$	505
2023		28,298		2,032		26,680		1,884
2024		21,657		1,924		19,671		1,688
2025		15,507		1,361		13,775		1,209
2026		8,559		260		8,127		264
Thereafter		49,766		0		46,139		4
Total		152,382		7,155		123,845		5,554
Less: Finance charges		19,577		473		16,736		319
Total principal liability	$	132,805	$	6,682	$	107,109	$	5,235

The Company has additional lease liabilities of $0.1 million which have not yet commenced as of September~~March 31,~~ 30, 2022, and as such, have not been recognized on the consolidated balance sheets.

6.	Capital Stock

Net income per share

Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented. For the three-month periods ended ~~March 31,~~September 30, 2022 and 2021, stock options of 0.5 million and 0.1 million, respectively, and for the ~~only dilutive common shares outstanding relate to the Company’s outstanding stock awards and options. For the~~ ~~three-month~~nine-month periods ended ~~March 31,~~September 30, 2022 and 2021, stock options of 0.1 million and 0.1 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Dividends

In February, May and August 2022, the Company’s board of directors declared quarterly cash dividends of $0.385 per share. These quarterly cash dividends of $19.3 million, $19.4 million and $19.3 million were paid on March 9, 2022, June 8, 2022 and September 7, 2022, respectively, to stockholders of record on February 28, 2022, May 27, 2022 and August 26, 2022, respectively. In October 2022, the Company’s board of directors declared a quarterly cash dividend of ~~$0.385~~$0.385 per ~~share. This quarterly cash dividend of~~ ~~$19.3 million~~ ~~was~~share to be paid on ~~March 9,~~December 7, 2022 to stockholders of record on ~~February 28, 2022~~November 25, 2022.. In ~~May 2022~~, ~~the board of directors declared a quarterly cash dividend of~~ ~~$0.385~~ ~~per share to be paid on June 8, 2022 to stockholders of record on May 27, 2022~~.

Repurchase of common stock

During the ~~three-month~~three-month periods ended ~~March~~ ~~31,~~September 30, 2022 and 2021, the Company repurchased ~~0.2~~1.0 million ~~shares~~ and ~~1.0~~0.2 million shares of its Class A common stock under its stock repurchase ~~plans~~plan for ~~$10.0~~$40.0 million and $10.0 million, respectively. During the nine-month periods ended September 30, 2022 and 2021, the Company repurchased 1.4 million shares and 1.4 million shares of its Class A common stock under its stock repurchase plan for $60.0 million and $70.4 million, respectively.~~$50.4 million, respectively.~~ As of ~~March~~ September 30, 2022,~~31,2022,$235.4~~ $185.4 million was available for repurchases under the Company’s stock repurchase plan.

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7.	Fair Value and Equity Investments

Fair Value

The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable approximates fair values due to the short-term nature of these instruments. The carrying value of debt approximates fair value due to the variable 30-day interest rate. Fair value estimates are made at a specific point in time, based on relevant market information.

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The FASB Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. On a quarterly basis, the Company measures at fair value certain financial assets, including cash equivalents. Accounting standards specify a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair-value hierarchy:

◾■

Level 1 – quoted prices in active markets for identical assets or liabilities;

◾■

Level 2 – inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

◾■

Level 3 – unobservable inputs based on the Company’s own assumptions.

Accounting standards permit companies, at their option, to measure certain financial instruments and other eligible items at fair value. The Company has elected not to apply the fair value option to existing eligible items beyond what is required by US GAAP.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (U.S. dollars in thousands):

	Fair Value at March 31, 2022										Fair Value at September 30, 2022
	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	57,647	$	0	$	0		$	57,647		$	68,552	$	—	$	—		$	68,552
Derivative financial instruments asset		0		14,664		0			14,664			—		21,168		—			21,168
Life insurance contracts		0		0		46,450			46,450			—		—		38,302			38,302
Contingent consideration		0		0		(10,226	)		(10,226	)		—		—		(8,372	)		(8,372	)
Total	$	57,647	$	14,664	$	36,224		$	108,535		$	68,552	$	21,168	$	29,930		$	119,650

	Fair Value at December 31, 2021										Fair Value at December 31, 2021
	Level 1		Level 2		Level 3			Total			Level 1		Level 2		Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	66,477	$	0	$	0		$	66,477		$	66,477	$	—	$	—		$	66,477
Derivative financial instruments asset		0		6,590		0			6,590			—		6,590		—			6,590
Life insurance contracts		0		0		49,851			49,851			—		—		49,851			49,851
Contingent consideration		0		0		(10,341	)		(10,341	)		—		—		(10,341	)		(10,341	)
Total	$	66,477	$	6,590	$	39,510		$	112,577		$	66,477	$	6,590	$	39,510		$	112,577

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The following table provides a summary of changes in fair value of the Company’s Level 3 life insurance contracts (U.S. dollars in thousands):

	2022			2021			2022			2021
Beginning balance at January 1	$	49,851		$	45,453		$	49,851		$	45,453
Actual return on plan assets		(3,401	)		1,153			(11,549	)		3,172
Purchase and issuances		0			7,016
Purchases and issuances								—			7,016
Sales and settlements		0			(7,016	)		—			(7,016	)
Transfers into Level 3		0			0			—			—
Ending balance at March 31	$	46,450		$	46,606
Ending balance at September 30							$	38,302		$	48,625

Life insurance contracts: ~~ASC~~Accounting Standards Codification (“ASC”) 820 preserves practicability exceptions to fair value measurements provided by other applicable provisions of U.S. GAAP. The guidance in ASC 715-30-35-60 allows a reporting entity, as a practical expedient, to use cash surrender value or conversion value as an expedient for fair value when it is present. Accordingly, the Company determines the fair value of its life insurance contracts as the cash-surrender value of life insurance policies held in its Rabbi Trust.

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The following table provides a summary of changes in fair value of the Company’s Level 3 contingent consideration (U.S. dollars in thousands):

	2022			2021			2022			2021
Beginning balance at January 1	$	(10,341	)	$	(3,125	)	$	(10,341	)	$	(3,125	)
Additions from acquisitions		0			0			—			(8,702	)
Changes in fair value of contingent consideration		115			(139	)		1,969			(305	)
Ending balance at March 31	$	(10,226	)	$	(3,264	)
Ending balance at September 30							$	(8,372	)	$	(12,132	)

Contingent consideration: Contingent consideration represents the obligations incurred in connection with acquisitions. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding the future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a Level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.

Equity Investments

The Company maintains equity investments in companies which are accounted for under the measurement alternative described in ASC 321-10-35-2 for equity securities that lack readily determinable fair values. The carrying amount of equity securities held by the Company without readily determinable fair values was $28.1 million at each of ~~March~~September ~~31,~~30, 2022 and December 31, 2021. During the three months ended September 30, 2021, the Company recognized $18.1 million upward fair value adjustments, based on the valuation of additional equity issued by the investee which was deemed to be an observable transaction of a similar investment under ASC 321. The third quarter of 2021 gain was recorded within Other income (expense), net on the Consolidated Statement of ~~Comprehensive Operations.~~Income. The upward fair value adjustment represents a nonrecurring fair value measurement based on observable price changes and is classified as a Level 3 fair value measurement.

8.	Income Taxes

Provision for income taxes for the ~~first quarter of~~three- and nine-month periods ended September 30, 2022 was ~~$12.0~~$(3.6) million and $17.1 million, compared to ~~$17.1~~$18.4 million and $57.5 million for the prior-year ~~period.~~periods. The effective tax rates for the ~~first quarter~~three- and nine-month periods ended September 30, 2022, ~~was 23.6%~~were 12.3% and 26.4% of pre-tax income compared to ~~26.5%~~27.0% and 26.9% in the prior-year ~~period.~~periods.

The Company accounts for income taxes in accordance with ASC Topic 740 “Income Taxes.” These standards establish financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. The Company takes an asset and liability approach for financial accounting and reporting of income taxes. The Company pays 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 the Company and its foreign affiliates. Deferred tax assets and liabilities are created in this process. The Company has netted 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. The Company had net deferred tax assets of ~~$22.0~~$22.2 million and $24.1 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively.

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The Company evaluates its indefinite reinvestment assertions with respect to foreign earnings for each quarter. For all foreign earnings, the Company accrues the applicable foreign income taxes. For the earnings that have been indefinitely reinvested, the Company does not accrue foreign withholding taxes. Undistributed earnings that the Company has indefinitely reinvested, for which no foreign withholding taxes have been provided, aggregate to $60.0 million as of December 31, 2021. If the amount designated as indefinitely reinvested as of December 31, 2021 was repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million. The Company intends to utilize the indefinitely reinvested offshore earnings to fund foreign investments, specifically capital expenditures.

