NU SKIN ENTERPRISES, INC. (NUS) FY 2023 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes, which are included in this
Annual Report on Form 10-K.

Business Overview

Our Products

Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in nearly 50 markets worldwide. In 2023, our revenue of $2.0
billion was primarily generated by our three primary brands: our beauty brand, Nu Skin; our wellness brand, Pharmanex; and our anti-aging brand, ageLOC. We operate in the direct selling channel, primarily
utilizing person-to-person marketing to promote and sell our products, including through the use of social and digital platforms. In all of our markets besides Mainland China, we refer to members of our independent sales force as “Brand Affiliates”
because their primary role is to promote our brand and products through their personal and social networks.

In addition to our core Nu Skin business, we also explore new areas of synergistic and adjacent growth through our business arm known as Rhyz Inc. Our Rhyz businesses primarily consist of consumer,
technology and manufacturing companies. In 2023, the Rhyz companies generated $216.6 million, or 11% of our 2023 reported revenue (excluding sales to our core Nu Skin business). Rhyz is a key component of our business, and we anticipate its
continued growth in the coming years both on an absolute basis and as a percentage of our consolidated revenue. These companies enable us to diversify our revenue mix, serve more customers where they shop, and create synergies for our owned and
partner brands.

Our Global Operations

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

A Global Network of Customers, Paid Affiliates and Sales Leaders

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

Our revenue is highly influenced by the number and productivity of our Sales Leaders. “Sales Leaders” are our Brand Affiliates, as well as sales employees and independent marketers in Mainland China,
who achieve certain qualification requirements. Our reported Sales Leaders number is the three-month average of our monthly Sales Leaders as of the end of each month of the quarter.

As we continue to focus on customer acquisition and social commerce, we believe our number of Paid Affiliates is an important indicator of consumer purchasing activity in our business. “Paid
Affiliates” are any Brand Affiliates, as well as members of our sales force in Mainland China, who earned sales compensation during the previous three months. Paid Affiliates power our social commerce model and are a bridge to attracting new
customers and nurturing relationships and community.

We have been successful in attracting and motivating our sales force by:

Our global sales force helps us to rapidly introduce products and penetrate our markets with modest up-front promotional expense. We rely on our sales force to create consumer demand for our products,
as opposed to a traditional approach of advertising-generated consumer awareness. Our approach is particularly effective with products that benefit from personal education and demonstration. Similar to other companies in our industry, we experience
relatively high turnover among our sales force.

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To enhance customer retention, we have developed product subscription and loyalty programs that provide incentives for consumers to commit to purchase a specific amount of product on a monthly basis.
All purchases under these programs are subject to our standard product payment and return policies. We believe these subscription and loyalty programs have improved consumer retention, have had a stabilizing impact on revenue and have helped
generate recurring sales.

Product Innovation

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

Any delays or difficulties in introducing compelling products or attractive initiatives or tools into our markets may have a negative impact on our revenue and our number of Customers, Paid Affiliates
and Sales Leaders.

Our Product Launch Process

Prior to making a product generally available for purchase in a market, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction
or promotion. We refer to the entire process, beginning with the introductory offering through general availability of the product, as a product launch or our product launch process. The timing of the launch of a particular product often varies from
market to market depending on such factors as customer demand, product registration or other local legal requirements, and product availability in our supply chain.

Sales Leader previews and other product introductions and promotions sometimes generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue during the
quarter and can skew year-over-year and sequential comparisons. We believe our product launch process attracts new Customers, Paid Affiliates and Sales Leaders to our business, increases consumer trial and provides us with important marketing and
forecasting information about our products. Please refer to Item 1A. Risk Factors for more information on risks related to our product launch process.

