SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

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.

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 ☑

NU SKIN ENTERPRISES, INC.

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.

PART I. FINANCIAL INFORMATION

~~ITEM 1.~~

ITEM 1.

FINANCIAL STATEMENTS

NU SKIN ENTERPRISES, INC.

Consolidated Balance Sheets (Unaudited)

Class A common stock – 500 million shares authorized, $0.001 par value, 90.6 million shares issued

Treasury stock, at cost – 40.4 million and 39.7 million shares

Treasury stock, at cost – 40.4 million and 40.7 million shares

Total liabilities and stockholders’ equity

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Income (Unaudited)

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

Foreign currency translation adjustment, net of taxes of $(2) and $(3) for the three months ended March 31, 2021 and 2020, respectively

Net unrealized gains/(losses) on cash flow hedges, net of taxes of $(839), and 0 for the for the three months ended March 31, 2021 and 2020, respectively

Less: Reclassification adjustment for realized losses/(gains) in current earnings, net of taxes of $(6) and 0 for the three months ended March 31, 2021 and 2020, respectively

Foreign currency translation adjustment, net of taxes of $(7) and $(2) for the three months ended March 31, 2022 and 2021, respectively

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

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

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)

Exercise of employee stock options (0.3 million shares)/vesting of stock awards

Exercise of employee stock options (0.4 million shares)/vesting of stock awards

Balance at March 31, 2021

Balance at March 31, 2022

Exercise of employee stock options (0.1 million shares)/vesting of stock awards

Exercise of employee stock options (0.3 million shares)/vesting of stock awards

Balance at March 31, 2020

Balance at March 31, 2021

NU SKIN ENTERPRISES, INC.

Consolidated Statements of Cash Flows (Unaudited)

NU SKIN ENTERPRISES, INC.

1.	The Company

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin, ~~a leading global direct selling company,~~ being the primary operating unit. Nu Skin develops and distributes premium-quality, innovative ~~personal care products~~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 9 segments, consisting of its 7 geographic Nu Skin segments—Mainland China; ~~Americas/Pacific,~~Americas, which includes ~~Australia,~~ Canada, Latin America ~~New Zealand~~ and the United States; South Korea; Southeast Asia/Pacific, which includes Australia, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam; Europe, Middle East and Africa (“EMEA”), which includes markets in Europe as well as Israel ~~Russia~~ and South Africa; Japan; ~~Southeast Asia, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam;~~ and Hong Kong/Taiwan, which also includes Macau—~~its~~ and 2 Rhyz Investments segments—Manufacturing, ~~segment,~~ which includes manufacturing and packaging subsidiaries it has acquired; and Rhyz other, which includes other investments by its ~~Grow Tech segment, which focuses on developing controlled-environment agriculture technologies~~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 31, ~~2021,~~2022, and for the ~~three-month~~three-month periods ended March 31, ~~2021~~2022 and ~~2020.~~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, ~~2020~~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~~10-K for the year ended December 31, ~~2020~~.2021.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current presentation. The Company reclassified $2.2 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 first quarter of 2021. The Company believes these costs are better reflected in selling expenses. The reclassification had no impact on operating income for the first quarter of 2021.

Accounting Pronouncements

In March 2020, the FASB issued, ASU 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 2020-04 applies only to contracts and hedging relationships that reference ~~LIBOR~~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 2020-04 are elective and are effective upon issuance for all entities. The Company 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. 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.

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Inventory

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

March 31,
2021

December 31,
2020

Raw materials $ 143,998 $ 118,877
Finished goods 219,433 195,489
Total Inventory, net $ 363,431 $ 314,366

	March 31, 2022		December 31, 2021
Raw materials	$	163,746	$	179,891
Finished goods		217,839		220,040
Total Inventory, net	$	381,585	$	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 31, ~~2021~~2022 and December 31, ~~2020~~2021 was $~~19.8~~20.8 million ~~million~~ and $~~18.2~~22.0 million ~~million,~~, respectively. The contract liabilities impact to revenue for the ~~three-month~~three-month periods ended March 31, ~~2021,~~2022, and ~~2020~~2021 was an increase of $1.2 million and a decrease of ~~$1.6~~$1.6 million ~~and an increase of $0.6 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, ~~2021~~2022 and December 31, ~~2020~~2021 (U.S. dollars in thousands):

March 31,
2021

December 31,
2020

Nu Skin
Mainland China $ 32,179 $ 32,179
Americas/Pacific 9,449 9,449
South Korea 29,261 29,261
EMEA 2,875 2,875
Japan 16,019 16,019
Southeast Asia 18,537 18,537
Hong Kong/Taiwan 6,634 6,634
Manufacturing 78,875 78,875
Grow Tech 9,150 9,150
Total $ 202,979 $ 202,979

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Debt

Credit Agreement

On April 18, 2018, the Company entered into a Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400 million term loan facility and a $350 million revolving credit facility, each with a term of five years. Both facilities bear interest at the ~~London Interbank Offered Rate (“LIBOR”),~~LIBOR, plus a margin based on the consolidated leverage ratio. The term loan facility amortizes 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 Credit Agreement, with the remainder payable at final maturity. The Credit Agreement requires the Company to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. As of March 31, ~~2021,~~2022, the Company was in compliance with all covenants under the Credit Agreement.

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The following table summarizes the Company’s debt facilities as of March 31, ~~2021~~2022 and December 31, ~~2020:~~2021:

Facility or Arrangement

Original

Principal Amount

Balance as of

March 31, ~~2021~~2022 ⁽¹⁾⁽²⁾

Balance as of

December 31, ~~2020~~2021⁽¹⁾⁽²⁾

Interest Rate

Repayment Terms

Credit Agreement term loan facility

400.0 million

~~330.0~~300.0 million

~~337.5~~307.5 million

Variable 30 day: ~~1.86%~~2.21%

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

Credit Agreement revolving credit facility

~~60.0~~70.0 million

070.0 million

Variable 30 day: ~~1.86%~~2.15%

Revolving line of credit expires April 18, 2023.

(1)	As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the current portion of the Company’s debt (i.e. becoming due in the next 12 months) included ~~$30.0~~$40.0 million and $37.5 million, respectively, of the balance of its term loan under the Credit Agreement.

(2)	The carrying value of the debt reflects the amounts stated in the above table, less debt issuance costs of ~~$1.9~~$1.0 million and $~~2.1~~1.2 million as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, related to the Credit Agreement, which are not reflected in this table.

