Quarterly report [Sections 13 or 15(d)]

Note 11 - Segment Information

v3.26.1
Note 11 - Segment Information
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Segment Reporting [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, 2026

    

Three Months Ended March 31, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 8,830     $ 298     $ 78     $ 9,206     $ 10,406     $ 234     $ 97     $ 10,737  

Cost of sales

     2,199       64       40       2,303       2,725       49       58       2,832  

Gross profit

     6,631       234       38       6,903       7,681       185       39       7,905  

Less:

                                                                

Commissions expense1

     3,826       —       27       3,853       4,435       —       53       4,488  

Employee-related costs

     875       233       15       1,123       959       233       12       1,204  

Facility costs

     293       37       3       333       285       35       3       323  

Other segment items2

     412       53       10       475       523       64       12       599  

Segment income (loss) from operations

   $ 1,225     $ (89 )   $ (17 )     1,119     $ 1,479     $ (147 )   $ (41 )     1,291  

Reconciliation of income (loss) before income taxes:

                                                                

Unallocated corporate expenses

                             (1,593 )                             (1,636 )

Other income, net

                             295                               465  

Income (loss) before income taxes

                           $ (179 )                           $ 120  

 

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, 2026

    

December 31, 2025

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Inventories

   $ 1,530     $ 129     $ 33     $ 1,692     $ 1,496     $ 142     $ 39     $ 1,677  

Other inventories and inventory-related deposits1

                       547                         444  

Other assets2

                       29,711                         36,307  

Total assets

                     $ 31,950                       $ 38,428  

 

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,

  
   

2026

    

2025

  

Net sales from external customers:

                

United States

   $ 279     $ 286  

Canada

     90       101  

Peru and Colombia

     310       249  

Hong Kong1

     7,602       9,123  

China

     298       234  

Taiwan

     264       322  

Japan

     48       64  

Malaysia and Singapore

     51       50  

Russia and Kazakhstan

     78       97  

Europe

     142       150  

Other foreign countries

     44       61  

Total net sales

   $ 9,206     $ 10,737  

 

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.