The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. In 2009, the Company entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. As of December 31, 2021, tax years through 2020 have been audited and are effectively closed to further examination. For tax years 2021 and 2022, the Company is in the Bridge phase of the CAP program, pursuant to which the IRS will not accept disclosures, will not conduct reviews and will not provide letters of assurance for the Bridge years. There are limited circumstances ~~that~~under which tax years in the Bridge phase will be opened for examination. The Company may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2018. In major foreign jurisdictions, the Company is generally no longer subject to income tax examinations for years before 2016. However, statutes of limitations in certain countries may be as long as ten years. The Company is currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable. The Company’s unrecognized tax benefits relate to multiple jurisdictions. Due to potential increases in unrecognized tax benefits from the multiple jurisdictions in which the Company operates, as well as the expiration of various statutes of limitations, it is reasonably possible that the Company’s gross unrecognized tax benefits, net of foreign currency adjustments, may increase in the next 12 months by approximately $1.0 to $2.0 million.

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9.	Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in Accumulated Other Comprehensive Income and subsequently reclassified into interest expense/income in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense/income as interest payments are made/received on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional ~~$3.2~~$8.2 million will be reclassified as a reduction to interest expense.

As of ~~March 31,~~September 30, 2022 and December 31, 2021, the Company had 4four outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk with a total notional amount of $200 million.

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Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet:

		Fair Values of Derivative Instruments					Fair Values of Derivative Instruments
Derivatives in Cash flow Hedging Relationships:	Balance Sheet Location	March 31, 2022		December 31, 2021		Balance Sheet Location	September 30, 2022		December 31, 2021
Interest Rate Swap - Asset	Prepaid expenses and other	$	3,207	$	557	Prepaid expenses and other	$	8,178	$	557
Interest Rate Swap - Asset	Other assets	$	11,457	$	6,033	Other assets	$	12,990	$	6,033

Effect of Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income

The tables below present the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income.

	Amount of Gain (Loss) Recognized in OCI on Derivatives				Amount of Gain (Loss) Recognized in OCI on Derivatives
	Three Months Ended				Three Months Ended				Nine Months Ended
Derivatives in Cash flow	March 31,				September 30,				September 30,
Hedging Relationships:	2022		2021		2022		2021		2022		2021
Interest Rate Swaps	$	8,057	$	3,879	$	5,832	$	32	$	15,903	$	3,133

		Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income					Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
		Three Months Ended					Three Months Ended					Nine Months Ended
Derivatives in Cash flow	Income Statement	March 31,				Income Statement	September 30,					September 30,
Hedging Relationships:	Location	2022		2021		Location	2022		2021			2022		2021
Interest Rate Swaps	Other income (expense), net	$	(18)	$	(27)	Other income (expense), net	$	1,040	$	(45	)	$	1,323	$	(110	)

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10.	Segment Information

The Company reports revenue from 9nine segments, consisting of its 7seven geographic Nu Skin segments—Americas, Mainland China, ~~Americas,~~Southeast Asia/Pacific, South Korea, ~~Southeast Asia/Pacific,~~ Japan, EMEA, and Hong Kong/Taiwan—and 2two Rhyz Investments 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 strategic investment arm. These segments reflect the way the chief operating decision maker evaluates the Company’s business performance and allocates resources. Reported revenue includes only the revenue generated by sales to external customers.

Profitability by segment as determined under US GAAP is driven primarily by the Company’s transfer pricing policies. Segment contribution, which is the Company’s segment profitability metric presented in the table below, excludes certain intercompany charges, specifically royalties, license fees, transfer pricing, discrete charges and other miscellaneous items. These charges have been included in Corporate and other expenses. Corporate and other expenses also include costs related to the Company’s executive and administrative offices, information technology, research and development, and marketing and supply chain functions not recorded at the segment level.

Prior year segment information has been recast to reflect the move of the Pacific components from the “America/Pacific” operating segment to the “Southeast Asia/Pacific” operating segment to comply with current segment presentation. Prior year segment information has ~~also~~ been recast to reflect the fourth quarter 2021 exit of the Grow Tech segment, which has been recast to Corporate and other ~~expenses.Consolidated~~expenses. Consolidated financial information is not affected.

The accounting policies of the segments are the same as those described in Note 2 – Summary of Significant Accounting Policies. The Company evaluates the performance of its segments based on revenue and segment contribution. Each segment records direct expenses related to its employees and its operations.

~~Table of contents~~

Summarized financial information for the Company’s reportable segments is shown in the following tables. Asset information is not reviewed or included with the Company’s internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.

Revenue by Segment

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2022		2021		2022		2021		2022		2021

Nu Skin
Americas					$	131,591	$	131,482	$	379,616	$	403,755
Mainland China	$	124,495	$	149,593		75,151		134,291		286,454		438,066
Americas		123,580		133,761
Southeast Asia/Pacific		90,236		83,289		83,502		79,081		267,805		246,338
South Korea		72,133		81,131		67,237		91,989		208,678		261,724
Japan		61,791		69,864		53,276		65,117		171,019		203,001
EMEA		52,968		76,180		45,099		55,839		148,938		215,134
Hong Kong/Taiwan		38,494		36,345		39,587		39,921		117,408		114,795
Other		620		878
Nu Skin other						496		1,672		2,434		3,497
Total Nu Skin		564,317		631,041		495,939		599,392		1,582,352		1,886,310
Rhyz Investments
Manufacturing ⁽¹⁾		40,341		45,985		41,328		41,635		119,898		135,760
Rhyz other		241		0		538		125		1,069		163
Total Rhyz Investments		40,582		45,985		41,866		41,760		120,967		135,923
Total	$	604,899	$	677,026	$	537,805	$	641,152	$	1,703,319	$	2,022,233

(1)

The ~~Rhyz Investments~~ Manufacturing segment had $~~14.6~~$17.5 million and $~~17.4~~$27.4 million of intersegment revenue for the ~~three-month period~~three months ended ~~March 31,~~September 30, 2022 and 2021, respectively, and $48.9 million and $68.0 million for the nine months ended September 30, 2022 and 2021, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table ~~above~~.above.

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Segment Contribution

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
(U.S. dollars in thousands)	2022			2021			2022			2021			2022			2021

Nu Skin
Americas							$	23,016		$	25,752		$	78,165		$	83,495
Mainland China	$	28,995		$	39,439			12,933			30,677			54,873			121,596
Americas		25,123			28,745
Southeast Asia/Pacific		23,406			19,648			20,719			19,020			68,492			59,881
South Korea		22,743			26,525			20,455			28,984			63,776			84,401
Japan		15,313			17,981			13,103			16,267			41,867			50,709
EMEA		3,836			8,896			3,379			6,693			13,377			29,270
Hong Kong/Taiwan		8,690			7,348			8,425			8,940			26,276			24,848
Nu Skin contribution		128,106			148,582			102,030			136,333			346,826			454,200
Rhyz Investments
Manufacturing		3,292			5,826			1,755			3,059			6,235			15,649
Rhyz other		(1,046	)		0			(1,724	)		(659	)		(4,069	)		(1,178	)
Total Rhyz Investments		2,246			5,826
Rhyz Investments contribution								31			2,400			2,166			14,471
Total segment contribution		130,352			154,408			102,061			138,733			348,992			468,671
Corporate and other		(78,207	)		(91,495	)		(122,345	)		(73,349	)		(265,604	)		(254,998	)
Operating income		52,145			62,913			(20,284	)		65,384			83,388			213,673
Other income (expense)		(1,453	)		1,582			(8,680	)		2,781			(18,773	)		351
Income before provision for income taxes	$	50,692		$	64,495		$	(28,964	)	$	68,165		$	64,615		$	214,024

~~Table of contents~~

Depreciation and Amortization

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2022		2021		2022		2021		2022		2021

Nu Skin
Americas					$	89	$	190	$	480	$	656
Mainland China	$	2,884	$	3,339		3,528		3,253		9,088		9,868
Americas		199		231
Southeast Asia/Pacific		381		354		382		359		1,144		1,096
South Korea		388		990		377		805		1,137		2,768
Japan		277		253		148		220		670		699
EMEA		230		286		125		281		599		850
Hong Kong/Taiwan		691		885		743		1,004		2,152		2,794
Total Nu Skin		5,050		6,338		5,392		6,112		15,270		18,731
Rhyz Investments
Manufacturing		3,330		2,688		3,161		3,069		9,773		8,644
Rhyz other		592		0		592		592		1,776		987
Total Rhyz Investments		3,922		2,688		3,753		3,661		11,549		9,631
Corporate and other		8,158		9,318		9,025		10,160		27,116		29,496
Total	$	17,130	$	18,344	$	18,170	$	19,933	$	53,935	$	57,858

Table of Contents

Capital Expenditures

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2022		2021		2022		2021		2022		2021

