Quarterly report [Sections 13 or 15(d)]

Note 11 - Segment Information

v3.25.2
Note 11 - Segment Information
 6 Months Ended
Jun. 30, 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 June 30, 2025

    

Three Months Ended June 30, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 9,493     $ 219     $ 101     $ 9,813     $ 10,023     $ 336     $ 116     $ 10,475  

Cost of sales

     2,450       51       57       2,558       2,574       65       60       2,699  

Gross profit

     7,043       168       44       7,255       7,449       271       56       7,776  

Less:

                                                                

Commissions expense1

     3,973       —       39       4,012       4,157       —       46       4,203  

Employee-related costs

     897       220       14       1,131       886       216       9       1,111  

Facility costs

     294       36       3       333       292       40       4       336  

Other segment items2

     319       81       12       412       404       91       14       509  

Segment income (loss) from operations

   $ 1,560     $ (169 )   $ (24 )     1,367     $ 1,710     $ (76 )   $ (17 )     1,617  

Reconciliation of income before income taxes:

                                                                

Unallocated corporate expenses

                             (1,700 )                             (1,855 )

Other income, net

                             348                               519  

Income before income taxes

                           $ 15                             $ 281  

 

   

Six Months Ended June 30, 2025

    

Six Months Ended June 30, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 19,899     $ 453     $ 198     $ 20,550     $ 20,489     $ 720     $ 217     $ 21,426  

Cost of sales

     5,177       99       114       5,390       5,364       138       109       5,611  

Gross profit

     14,722       354       84       15,160       15,125       582       108       15,815  

Less:

                                                                

Commissions expense1

     8,408       —       92       8,500       8,585       —       104       8,689  

Employee-related costs

     1,738       453       26       2,217       1,826       474       25       2,325  

Facility costs

     579       71       6       656       589       82       8       679  

Other segment items2

     764       145       24       933       789       196       28       1,013  

Segment income (loss) from operations

   $ 3,233     $ (315 )   $ (64 )     2,854     $ 3,336     $ (170 )   $ (57 )     3,109  

Reconciliation of income before income taxes:

                                                                

Unallocated corporate expenses

                             (3,532 )                             (3,712 )

Other income, net

                             813                               1,082  

Income before income taxes

                           $ 135                             $ 479  

 

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):

 

   

June 30, 2025

    

December 31, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Inventories

   $ 1,914     $ 165     $ 67     $ 2,146     $ 2,422     $ 159     $ 36     $ 2,617  

Other inventories and inventory-related deposits1

                       760                         971  

Other assets2

                       42,256                         51,771  

Total assets

                     $ 45,162                       $ 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 June 30,

    

Six Months Ended June 30,

  
   

2025

    

2024

    

2025

    

2024

  

Net sales from external customers:

                                

United States

   $ 299     $ 263     $ 585     $ 525  

Canada

     130       142       231       253  

Peru and Colombia

     320       284       569       504  

Hong Kong1

     8,004       8,468       17,127       17,642  

China

     219       336       453       720  

Taiwan

     396       486       718       823  

Japan

     82       55       146       121  

Malaysia and Singapore

     82       66       132       119  

Russia and Kazakhstan

     101       116       198       217  

Europe

     120       157       270       309  

Other foreign countries

     60       102       121       193  

Total net sales

   $ 9,813     $ 10,475     $ 20,550     $ 21,426  

 

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.