Leases

As of March 31, ~~2021,~~2022, the weighted average remaining lease term was ~~6.6~~8.0 and ~~4.5~~3.5 years for operating and finance leases, respectively. As of March 31, ~~2021,~~2022, the weighted average discount rate was ~~4.1%~~3.7% 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 March 31,
	2021			2020			2022		2021
Operating lease expense
Operating lease cost	$	12,815		$	13,136		$	10,439	$	12,815
Variable lease cost		1,368			974			1,157		1,368
Short-term lease cost		339			45			30		339
Sublease income		(1,984	)		(1,131	)		0		(1,984	)
Finance lease expense
Amortization of right-of-use assets		611			0			556		611
Interest on lease liabilities		88			0			66		88
Total lease expense	$	13,237		$	13,024		$	12,248	$	13,237

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

Three Months Ended
March 31,

2021 2020
Operating cash outflow from operating leases $ 14,149 $ 13,367
Operating cash outflow from finance leases $ 89 $ 0
Financing cash outflow from finance leases $ 483 $ 0
Right-of-use assets obtained in exchange for operating lease obligations $ 10,891 $ 21,822
Right-of-use assets obtained in exchange for finance lease obligations $ 49 $ 0

	Three Months Ended March 31,
	2022		2021
Operating cash outflow from operating leases	$	10,405	$	14,149
Operating cash outflow from finance leases	$	68	$	89
Financing cash outflow from finance leases	$	476	$	483
Right-of-use assets obtained in exchange for operating lease obligations	$	23,730	$	10,891
Right-of-use assets obtained in exchange for finance lease obligations	$	0	$	49

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

Year Ending December 31	Operating Leases		Finance Leases		Operating Leases		Finance Leases
2021	$	35,534	$	1,661
2022		34,437		2,226	$	28,595	$	1,578
2023		23,875		2,144		28,298		2,032
2024		18,976		2,033		21,657		1,924
2025		14,298		1,436		15,507		1,361
2026						8,559		260
Thereafter		41,344		260		49,766		0
Total		168,464		9,760		152,382		7,155
Less: Finance charges		21,060		805		19,577		473
Total principal liability	$	147,404	$	8,955	$	132,805	$	6,682

The Company has additional lease liabilities of $~~0.3~~0.1 million which have not yet commenced as of March 31, ~~2021~~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~~three-month periods ended March 31, 2022 and 2021, ~~and 2020,~~ the only dilutive common shares outstanding relate to the Company’s outstanding stock awards and options. For the ~~three-month~~three-month periods ended March 31, ~~2021~~2022 and 2021,~~2020,~~ stock options of 0.1 million ~~million~~ and ~~1.0~~0.1 million ~~million,~~, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

Dividends

In February ~~2021~~2022,, the Company’s board of directors declared a quarterly cash dividend of $~~0.38~~0.385 per share. This quarterly cash dividend of $19.3 million ~~million~~ was paid on March ~~10, 2021~~9, 2022 to stockholders of record on February ~~26, 2021~~28, 2022.. In May ~~2021~~2022, the board of directors declared a quarterly cash dividend of ~~$0.38~~$0.385 per share to be paid on June ~~9, 2021~~8, 2022 to ~~shareholders~~stockholders of record on May ~~28, 2021.~~27, 2022.

Repurchase of common stock

During the ~~three-month~~three-month periods ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company repurchased 0.2~~1.0~~ million~~million~~ shares and ~~2.6~~1.0 million shares of its Class A common stock under its stock repurchase plans for $~~50.4~~10.0 million ~~million~~ and $~~60.9~~50.4 million ~~million,~~, respectively. As of March 31, ~~2021, $275.4~~ 2022,$235.4 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.

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.

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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, 2021											Fair Value at March 31, 2022
	Level 1		Level 2			Level 3			Total			Level 1		Level 2		Level 3			Total
Financial assets (liabilities):
Cash equivalents and current investments	$	57,236	$	0		$	0		$	57,236		$	57,647	$	0	$	0		$	57,647
Derivative financial instruments asset		0		5,030			0			5,030			0		14,664		0			14,664
Life insurance contracts		0		0			46,606			46,606			0		0		46,450			46,450
Derivative financial instruments liability		0		(83	)		0			(83	)
Contingent consideration		0		0			(3,264	)		(3,264	)		0		0		(10,226	)		(10,226	)
Total	$	57,236	$	4,947		$	43,342		$	105,525		$	57,647	$	14,664	$	36,224		$	108,535

	Fair Value at December 31, 2020											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	$	56,628	$	0		$	0		$	56,628		$	66,477	$	0	$	0		$	66,477
Derivative financial instruments asset		0		1,145			0			1,145			0		6,590		0			6,590
Life insurance contracts		0		0			45,453			45,453			0		0		49,851			49,851
Derivative financial instruments liability		0		(105	)		0			(105	)
Contingent consideration		0		0			(3,125	)		(3,125	)		0		0		(10,341	)		(10,341	)
Total	$	56,628	$	1,040		$	42,328		$	99,996		$	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 ~~marketable securities~~life insurance contracts (U.S. dollars in thousands):

Beginning balance at January 1, 2021	$	45,453
				2022			2021
Beginning balance at January 1				$	49,851		$	45,453
Actual return on plan assets		1,153			(3,401	)		1,153
Purchase and issuances		7,016			0			7,016
Sales and settlements		(7,016	)		0			(7,016	)
Transfers into Level 3		0			0			0
Ending balance at March 31, 2021	$	46,606
Ending balance at March 31				$	46,450		$	46,606

Life insurance contracts: 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.

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

Beginning balance at January 1, 2021
$ (3,125 )
Changes in fair value of contingent consideration (139 )
Ending balance at March 31, 2021
$ (3,264 )

	2022			2021
Beginning balance at January 1	$	(10,341	)	$	(3,125	)
Additions from acquisitions		0			0
Changes in fair value of contingent consideration		115			(139	)
Ending balance at March 31	$	(10,226	)	$	(3,264	)

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~~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 31,2022 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 2021 gain was recorded within Other income (expense), net on the Consolidated Statement of Comprehensive Operations. 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.

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8.	Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740 ~~‘‘Income~~“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 $~~29.9~~$22.0 million and $~~34.8~~$24.1 million as of March 31, ~~2021~~ 2022 and December 31, ~~2020,~~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, ~~2020.~~2021. If the amount designated as indefinitely reinvested as of December 31, ~~2020~~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. The Company is no longer subject to tax examinations from the IRS for all years for which tax returns have been filed before 2020. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2016. 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 tax years in the Bridge phase will be opened for examination. The Company ~~has elected to participate in CAP for 2021 and~~ 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 ~~2015.~~2016. However, statutes of limitations in certain countries may be as long as ten ~~years~~.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 ~~decrease~~increase in the next 12 months by approximately ~~$0.1~~$1.0 to ~~$1.1~~$2.0 million.