Nu Skin
Americas					$	23	$	95	$	152	$	294
Mainland China	$	4,068	$	8,517		2,946		3,237		9,066		15,170
Americas		42		112
Southeast Asia/Pacific		68		565		19		92		143		1,015
South Korea		362		490		35		—		613		508
Japan		0		91		16		3		200		94
EMEA		393		172		183		391		961		821
Hong Kong/Taiwan		263		0		587		110		1,386		222
Total Nu Skin		5,196		9,947		3,809		3,928		12,521		18,124
Rhyz Investments
Manufacturing		1,208		3,338		1,923		2,604		4,353		11,604
Rhyz other		0		0		—		—		—		—
Total Rhyz Investments		1,208		3,338		1,923		2,604		4,353		11,604
Corporate and other		3,875		6,088		19,723		7,003		28,400		20,656
Total	$	10,279	$	19,373	$	25,455	$	13,535	$	45,274	$	50,384

~~Table of contents~~

11.	Commitments and Contingencies

The Company is subject to government regulations pertaining to product formulation, labeling and packaging, product claims and advertising, and the Company’s direct selling system. The Company is also subject to the jurisdiction of numerous foreign tax and customs authorities. Any assertions or determination that either the Company or the Company’s sales force is not in compliance with existing statutes, laws, rules or regulations could have a material adverse effect on the Company’s operations. In addition, in any country or jurisdiction, the adoption of new statutes, laws, rules or regulations or changes in the interpretation of existing statutes, laws, rules or regulations could have a material adverse effect on the Company and its operations. No assurance can be given that the Company’s compliance with applicable statutes, laws, rules and regulations will not be challenged by foreign authorities or that such challenges will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company and its Subsidiaries are defendants in litigation, investigations and other proceedings involving various matters. Management believes that the ultimate liability arising from such claims and contingencies, if any, is not likely to have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows.

The Company is subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company believes it has appropriately provided for income taxes for all years. Several factors drive the calculation of its tax reserves. Some of these factors include: (i) the expiration of various statutes of limitations; (ii) changes in tax law and regulations; (iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to the Company’s reserves, which would impact its reported financial results.

12.	Acquisitions

In April 2021, the Company acquired 100% ownership in MyFavoriteThings, Inc. (“Mavely”), making Mavely a wholly owned subsidiary of the Company. The acquisition enables the Company to continue to expand its digital tools. The purchase price for Mavely was $16.8 million, net of cash acquired of $0.4 million and $0.9 million to be paid within six months, all payable in cash. In addition, there is potential for an incremental $24.0 million in contingent consideration, which becomes payable if certain revenue and profitability targets are reached in 2021, 2022 and 2023. The fair value of the contingent consideration recorded on the acquisition date was $8.7 million. The Company allocated the gross purchase price of $29.4 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of assets acquired included $16.4 million of intangible assets, $0.4 million of cash, $0.1 million of accounts receivable, and also resulted in a deferred tax liability of $3.5 million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of $12.6 million was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies. None of the goodwill is expected to be deductible for income tax purposes. The intangible assets acquired were comprised of $2.0 million for customer relationships, $11.3 million for technology, $2.8 million for trademarks and $0.3 million for other intangibles. The intangibles were assigned useful lives of 8 years for the technology and tradename, approximately 4 years for the customer relationships and 3 years for the other intangibles. All the goodwill was assigned to our Rhyz other segment. The allocation of the fair value of assets acquired and liabilities assumed for the acquisition was finalized during the three months ended September 30, 2021.

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13.	Restructuring

In the fourth quarter of 2021, the Company determined to exit the Grow Tech segment, to better align its resources on key strategic initiatives to achieve the future growth objectives and priorities of the core Nu Skin business. The Grow Tech segment was pursuing the commercialization of controlled-environment agriculture for use in the agriculture feed industry. This segment ~~has~~had been operating as part of the Company’s Rhyz strategic investment arm. As a result of the restructuring program, the Company recorded a non-cash charge of $38.5 million in 2021, including $9.2 million for impairment of goodwill, $9.0 million for impairment of intangibles, $13.7 million of fixed asset impairments and $6.6 million for inventory write-off, and $20.0 million of cash charges, including $6.5 million for employee severance and $13.5 million for other related cash charges with our restructuring. As of December 31, 2021, the $20.0 million liability related to ~~the~~ cash charges was recorded within Accrued expenses. During the first quarter of 2022, the Company made cash payments of $11.6 million, leaving an ending restructuring accrual of $8.3 million as of March 31, 2022. ~~The~~During the second quarter of 2022, the Company ~~expects to pay out~~made cash payments of $8.0 million, leaving an ending restructuring accrual of $0.3 million as of June 30, 2022. During the ~~remaining liability in~~third quarter of 2022, the ~~first half~~Company made cash payments of $0.3 million, leaving no restructuring accrual as of September 30, 2022. The restructuring charges were recorded in the previous Grow Tech segment, which in the current year has been recast to Corporate and Other.

In the third quarter of 2022, the Company adopted a strategic plan to focus resources on the Company’s strategic priorities and optimize future growth and profitability. The global program includes workforce reductions and footprint optimization. The Company estimates total charges under the program will approximate $35–$45 million, with $30–$35 million in cash charges of severance and lease termination cost and $9.9 million of non-cash charges of impairment of fixed assets and other intangibles related to the footprint optimization. The Company expects to substantially complete the program during the first half of 2023. During the third quarter of 2022, the Company incurred charges to be settled in cash of $17.2 million in severance charges, $2.1 million in lease termination cost, and $0.9 million in other associated cost, and non-cash charges of $8.2 million in fixed asset impairments and $1.7 million in impairment of other intangibles. During the third quarter of 2022, the Company made cash payments of $7.9 million related to this global program, leaving an ending restructuring accrual of $12.3 million.

Restructuring expense by segment

(U.S. dollars in thousands)	Three Months Ended September 30,2022

Nu Skin
Americas	$	1,723
Mainland China		11,484
Southeast Asia/Pacific		663
South Korea		54
Japan		—
EMEA		894
Hong Kong/Taiwan		747
Total Nu Skin		15,565
Rhyz Investments
Manufacturing		—
Rhyz other		—
Total Rhyz Investments		—
Corporate and other		14,559
Total	$	30,124

Table of ~~contents~~Contents

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent our current expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws and include, but are not limited to, statements of management’s expectations regarding our performance, initiatives, strategies, product introductions and offerings, growth, opportunities and risks; statements of projections regarding future sales, expenses, operating results, taxes and duties, capital expenditures, sources and uses of cash, foreign-currency fluctuations or devaluations, repatriation of undistributed earnings, and other financial items; statements of management’s expectations and beliefs regarding our markets and global economic conditions; statements regarding the payment of future dividends and stock repurchases; statements regarding the outcome of litigation, audits, investigations or other regulatory actions; statements regarding government policies and regulations relating to our industry, including government policies and regulations in Mainland China; accounting estimates and assumptions; statements of belief; and statements of assumptions underlying any of the foregoing. In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “optimistic,” “project,” “anticipate,” “determine,” “estimate,” “intend,” “plan,” “goal,” “objective,” “targets,” “become,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. We caution and advise readers that these statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results to differ materially from the expectations and beliefs contained herein. For a summary of these risks, see the risk factors included in our Annual Report on Form 10-K for the 2021 fiscal year and in our subsequent quarterly and other reports, including this Quarterly Report.

The following Management’s Discussion and Analysis should be read in conjunction with our consolidated financial statements and related notes and Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the 2021 fiscal year, and our other reports filed with the Securities and Exchange Commission through the date of this Quarterly Report.

Overview

Revenue for the three-month period ended ~~March 31,~~September 30, 2022 decreased ~~11%~~16% to ~~$604.9~~$537.8 million, compared to ~~$677.0~~$641.2 million in the prior-year period, and revenue for the nine-month period ended September 30, 2022 decreased 16% to $1.7 billion, compared to $2.0 billion in the prior-year period. Our revenue in the third quarter and first ~~quarter~~nine months of 2022 was negatively impacted 3%7% and 5%, respectively, from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders declined ~~13%~~11%, ~~14%~~11% and 22%, respectively, on a year-over-year basis.

~~The declines for the three-month period ended March 31,~~Our third quarter and first nine months of 2022 ~~were largely~~revenue was softer than anticipated primarily driven by continuation of COVID-related ~~lockdowns and other~~ factors in Mainland China, South Korea and Hong Kong; distractions in EMEA related to the ongoing conflict in Russia and Ukraine; and the general global economic downturn pressures being felt in our ~~eastern markets along with~~global markets.

During the ~~continued softening in EMEA. We are looking forward to~~third quarter we began our ~~product launches, specifically the expected launch~~limited introduction of the ageLOC LumiSpa iOin all of our segments, which generated approximately $19.3 million of revenue. The limited introductions are continuing into the ~~back half~~fourth quarter, with the ageLOC LumiSpa iO being generally available for purchase in all of our markets by the end of the ~~year.~~fourth quarter.

