Goodwill and Intangibles

9 Months Ended

Sep. 30, 2024

3.	Goodwill and Intangibles

Goodwill

The Company’s reporting units for goodwill are its operating segments, which are also its reportable segments, with the exception of Rhyz other. The Rhyz other segment is made up of three reporting units, which had goodwill of $12.6 million, $3.7 million and $4.7 million as of September 30, 2024, and $12.6 million, $19.6 million and $4.7 million as of December 31, 2023, respectively.

During the three months ended June 30, 2024, the Company determined that the continued decline in the Company’s stock price and corresponding market capitalization as well as declines in some of the Company’s reporting units’ forecasts were triggering events that required the Company to perform a quantitative impairment analysis for all reporting units. Based on the analysis, the Company concluded the fair values of certain of its reporting units were less than their carrying values. As a result, the Company recorded non-cash goodwill impairment charges of $130.9 million within restructuring and impairment expenses on the consolidated statement of income during the three months ended June 30, 2024. The impairment charges were $9.4 million for the Americas segment, $32.2 million for the Mainland China segment, $18.5 million for the Southeast Asia/Pacific segment, $16.0 million for the Japan segment, $29.3 million for the South Korea segment, $2.9 million for the Europe & Africa segment, $6.6 million for the Hong Kong/Taiwan segment and $15.9 million for the BeautyBio reporting unit within the Rhyz other segment. As part of the Company’s impairment analysis, the fair values of the reporting units were determined using the income approach. The income approach used level 3 inputs and utilized management estimates related to revenue growth rates, profitability margins, estimated future cash flows and discount rates.

During the three months ended September 30, 2024, the Company determined that the continued decline in the Company’s stock price and corresponding market capitalization was a triggering event that required the Company to perform a quantitative impairment analysis for the Manufacturing and Rhyz other reporting units. Based on the analysis, the Company concluded the fair value of the Manufacturing and Rhyz other reporting units were in excess of their carrying amounts and no impairment charge was required. For goodwill, the estimated fair value of Manufacturing and Rhyz other reporting units exceeded the carrying value by approximately 2% - 8%; therefore, the reporting units are considered to be at risk of future impairment. The Manufacturing and Rhyz other reporting units’ fair values remain sensitive to unfavorable changes in assumptions utilized in the income approach, including revenue growth rates, profitability margins, estimated future cash flows, and the discount rates that could result in impairment charges in a future period.

The following table presents goodwill allocated to the Company’s reportable segments for the periods ended September 30, 2024 and December 31, 2023 (U.S. dollars in thousands):

	September 30, 2024		December 31, 2023
Nu Skin
Americas	$	—	$	9,449
Southeast Asia/Pacific		—		18,537
Mainland China		—		32,179
Japan		—		16,019
South Korea		—		29,261
Europe & Africa		—		2,875
Hong Kong/Taiwan		—		6,634
Rhyz Investments
Manufacturing		78,875		78,875
Rhyz other		21,010		36,939
Total	$	99,885	$	230,768

Accumulated impairment charges as of September 30, 2024 were $9.4 million for the Americas segment, $18.5 million for the Southeast Asia/Pacific segment, $32.2 million for the Mainland China segment, $16.0 million for the Japan segment, $29.3 million for the South Korea segment, $2.9 million for the Europe & Africa segment, $6.6 million for the Hong Kong/Taiwan segment and $15.9 million for the Rhyz other segment. There were no accumulated impairment charges as of December 31, 2023.

Intangibles

The Company reviews long-lived assets for impairment when performance expectations, events or change in circumstances indicate that the assets’ carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows by comparing the carrying value of the asset group to the net undiscounted cash flows. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset group.

During the second quarter of 2024, based on continued losses and change in forecasted losses associated with the BeautyBio retail asset group within the Rhyz other segment, the Company concluded that these factors were an interim triggering event. As a result, the Company performed an interim impairment test of the asset group and assessed the recoverability of the related asset group by comparing the carrying value of the retail asset group to the net undiscounted cash flow expected to be generated. The recoverability test indicated that the retail asset group was impaired. The Company concluded the retail asset group’s carrying value exceeded its estimated fair value, which was determined utilizing the discounted projected future cash flows, which resulted in an impairment charge. The estimated fair value was based on expected future cash flows using level 3 inputs and utilized management estimates related to revenue growth rates, profitability margins and discount rates. The Company recorded an impairment charge of $10.1 million for its Rhyz other segment during the three months ended June 30, 2024 within restructuring and impairment expenses on the consolidated statement of income. The retail asset group has a remaining carrying value of $2.3 million with a remaining amortization period of approximately 9 years.