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 ~~fixed-rate~~variable-rate amounts from a counterparty in exchange for the Company making ~~variable-rate~~fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During ~~2021,~~2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

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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 ~~$83 thousand~~$3.2 million will be reclassified as ~~an increase~~a reduction to interest expense.

As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had 4 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, 2021		December 31, 2020		Balance Sheet Location	March 31, 2022		December 31, 2021
Interest Rate Swap - Asset	Other Assets	$	5,030	$	1,145	Prepaid expenses and other	$	3,207	$	557
Interest Rate Swap - Liability	Accrued Expenses	$	83	$	105
Interest Rate Swap - Asset						Other assets	$	11,457	$	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 or (Loss) Recognized in OCI on Derivative				Amount of Gain (Loss) Recognized in OCI on Derivatives
	Three Months Ended				Three Months Ended
Derivatives in Cash flow	March 31,				March 31,
Hedging Relationships:	2021		2020		2022		2021
Interest Rate Swaps	$	3,879	$	0	$	8,057	$	3,879

Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Loss into Income
Three Months Ended
Derivatives in Cash flow Income Statement March 31,
Hedging Relationships: Location 2021 2020
Interest Rate Swaps Other Income $ (27) $ 0

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

10.	Segment Information

The Company reports revenue from 9 segments, consisting of its 7 geographic Nu Skin segments—Mainland China, ~~Americas/Pacific,~~Americas, South Korea, Southeast ~~Asia,~~Asia/Pacific, Japan, EMEA, and Hong Kong/Taiwan—and ~~its~~ 2 Rhyz Investments segments—Manufacturing and ~~Grow Tech segments.~~Rhyz other. The ~~Other~~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.

~~In the first quarter of 2021, as a result of a change in the Company’s transfer pricing policies in the Americas/Pacific, the~~Prior year segment ~~contribution calculation has been adjusted, the prior year Americas/Pacific and Corporate and other~~information has been recast to ~~conform~~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 ~~new policy.~~fourth quarter 2021 exit of the Grow Tech segment, which has been recast to Corporate and other expenses.Consolidated financial information is not affected.

~~Table of Contents~~

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 March 31,
(U.S. dollars in thousands)	2021		2020		2022		2021

Nu Skin
Mainland China	$	149,593	$	137,696	$	124,495	$	149,593
Americas/Pacific		149,465		74,573
Americas						123,580		133,761
Southeast Asia/Pacific						90,236		83,289
South Korea		81,131		75,719		72,133		81,131
Japan						61,791		69,864
EMEA		76,180		35,403		52,968		76,180
Japan		69,864		61,300
Southeast Asia		67,585		69,586
Hong Kong/Taiwan		36,345		35,827		38,494		36,345
Other		705		773		620		878
Total Nu Skin		630,868		490,877		564,317		631,041
Rhyz Investments
Manufacturing ⁽¹⁾		45,985		27,147		40,341		45,985
Grow Tech		173		4
Rhyz other						241		0
Total Rhyz Investments						40,582		45,985
Total	$	677,026	$	518,028	$	604,899	$	677,026

(1)

The Rhyz Investments Manufacturing segment had $~~17.4~~14.6 million and $~~6.4~~17.4 million of intersegment revenue for the three-month period ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. Intersegment revenue is eliminated in the consolidated financial statements, as well as the reported segment revenue in the table above.

Segment Contribution

	Three Months Ended March 31,						Three Months Ended March 31,
(U.S. dollars in thousands)	2021			2020			2022			2021

Nu Skin
Mainland China	$	39,439		$	37,387		$	28,995		$	39,439
Americas/Pacific		32,144			11,280
Americas								25,123			28,745
Southeast Asia/Pacific								23,406			19,648
South Korea		26,525			24,099			22,743			26,525
Japan								15,313			17,981
EMEA		8,896			631			3,836			8,896
Japan		17,981			14,592
Southeast Asia		16,249			16,718
Hong Kong/Taiwan		7,348			6,938			8,690			7,348
Nu Skin contribution		148,582			111,645			128,106			148,582
Rhyz Investments
Manufacturing		5,826			2,849			3,292			5,826
Grow Tech		(6,091	)		(6,850	)
Rhyz other								(1,046	)		0
Total Rhyz Investments								2,246			5,826
Total segment contribution		148,317			107,644			130,352			154,408
Corporate and other		(85,404	)		(71,079	)		(78,207	)		(91,495	)
Operating income		62,913			36,565			52,145			62,913
Other income (expense)		1,582			(6,174	)		(1,453	)		1,582
Income before provision for income taxes	$	64,495		$	30,391		$	50,692		$	64,495

Table of ~~Contents~~contents

Depreciation and Amortization

	Three Months Ended March 31,				Three Months Ended March 31,
(U.S. dollars in thousands)	2021		2020		2022		2021

Nu Skin
Mainland China	$	3,339	$	2,424	$	2,884	$	3,339
Americas/Pacific		256		245
Americas						199		231
Southeast Asia/Pacific						381		354
South Korea		990		1,057		388		990
Japan						277		253
EMEA		286		258		230		286
Japan		253		472
Southeast Asia		329		487
Hong Kong/Taiwan		885		639		691		885
Total Nu Skin		6,338		5,582		5,050		6,338
Rhyz Investments
Manufacturing		2,688		1,815		3,330		2,688
Grow Tech		1,339		1,225
Rhyz other						592		0
Total Rhyz Investments						3,922		2,688
Corporate and other		7,979		10,473		8,158		9,318
Total	$	18,344	$	19,095	$	17,130	$	18,344

Capital Expenditures

Three Months Ended
March 31,

(U.S. dollars in thousands) 2021 2020
Nu Skin
Mainland China $ 8,517 $ 2,861
Americas/Pacific 278 694
South Korea 490 169
EMEA 172 27
Japan 91 157
Southeast Asia 399 633
Hong Kong/Taiwan 0 4
Total Nu Skin 9,947 4,545
Manufacturing 3,338 10,505
Grow Tech 942 178
Corporate and other 5,146 4,159
Total $ 19,373 $ 19,387

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

Nu Skin
Mainland China	$	4,068	$	8,517
Americas		42		112
Southeast Asia/Pacific		68		565
South Korea		362		490
Japan		0		91
EMEA		393		172
Hong Kong/Taiwan		263		0
Total Nu Skin		5,196		9,947
Rhyz Investments
Manufacturing		1,208		3,338
Rhyz other		0		0
Total Rhyz Investments		1,208		3,338
Corporate and other		3,875		6,088
Total	$	10,279	$	19,373