Earnings per share for the ~~first~~third quarter of 2022 decreased ~~16%~~153% to ~~$0.76,~~$(0.51), compared to ~~$0.91~~$0.97 in the prior-year period. Earnings per share for the first nine months of 2022 decreased 69% to $0.94, compared to $3.03 in the prior-year period. The decrease in earnings per share for the third quarter isand first nine months of 2022 was primarily driven by the ~~decline~~third quarter restructuring and related cost, along with decreases in revenue ~~along with decline in gross margin from sales promotions.~~for both periods presented.

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Table of ~~contents~~Contents

Segment Results

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, ~~Americas,~~ Southeast Asia/Pacific, South Korea, Japan, EMEA, and Hong Kong/~~Taiwan —and~~Taiwan—and our Rhyz Investment segments—Manufacturing and Rhyz other. The Nu Skin ~~Other~~other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other segment includes other investments by our Rhyz strategic investment arm, which were entered into during the second quarter of 2021.

The following table sets forth revenue for the ~~three-month~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021 for each of our reportable segments (U.S. dollars in thousands):

											Three Months Ended September 30,							Constant- Currency			Nine Months Ended September 30,							Constant- Currency
	Three Months Ended March 31,							Constant-Currency			2022		2021		Change			Change⁽¹⁾			2022		2021		Change			Change⁽¹⁾
	2022		2021		Change			Change⁽¹⁾
Nu Skin
Americas											$	131,591	$	131,482		—			3	%	$	379,616	$	403,755		(6	)%		(4	)%
Mainland China	$	124,495	$	149,593		(17	)%		(18	)%		75,151		134,291		(44	)%		(41	)%		286,454		438,066		(35	)%		(34	)%
Americas		123,580		133,761		(8	)%		(6	)%
Southeast Asia/Pacific		90,236		83,289		8	%		11	%		83,502		79,081		6	%		12	%		267,805		246,338		9	%		13	%
South Korea		72,133		81,131		(11	)%		(4	)%		67,237		91,989		(27	)%		(15	)%		208,678		261,724		(20	)%		(11	)%
Japan		61,791		69,864		(12	)%		(3	)%		53,276		65,117		(18	)%		3	%		171,019		203,001		(16	)%		(1	)%
EMEA		52,968		76,180		(30	)%		(25	)%		45,099		55,839		(19	)%		(6	)%		148,938		215,134		(31	)%		(22	)%
Hong Kong/Taiwan		38,494		36,345		6	%		6	%		39,587		39,921		(1	)%		6	%		117,408		114,795		2	%		6	%
Other		620		878		(29	)%		(29	)%
Nu Skin other												496		1,672		(70	)%		(70	)%		2,434		3,497		(30	)%		(30	)%
Total Nu Skin		564,317		631,041		(11	)%		(8	)%		495,939		599,392		(17	)%		(9	)%		1,582,352		1,886,310		(16	)%		(11	)%
Rhyz Investments
Manufacturing		40,341		45,985		(12	)%		(12	)%		41,328		41,635		(1	)%		(1	)%		119,898		135,760		(12	)%		(12	)%
Rhyz other		241		—								538		125		330	%		330	%		1,069		163		556	%		556	%
Total Rhyz Investments		40,582		45,985		(12	)%		(12	)%		41,866		41,760		—			—			120,967		135,923		(11	)%		(11	)%
Total	$	604,899	$	677,026		(11	)%		(8	)%	$	537,805	$	641,152		(16	)%		(9	)%	$	1,703,319	$	2,022,233		(16	)%		(11	)%

(1)	Constant-currency revenue change is a non-GAAP financial measure. See “Non-GAAP Financial Measures,” below.

The following table sets forth segment contribution for the ~~three-month~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021 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. ~~Prior~~The prior year segment contribution has been recast for the fourth quarter of 2021 exit of the Grow Tech segment and the ~~$6.1 million of~~ expense has been recast to Corporate and other. For additional information regarding our segments and the calculation of segment contribution, see Note 10 to the consolidated financial statements contained in this report.

									Three Months Ended September 30,									Nine Months Ended September 30,
	Three Months Ended March 31,								2022			2021			Change			2022			2021			Change
	2022			2021		Change
Nu Skin
Americas									$	23,016		$	25,752			(11	)%	$	78,165		$	83,495			(6	)%
Mainland China	$	28,995		$	39,439		(26	)%		12,933			30,677			(58	)%		54,873			121,596			(55	)%
Americas		25,123			28,745		(13	)%
Southeast Asia/Pacific		23,406			19,648		19	%		20,719			19,020			9	%		68,492			59,881			14	%
South Korea		22,743			26,525		(14	)%		20,455			28,984			(29	)%		63,776			84,401			(24	)%
Japan		15,313			17,981		(15	)%		13,103			16,267			(19	)%		41,867			50,709			(17	)%
EMEA		3,836			8,896		(57	)%		3,379			6,693			(50	)%		13,377			29,270			(54	)%
Hong Kong/Taiwan		8,690			7,348		18	%		8,425			8,940			(6	)%		26,276			24,848			6	%
Total Nu Skin		128,106			148,582		(14	)%		102,030			136,333			(25	)%		346,826			454,200			(24	)%
Rhyz Investments
Manufacturing		3,292			5,826		(43	)%		1,755			3,059			(43	)%		6,235			15,649			(60	)%
Rhyz other		(1,046	)		—					(1,724	)		(659	)		(162	)%		(4,069	)		(1,178	)		(245	)%
Total Rhyz Investments		2,246			5,826		(61	)%	$	31		$	2,400			(99	)%	$	2,166		$	14,471			(85	)%

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Table of ~~contents~~Contents

The following ~~table provides~~tables provide information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business for the three-month periods ended ~~March 31,~~September 30, 2022 and 2021. As we continue to focus on customer acquisition, our Paid Affiliates, who primarily share products, are a bridge to attracting new customers and nurturing relationships and community. Paid Affiliates power our social commerce model and this is an important indicator of consumer purchasing activity in our business. During the first quarter of 2022, in connection with the introduction of the new metric Paid Affiliates, we reviewed how we currently present Sales Leaders and adjusted that metric’s definition to what we believe provides a better insight into the trends of our business. The definition of our Customer metric remained unchanged. We have recast the 2021 Sales Leaders to the new definition. ~~Except as discussed below regarding our Southeast Asia/Pacific segment, the trends under the new definition were materially consistent with those under the previous definition.~~

●

~~“Customers”~~“Customers” are persons who have purchased directly from the Company during the three months ended as of the date indicated. 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 products directly from members of our sales force.

●

“Paid Affiliates” are any Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who earned sales compensation during the three-month period. 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 social networks.

●

“Sales Leaders” are the three-month average of our monthly Brand Affiliates, as well as sales employees and independent marketers in Mainland China, who ~~had~~ achieved certain qualification requirements as of the end of each month of the quarter.

	Three Months Ended September 30,
Customers	2022		2021		Change
Americas		316,123		324,884		(3	)%
Mainland China		256,183		355,256		(28	)%
Southeast Asia/Pacific		153,432		162,047		(5	)%
South Korea		134,549		156,431		(14	)%
Japan		121,202		123,453		(2	)%
EMEA		187,906		210,705		(11	)%
Hong Kong/Taiwan		69,989		62,491		12	%
Total		1,239,384		1,395,267		(11	)%

	Three Months Ended September 30,
Paid Affiliates	2022		2021		Change
Americas		44,745		50,619		(12	)%
Mainland China		23,088		32,167		(28	)%
Southeast Asia/Pacific		40,624		43,298		(6	)%
South Korea		47,852		54,119		(12	)%
Japan		38,119		38,315		(1	)%
EMEA		31,409		36,245		(13	)%
Hong Kong/Taiwan		17,439		18,872		(8	)%
Total		243,276		273,635		(11	)%

	Three Months Ended September 30,
Sales Leaders	2022		2021		Change
Americas		9,545		11,889		(20	)%
Mainland China⁽¹⁾		11,897		19,392		(39	)%
Southeast Asia/Pacific		7,618		7,623		—
South Korea		6,992		8,929		(22	)%
Japan		6,063		6,007		1	%
EMEA		4,777		6,417		(26	)%
Hong Kong/Taiwan		2,932		3,629		(19	)%
Total		49,824		63,886		(22	)%

(1)	The September 30, 2022 number reflects a modified Sales Leader definition. See “Mainland China,” below.