Income Statement Presentation

We report revenue in nine segments, and we translate revenue from each market’s local currency into U.S. dollars using weighted-average exchange rates. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with
revenue recognized at shipping point, the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. In most markets, we
offer a return policy that allows our sales force to return unopened and unused product for up to 12 months subject to a 10% restocking fee. Reported revenue is net of returns, which have historically been less than 5% of annual revenue. Sales
taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.

Cost of sales primarily consists of:

For markets other than Mainland China, in 2023, we sourced most of our beauty products and wellness products from trusted third-party suppliers and manufacturers. In Mainland China, we operate
manufacturing facilities where we produce the majority of our beauty and wellness products sold in Mainland China. We also produce some products at these facilities that are exported to other markets. In addition, our Rhyz Manufacturing entities in
the United States are producing some of our products. Cost of sales and gross profit, on a consolidated basis, may fluctuate as a result of changes in the ratio between self-manufactured products and products sourced from third-party vendors. In
addition, because we purchase a significant amount of our goods in U.S. dollars and recognize revenue in local currencies, our gross margin is subject to exchange rate risks. Because our gross margins vary from product to product and due to higher
pricing in some markets, changes in product mix and geographic revenue mix can impact our gross margin on a consolidated basis.

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Selling expenses are our most significant expense and are classified as operating expenses. Selling expenses include sales commissions paid to our sales force, special incentives, costs for incentive
trips, cost of sales force conventions and other rewards, as well as salaries, service fees, benefits, bonuses and other labor and unemployment expenses we pay to our sales force in Mainland China. The sales force conventions are held in various
markets worldwide, which we generally expense in the period in which they are incurred. Because our various sales force conventions are not held during each fiscal year, or in the same period each year, their impact on our general and administrative
expenses may vary from year to year and from quarter to quarter. For example, we currently plan to hold a global convention approximately every other year. We held our last in-person global convention in October 2019, as our 2021 global convention
was held virtually due to the COVID-19 pandemic. We are currently planning to hold a global convention in 2024 to celebrate our 40th anniversary. In addition, we hold
regional conventions and conventions in our major markets at different times during the year. These conventions have significant expenses associated with them. Because we have not incurred expenses for these conventions during every fiscal year or in
comparable interim periods, year-over-year comparisons have been impacted accordingly. Selling expenses do not include amounts we pay to our sales force based on their personal purchases; rather, such amounts are reflected as reductions to revenue.
Our global sales compensation plan, which we employ in all our markets except Mainland China, is an important factor in our ability to attract and retain our Sales Leaders. Under our global sales compensation plan, Sales Leaders can earn
“multi-level” compensation, where they earn commissions for product sales to their consumer groups as well as the product sales made through the sales network they have developed and trained. We do not pay commissions on sales materials. Fluctuations
occur in the amount of commissions paid as our numbers of Customers and Sales Leaders change from month to month, but the fluctuation in the overall payout as a percentage of revenue tends to be relatively small. Selling expenses as a percentage of
revenue typically increase in connection with a significant product offering, due to growth in the number of Sales Leaders qualifying for increased sales compensation and promotional incentives. From time to time, we make modifications and
enhancements to our global sales compensation plan in an effort to help motivate our sales force and develop leadership characteristics, which can have an impact on selling expenses.

Outside of Mainland China, Brand Affiliates also have the opportunity to make profits by purchasing products from us at a discount and selling them to consumers with a mark-up. We do not account for,
nor pay, additional commissions on these mark-ups received by Brand Affiliates. In many markets, we also allow individuals who are not part of our sales force, whom we refer to as “preferred customers,” to buy products directly from us at a
discount. We pay commissions on preferred customer purchases to the referring member of our sales force.

General and administrative expenses include:

Labor expenses are the most significant portion of our general and administrative expenses.

Provision for income taxes depends on the statutory tax rates and the withholding taxes in each of the jurisdictions in which we operate. For example, statutory tax rates in 2023 were approximately
17% in Hong Kong, 20% in Taiwan, 21% in South Korea, 32% in Japan and 25% in Mainland China. We are subject to taxation in the United States at the statutory corporate federal tax rate of 21% in 2023, and we pay taxes in multiple states within the
United States at various tax rates. Our overall effective tax rate was 67.7% for the year ended December 31, 2023.