Table of ~~Contents~~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 ~~December 2020,~~April 2021, the Company acquired 100% ownership in MyFavoriteThings, Inc. (“Mavely”), making Mavely a wholly owned subsidiary of the ~~outstanding equity interest of Ingredient Innovations International~~Company. The acquisition enables the Company ~~(“3i”).~~to continue to expand its digital tools. The purchase price for 3iMavely was ~~$15.7~~$16.8 million, net of cash acquired of ~~$2.1~~$0.4 million and ~~$0.8~~$0.9 million to be paid within six months, all payable in cash. In addition, there is potential for an incremental ~~$7.0~~$24.0 million in contingent consideration, which becomes payable if certain ~~performance~~revenue and profitability targets are reached in 2021, 2022 and ~~2022.~~2023. The fair value of the contingent consideration recorded on the acquisition date ~~is $3.1~~was $8.7 million. The Company allocated the gross purchase price of ~~$24.5~~$29.4 million to the assets acquired and liabilities assumed at estimated fair values. The estimated fair value of assets acquired included ~~$14.4~~$16.4 million of intangible assets, ~~$0.3 million of property and equipment, $2.1~~$0.4 million of cash, ~~$0.8~~$0.1 million of accounts receivable, and ~~less than $0.3 million of inventory, and the acquisition~~ also ~~included approximately $0.3 million of current liabilities and~~ resulted in a deferred tax liability of ~~$3.1~~$3.5 million. The excess purchase price over the aggregate fair value of assets acquired less liabilities assumed of ~~$6.4~~$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 ~~$3.7~~$2.0 million for ~~Customer~~customer relationships, ~~$10.0~~$11.3 million for technology, $2.8 million for trademarks and ~~$0.7~~$0.3 million for other intangibles. The intangibles ~~all with an~~were assigned ~~estimated~~ useful ~~life~~lives of 8 years for the technology and tradename, approximately ~~8 years.~~4 years for the customer relationships and 3 years for the other intangibles. All the goodwill was assigned to our ~~Manufacturing~~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 ~~March 31, 2021~~.

September 30, 2021.

13.	~~Subsequent Events~~Restructuring

~~On April 19,~~

In the fourth quarter 2021, the Company ~~acquired 100% ownership in MyFavoriteThings, Inc. (“MyFavoriteThings”) making MyFavoriteThings a wholly owned subsidiary~~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 ~~Company. MyFavoriteThings is a digital technology development company. Under~~core Nu Skin business. The Grow Tech segment was pursuing the ~~terms~~commercialization of controlled-environment agriculture for use in the agriculture feed industry. This segment has been operating as part of the ~~purchase agreement,~~Company’s Rhyz strategic investment arm. As a result of the restructuring program, the Company ~~has agreed~~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 Company expects to pay ~~$17.0 million~~out the remaining liability in ~~cash~~the first half of 2022. The restructuring charges were recorded in ~~exchange for 100% ownership~~the previous Grow Tech segment, which in ~~MyFavoriteThings, subject~~the current year has been recast to adjustment for certain closing items. In addition, there is potential for an incremental $24.0 million in contingent consideration, which becomes payable if certain performance targets are reached in 2021, 2022Corporate and ~~2023.~~Other.

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 ~~2020~~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 ~~2020~~2021 fiscal year, and our other reports filed with the Securities and Exchange Commission through the date of this Quarterly ~~Report on Form 10-Q.~~Report.

Overview

Revenue for the three-month period ended March 31, ~~2021 increased 31%~~2022 decreased 11% to ~~$677.0~~$604.9 million, compared to ~~$518.0~~$677.0 million in the prior-year period. Our revenue in the first quarter of ~~2021 benefitted 6%~~2022 was negatively impacted 3% from foreign-currency fluctuations. Our Customers, Paid Affiliates and Sales Leaders ~~increased~~declined 13%, 14% and 22% ~~and Customers increased 34%~~, respectively, on a year-over-year basis.

~~Our results benefited from our strategic shift to become a more digital business, as well as~~The declines for the current environment where consumers are spending more time online and working from home, and our sales leaders have been able to leverage the power of social sharing to achieve greater levels of productivity. If and when the COVID-19 pandemic subsides, there is uncertainty as to the impact on trends towards online shopping and how our business would be impacted by changes in those trends. Our 31% revenue growth wasthree-month period ended March 31, 2022 were largely driven by ~~solid growth~~COVID-related lockdowns and other factors in our ~~Americas/Pacific and EMEA segments, where our Brand Affiliates have more broadly adopted social commerce to share our products. The pandemic negatively impacted our Asia~~eastern markets ~~more heavily, as our sales force generally relies more on in-person meetings~~along with the continued softening in ~~those markets and the social sharing model is less mature.~~EMEA. We are ~~continuing~~looking forward to our product launches, specifically the expected launch of the ageLOC ~~Boost~~LumiSpa iO ~~and~~ ~~Nutricentials Bioadaptives, which generated more than $35 million of combined revenue~~ in the ~~first quarter~~back half of ~~2021.~~the year.

Earnings per share for the first quarter of ~~2021 increased 153%~~2022 decreased 16% to ~~$0.91,~~$0.76, compared to ~~$0.36~~$0.91 in the prior-year period. The ~~increase~~decrease in earnings per share for the quarter is primarily driven by the ~~increase~~decline in revenue ~~lower weighted-average outstanding shares due to our stock repurchases and a lower tax rate, partially offset by an increase~~along with decline in ~~selling expenses.~~gross margin from sales promotions.

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—Mainland China, ~~Americas/~~Americas, Southeast Asia/Pacific, South Korea, ~~EMEA,~~ Japan, ~~Southeast Asia,~~EMEA and Hong Kong/Taiwan —and our Rhyz Investment segments—Manufacturing and ~~Grow Tech segments.~~Rhyz other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments.