Three Months Ended
March 31,

Customers 2022 2021 Change
Mainland China
289,060 316,000 (9 )%
Americas 318,458 374,867 (15 )%
Southeast Asia/Pacific 165,657 185,435 (11 )%
South Korea 140,648 152,390 (8 )%
Japan 122,616 126,525 (3 )%
EMEA 216,037 296,001 (27 )%
Hong Kong/Taiwan 68,975 66,042 4 %
Total 1,321,451 1,517,260 (13 )%

Three Months Ended
March 31,

Paid Affiliates 2022 2021 Change
Mainland China

22,762

41,944

(46
)%
Americas
46,281

52,767

(12
)%
Southeast Asia/Pacific
43,262

45,871

(6
)%
South Korea
49,328

51,006

(3
)%
Japan
38,059

38,283

(1
)%
EMEA
33,834

43,696

(23
)%
Hong Kong/Taiwan
17,910

17,885

—

Total
251,436

291,452

(14
)%

Three Months Ended
March 31,

Sales Leaders 2022 2021 Change
Mainland China

14,146

23,013

(39
)%
Americas
9,547

11,394

(16
)%
Southeast Asia/Pacific
8,012

8,446

(5
)%
South Korea
6,072

6,682

(9
)%
Japan
5,977

6,135

(3
)%
EMEA
5,455

7,479

(27
)%
Hong Kong/Taiwan
3,253

3,755

(13
)%
Total
52,462

66,904

(22
)%

1920

Table of ~~contents~~Contents

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

Americas. Our Americas segment continues to be challenged by macroeconomic issues in the Latin America markets, which drove the decline in Customers, Paid Affiliates and Sales Leaders. Our U.S. market revenue increased 7% for the third quarter of 2022 and 9% for the first nine months of 2022 due to continued social selling momentum and subscription enrollment. During the third quarter of 2022, we began our launch process of the ageLOC LumiSpa iO, with limited offerings to our sales force ahead of the full launch in the fourth quarter of 2022. The limited launch of the ageLOC LumiSpa iO generated approximately $8.3 million in revenue.

The year-over-year decrease in segment contribution for the third quarter is primarily attributable to a 2.3 percentage point decrease in gross margin, primarily from sales mix and higher sales discounts and promotions during the quarter. The year-over-year decrease in segment contribution for the first nine months of 2022 is primarily attributable to the decline in revenue, with a 1.7 percentage point decrease in gross margin, primarily from high sales discounts and promotions, partially offset by a 1.6 percentage point decrease in selling expenses as a percentage of revenue, primarily attributable to the make up of the sales force, which resulted in less Sales Leaders qualifying for increased compensation and a lower incentive trip expenses.

Mainland China. Our Mainland China market continued to be challenged during the third quarter and first ~~quarter~~nine months of 2022, with continued pressures from COVID-related ~~lockdowns and other~~ factors, which negatively ~~impacting~~impacted our selling and promotional activities. ~~Due~~As a result of the economic headwinds in the market we made some modifications to ~~increasing COVID-19 cases,~~ the ~~government implemented~~compensation plan during the quarter, which provides our leaders more ~~significant lockdowns that precluded gatherings and~~flexible requirements to maintain their business. Our Mainland China Sales Leader numbers as of September 30, 2022 reflect these modified requirements.

During July 2022, we resumed allowing Sales Leader meetings ~~for the general population in Shanghai and other areas. Revenue~~ in this market ~~benefited from~~on a limited basis, so long as they are in compliance with government regulations and related controls that we have implemented. In our ~~recently launched products, which generated approximately $18.0 million in revenue during~~Quarterly Reports on Form 10-Q for the ~~quarter,~~2022 first and ~~from utilizing discounted product promotions. As previously disclosed,~~second quarters, we ~~anticipate that COVID-related challenges will persist throughout 2022.~~

~~In addition, in February 2022, we learned of reports in the Chinese media of COVID-19 cases that were reportedly traced back~~referenced government inquiries related to a meeting in a hotel in Wuhan, Hubei Province organized by an independent marketer of Nu Skin China. The meeting was not authorized by Nu Skin China and was not registered with the applicable government authorities. After learning of the incident, we suspended all Sales Leader meetings in the Hubei Province, ceased operations in our Hubei Province branch office and conducted PCR tests on employees in that branch office. After the Wuhan meeting incident, various offices of Mainland China’s Administration for Market Regulation (the “AMRs”) beganThese inquiries into our Nu Skin China business activities since early 2020. We were also later asked to provide information to Mainland China’s Ministry of Commerce, which we did. We cooperated with the government, and we believe these matters are nearlyhave been resolved.

Upon receiving the inquiries from the AMRs, we proactively suspended all Sales Leader meetings throughout the Mainland China market. Shortly thereafter, as noted above, the government instituted more significant lockdowns in Shanghai and other areas in Mainland China due to rising COVID-19 cases. We believe the meeting restrictions negatively impacted our business momentum in this market. While we currently anticipate resuming Sales Leader meetings when the government-imposed lockdowns are lifted, we believe the loss of momentum will impact this market’s performance through the rest of this year. As we continue to invest in new social commerce technologies in this market, our focus is to decrease dependence on in-person meetings.

The year-over-year decrease in segment contribution for the third quarter and first ~~quarter~~nine months of 2022 primarily reflects lower ~~revenue, the fixed nature of general~~revenue. The decrease also reflects a 1.7 and ~~administrative expenses and a 2.7~~3.3 percentage point decrease in gross margin ~~attributable to~~for the third quarter and first nine months of 2022, respectively, primarily from increased product promotions and discounts during the third quarter of 2022, along with a shift in product mix, where a higher proportion of devices were sold in the period, and increased freight charges. The decrease in segment contribution also reflects an ~~unfavorable sales mix, which was partially offset by a 1.7 percentage point improvement~~increase in ~~selling~~general and administrative expenses as a percentage of ~~revenue.~~

~~Americas. The decline in~~ revenue ~~Customers, Paid Affiliates and Sales Leaders in our Americas segment is predominately attributable~~due to ~~continued economic challenges in our Latin America markets. Our U.S. market’s revenue increased 15% for the first quarter of 2022 from continued momentum, specifically from the launch of~~ ~~Beauty Focus Collagen+~~ ~~during the second half of 2021 and continued social adoption.~~

The year-over-year decline in segment contribution for the first quarter of 2022 primarily reflects the decrease in revenue, a 1.8 percentage point decrease in gross margin, primarily attributable to higher sales promotions and an unfavorable product mix in the first quarter. Our Americas segment contribution was also negatively impacted by the fixed nature of ~~general and administrative~~these expenses.

Southeast Asia/Pacific. Our Southeast Asia/Pacific segment revenue increased 8%6% and 9% for the third quarter and first ~~quarter~~nine months of 2022, ~~with~~respectively, including a 3%6% and 4% negative impact from unfavorable foreign-currency ~~fluctuations.~~fluctuations for the third quarter and first nine months of 2022, respectively. The increase in revenue was partially driven by a strong product ~~launch~~launches of ageLOC Meta ~~(locally~~(locally referred to as ageLOC Reset in the Southeast Asia markets), which generated approximately ~~$13.2~~$40.3 million in revenue for the first nine months of 2022, along with ~~the~~ loosening of ~~COVID~~COVID-related restrictions in the markets. In addition, during the third quarter of 2022, we began our launch process of the ageLOC LumiSpa iO, with limited offerings to our sales force with the full launch occurring in the fourth quarter of 2022. Our product launches and promotions during the quarter were focused on re-energizing our existing Sales Leaders, which led to a decline in our Customers and Paid Affiliates.~~Under our previous Sales Leaders definition, Sales Leaders increased 10% for the first quarter of 2022, this was driven by an increase of Sales Leaders in March from the launch of~~ ~~ageLOC Meta,~~ ~~while with the new definition being calculated as the average Sales Leaders for the three-months in the quarter, the March increase from the~~ ~~ageLOC Meta~~ ~~launch does not fully offset the decline in Sales Leaders for January and February.~~ ~~In addition, the March launch of~~ ~~ageLOC Meta~~ in Maylasia and Indonesia was a preview sale, which is only available to members of our sales force who achieve certain qualifications. This typically leads to an increase in Sales Leaders during the preview period.

The year-over-year increase in segment contribution is primarily attributable to higher revenue, along with ~~a decline in~~the fixed nature of general and administrative ~~expenses.~~expenses on increased revenue, partially offset by increases in selling expenses attributable to product mix, as our products each have a differing commission percentage assigned to them, and sales force conventions that were held during the quarter.

South Korea~~. Our first quarter of 2022 constant-currency revenue was a decline of 4% compared to 2021; our reported revenue reflects a 7% negative impact from foreign-currency~~ ~~fluctuations~~. Our South Korea segment ~~remained~~was challenged from a recent price increase to address the ~~ongoing COVID-19 spikes in cases during~~inflationary pressure, along with continued COVID-related disruptions for the third quarter and first ~~quarter~~nine months of 2022, ~~leading to~~resulting in a 27% and 20% decline in revenue for the third quarter and first nine months of 2022, along with declines in ~~revenue and~~ Customers,, Paid Affiliates, and Sales Leaders. In addition, our revenue was negatively impacted 12% and 9% from unfavorable foreign-currency fluctuations.

