Quarterly report [Sections 13 or 15(d)]

Note 11 - Segment Information

v3.25.3
Note 11 - Segment Information
 9 Months Ended
Sep. 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 September 30, 2025

    

Three Months Ended September 30, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 9,135     $ 237     $ 105     $ 9,477     $ 9,951     $ 601     $ 139     $ 10,691  

Cost of sales

     2,396       47       47       2,490       2,599       103       63       2,765  

Gross profit

     6,739       190       58       6,987       7,352       498       76       7,926  

Less:

                                                                

Commissions expense1

     3,832       —       44       3,876       4,256       —       77       4,333  

Employee-related costs

     859       224       14       1,097       954       220       13       1,187  

Facility costs

     311       36       3       350       301       37       3       341  

Other segment items2

     253       59       12       324       331       80       14       425  

Segment income (loss) from operations

   $ 1,484     $ (129 )   $ (15 )     1,340     $ 1,510     $ 161     $ (31 )     1,640  

Reconciliation of income (loss) before income taxes:

                                                                

Unallocated corporate expenses

                             (1,835 )                             (1,915 )

Other income, net

                             206                               441  

Income (loss) before income taxes

                           $ (289 )                           $ 166  

 

   

Nine Months Ended September 30, 2025

    

Nine Months Ended September 30, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Net sales

   $ 29,034     $ 690     $ 303     $ 30,027     $ 30,440     $ 1,321     $ 356     $ 32,117  

Cost of sales

     7,573       146       161       7,880       7,963       241       172       8,376  

Gross profit

     21,461       544       142       22,147       22,477       1,080       184       23,741  

Less:

                                                                

Commissions expense1

     12,240       —       136       12,376       12,841       —       181       13,022  

Employee-related costs

     2,597       677       40       3,314       2,780       694       38       3,512  

Facility costs

     890       107       9       1,006       890       119       11       1,020  

Other segment items2

     1,017       204       36       1,257       1,120       276       42       1,438  

Segment income (loss) from operations

   $ 4,717     $ (444 )   $ (79 )     4,194     $ 4,846     $ (9 )   $ (88 )     4,749  

Reconciliation of income (loss) before income taxes:

                                                                

Unallocated corporate expenses

                             (5,367 )                             (5,627 )

Other income, net

                             1,019                               1,523  

Income (loss) before income taxes

                           $ (154 )                           $ 645  

 

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):

 

   

September 30, 2025

    

December 31, 2024

  
   

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

    

Primary Reporting Unit

    

China

    

Russia and Kazakhstan

    

Total

  
                                                                 

Inventories

   $ 1,475     $ 143     $ 45     $ 1,663     $ 2,422     $ 159     $ 36     $ 2,617  

Other inventories and inventory-related deposits1

                       634                         971  

Other assets2

                       39,954                         51,771  

Total assets

                     $ 42,251                       $ 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 September 30,

    

Nine Months Ended September 30,

  
   

2025

    

2024

    

2025

    

2024

  

Net sales from external customers:

                                

United States

   $ 302     $ 274     $ 887     $ 799  

Canada

     128       134       359       387  

Peru and Colombia

     301       340       870       844  

Hong Kong1

     7,715       8,356       24,842       25,998  

China

     237       601       690       1,321  

Taiwan

     331       454       1,049       1,277  

Japan

     111       81       257       202  

Malaysia and Singapore

     67       58       199       177  

Russia and Kazakhstan

     105       139       303       356  

Europe

     130       164       400       473  

Other foreign countries

     50       90       171       283  

Total net sales

   $ 9,477     $ 10,691     $ 30,027     $ 32,117  

 

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.