Nu Skin - 10-Q quarterly report FY2026 Q3

Nu Skin Enterprises, Inc. (the “Company”) is a holding company, with Nu Skin being the primary operating unit. Nu Skin develops and distributes premium-quality, innovative beauty and wellness products that are sold worldwide. The Company reports revenue from nine segments, consisting of its seven geographic Nu Skin segments—Americas, which includes Canada, Latin America and the United States; Southeast Asia/Pacific, which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Australia, New Zealand, and other markets; Mainland China; Japan; Europe and Africa, which includes markets in Europe as well as South Africa; South Korea; and Hong Kong/Taiwan, which also includes Macau—and two Rhyz segments—Manufacturing, which includes manufacturing and packaging subsidiaries it has acquired; and Rhyz Other, which includes other investments by its Rhyz strategic investment arm (the Company’s subsidiaries operating within each segment are collectively referred to as the “Subsidiaries”). During the fourth quarter of 2025, the Company began pre-market activities in India, setting the operational foundation and infrastructure ahead of a full market opening currently anticipated in the first half of 2027. This market’s financial results, which are included in the Southeast Asia/Pacific segment in this report, were insignificant for the third quarter and first nine months of 2026.

During the first quarter of 2025, the Company recorded $5.2 million of stock-based compensation expense related to profit interest units issued to the Mavely founders. This expense should have been recorded in the fourth quarter of 2024 when the performance conditions became probable of vesting. The impact of the adjustment to correct this item was immaterial to the current and prior period financial statements.

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments, with the exception of Rhyz Other. The Rhyz Other segment is made up of two reporting units, which had goodwill of $4.7 million and $0.0, respectively, as of both September 30, 2026 and December 31, 2025.

During the three months ended June 30, 2026, the Company determined that the continued decline in the Company’s stock price and corresponding market capitalization as well as declines in the manufacturing segment forecast was a triggering event that required the Company to perform a quantitative impairment analysis. Based on the analysis, the Company concluded the fair value of the manufacturing reporting unit was less than the carrying value. As a result, the Company recorded a non-cash goodwill impairment charge of $78.9 million within impairment expenses on the consolidated statement of income. As part of the Company’s impairment analysis, the fair value of the reporting unit was determined using the income and market approach. The income approach used level 3 inputs and utilized management’s estimates related to future cash flows, which assumed factors such as revenue growth rates, profitability margins, and discount rates.

The Company reviews long-lived assets for impairment when performance expectations, events or change in circumstances indicate that the assets’ carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the net undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset group.

On June 14, 2022, the Company entered into an Amended and Restated Credit Agreement (the “2022 Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2018 Credit Agreement. The 2022 Credit Agreement provided for a $400 million term loan facility and a $500 million revolving credit facility, each with a term of five years. Both facilities bore interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the 2022 Credit Agreement were also based on the consolidated leverage ratio as defined in the 2022 Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility amortized in quarterly installments in amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the second, third, fourth and fifth years after the closing date of the 2022 Credit Agreement, with the remainder payable at final maturity. The 2022 Credit Agreement was guaranteed by certain of the Company’s domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. The 2022 Credit Agreement required the Company to maintain a consolidated leverage ratio not exceeding 2.75 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00.

On March 27, 2026, the Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with several financial institutions as lenders and Bank of America, N.A., as administrative agent, which amended and restated the 2022 Credit Agreement. The Credit Agreement provides for a $175 million term loan facility and a $75 million revolving credit facility, each with a term of five years. Both facilities bear interest at the SOFR, plus a margin based on the Company’s consolidated leverage ratio. Commitment fees payable under the Credit Agreement are also based on the consolidated leverage ratio as defined in the Credit Agreement and range from 0.175% to 0.30% on the unused portion of the total lender commitments then in effect. The term loan facility will amortize in equal quarterly installments in amounts resulting in an annual amortization of $20 million per annum, with the remainder payable at final maturity. The Credit Agreement is guaranteed by certain of the Company’s domestic subsidiaries and collateralized by assets of such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries. 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 September 30, 2026, the Company was in compliance with all covenants under the Credit Agreement.

