Quarterly report [Sections 13 or 15(d)]

Note 11 - Segment Information

v3.25.1
Note 11 - Segment Information
3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

11. SEGMENT INFORMATION

 

The Company sells products to a member network that operates in a seamless manner from market to market, except for the China market where it sells to some consumers through an e-commerce retail platform, and the Russia and Kazakhstan market where the Company’s engagement of a third-party service provider results in a different economic structure than its other markets. The Company believes that all of its other operating segments have similar economic characteristics and are similar in the nature of the products sold, the product acquisition process, the types of customers products are sold to, the methods used to distribute the products, and the nature of the regulatory environment. Therefore, the Company aggregates its other operating segments (including its Hong Kong operating segment) into a single reporting segment (the “Primary Reporting Unit”).

 

The Company’s CODM is its President, who reviews financial information presented on a geographic basis. The CODM primarily uses net sales, gross profit and operating profit in assessing segment performance and determining the allocation of resources. The CODM also uses gross profit for evaluating pricing strategy. The CODM is the primary individual in control of resource allocation, and the allocation determinations are generally made in consultation with senior management, which the CODM is a member. Segment operating income is adjusted for certain direct costs and commission allocations. The CODM also regularly reviews inventory information by operating segment in assessing segment performance and determining the allocation of resources.

 

The Company’s financial information by segment is as follows (in thousands):

 

   

Three Months Ended March 31, 2025

   

Three Months Ended March 31, 2024

 
   

Primary Reporting Unit

   

China

   

Russia and Kazakhstan

   

Total

   

Primary Reporting Unit

   

China

   

Russia and Kazakhstan

   

Total

 
                                                                 

Net sales

  $ 10,406     $ 234     $ 97     $ 10,737     $ 10,466     $ 384     $ 101     $ 10,951  

Cost of sales

    2,727       48       57       2,832       2,790       73       49       2,912  

Gross profit

    7,679       186       40       7,905       7,676       311       52       8,039  

Less:

                                                               

Commissions expense1

    4,435             53       4,488       4,428             58       4,486  

Employee-related costs

    841       233       12       1,086       940       258       16       1,214  

Facility costs

    285       35       3       323       297       42       4       343  

Other segment items2

    445       64       12       521       385       105       14       504  

Segment income (loss) from operations

  $ 1,673     $ (146 )   $ (40 )     1,487     $ 1,626     $ (94 )   $ (40 )     1,492  

Reconciliation of income before income taxes:

                                                               

Unallocated corporate expenses

                            (1,832 )                             (1,857 )

Other income, net

                            465                               563  

Income before income taxes

                          $ 120                             $ 198  

 


1 Our China subsidiary maintains an e-commerce retail platform and does not pay commissions.

2 Other segment items include credit card fees and assessments, marketing-related costs, professional fees and other business expenses.

 

The Company's segment assets are as follows (in thousands):

 

   

March 31, 2025

   

December 31, 2024

 
   

Primary Reporting Unit

   

China

   

Russia and Kazakhstan

   

Total

   

Primary Reporting Unit

   

China

   

Russia and Kazakhstan

   

Total

 
                                                                 

Inventories

  $ 1,926     $ 162     $ 81     $ 2,169     $ 2,422     $ 159     $ 36     $ 2,617  

Other inventories and inventory-related deposits1

                      871                         971  

Other assets2

                      50,139                         51,771  

Total assets

                    $ 53,179                       $ 55,359  

 


1 Other inventories and inventory-related deposits pertain to the Company's trading company and are not specific to any of the Company's operating segments.

2 Other assets primarily include cash, cash equivalents and marketable securities, but also includes all other current and noncurrent assets.

 

The Company’s net sales by geographic area are as follows (in thousands):

 

   

Three Months Ended March 31,

 
   

2025

   

2024

 

Net sales from external customers:

               

United States

  $ 286     $ 262  

Canada

    101       111  

Peru and Colombia

    249       220  

Hong Kong1

    9,123       9,174  

China

    234       384  

Taiwan

    322       337  

Japan

    64       66  

Malaysia and Singapore

    50       53  

Russia and Kazakhstan

    97       101  

Europe

    150       152  

Other foreign countries

    61       91  

Total net sales

  $ 10,737     $ 10,951  

 


1 Substantially all of the Company's Hong Kong revenues are derived from the sale of products that are delivered to members in China. See “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K.