The year-over-year ~~decline~~decrease in segment contribution is primarily ~~reflects the decreased~~from a decline in revenue along with a ~~1.0 percentage point increase~~slight decline in selling expenses as a percentage of ~~revenue, from growth in the number of Sales Leaders qualifying for increased sales compensation.~~revenue.

Japan. The decline in revenue is primarily attributable to a ~~9% negative impact from~~21% and 15% unfavorable foreign-currency ~~fluctuations. In addition, our~~fluctuations for the third quarter and first nine months of 2022. On a local currency basis, revenue ~~Customers, Paid Affiliates,~~increased 3% for the third quarter and ~~Sales Leaders were negatively impacted by~~decreased 1% for the ~~continued COVID restrictions in the beginning~~first nine months of ~~the quarter, which loosened as the quarter progressed.~~2022.

The year-over-year decline in segment contribution ~~reflects~~is primarily from the ~~decreased~~decline in revenue.

2021

Table of ~~contents~~Contents

EMEA. The continued softening of momentum in our EMEA segment ~~further~~was driven by distractions to our sales force from the ~~current~~ongoing geopolitical Russian/Ukraine conflict ~~which has caused disruption to our sales force, especially in Eastern Europe,~~and led to a ~~30% decline in~~ revenue, ~~for the quarter.~~Customers, Paid Affiliates and Sales Leaders decline. Our reported revenue was also negatively impacted 5% from foreign-currency fluctuations. We have suspended business operations in ~~Russia~~Ukraine and ~~Ukraine.~~have closed our market in Russia. The Russia and Ukraine markets have historically accounted for less than 1% of our consolidated revenue.

The year-over-year decline in segment contribution reflects the decline in revenue along with a ~~1.8 percentage point increase in selling expenses as a percentage of revenue~~lower gross margin from ~~higher cost associated with the incentive trips,~~unfavorable product mix and increased promotions, and the fixed nature of general and administrative expenses with a decline in revenue.

Hong Kong/Taiwan. Our Hong ~~Kong/Taiwan~~Kong /Taiwan segment revenue decreased 1% for the third quarter and increased 2% for the first nine months of 2022, reflecting negative impacts of 7% and 4% from foreign-currency fluctuations. On a constant-currency basis, revenue increased 6% for both the third quarter and first nine months of 2022. The increase in constant-currency revenue is primarily from revenue growth in our Taiwan ~~market. Revenue~~market from social selling. Our Customers also increased 12%, from social commerce adoption and growth in our ~~ageLOC Meta~~ ~~and~~ ~~Beauty Focus Collagen +~~ ~~product launches was approximately $4.9 million.~~Taiwan market. Our Hong Kong market continues to be challenged from the ongoing pressures from COVID-19, which led to a decline in Sales ~~Leaders.~~Leaders and Paid Affiliates.

The decrease in segment contribution for the third quarter of 2022, is primarily from a 1.4 percentage point drop in gross margin from elevated freight cost during the quarter, along with a 2.1 percentage point increase in selling expenses as a percent of revenue, primarily attributable increased travel cost associated with our incentive trips. The increase in segment contribution ~~was~~for the first nine months of 2022 is primarily driven by an increase in revenue ~~growth,~~along with a decline in general and administrative ~~expenses remaining flat on slightly improved revenue.~~expenses.

Manufacturing. Our Manufacturing segment revenue was flat for the third quarter of 2022 and declined 12% for the first ~~quarter~~nine months of 2022, primarily ~~from a majority of their~~due to our customers ~~increasing~~rebalancing their inventory from higher levels ~~during~~in 2021, ~~which reduced~~reducing demand ~~for the first quarter of~~in 2022.

The ~~43%~~ decline in segment contribution is ~~attributed~~attributable to ~~the~~ lower revenue, ~~on fixed costs,~~ along with the revenue mix between our manufacturing entities with ~~different profitability.~~differing profitability levels.

Consolidated Results

Revenue

Revenue for the three-month period ended ~~March 31,~~September 30, 2022 decreased ~~11%~~16% to ~~$604.9~~$537.8 million, compared to ~~$677.0~~$641.2 million in the prior-year period. Revenue for the nine-month period ended September 30, 2022 decreased 16% to $1.7 billion compared to $2.0 billion. Our reported revenue was negatively impacted 7% and 5% from foreign-currency fluctuations for the three- and nine-month periods ended September 30, 2022, respectively. For a discussion and analysis of ~~this decrease~~these decreases in revenue, see “Overview” and “Segment Results,” above.

Gross profit

Gross profit as a percentage of revenue was ~~73.3%~~67.7% for the ~~first~~third quarter of 2022, compared to ~~74.8%~~75.2% for the prior-year period, and 71.6% for the first nine months of 2022, compared to 75.2% for the prior-year period. ~~The gross margin~~Gross profit as a percentage of ~~our~~revenue for core Nu Skin ~~business declined 1.3~~decreased 5.6 percentage points to ~~76.5%.~~73.0% for the third quarter of 2022 and decreased 2.6 percentage points to 75.6% for the first nine months of 2022. The decline in our gross margin for the third quarter of 2022 and first nine months of 2022 is ~~predominately attributed~~primarily driven by our strategic decision to align our inventory on hand with our future sales and promotional plans, which resulted in an ~~increase~~incremental $26.9 million write-off, which was recorded in our Corporate and other category. Our Nu Skin gross margin was also negatively impacted by increased sales promotions during the ~~period.~~third quarter and first nine months of 2022, as well as changes in our geographical revenue mix, as our markets have differing gross margins.

Selling expenses

Selling expenses as a percentage of revenue ~~was 40.1%~~decreased to 40.3% for the ~~first~~third quarter of 2022, compared to ~~40.8%~~40.6% for the prior year period, and decreased to 39.8% for the first nine months of 2022, compared to 40.4% for the prior-year period. ~~Selling expenses for our core~~Core Nu Skin ~~business~~selling expenses as a percentage of revenue remained flat at 43.5% for the third quarter of 2022 and decreased ~~0.7~~0.5 percentage points to ~~43.0%~~42.8% for the first ~~quarter~~nine months of 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 ~~fluctuates~~fluctuate plus or minus approximately 100 basis points from period to period.

Table of Contents

General and administrative expenses

General and administrative expenses decreased to ~~$148.6~~$138.0 million in the ~~first~~third quarter of 2022, compared to ~~$167.6~~$156.5 million in the prior-year period and decreased to $428.1 million in the first nine months of 2022, compared to $490.2 million in the prior-year period. The ~~$19.0~~$18.5 million ~~decline is~~decrease for the third quarter of 2022 was primarily from a ~~$12.4~~$9.8 million contraction in labor expense from lower employee performance incentive compensation, along with our recent restructuring plan, and a $6.9 million decline from our fourth quarter 2021 exit of the Grow Tech segment. The $62.1 million decrease for the first nine months of 2022 was primarily from a $37.2 million contraction in labor expenses from lower employee performance incentive compensation, along with our fourth quarter 2021 exit of the Grow Tech segment, which led to ~~$6.1~~$20.0 million less expense for the first ~~quarter~~nine months of 2022. General and administrative expenses as a percentage of revenue ~~declined~~increased to ~~24.6%~~25.7% for the ~~first~~third quarter of 2022, from ~~24.8%~~24.4% for the prior-year period, and increased to 25.1% for the first nine months of 2022, from 24.2% for the prior-year period.

21Restructuring and impairment expenses

~~Table~~In the third quarter of ~~contents~~2022, we adopted a strategic plan to focus resources on our strategic priorities and optimize future growth and profitability. The global program includes workforce reductions and footprint optimization. We estimate total charges under the program will approximate $35–$45 million, with $30–$35 million in cash charges of severance and lease termination cost and $9.9 million of non-cash charges of impairment of fixed assets and other intangibles related to the footprint optimization. We expect to substantially complete the program during the first half of 2023. During the third quarter of 2022, we incurred charges to be settled in cash of $17.2 million in severance charges, $2.1 million in lease termination cost, and $0.9 million in other associated cost, with non-cash charges of $8.2 million in fixed asset impairments and $1.7 million in impairment of other intangibles.

Other income (expense), net

Other income (expense), net was $(8.7) million for the third quarter and $(18.8) million for the first nine months of 2022, which included a $3.3 million and $9.0 million unrealized investment loss for the third quarter and first nine months of 2022, respectively, related to a controlled environment agriculture company we invested in as part of our previous Grow Tech segment. With our fourth quarter of ~~2022,~~2021 exit from the Grow Tech segment, we are in the process of exiting this investment. Other income (expense), net was ~~$1.5~~$2.8 million ~~in expense compared to $1.6 million of income~~ for the ~~same period in 2021. The increase in other expense is largely attributable to unrealized investment income~~third quarter of 2021 and $0.4 million for the first ~~quarter~~nine months of ~~2021.~~2021, which included a $18.1 million in unrealized equity investment income, partially offset by a $10.7 million loss on asset disposal, both of which did not recur in 2022.