Critical Accounting Policies and Estimates

The following critical accounting policies and estimates should be read in conjunction with our audited consolidated financial statements and related notes thereto. Management considers our critical
accounting policies to be accounting for income taxes and accounting for intangible assets. In each of these areas, management makes estimates based on historical results, current trends and future projections.

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Income Taxes. We account for income taxes in accordance with the Income Taxes Topic of the Financial Accounting Standards Codification. This Topic
establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. We take an asset and liability approach for financial accounting and
reporting of income taxes. We pay income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between Nu Skin affiliates around the
world. Deferred tax assets and liabilities are created in this process. As of December 31, 2023, we had net deferred tax assets of $105.0 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. These deferred tax assets assume sufficient future earnings will exist for their realization, and are calculated using anticipated tax
rates. In certain jurisdictions, valuation allowances have been recorded against the deferred tax assets specifically related to use of foreign tax credits, research and development credits and net operating losses. The valuation allowance
assessment requires estimates as to future operating results. These estimates are made on an ongoing basis based upon the Company’s business plans and growth strategies in each market and consequently, future material changes in the valuation
allowance are possible. The valuation allowance reduces the deferred tax assets to an amount that management determined is more-likely-than-not to be realized. When we determine that there is sufficient taxable income to utilize the foreign tax
credits, the research and development credits, or the net operating losses, the valuation allowances will be released. In the event we were to determine that we would not be able to realize all or part of our deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to earnings in the period such determination was made.

We evaluate our indefinite reinvestment assertions with respect to foreign earnings for each period. Other than earnings we intend to reinvest indefinitely, we accrue for the U.S. federal and state
income taxes applicable to the earnings. For all foreign earnings, we accrue the applicable foreign income taxes. We intend to utilize the offshore earnings to fund foreign investments, specifically capital expenditures. Undistributed earnings that
we have indefinitely reinvested aggregate to $60.0 million as of December 31, 2023. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.

The company operates in and files income tax returns in the U.S. and numerous foreign jurisdictions, which are subject to examination by tax authorities. Years open to examination
contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions, and tax credits. We account for uncertain tax positions in accordance with
Accounting Standards Codification (“ASC”) 740, Income Taxes. This guidance prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax
position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be
recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. In 2009, we entered into a voluntary program with the IRS called Compliance Assurance Process (“CAP”).
Under the CAP program, the IRS audits the tax position of the Company to identify and resolve any tax issues that may arise throughout the tax year.  The IRS has developed
a new pilot phase called “Bridge Plus.” Under Bridge Plus the taxpayer is required to provide book-to-tax reconciliations, credit utilization and other supporting documentation shortly after their audited financial statement is finalized.  The company was selected for Bridge Plus for the 2022, 2023 and 2024 tax years. As of December 31, 2023, all open tax years except 2021 have been audited and are effectively closed
to further examination. For the tax year 2021, the Company was in the Bridge phase of the CAP program, pursuant to which the IRS did not accept disclosures, did not conduct reviews and did not provide letters of assurance for the Bridge year.
There are limited circumstances that tax years in the Bridge phase will be opened for examination. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years before 2020. Foreign
jurisdictions, have varying lengths of statutes of limitations for income tax examinations. Some statutes are as short as three years and in certain markets may be as long as ten years. We are currently under examination in certain foreign
jurisdictions; however, the outcomes of those reviews are not yet determinable.

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

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

We are subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. We account for such contingent liabilities in accordance with
relevant accounting standards and believe we have appropriately provided for income taxes for all years. Several factors drive the calculation of our 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 our reserves, which would impact our reported financial
results.