The following table sets forth revenue for the three-month periods ended March 31, ~~2021~~2022 and ~~2020~~2021 for each of our reportable segments (U.S. dollars in thousands):

	Three Months Ended March 31,							Constant-Currency			Three Months Ended March 31,							Constant-Currency
	2021		2020		Change			Change ⁽¹⁾			2022		2021		Change			Change⁽¹⁾
Nu Skin
Mainland China	$	149,593	$	137,696		9	%		1	%	$	124,495	$	149,593		(17	)%		(18	)%
Americas/Pacific		149,465		74,573		100	%		97	%
Americas												123,580		133,761		(8	)%		(6	)%
Southeast Asia/Pacific												90,236		83,289		8	%		11	%
South Korea		81,131		75,719		7	%		—			72,133		81,131		(11	)%		(4	)%
Japan												61,791		69,864		(12	)%		(3	)%
EMEA		76,180		35,403		115	%		98	%		52,968		76,180		(30	)%		(25	)%
Japan		69,864		61,300		14	%		11	%
Southeast Asia		67,585		69,586		(3	)%		(5	)%
Hong Kong/Taiwan		36,345		35,827		1	%		(3	)%		38,494		36,345		6	%		6	%
Other		705		773		(9	)%		(9	)%		620		878		(29	)%		(29	)%
Total Nu Skin		630,868		490,877		29	%		22	%		564,317		631,041		(11	)%		(8	)%
Rhyz Investments
Manufacturing		45,985		27,147		69	%		69	%		40,341		45,985		(12	)%		(12	)%
Grow Tech		173		4		4,225	%		4,225	%
Rhyz other												241		—
Total Rhyz Investments												40,582		45,985		(12	)%		(12	)%
Total	$	677,026	$	518,028		31	%		25	%	$	604,899	$	677,026		(11	)%		(8	)%

(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 periods ended March 31, ~~2021~~2022 and ~~2020~~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 year segment contribution has been recast for the fourth quarter of 2021 exit of the Grow Tech segment, 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. ~~Prior year segment contribution for Americas/Pacific has been recast to conform with first quarter of 2021 changes to our transfer pricing policy.~~

	Three Months Ended March 31,									Three Months Ended March 31,
	2021			2020			Change			2022			2021		Change
Nu Skin
Mainland China	$	39,439		$	37,387			5	%	$	28,995		$	39,439		(26	)%
Americas/Pacific		32,144			11,280			185	%
Americas											25,123			28,745		(13	)%
Southeast Asia/Pacific											23,406			19,648		19	%
South Korea		26,525			24,099			10	%		22,743			26,525		(14	)%
Japan											15,313			17,981		(15	)%
EMEA		8,896			631			1,310	%		3,836			8,896		(57	)%
Japan		17,981			14,592			23	%
Southeast Asia		16,249			16,718			(3	)%
Hong Kong/Taiwan		7,348			6,938			6	%		8,690			7,348		18	%
Total Nu Skin		148,582			111,645			33	%		128,106			148,582		(14	)%
Rhyz Investments
Manufacturing		5,826			2,849			104	%		3,292			5,826		(43	)%
Grow Tech		(6,091	)		(6,850	)		11	%
Rhyz other											(1,046	)		—
Total Rhyz Investments											2,246			5,826		(61	)%

Table of ~~Contents~~contents

The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders ~~as of~~in our core Nu Skin business for the three-month periods ended March 31, ~~2021~~2022 and ~~2020. “Customers”~~2021. As we continue to focus on customer acquisition, our Paid Affiliates, who primarily share products, are ~~persons who have purchased products directly from~~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 ~~Company during~~first quarter of 2022, in connection with the ~~three months ended as~~introduction of the ~~date indicated. Our Customer numbers do not include consumers who purchase products directly from members~~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 ~~sales force. “Sales Leaders” are~~business. The definition of our ~~Brand Affiliates, and sales employees and independent marketers in Mainland China, who achieve certain qualification requirements.~~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” 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.

~~Following~~

	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	)%

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

Mainland China. ~~The 9% increase in revenue for~~Our Mainland China market continued to be challenged during the first quarter of ~~2021 is primarily attributable~~2022, with COVID-related lockdowns and other factors negatively impacting our selling and promotional activities. Due to increasing COVID-19 cases, the ~~8% benefit~~government implemented more significant lockdowns that precluded gatherings and meetings for the general population in Shanghai and other areas. Revenue in this market benefited from ~~favorable foreign-currency fluctuations. Our Customers increased 16%, benefiting~~our recently launched products, which generated approximately $18.0 million in revenue during the quarter, and from utilizing discounted product promotions. As previously disclosed, 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 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”) began 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 nearly resolved.

Upon receiving the inquiries from the ~~continued focus on customer initiatives including enJoy program~~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 ~~new customer coupon program. During the second quarter of 2021, the~~ ~~ageLOC Boost~~ ~~will be made generally available to all consumers.~~

The year-over-year increase in segment contribution for the first quarter of 2021 primarily reflects higher revenue and a 2.3 percentage point improvement in gross margin, due to product mix. This was largely offset by a 2.2 percentage point increase in selling expense as a percent of revenue. The salaries and service fees of our sales forceother 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 ~~fixed until they are adjusted in a quarterly evaluation process.~~lifted, we believe the loss of momentum will impact this market’s performance through the rest of this year. As ~~a result,~~ we ~~have variations in our selling expenses as a percentage of revenue, particularly when there is a sequential change in revenue.~~

~~Americas/Pacific. Our Americas/Pacific markets~~ continue to ~~benefit from greater adoption of innovative products shared increasingly via the~~ invest in new social commerce ~~business model supported by~~technologies in this market, our ~~digital tools, combined with the current environment where consumers are spending more time at home, shopping and working online. This contributed~~focus is to a 100% increase in revenue for the first quarter of 2021. The new social and digital tools as well as strong sales leadership in social sharing in these markets have enabled our sales force to more effectively transact business digitally. These factors also led to a significant increase in Customers and Sales Leaders. Our reported revenue also reflects a 3% benefit from favorable foreign-currency fluctuations.

The year-over-year increase in segment contribution for the first quarter of 2021 primarily reflects the increase in revenue and the fixed nature of general and administrative expenses, which as a percentage of revenue decreased 4.7 percentage points.

~~South Korea. Our first quarter of 2021 constant-currency revenue was flat compared to 2020; our reported revenue reflects a 7% benefit from favorable foreign-currency~~ ~~fluctuations. Sales Leaders increased 7% from product promotions, while Customers declined 12% from a prior year customer campaign.~~

~~The year-over-year increase in segment contribution primarily reflects the increased revenue, along with improvements in gross margin from a shift to more favorable margin products.~~

~~EMEA. Our EMEA segment strong revenue trends continued into the first quarter 2021, benefiting from further adoption of the~~ ~~social sharing business model supported by our digital tools, combined with the current environment where consumers are spending more time shopping and working online. This contributed to a~~ 115% increase in revenue, 111% increase in Customers and 88% increase in Sales Leaders. Our reported revenue also benefited 17% from foreign-currency fluctuations for the first quarter of 2021. Similar to our Americas/Pacific segment, the strong sales leadership in social sharing has allowed the EMEA segment to more effectively transact business digitally.

~~The strong improvement in segment contribution for the first quarter of 2021 is primarily attributable to higher revenue and the fixed nature of general and administrative expenses~~.