Provision for income taxes

Provision for income taxes for the ~~first quarter of~~three- and nine-month periods ended September 30, 2022 was ~~$12.0~~$(3.6) million and $17.1 million, respectively, compared to ~~$17.1~~$18.4 million and $57.5 million for the prior-year ~~period.~~periods. The effective tax ~~rate was 23.6%~~rates for the three- and nine-month periods ended September 30, 2022 were 12.3% and 26.4% of pre-tax ~~book~~ income ~~during the first quarter of 2022~~ compared, respectively, to ~~26.5%~~27.0% and 26.9% in the prior-year ~~period.~~periods. The decrease in ~~the~~ effective tax rate for the third quarter and first ~~quarter~~nine months of 2022 primarily reflects our expenses associated with the ~~strong~~adoption of a strategic plan to focus resources on our strategic priorities and optimize future growth ~~in the U.S. market, which enabled us to utilize additional foreign tax credits to offset U.S. income taxes.~~and profitability.

Net income

As a result of the foregoing factors, net income for the ~~first~~third quarter of 2022 was ~~$38.7~~$(25.4) million, compared to ~~$47.4~~$49.7 million in the prior-year period. Net income for the first nine months of 2022 was $47.6 million, compared to $156.5 million for the first nine months of 2021.

Table of Contents

Liquidity and Capital Resources

Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital expenditures, stock repurchases, dividends, and debt repayment. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock repurchases, capital investments and short-term operating needs. We typically generate positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities. In the first ~~three~~nine months of 2022, we generated ~~$7.5~~$82.5 million in cash from operations, compared to ~~$18.9~~$32.1 million ~~of cash used in operations~~ during the prior-year period. The increase in cash flow from operations primarily reflects an approximate ~~$17.2~~$48.4 million decline in inventory during the period, compared to an ~~inventory~~ increase ~~of $53.8 million~~ in the prior year period, ~~partially offset by~~as we continue to work towards our optimal inventory levels, and a decrease in accrued expenses from the ~~lower revenue and an increase in~~2022 payout of our ~~accounts receivable from higher sales during the backend~~fourth quarter of ~~the quarter.~~2021 restructuring cost. Cash and cash equivalents, including current investments, as of ~~March 31,~~September 30, 2022 and December 31, 2021 were ~~$317.5~~$308.0 million and $354.8 million, respectively, with the decrease being driven by ~~purchases of property and equipment,~~capital expenditures, as discussed below, our quarterly dividend payments, stock repurchases and payment on liabilities associated with our fourth quarter ~~restructuring.~~2021 and third quarter of 2022 restructurings.

Working capital. As of ~~March 31,~~September 30, 2022, working capital was ~~$354.8~~$412.3 million, compared to $343.3 million as of December 31, 2021. The increase in working capital is ~~primarily~~ attributable to our second quarter debt modification, which resulted in a ~~$21.0~~net $60.0 million of incremental borrowings, while shifting $100.0 million from current to long-term debt. Our working capital also benefited from a $17.5 million increase in prepaid expenses and other assets primarily ~~from an increase in~~attributable to prepaid income tax, ~~and~~ a ~~$28.5~~$90.8 million ~~decrease~~reduction in accrued expenses from the first ~~quarter~~half of 2022 pay-out of restructuring cost, ~~and~~ employee incentive accruals, and a decline in accrued commission from the decline in sales, all partially offset by ~~declines~~a $72.5 million decrease in ~~cash and cash equivalents and~~ inventory.

Capital expenditures. Capital expenditures for the ~~three~~nine months ended ~~March 31,~~September 30, 2022 were ~~$10.3~~$45.3 million. We expect that our capital expenditures in 2022 will be primarily related to:

●

purchases and expenditures for computer systems and equipment, software, and application development;

●

the expansion and upgrade of facilities in our various markets; and

●

a new manufacturing plant in Mainland China.

We estimate that capital expenditures for the uses listed above will total approximately ~~$85–105~~$75–95 million for 2022. We are currently expecting to complete construction of the new manufacturing plant in Mainland China in the ~~back~~first half of ~~2022.~~2023. As of ~~March 31,~~September 30, 2022, we have spent approximately ~~$40.3~~$43.1 million on this project, ~~with $3.0~~ including $5.8 million in the first ~~quarter~~nine months of 2022 and expect that our expenditures for this project will total approximately $52-57 million, including approximately $15-20 million during 2022.

~~Table of contents~~

Credit Agreement. ~~In April 2018,~~On June 14, 2022, we entered into aan 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 ~~$350.0~~$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, and~~agreement. Both facilities bear interest at the ~~outstanding balance on the convertible notes. The interest rate applicable to the facilities is subject to adjustments~~SOFT, 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 ~~first and second~~subsequent years ~~7.5% during the third and fourth years and 10.0% during the fifth year~~ after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of ~~March 31,~~September 30, 2022, ~~and December 31, 2021,~~ we had ~~$70.0~~$30.0 million ~~and $70.0 million~~of outstanding borrowings under our revolving credit facility, and ~~$300.0~~$397.5 million ~~and $307.5 million remaining balance~~ on our term loan facility. The carrying value of the debt also reflects debt issuance costs of ~~$(1.0) million and $(1.2)~~$(2.7) million as of ~~March 31,~~September 30, 2022, ~~and December 31, 2021, 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 ~~March 31,~~September 30, 2022, we were in compliance with all debt covenants under the Credit Agreement. ~~In addition, as previously disclosed, we currently plan to refinance our credit facility during 2022.~~

Modification of previous credit agreement. On June 14, 2022, we repaid our outstanding debt under our credit agreement, dated as of April 18, 2018, with several financial institutions as lenders and Bank of America, N.A., as administrative agent. We had indebtedness of $70.0 million on our revolver as of December 31, 2021, and $307.5 million on our term loan as of December 31, 2021.

Derivative Instruments. As of ~~March 31,~~September 30, 2022, 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.

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Stock repurchase plan. In 2018, our board of directors approved a stock repurchase plan authorizing us to repurchase up to $500.0 million of our outstanding shares of Class A common stock on the open market or in private transactions. During the ~~first three months~~third quarter of 2022, we repurchased approximately ~~0.2~~1.0 million shares of our Class A common stock under the plan for ~~$10.0~~$40.0 million. As of ~~March 31,~~September 30, 2022, ~~$235.4~~$185.4 million was available for repurchases under the plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

Dividends. In February, May and August 2022, our board of directors declared quarterly cash dividends of $0.385 per share. ~~This~~These quarterly cash ~~dividend~~dividends of $19.3 million, $19.4 million and $19.3 million was paid on March 9, 2022, June 8, 2022 and September 7, 2022 to stockholders of record on February 28, 2022, May 27, 2022 and August 26, 2022. In ~~May~~October 2022, our board of directors declared a quarterly cash dividend of $0.385 per share to be paid on ~~June 8,~~December 7, 2022 to stockholders of record on ~~May 27,~~November 25, 2022. Currently, we anticipate that our board of directors will continue to declare quarterly cash dividends and that the cash flows from operations will be sufficient to fund our future dividend payments. However, the continued declaration of dividends is subject to the discretion of our board of directors and will depend upon various factors, including our net earnings, financial condition, cash requirements, future prospects and other relevant factors.

Cash from foreign subsidiaries. As of ~~March 31,~~September 30, 2022 and December 31, 2021, we held ~~$317.5~~$308.0 million and $354.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include ~~$263.2~~$221.9 million and $274.9 million as of ~~March 31,~~September 30, 2022 and December 31, 2021, respectively, held in our operations outside of the U.S. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

We typically fund the cash requirements of our operations in the U.S. through intercompany dividends, intercompany loans and intercompany charges for products, use of intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends. For example, in Mainland China, we are unable to repatriate cash from current operations in the form of dividends until we file the necessary statutory financial statements for the relevant period. As of ~~March 31,~~September 30, 2022, we had ~~$62.7~~$34.1 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of ~~March 31,~~September 30, 2022 and December 31, 2021, we had ~~$12.1~~$13.6 million and $11.3 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.

We currently believe that existing cash balances, future cash flows from operations and existing lines of credit will be adequate to fund our cash needs on both a short- and long-term basis. The majority of our historical expenses have been variable in nature, and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances, future cash flow from operations and current lines of credit are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds in the debt or equity markets or restructuring our current debt obligations. Additionally, we would consider realigning our strategic plans, including a reduction in capital spending, stock repurchases or dividend payments.

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Contingent Liabilities

Please refer to Note 11 to the consolidated financial statements contained in this Quarterly Report for information regarding our contingent liabilities.

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Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting policies or estimates during the ~~first~~third quarter of 2022.

Seasonality and Cyclicality

In addition to general economic factors, we are impacted by seasonal factors and trends such as major cultural events and vacation patterns. For example, most Asian markets celebrate their respective local New Year in the first quarter, which generally has a negative impact on that quarter. We believe that direct selling is also generally negatively impacted during the third quarter, when many individuals, including our sales force, traditionally take vacations.