Intangible Assets. Acquired intangible assets may represent indefinite-lived assets, determinable-lived intangibles or goodwill. Of these, only the costs of determinable-lived intangibles are
amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately from
our impairment testing of indefinite-lived intangibles. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to perform a qualitative assessment
to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity is not
required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting unit is
less than its carrying amount, then the amount of the impairment loss, if any, must be measured. We elected to perform the quantitative assessment for fiscal years 2022 and we used the qualitative assessment for fiscal years 2023 and 2021.

Considerable management judgment and assumptions are used in our goodwill impairment assessment, including with respect to the estimated future cash
flows, the earnings multiples used in the market approach, the discount rate used to discount such estimated future cash flows to their net present value and the reasonableness of the implied control premium relative to our market capitalization.
These factors could materially increase or decrease the fair value of our reporting units and, accordingly, could result in a related impairment charge. Declines in our market capitalization or in our business performance could also result in a
material impairment charge in a future period.

We completed the annual goodwill and indefinite-lived intangible asset impairment testing as of October 1, 2023, and concluded the qualitative assessment indicated that the fair value of the
reporting units exceeded their carrying value and therefore were not at risk for impairment. As of the October 1, 2022 testing date, the fair value of the Manufacturing reporting unit was estimated to be approximately 8% in excess of
its carrying amount, and therefore the reporting unit is considered to be at risk of future impairment. The Manufacturing reporting unit’s fair value remains sensitive to significant unfavorable changes in revenue, gross margin and discount rates
that could negatively impact future analyses.

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

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Results of Operations

The following table sets forth our operating results as a percentage of revenue for the periods indicated:

2023 Compared to 2022

Overview

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

The year-over-year decrease in our 2023 revenue was primarily driven by the continued macroeconomic pressures we’ve been facing in our markets, which have negatively impacted consumer spending and customer
acquisition. In addition, while we continue to make progress on our long-term vision, we have experienced headwinds from the transformation process. During 2023 we began the launch process of ageLOC TRMe, our new personalized approach to weight management, which generated approximately $87.5 million in revenue in 2023. In the third quarter of 2023, we began the
launch process of our next smart connected device system, ageLOC WellSpa iO, which generated $62.2 million in revenue. The decline in our core Nu Skin segments was partially offset by 41% growth in our
Rhyz segments, partially from acquisitions during the year as well as organic growth.

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

Segment Results

We report our business in nine segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Americas, Mainland China, Southeast Asia/Pacific, South Korea,
Japan, Europe & Africa, and Hong Kong/Taiwan—and our two Rhyz segments—Manufacturing and Rhyz other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other segment includes other
investments by our Rhyz business arm, which were entered into during 2021 and 2023. Our Europe & Africa segment was previously Europe, Middle East and Africa (“EMEA”), but was changed following the June 2023 closure of the Israel market.

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The following table sets forth revenue for the years ended December 31, 2023 and 2022 for each of our reportable segments (U.S. dollars in thousands):

The table below sets forth segment contribution for the years ended December 31, 2023 and 2022 for each of our reportable segments (U.S. dollars in thousands). Segment contribution excludes
certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to control for
their respective segments. For additional information regarding our segments and the calculation of segment contribution, see Note 15 to the consolidated financial statements contained in this report.

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The following table provides information concerning the number of Customers, Paid Affiliates and Sales Leaders in our core Nu Skin business as of December 31, 2023 and 2022.

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

Americas. The decline in revenue, Customers, Paid Affiliates and Sales Leaders in our Americas segment for the fiscal year 2023 is attributable to the continued
decline in momentum in our North America markets, while our Latin America markets continue to be challenged by macroeconomic issues. In the first quarter of 2023 we launched our new affiliate rewards and recognition program in North America. In
the second quarter of 2023, we adjusted the structure of our sales compensation program in our Latin America markets and implemented our new e-commerce platform in North America. In connection with the transformation efforts, we experienced
disruptions to our subscriptions in North America, which negatively impacted revenue. Despite some early difficulties with migration and adoption of the new programs and platforms, we believe these changes will be beneficial for our future
growth opportunities.