~~Japan~~. Our Japan segment continues to perform well, with increases in revenue, Customers and Sales Leaders over the prior year, due to our ability to attract an increasingly younger demographic that is adept at social sharing. In addition, our Japan segment benefitted from product launches, including the ~~ageLOC Boost~~ ~~along with restages of other product lines.~~

The year-over-year increase in segment contribution reflects the increased revenue, a slight decline from normal fluctuations in selling expense as a percent of revenue and the fixed nature of general and administrative expensesdecrease dependence on ~~increased revenue.~~

~~Southeast Asia~~. The year-over-year decrease in revenue in our Southeast Asia segment primarily reflects impacts from the COVID-19 pandemic. Continued restrictions and logistic challenges have led to a slower economic recovery in some Southeast Asia markets. The increase in Customers for the Southeast Asia segment was primarily driven by successful customer initiatives, which also drove an increase in our Sales Leaders.in-person meetings.

The year-over-year decrease in segment contribution for the first quarter of ~~2021~~2022 primarily reflects lower revenue, the fixed nature of general and administrative expenses and a 2.7 percentage point decrease in gross margin attributable to increased product promotions and an unfavorable sales mix, which was partially offset by a 1.7 percentage point improvement in selling expenses as a percentage of revenue.

Americas. The decline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment is predominately attributable 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 expenses.

Southeast Asia/Pacific. Our Southeast Asia/Pacific segment revenue increased 8% for the first quarter of 2022, with a 3% negative impact from unfavorable foreign-currency fluctuations. The increase in revenue was partially driven by a strong product launch of ageLOC Meta (locally referred to as ageLOC Reset in the Southeast Asia markets), which generated approximately $13.2 million in revenue along with the loosening of COVID restrictions in the markets. 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 general and administrative expenses.

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 challenged from the ongoing COVID-19 spikes in cases during the first quarter of 2022, leading to declines in revenue and Customers, Paid Affiliates, and Sales Leaders.

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

Japan. The decline in revenue is primarily attributable to a 9% negative impact from unfavorable foreign-currency fluctuations. In addition, our revenue, Customers, Paid Affiliates, and Sales Leaders were negatively impacted by the continued COVID restrictions in the beginning of the quarter, which loosened as the quarter progressed.

The year-over-year decline in segment contribution reflects the decreased revenue.

EMEA. The continued softening of momentum in our EMEA segment, further driven by the current geopolitical Russian/Ukraine conflict which has caused disruption to our sales force, especially in Eastern Europe, led to a 30% decline in revenue for the quarter. Our reported revenue was negatively impacted 5% from foreign-currency fluctuations. We have suspended business operations in Russia and Ukraine. 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 from higher cost associated with the incentive trips, 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 increased 1%6% for the quarter, ~~with a 4% benefit~~primarily from ~~favorable foreign-currency~~revenue growth in our Taiwan market. Revenue from our ~~fluctuations~~ageLOC Meta ~~. The fourth quarter of 2020~~ and Beauty Focus Collagen + product launches ~~drove an increase~~was approximately $4.9 million. Our Hong Kong market continues to be challenged from the ongoing pressures from COVID-19, which led to decline in Sales ~~Leaders, which increased 5% as of the first quarter of 2021, compared to the prior-year period.~~Leaders.

The increase in segment contribution was primarily driven by ~~reported~~ revenue growth, with general and administrative expenses remaining flat on slightly improved revenue.

Manufacturing. Our Manufacturing segment ~~generated a 69% increase in~~ revenue declined 12% for the first quarter of ~~2021.~~ ~~Our previous investments in additional capacity have allowed our manufacturing companies to continue to increase revenue as the~~2022, primarily from a majority of their customers increasing their inventory levels during 2021, which reduced demand for ~~nutrition and personal care products continues to expand.~~the first quarter of 2022.

The ~~104% increase~~43% decline in segment contribution is ~~primarily attributable~~attributed to the ~~increased~~lower revenue on fixed costs, along with the ~~fixed nature of general and administrative expenses.~~

~~Grow Tech~~. Our Grow Tech segment continues to invest in controlled-environment agriculture technologies. We have found that some of this technology has broader applications in agriculture, and we are investing to pursue these potential opportunities. We are expecting continued losses in 2021 from this segment as we continue to research and refine the technology. We are currently evaluating strategic alternativesrevenue mix between our manufacturing entities with ~~respect to this business.~~different profitability.

Gross profit as a percentage of revenue was ~~74.8%~~73.3% for the first quarter of ~~2021~~2022 compared to ~~75.7%~~74.8% for the prior-year period. The gross margin of our core Nu Skin business declined ~~0.3~~1.3 percentage points to ~~77.8%~~76.5%. ~~Our~~The decline in our gross margin ~~was impacted by~~is predominately attributed to an increase in sales promotions during the gross margin of our owned manufacturing entities, which as previously disclosed, is significantly lower than the gross margin of our core Nu Skin business. With the strong year-over-year growth within our Manufacturing segment, their revenue represented a higher proportion of our overall consolidated revenue in the first quarter of 2021 than in the prior-year quarter.period.

Selling expenses as a percentage of revenue ~~remained relatively consistent with the prior year, at 40.4%~~was 40.1% for the first quarter of ~~2021,~~2022, compared to ~~39.8%~~40.8% for the prior-year period. Selling expenses for our core Nu Skin business as a percentage of revenue ~~increased 1.4~~decreased 0.7 percentage points to ~~43.4%~~43.0% for the first quarter of ~~2021.~~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 plus or minus approximately 100 basis points from period to period. ~~Our increase in selling expenses is also attributable to increases in qualification for our incentive trips due to the growth in the West.~~

General and administrative expenses

General and administrative expenses ~~increased~~decreased to ~~$169.8~~$148.6 million in the first quarter of ~~2021,~~2022, compared to ~~$149.6~~$167.6 million in the prior-year period. The ~~$20.2~~$19.0 million ~~increase~~decline is ~~mainly driven by~~primarily from a ~~$14.1~~$12.4 million ~~increase~~contraction in labor expenses ~~attributable to higher~~from lower employee performance incentive compensation, ~~and approximately $3.0 million in increased IT expenses, associated~~along with our ~~cloud transition and ongoing development~~fourth quarter 2021 exit of ~~digital tools.~~the Grow Tech segment, which led to $6.1 million less expense for the first quarter of 2022. General and administrative expenses as a percentage of revenue declined to ~~25.1%~~24.6% for the first quarter of ~~2021~~2022 from ~~28.9%~~24.8% for the prior-year ~~period, due to the relatively fixed nature~~period.