Prior to making a key product generally available for purchase, we may do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders, a limited-time offer, or other product introduction or promotion. These offerings may generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue, Sales Leaders and/or Customers during the quarter and can skew year-over-year and sequential comparisons.

Non-GAAP Financial Measures

Constant-currency revenue change is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the Company’s performance. It is calculated by translating the current period’s revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing that amount to the prior-year period’s revenue. We believe that constant-currency revenue change is useful to investors, lenders and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on our revenue from period to period.

Available Information

Our website address is www.nuskin.com. We make available, free of charge on our Investor Relations website, ir.nuskin.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

We also use our Investor Relations website, ir.nuskin.com, as a channel of distribution of additional Company information that may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Currency Risk and Exchange Rate Information

A majority of our revenue and many of our expenses are recognized outside of the United States, except for inventory purchases, a significant portion of which are primarily transacted in U.S. dollars from vendors in the United States. The local currency of each of our Subsidiaries’ primary markets is considered the functional currency with the exception of our Asia product-distribution subsidiary in Singapore and, as discussed below, our subsidiary in Argentina. All revenue and expenses are translated at weighted-average exchange rates for the periods reported. Therefore, our reported revenue and earnings will be positively impacted by a weakening of the U.S. dollar and will be negatively impacted by a strengthening of the U.S. dollar. These impacts may be significant because a large portion of our business is derived from outside of the United States. Given the uncertainty of exchange rate fluctuations, it is difficult to predict the effect of these fluctuations on our future business, product pricing and results of operations or financial condition.

In the second quarter of 2018, published inflation indices indicated that the three-year cumulative inflation in Argentina exceeded 100 percent, and as of July 1, 2018, we elected to adopt highly inflationary accounting for our subsidiary in Argentina. Under highly inflationary accounting, the functional currency for our subsidiary in Argentina became the U.S. dollar, and the income statement and balance sheet for this subsidiary have been measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities has been reflected in earnings in Other income (expense), net and was not material. As of ~~March 31,~~September 30, 2022, our subsidiary in Argentina had a small net peso monetary position. Net sales of our subsidiary in Argentina were less than 2% of our consolidated net sales for the ~~three-month~~three- and nine-month periods ended ~~March 31,~~September 30, 2022 and 2021.

We may seek to reduce our exposure to fluctuations in foreign currency exchange rates through the use of foreign currency exchange contracts and through intercompany loans of foreign currency. We do not use derivative financial instruments for trading or speculative purposes. We regularly monitor our foreign currency risks and periodically take measures to reduce the impact of foreign exchange fluctuations on our operating results. As of ~~March 31,~~September 30, 2022 and 2021, we did not hold material non-designated mark-to-market forward derivative contracts to hedge foreign denominated intercompany positions or third party foreign debt. As of ~~March 31,~~September 30, 2022, and 2021 we did not hold any material forward contracts designated as foreign currency cash flow hedges. We continue to evaluate our foreign currency hedging policy.

For additional information about our market risk see Note 9 to the consolidated financial statements contained in this Quarterly Report.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2022.

Changes in Internal Controls Over Financial Reporting.

We made no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter ended ~~March 31,~~September 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

There have been no material developments concerning the matters discussed in the “Legal Proceedings” section of our Annual Report on Form 10-K for the 2021 fiscal year.

ITEM 1A.

RISK FACTORS

~~There have been no material changes from~~The information presented below supplements and should be read in conjunction with the ~~risk factors previously disclosed~~detailed discussion of risks associated with our business in our recent SEC filings, including our Annual Report on Form 10-K for the 2021 fiscal year and subsequent reports.

If we are unable to retain our existing sales force and recruit additional people to join our sales force, our revenue may not increase and may even decline.

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

We have experienced periodic fluctuations in both Sales Leaders and Customers in the past and could experience such fluctuations again in the future. For example, our Sales Leaders in Mainland China declined 46% from December 31, 2018 to December 31, 2019 due to such factors as meeting restrictions and negative media scrutiny, and further declined 39% from September 30, 2021 to September 30, 2022 due to continued pressures from COVID-related factors. Our ability to retain our Sales Leaders and Customers could be affected as our sales force makes increased use of social sharing channels, which may allow them to more easily engage their consumers and sales network in other opportunities. If our initiatives do not drive growth in both Sales Leaders and Customers, our operating results could be harmed. While we take many steps to help train, motivate and retain our sales force, we cannot accurately predict how the number and productivity of our sales force may fluctuate because we rely primarily upon our Sales Leaders to find new consumers and to find, train and develop new Sales Leaders. Our operating results could be harmed if we and our Sales Leaders do not generate sufficient interest in our business and its products to retain and motivate our existing sales force and attract new people to join our sales force.

The number and productivity of our sales force is negatively impacted by several additional factors, including:

any adverse publicity or negative public perception regarding us, our products or ingredients, our distribution channel, or our industry or competitors;

lack of interest in, dissatisfaction with, or the technical failure of, existing or new products;

lack of compelling products or income opportunities, including through our sales compensation plans and incentive trips and other offerings;

negative sales force reaction to changes in our sales compensation plans or to our failure to make changes that would be necessary to keep our compensation competitive with the market;

interactions with our company, including our actions to enforce our policies and procedures and the quality of our customer service;

any regulatory actions or charges against us or others in our industry, as well as regulatory changes that impact product formulations and sales viability;

general economic, business, public health and geopolitical conditions, including employment levels, employment trends such as the gig and sharing economies, pandemics or other conditions that curtail person-to-person interactions, and the ongoing conflict in Russia and Ukraine which has caused disruption to our sales force;

changes in the policies of social media platforms used to prospect or recruit potential consumers and sales force participants;

recruiting efforts of our competitors and changes in consumer-loyalty trends; and

potential saturation or maturity levels in a given market, which could negatively impact our ability to attract and retain our sales force in such market.

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Our ability to conduct business in international markets may be affected by political, legal, tax and regulatory risks.

Our ability to capitalize on growth in new international markets and to maintain the current level of operations in our existing international markets is exposed to risks associated with our international operations, including:

the possibility that a government might ban or severely restrict our sales compensation and business models;

the possibility that local civil unrest, political instability, or changes in diplomatic or trade relationships might disrupt our operations in one or more markets—for example, the ongoing conflict in Russia and Ukraine has caused disruption to our sales force;

the lack of well-established or reliable legal systems in certain areas where we operate;

the presence of high inflation in the economies of international markets in which we operate;

the possibility that a government authority might impose legal, tax, customs, or other financial burdens on us or our sales force, due, for example, to the structure of our operations in various markets;

the possibility that a government authority might challenge the status of our sales force as independent contractors or impose employment or social taxes on our sales force; and

the possibility that governments may impose currency remittance restrictions limiting our ability to repatriate cash.

There has been an increasing level of tension in U.S.-China relations over the last few years. Given the significant size of our China business, our business could be harmed if relations continue to deteriorate or additional sanctions or restrictions are imposed by either government. In addition, there have been adverse public reaction and media attention to statements made by representatives of other businesses related to these issues that have adversely affected business. We could similarly face adverse public or media attention, and potentially increased regulatory scrutiny, as a result of increased trade or political tensions or any statements or actions by employees or our sales force that generate publicity with respect to these issues.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

(a) (b) (c) (d)
Period
Total
Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Approximate Dollar
Value of Shares that May
Yet Be Purchased Under
the Plans or Programs
(in millions)⁽¹⁾

January 1 - 31, 2022
68,636

$
52.14

68,636

$
241.8

February 1 - 28, 2022
74,732

50.88

74,732

$
238.0

March 1 - 31, 2022
57,120

45.97

57,120

$
235.4

Total
200,488

$
49.91

200,488

	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)⁽¹⁾

July 1 - 31, 2022		236,075	$	42.10		236,075	$	215.5
August 1 - 31, 2022		320,528		44.51		320,528	$	201.2
September 1 - 30, 2022		393,931		40.17		393,931	$	185.4
Total		950,534	$	42.11		950,534

(1)	In August 2018, we announced that our board of directors approved a stock repurchase plan. Under this plan, our board of directors authorized the repurchase of up to $500 million of our outstanding Class A common stock on the open market or in privately negotiated transactions.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

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ITEM 6.

EXHIBITS

Exhibits Regulation S-K Number		Description

31.1		Certification by Ryan S. Napierski, Chief Executive Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Mark H. Lawrence, Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Ryan S. Napierski, Chief Executive Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Mark H. Lawrence, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~May 4,~~November 2, 2022

NU SKIN ENTERPRISES, INC.

By:	/s/ Mark H. Lawrence
	Mark H. Lawrence
	Chief Financial Officer
	(Duly Authorized Officer and Principal Financial Officer)