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

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

The year-over-year decrease in segment contribution for fiscal year 2023 primarily reflects a decrease in revenue, partially offset by a 0.8 percentage point improvement in gross margin from a
favorable sales mix as well as decreased production promotions and discounts during the year.

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

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

South Korea. Our South Korea market was challenged by difficult macroeconomic trends, including inflationary pressures, and our associated price increases which negatively impacted our
revenue, Customers, Paid Affiliates and Sales Leaders for the year ended December 31, 2023. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation
structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 14 thousand Paid Affiliates for the three months ended December 31, 2023.

The year-over-year decrease in segment contribution primarily reflects the decline in revenue, partially offset by a $9.0 million decrease in general and administrative expenses from savings
generated by our 2022 restructuring plan.

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

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

Europe & Africa. The reduction in revenue, Customers, Paid Affiliates and Sales Leaders reflects the softening of momentum that occurred during the first half of
2023, as well as macroeconomic factors that have led to a decline in the purchasing power of our customers. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our
compensation structure. We estimate the change in eligibility requirements resulted in a reduction of approximately 6 thousand Paid Affiliates for the fourth quarter of 2023. Effective June 2023, we closed our Israel market. This market generated
$65 thousand of revenue for the first half of 2023 prior to its closure and $172 thousand for the full year 2022.

The year-over-year decline in segment contribution reflects the decline in revenue, partially offset by a slight 1.4 percentage point improvement in gross margin due to favorable sales mix and price increase.

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Hong Kong/Taiwan. Our Hong Kong/Taiwan segment revenue decreased 2% for fiscal year 2023. Our revenue was negatively impacted 3% from unfavorable foreign-currency fluctuations. During the back half of 2023,
we previewed and launched our ageLOC WellSpa iO, which generated approximately $13.5 million of revenue.  Our decline in Customers is primarily related to the product launch process, under which the
product was initially only available to our Sales Leaders for purchase. Our Paid Affiliates were also negatively impacted by a change in eligibility requirements for receiving certain rewards within our compensation structure. We estimate the
change in eligibility requirements resulted in a reduction of approximately 3 thousand Paid Affiliates for the fourth quarter of 2023.

Our segment contribution benefited from a 2.0 percentage point improvement in gross margin from cost saving initiatives to reduce freight and overhead cost, a 2.1 percentage point decrease in selling expenses as a
percentage of revenue from lower incentive trip accruals, and a 1.7 percentage point decrease in general and administrative expenses from cost savings in occupancy and labor resulting primarily from our 2022 restructuring plan.

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

The increase in segment contribution for 2023 is primarily from the increased revenue and efficiencies gained from automation. In addition, segment contribution benefited from a favorable revenue mix between our
manufacturing entities, which have differing profitability levels.

Rhyz Other.  The increase in revenue in our Rhyz other segment is primarily driven by $20.8 million growth at Mavely, our previously acquired social commerce platform for 2023. In addition, we recognized $10.6 million of revenue for 2023, from our entities acquired in the second quarter of 2023. Because we acquired these entities during the year, our reported revenue for these entities consists only of the
revenue after the acquisition dates, not the full year.

In April 2023, we acquired 60 percent of LifeDNA, Inc. (“LifeDNA”), a DNA assessment company. Consideration paid included $4.0 million of cash, along with the conversion of a previous $3.0 million
Simple Agreement for Future Equity (“SAFE”), and a $0.2 million convertible note. In June 2023, we acquired 100 percent ownership in Beauty Biosciences, LLC (“BeautyBio”), a clean and clinically proven skin care and beauty device company. The
purchase price for BeautyBio was $75.0 million, net of cash acquired of $1.5 million, all payable in cash.