Other income (expense), net

Other income (expense), net for the first quarter of ~~2021~~2022, was $1.5 million in expense compared to $1.6 million ~~compared to ($6.2 million)~~of income for the same period in ~~2020.~~2021. The increase in other ~~income~~expense is largely attributable to ~~a $2.2 million decrease in foreign currency losses, $2.2 million decrease from a loss on asset disposal in the prior year, a $1.2 million decrease interest expense from lower interest rates and~~ unrealized investment ~~income.~~income for the first quarter of 2021.

Provision for income taxes

Provision for income taxes for the first quarter of ~~2021~~2022 was ~~$17.1~~$12.0 million, compared to ~~$10.7~~$17.1 million for the prior-year period. The effective tax rate was ~~26.5%~~23.6% of pre-tax book income during the first quarter of ~~2021~~2022 compared to ~~35.1%~~26.5% in the prior-year period. The decrease in the effective tax rate for the first quarter of ~~2021~~2022 primarily reflects the strong growth in the U.S. market, ~~and Manufacturing segment,~~ which enabled us to utilize additional foreign tax credits to offset U.S. income taxes. ~~In addition, there was a statute of limitation expiration that resulted in a tax benefit in the first quarter.~~

As a result of the foregoing factors, net income for the first quarter of ~~2021~~2022 was ~~$47.4~~$38.7 million compared to ~~$19.7~~$47.4 million in the prior-year period.

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 and the development of operations in new markets.~~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. ~~However, in~~In the first three months of ~~2021,~~2022, we ~~had a net outflow of $18.9~~generated $7.5 million in cash from operations, compared to ~~$69.0~~$18.9 million inof cash ~~from~~used in operations during the prior-year period. The ~~decrease~~increase in cash flow from operations primarily reflects ~~a $49.1~~an approximate $17.2 million decline in inventory during the period, compared to an inventory increase of $53.8 million in the prior year period, partially offset by the lower revenue and an increase in ~~inventory partially attributable to~~our accounts receivable from higher sales during the ~~revenue growth at our manufacturing entities and increases in preparation of our product launches, along with the first quarter of 2021 payout~~backend of the ~~accrued commission and accrued employee incentive payments attributable to our fourth-quarter growth.~~quarter. Cash and cash equivalents, including current investments, as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 were ~~$362.7~~$317.5 million and ~~$423.9~~$354.8 million, respectively, with the decrease being driven by ~~the net outflow of cash flow from operations,~~ purchases of property and equipment, as discussed below, our quarterly dividend payments, ~~and~~ stock repurchases ~~partially offset by increased borrowings under~~and payment on liabilities associated with our ~~revolving credit facility.~~fourth quarter restructuring.

Working capital. As of March 31, ~~2021,~~2022, working capital was ~~$339.3~~$354.8 million, compared to ~~$360.3~~$343.3 million as of December 31, ~~2020.~~2021. The ~~decline~~increase in working capital is primarily attributable to a ~~net $60.0~~$21.0 million increase in ~~borrowings under our revolving credit facility during the quarter to fund our stock repurchases~~prepaid expenses and other, primarily from an increase in prepaid income tax, and a $28.5 million decrease in accrued expenses ~~for operations,~~from the first quarter pay-out of restructuring cost and employee incentive accruals, partially offset by ~~increased~~declines in cash and cash equivalents and inventory.

Capital expenditures. Capital expenditures for the three months ended March 31, ~~2021~~2022 were ~~$19.4~~$10.3 million. We expect that our capital expenditures in ~~2021~~2022 will be primarily related to:

We estimate that capital expenditures for the uses listed above will total approximately ~~$70–85~~$85–105 million for ~~2021.~~ 2022. We are currently ~~in the building phase~~expecting to complete construction of the new manufacturing plant in Mainland ~~China. To date~~China in the back half of 2022. As of March 31, 2022, we have spent approximately ~~$26~~$40.3 million on this project, with $3.0 million in the first quarter of 2022, and expect that our expenditures for this project will total approximately ~~$55~~$52-57 million, ~~over the next 1-2 years,~~ including approximately $15-20 million during ~~2021.~~2022.

Credit Agreement. In April 2018, we entered into a 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 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 the outstanding balance on the convertible notes. The interest rate applicable to the facilities is subject to adjustments based on our consolidated leverage ratio. The term loan facility amortizes 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 Credit Agreement, with the remainder payable at final maturity. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$60.0~~$70.0 million and no$70.0 million outstanding borrowings under our revolving credit facility, and ~~$330.0~~$300.0 million and ~~$337.5~~$307.5 million remaining balance on our term loan facility. The carrying value of the debt also reflects debt issuance costs of ~~$(1.9)~~$(1.0) million and ~~$(2.1)~~$(1.2) million as of March 31, ~~2021~~2022 and December 31, ~~2020,~~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. ~~We are currently~~As of March 31, 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.

Derivative Instruments. As of March 31, ~~2021,~~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.

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 of ~~2021,~~2022, we repurchased approximately ~~1.0~~0.2 million shares of our Class A common stock under the plan for ~~$50.4~~$10.0 million. As of March 31, ~~2021, $275.4~~2022, $235.4 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 ~~2021,~~2022, our board of directors declared quarterly cash dividends of ~~$0.38~~$0.385 per share. This quarterly cash dividend of $19.3 million was paid on March ~~10, 2021~~9, 2022 to stockholders of record on February ~~26, 2021.~~28, 2022. In May ~~2021,~~2022, our board of directors declared a quarterly cash dividend of ~~$0.38~~$0.385 per share to be paid on June ~~9, 2021~~8, 2022 to stockholders of record on May ~~28, 2021.~~27, 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, ~~2021~~2022 and December 31, ~~2020,~~2021, we held ~~$362.7~~$317.5 million and ~~$423.9~~$354.8 million, respectively, in cash and cash equivalents, including current investments. These amounts include ~~$332.0~~$263.2 million and ~~$374.7~~$274.9 million as of March 31, ~~2021~~2022 and December 31, ~~2020,~~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, ~~2021,~~2022, we had ~~$91.7~~$62.7 million in cash denominated in Chinese RMB. We also have experienced delays in repatriating cash from Argentina. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$10.4~~$12.1 million and ~~$10.6~~$11.3 million, respectively, in intercompany ~~receivable~~receivables with our Argentina subsidiary. We also have intercompany loan arrangements ~~with~~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.

Contingent Liabilities

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

Critical Accounting Policies and Estimates

There were no significant changes in our critical accounting policies or estimates during the first quarter of ~~2021.~~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.

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, ~~2021,~~2022, our subsidiary in Argentina had a small net peso monetary position. Net sales of our subsidiary in Argentina were less than 1%2% of our consolidated net sales for the three-month periods ended March 31, ~~2021~~2022 and ~~2020.~~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, ~~2021~~2022 and ~~2020,~~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, ~~2021,~~2022, and ~~2020~~2021 we did not hold any 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.

