Nu Skin Enterprises (NUS) risk factors, FY2024 10-K

Other

1. 01Challenges to the form of our network marketing system or to our business practices have harmed and could continue to harm our business
2. 02In 2024, the FTC issued guidance concerning multi-level marketing. The guidance indicates an increasingly restrictive view of multi-level marketing, compensation structures, earnings claims and a company’s protection from liability for claims made by members of its sales force
3. 03Direct selling laws and regulations vary globally, are subject to interpretation or change, and may prohibit or severely restrict direct selling and cause our revenue and profitability to decline
4. 04require that our sales force is compensated for selling products and not for recruiting others
5. 05Sales force activities that violate applicable laws, regulations or policies, or that are alleged to do so, have harmed our business and reputation and resulted in government or third-party actions against us, and they could do so in the future
6. 06Social media platforms’ decisions to prohibit, block or decrease the prominence of our sales force’s content could harm our business
7. 07If our business practices or policies or the actions of our sales force are deemed to be in violation of applicable local regulations regarding foreigners, then we could be sanctioned and/or required to change our business model, which could significantly harm our business
8. 08Our sales compensation plans or other incentives could be viewed negatively by some of our sales force, could be restricted by government regulators, and could fail to achieve desired long-term results and have a negative impact on revenue
9. 09Limits on the amount of sales compensation we pay could inhibit our ability to attract and retain our sales force, negatively impact our revenue and cause regulatory risks
10. 10We may be held responsible for certain taxes, assessments and other requirements relating to the activities of our sales force, which could harm our financial condition and operating results
11. 11Some jurisdictions have, without challenging the “independent contractor” status, taken the position that direct sellers must nonetheless pay certain taxes with respect to payments to their sales force
12. 12Inability of products, platforms, business opportunities and other initiatives to gain or maintain sales force and market acceptance could harm our business, and trends among older and younger generations of customers contribute to this risk
13. 13Difficult economic conditions could harm our business
14. 14Our markets are intensely competitive, and market conditions and the strengths of competitors may harm our business
15. 15Adverse publicity concerning our business, marketing plan, products or people could harm our business and reputation
16. 16These issues have previously resulted in negative publicity and have harmed our business
17. 17Product diversion may have a negative impact on our business
18. 18Our operations in Mainland China are subject to significant government scrutiny, and we could be subject to fines or other penalties
19. 19If direct selling regulations in Mainland China are modified, interpreted or enforced in a manner that results in negative changes to our business model or the imposition of a range of potential penalties, our business could be significantly negatively impacted
20. 20Our ability to expand our business in Mainland China could be negatively impacted if we are unable to obtain additional necessary national and local government approvals in Mainland China
21. 21If we are not able to register products for sale in Mainland China, our business could be harmed
22. 22Epidemics and other crises have negatively impacted our business and may do so in the future

International Risks

1. 23Our ability to conduct business in international markets may be affected by political, legal, tax and regulatory risks
2. 24It is unpredictable what impact, if any, the recent change in political administrations in the United States will have on the above risks. If actions by the United States or other jurisdictions cause any of the above risks to materialize, our financial position and results of operations could be negatively affected
3. 25We are subject to financial risks as a result of our international operations, including exposure to foreign-currency fluctuations, currency controls and inflation in foreign markets, all of which could impact our financial position and results of operations
4. 26Changes to tariff and import/export regulations, and trade disputes between the United States and other jurisdictions may have a negative effect on global economic conditions and our business, financial results and financial condition

Human Capital Risks

1. 27If we are unable to retain our existing sales force and recruit additional people to join our sales force, our revenue may not increase and may even decline
2. 28We depend on our key personnel and Sales Leaders, and the loss of the services provided by any of our executive officers, other key employees or key Sales Leaders could harm our business and results of operations
3. 29Production difficulties, quality control problems, inaccurate forecasting, shortages in ingredients, and reliance on our suppliers could harm our business
4. 30The loss of or a disruption in our manufacturing, supply chain and distribution operations, or significant expenses or violations incurred by such operations, could adversely affect our business
5. 31Our business could be negatively impacted if we fail to execute our product launch process or ongoing product sales due to difficulty in forecasting or increased pressure on our supply chain, information systems and management
6. 32If we are unable to effectively manage our growth in certain markets, our business and operations could be harmed
7. 33System failures, capacity constraints and other information technology difficulties could harm our business
8. 34Any acquired companies or future acquisitions may expose us to additional risks
9. 35risks associated with entering markets or industries in which we have limited or no prior experience, including limited expertise in running the business, developing the technology, and selling and servicing the products
10. 36Regulations governing our products, including the formulation, registration, pre-approval, marketing and sale of our products, could harm our business
11. 37product reformulations, or the recall or discontinuation of certain products that cannot be reformulated to comply with new regulations
12. 38Government regulations and private party actions relating to the marketing and advertising of our products and services may restrict, inhibit or delay our ability to sell our products and harm our business
13. 39Our operations could be harmed if we or our vendors fail to comply with Good Manufacturing Practices
14. 40We may incur product liability claims that could harm our business
15. 41If our sales force or employees provide improper advice regarding our products or our products’ use or safety, we may be subject to additional product liability

Legal, Regulatory and Compliance Risks

1. 42We may become involved in legal proceedings and other matters that could adversely affect our operations or financial results
2. 43Non-compliance or alleged non-compliance with anti-corruption laws could harm our business
3. 44A failure of our internal controls over financial reporting or our regulatory compliance efforts could harm our stock price and our financial and operating results or could result in fines or penalties
4. 45We are subject to changes in tax and customs laws, changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities, which could have a material and adverse impact on our effective tax rate, operating results, cash flows and financial condition
5. 46Government authorities may question our tax or customs positions or change their laws in a manner that could increase our effective tax rate or otherwise harm our business
6. 47A decline in our business could adversely affect our financial position and liquidity, and our debt covenants could limit our ability to pursue transactions or other opportunities that could be beneficial to our business
7. 48We may be subject to claims of infringement on the intellectual property rights or trade secrets of others, resulting in costly litigation
8. 49If we are unable to protect our intellectual property rights or our proprietary information and know-how, our ability to compete could be negatively impacted and the value of our products could be adversely affected
9. 50Failure to maintain satisfactory compliance with certain privacy and data protections laws and regulations, and the integrity of company, employee, sales force, customer or guest data, could expose us to litigation, liability, substantial negative financial consequences and harm to our reputation
10. 51Sales force—We share certain data with our sales force. We could face fines, investigations, lawsuits or other legal action if our sales force violates, or is perceived to violate, applicable laws and regulations, and our reputation and brand could be negatively impacted
11. 52The unauthorized access, use, theft or destruction of our information systems or of data that is stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues
12. 53Our business could be negatively impacted by corporate citizenship and sustainability matters

Risks Related to Our Common Stock

1. 54The market price of our Class A common stock is subject to significant fluctuations due to a number of factors that are beyond our control