As of September 30, 2026, the weighted-average remaining lease term was 6.0 and 3.1 years for operating and finance leases, respectively. As of September 30, 2026, the weighted-average discount rate was 3.8% and 6.5% for operating and finance leases, respectively.

Net income per share is computed based on the weighted-average number of common shares outstanding during the periods presented. Additionally, diluted earnings per share data gives effect to all potentially dilutive common shares that were outstanding during the periods presented. For the three-month periods ended September 30, 2026 and 2025, stock awards and options of 3.4 million and 1.0 million, respectively, and for the nine-month periods ended September 30, 2026 and 2025, stock awards and options of 2.5 million and 1.6 million, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

In February, May, and August 2026, the Company’s board of directors declared quarterly cash dividends of $0.06 per share. These quarterly cash dividends of $2.9 million were paid on March 11, 2026 and June 10, 2026, and September 9, 2026, respectively, to stockholders of record on February 27, 2026 and May 29, 2026, and August 28, 2026, respectively. In November 2026, the Company’s board of directors declared a quarterly cash dividend of $0.06 per share to be paid on December 9, 2026 to stockholders of record on November 27, 2026.

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.

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

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

 

During the third quarter of 2026, the Company recorded a $2.8 million out-of-period adjustment to correct for an error in the recognition of R&D credits related to the fourth quarter of 2025. This correction, which is immaterial, individually and in aggregate, to prior periods, increased the provision for income taxes for the third quarter of 2026.

 

The Company accounts for income taxes in accordance with ASC Topic 740 “Income Taxes.” These standards establish financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. The Company takes an asset and liability approach for financial accounting and reporting of income taxes. The Company pays income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between the Company and its foreign affiliates. Deferred tax assets and liabilities are created in this process. The Company has netted these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. The Company had net deferred tax assets of $6.5 million and $171.4 million as of September 30, 2026 and December 31, 2025, respectively.

 

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, 2025. If the amount designated as indefinitely reinvested as of December 31, 2025 were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million. The Company intends to utilize the indefinitely reinvested offshore earnings to fund foreign investments, specifically capital expenditures.

 

The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. In 2009, the Company entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”). The objective of CAP is to contemporaneously work with the IRS to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. As of September 30, 2026, all tax years through 2024, with the exception of 2021, have been audited and are effectively closed to further examination. For tax year 2021, the Company was 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. For tax years 2025 and 2026, the Company has been accepted in the IRS’s Bridge Plus program. The Company may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time. With a few exceptions, the Company is no longer subject to state and local income tax examination by tax authorities for the years before 2022. Foreign jurisdictions have varying lengths of statutes of limitations for income tax examinations. Some statutes are as short as three years and in certain markets may be as long as ten years. The Company is currently under examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable.

 

In 2021, as part of the Organization for Economic Co-operation and Development’s (“OECD”) Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax (“Pillar Two”) of 15%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. On January 5, 2026, the OECD announced the acceptance of a “side-by-side” safe harbor election that exempts U.S.-parented multinational groups from certain minimum taxes prescribed under the Pillar Two rules. Based on current enacted legislation, the Company anticipates the impact of Pillar Two to be immaterial for 2026.

 

On July 4, 2025, U.S. legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“the Act”) and commonly referred to as the One Big Beautiful Bill Act was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. The Act has not materially impacted the Company’s effective tax rate.

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.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During 2025, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.

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

During July of 2025, the Company’s four interest rate derivatives with a total notional amount of $200 million matured, leaving no outstanding derivatives as of September 30, 2026 and December 31, 2025.

The Company reports revenue from nine segments, consisting of its seven geographic Nu Skin segments—Americas, Southeast Asia/Pacific, Mainland China, Japan, Europe & Africa, South Korea, and Hong Kong/Taiwan—and two Rhyz segments—Manufacturing and Rhyz Other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments. The Rhyz Other segment includes two operating segments that are aggregated into one reporting segment and includes other investments by our Rhyz business arm. The Chief Executive Officer is the chief operating decision maker (“CODM”). These segments reflect the way the CODM 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.