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, ~~2021.~~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, ~~2021~~2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

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 ~~2020~~2021 fiscal year. ~~Please refer to Note 11 to the consolidated financial statements contained in this report for certain information regarding our legal proceedings.~~

~~The information presented below supplements and should be read~~

There have been no material changes from the risk factors previously disclosed in ~~conjunction with the detailed discussion of risks associated with our business in our recent SEC filings, including~~ our Annual Report on Form 10-K for the ~~2020~~2021 fiscal ~~year and subsequent reports.~~year.

There are increased expectations and focus from certain investors, Brand Affiliates, consumers, employees and other stakeholders concerning corporate citizenship and sustainability matters, including environmental, social and governance matters; packaging; responsible sourcing; and diversity, equity and inclusion matters. From time to time, we announce certain initiatives and goals in these areas. We could fail, or be perceived to fail, in our achievement of such initiatives or goals or in stakeholders’ expectations, or we could fail in accurately reporting our progress on such initiatives, goals and expectations. Moreover, the standards by which corporate citizenship and sustainability efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions. The standards or assumptions could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

Value of Shares that May

Yet Be Purchased Under

the Plans or Programs

(in millions)⁽¹⁾

Value of Shares that May

Yet Be Purchased Under

the Plans or Programs

(in millions)⁽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.

DEFAULTS UPON SENIOR SECURITIES

MINE SAFETY DISCLOSURES

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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 ~~5, 2021~~4, 2022

/s/ Mark H. Lawrence

Chief Financial Officer

(Duly Authorized Officer and Principal Financial Officer)

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

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

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

			Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited):	1
		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
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1617
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2325
	Item 4.	Controls and Procedures	2325

Part II.	Other Information
	Item 1.	Legal Proceedings	2426
	Item 1A.	Risk Factors	2426
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2426
	Item 3.	Defaults Upon Senior Securities	2426
	Item 4.	Mine Safety Disclosures	2426
	Item 5.	Other Information	2426
	Item 6.	Exhibits	2527

	Signature		2628

	March 31, 2021			December 31, 2020			March 31, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	339,099		$	402,683		$	302,216		$	339,593
Current investments		23,615			21,216			15,313			15,221
Accounts receivable, net		60,625			63,370			52,171			41,299
Inventories, net		363,431			314,366			381,585			399,931
Prepaid expenses and other		114,118			101,563			97,923			76,906
Total current assets		900,888			903,198			849,208			872,950

Property and equipment, net		464,247			468,181			448,822			453,674
Operating lease right-of-use assets		147,129			155,104			132,949			120,973
Goodwill		202,979			202,979			206,432			206,432
Other intangible assets, net		87,135			89,532			74,874			76,991
Other assets		147,721			138,082			179,964			175,460
Total assets	$	1,950,099		$	1,957,076		$	1,892,249		$	1,906,480

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	67,083		$	66,174		$	40,719		$	49,993
Accrued expenses		404,493			446,682			343,737			372,201
Current portion of long-term debt		90,000			30,000			110,000			107,500
Total current liabilities		561,576			542,856			494,456			529,694

Operating lease liabilities		108,237			112,275			100,844			88,759
Long-term debt		298,120			305,393			258,995			268,781
Other liabilities		110,692			102,281			103,754			106,474
Total liabilities		1,078,625			1,062,805			958,049			993,708
									��
Commitments and contingencies (Note 5 and 11)		0			0
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		579,204			579,801			599,258			601,703
Treasury stock, at cost – 40.4 million and 39.7 million shares		(1,505,076	)		(1,461,593	)
Treasury stock, at cost – 40.4 million and 40.7 million shares								(1,526,778	)		(1,526,860	)
Accumulated other comprehensive loss		(71,626	)		(64,768	)		(69,528	)		(73,896	)
Retained earnings		1,868,881			1,840,740			1,931,157			1,911,734
Total stockholders’ equity		871,474			894,271			934,200			912,772
Total liabilities and stockholders’ equity	$	1,950,099		$	1,957,076
Total liabilities and stockholders’ equity							$	1,892,249		$	1,906,480

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

	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)

	For the Three Months Ended March 31, 2021																	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			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 January 1, 2022																		$	91	$	601,703		$	(1,526,860	)	$	(73,896	)	$	1,911,734		$	912,772

Net income		0		0			0			0			47,430			47,430			0		0			0			0			38,716			38,716
Other comprehensive loss, net of tax		0		0			0			(6,858	)		0			(6,858	)
Other comprehensive income, net of tax																			0		0			0			4,368			0			4,368
Repurchase of Class A common stock (Note 6)		0		0			(50,406	)		0			0			(50,406	)		0		0			(10,006	)		0			0			(10,006	)
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 (0.4 million shares)/vesting of stock awards																			0		(6,572	)		10,088			0			0			3,516
Stock-based compensation		0		6,803			0			0			0			6,803			0		4,127			0			0			0			4,127
Cash dividends		0		0			0			0			(19,289	)		(19,289	)		0		0			0			0			(19,293	)		(19,293	)
Balance at March 31, 2021	$	91	$	579,204		$	(1,505,076	)	$	(71,626	)	$	1,868,881		$	871,474
Balance at March 31, 2022																		$	91	$	599,258		$	(1,526,778	)	$	(69,528	)	$	1,931,157		$	934,200

	As of March 31, 2021				As of March 31, 2020				% Increase (Decrease)
	Customers		Sales Leaders		Customers		Sales Leaders		Customers			Sales Leaders
Mainland China		316,000		16,716		271,536		16,159		16	%		3	%
Americas/Pacific		407,413		12,340		214,139		6,930		90	%		78	%
South Korea		152,390		7,099		174,004		6,608		(12	)%		7	%
EMEA		296,001		7,950		140,344		4,237		111	%		88	%
Japan		126,525		6,131		119,784		5,635		6	%		9	%
Southeast Asia		152,889		6,882		145,116		6,634		5	%		4	%
Hong Kong/Taiwan		66,042		3,501		66,024		3,348		—			5	%
Total		1,517,260		60,619		1,130,947		49,551		34	%		22	%

	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	)%

	(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, 2021		—	$	—		—	$	325.8
February 1 - 28, 2021		317,217		49.36		317,217	$	310.2
March 1 - 31, 2021		670,187		51.85		670,187	$	275.4
Total		987,404	$	51.05		987,404

Exhibits Regulation S-K Number		Description
~~10.1~~		~~Employment Letter Agreement with Connie Tang.~~
31.1		Certification by ~~Ritch N. Wood,~~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 ~~Ritch N. Wood,~~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)

NU SKIN ENTERPRISES, INC.

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