The decline in segment contribution for 2023 is primarily from our recent acquisitions, which we are currently investing in to enable future growth, as well as the impacts of purchase accounting,
which resulted in $3.3 million of incremental amortization of intangible assets.

Consolidated Results

Revenue

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

Gross profit

Gross profit as a percentage of revenue decreased to 68.9% in 2023, compared to 71.7% in 2022. Gross profit as a percentage of revenue for core Nu Skin decreased 2.2 percentage points
to 73.2%, primarily driven by our third quarter of 2023 strategic decision to re-balance and narrow our product portfolio, which resulted in an incremental $65.7 million inventory write-off, compared to an incremental $26.9 million
write-off in the third quarter of 2022. Our gross margin was also impacted by the gross margin of our owned manufacturing entities, which as previously disclosed, is significantly lower than the gross margin
of our core Nu Skin business. With the year-over-year growth within our Manufacturing segment, their revenue represented a higher proportion of our overall consolidated revenue for the year ended December 31, 2023 than in the prior-year.

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Selling expenses

Selling expenses as a percentage of revenue decreased to 37.7% in 2023, compared to 39.5% for 2022. Our core Nu Skin business’s selling expense as a percentage of revenue decreased 1.2 percentage
points to 41.1% for 2023, compared to 42.3% for 2022. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders. Given the size of our sales force and the various components of our
compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period. Our selling expenses is also impacted by the growth within our
Manufacturing segment, which has minimal selling expenses. We expect to see future fluctuations in our selling expenses as a result of growth in the Rhyz segments and varying level of selling expenses by entity. For example, as discussed above,
Manufacturing has minimal selling expenses, and within Rhyz other, Mavely has selling expenses of approximately 80% and BeautyBio and LifeDNA are minimal.

General and administrative expenses

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

Restructuring and impairment expenses

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

In the fourth quarter of 2023, we adopted another strategic plan to focus resources on our global priorities and optimize future growth and profitability. The global program includes workforce reductions. We
estimate total charges under the program will approximate $15–$25 million in severance charges, which will be paid in cash. We expect to substantially complete the program during the first half of 2024. The program may expand as we continue to
evaluate our business, including our product portfolio, global processes and organization, and operational footprint. During the fourth quarter of 2023, we incurred charges to be settled in cash of $10.0 million in severance charges.

Other income (expense),
net

Other income (expense), net for 2023 was $(21.7) million, compared to $(21.9) million in 2022. The decrease in other expense for year ended
December 31, 2023 reflects a $7.2 million decline in foreign currency losses and a $9.3 million unrealized investment loss recorded in 2022 related to a controlled environment agriculture company that we invested in, partially offset by a $12.1 million increase in interest expense and a $4.0 million decline in contingent consideration that was recorded in 2022 in connection with a previous
acquisition.

Provision for income taxes

Provision (benefit) for income taxes increased to $18.0 million in 2023 from $(15.8) million in 2022. Our effective tax rate increased to 67.7% of pre-tax income in 2023 from (17.8)%
in 2022. The increase in the effective tax rate for 2023 is primarily due to the restructuring charges that affected our U.S. earnings. These additional expenses in the U.S. reduced our ability to utilize
foreign tax credits. As a result, we recorded an additional $6.1 million valuation allowance against our foreign tax credits.

For 2024, we currently anticipate that our effective tax rate will be approximately 25-35%. Our actual 2024 effective tax rate could differ materially from this estimate. Our future effective tax
rates could fluctuate significantly, being affected by numerous factors, such as intercompany transactions, changes in our business operations, foreign audits, increases in uncertain tax positions, acquisitions, entry into new markets, the
amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have a lower statutory rate and higher than anticipated in jurisdictions where we have a higher statutory rate, losses incurred in
jurisdictions, the inability to realize tax benefits, withholding taxes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation.

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Net income

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

2022 Compared to 2021

For a comparison of our operating results for 2022 compared to 2021, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 44 of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2022, as filed with the SEC on February 16, 2023.

Liquidity and Capital Resources

Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital
expenditures, stock repurchases, dividends, debt repayment and the development of operations in new markets. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock
repurchases, capital investments and short-term operating needs. We typically generate positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities. We generated
$118.6 million in cash from operations during 2023, compared to $108.1 million in cash from operations during 2022. The increase in cash flow from operations primarily reflects higher payout of our accruals in 2022, attributable to
our 2021 restructuring and higher commission charges incurred during the fourth quarter of 2021, partially offset by a lower net income in 2023.

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

Cash requirements. For 2024, we currently expect that our material cash requirements will include the following:

For 2024 and onward, we currently expect the above material cash requirements will remain.  See Note 6 and Note 7 to the consolidated financial statements contained in this report for our future
cash requirements related to our debt principal repayment and our maturities of lease liabilities.

We intend to fund the aforementioned cash requirements with our cash from operations and draw on our revolving credit facility, as needed, to address any short-term funding requirements.

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

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

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Credit Agreement. On June 14, 2022, we entered into an
Amended and Restated Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit Agreement provides for a $400.0 million term loan facility and a $500.0
million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off the previous credit agreement. Both facilities bear interest at the Secured Overnight Financing Rate (“SOFR”), plus a margin based on our consolidated leverage ratio. The term loan facility amortizes in quarterly installments in
amounts resulting in an annual amortization of 2.5% during the first year and 5.0% during the subsequent years after the closing date of the Credit Agreement, with the remainder payable at final maturity. As of December 31, 2023 and 2022, we
had $120.0 million and $10.0 million of outstanding borrowings under our revolving credit facility, and $385.0 million and $395.0 million on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $2.0

million and $2.5 million as of December 31, 2023 and 2022, respectively, related to the Credit Agreement. The Credit Agreement requires us to maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage
ratio of no less than 3.00 to 1.00. As of December 31, 2023, we were in compliance with all debt covenants under the Credit Agreement.

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

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

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 2023, we repurchased approximately 0.6 million shares of our Class A common stock under the plan for $13.0 million. As of December 31, 2023, $162.4 million was available for repurchases under the
plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

Dividends. In February, May, July and October 2023, our
board of directors declared quarterly cash dividends of $0.39 per share. These quarterly cash dividends of $19.4 million, $19.5 million, $19.5 million and $19.3 million were paid on March 8, 2023, June 7, 2023, September 6, 2023 and December 6,
2023 to stockholders of record on February 27, 2023, May 26, 2023, August 25, 2023 and November 24, 2023. In February 2024, our board of directors declared a reduced quarterly cash dividend of $0.06 per share to be paid on March 6, 2024 to stockholders of record on February 26, 2024. The reduction of our quarterly dividend is expected to preserve approximately $65.0 million of capital on an annualized basis, better positioning us to allocate additional capital to our growth initiatives to execute on our business strategy. 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 December 31, 2023 and 2022, we held $267.8 million and $278.5 million, respectively, in cash and cash equivalents, including current investments. These
amounts include $213.7 million and $223.0 million as of December 31, 2023 and 2022, respectively, held in our operations outside of the United States. 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 United States 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 December 31, 2023 and 2022, we had $31.8 million and $33.4 million, respectively, in cash denominated in Chinese RMB. We
also have experienced delays in repatriating cash from Argentina. As of December 31, 2023 and 2022, we had $17.7 million and $14.9 million, respectively, in intercompany receivable with our Argentina subsidiary. We

also have intercompany loan arrangements with 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 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.

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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.

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.

Contingent Liabilities

Please refer to Note 16 to the consolidated financial statements contained in this report for information regarding our contingent liabilities.

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

Recent Accounting Pronouncements

A description of new accounting pronouncements is contained in Note 2 to consolidated financial statements contained in this report.