NATURAL HEALTH TRENDS CORP Segments Disclosure

13.    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):

 

		Year Ended December 31, 2025																Year Ended December 31, 2024
		Primary Reporting Unit				China				Russia and Kazakhstan				Total				Primary Reporting Unit				China				Russia and Kazakhstan				Total
Net sales		$	38,386			$	946			$	444			$	39,776			$	40,893			$	1,580			$	490			$	42,963
Cost of sales			10,117				195				211				10,523				10,658				292				228				11,178
Gross profit			28,269				751				233				29,253				30,235				1,288				262				31,785
Less:
Commissions expense1			16,111				—				191				16,302				17,305				—				266				17,571
Employee-related costs			3,506				973				55				4,534				3,629				950				48				4,627
Facility costs			1,180				144				12				1,336				1,191				155				14				1,360
Other segment items2			1,294				261				53				1,608				1,494				325				57				1,876
Segment income (loss) from operations		$	6,178			$	(627	)		$	(78	)			5,473			$	6,616			$	(142	)		$	(123	)			6,351
Reconciliation of income before income taxes:
Unallocated corporate expenses															(7,281	)															(7,650	)
Other income, net															1,241																1,919
Income (loss) before income taxes														$	(567	)														$	620

 

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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):

 

		December 31, 2025																December 31, 2024
		Primary Reporting Unit				China				Russia and Kazakhstan				Total				Primary Reporting Unit				China				Russia and Kazakhstan				Total
Inventories		$	1,496			$	142			$	39			$	1,677			$	2,422			$	159			$	36			$	2,617
Other inventories and inventory-related deposits1															444																971
Other assets2															36,307																51,771
Total assets														$	38,428															$	55,359

 

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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):

 

		Year Ended December 31,
		2025				2024
Net sales from external customers:
United States		$	1,153			$	1,044
Canada			475				535
Peru and Colombia			1,205				1,101
Hong Kong1			32,671				35,106
China			946				1,580
Taiwan			1,542				1,591
Japan			333				292
Russia and Kazakhstan			444				490
Europe			530				635
Other foreign countries			477				589
Total net sales		$	39,776			$	42,963

 

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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.”

 

The Company’s net sales by product and service are as follows (in thousands):

 

		Year Ended December 31,
		2025				2024
Net sales by product and service:
Product sales		$	39,017			$	41,729
Administrative fees, freight and other			1,080				1,544
Less: sales returns			(321	)			(310	)
Total net sales		$	39,776			$	42,963

 

Due to system constraints, it is impracticable for the Company to separately disclose sales by product category for the years presented.

 

The Company’s long-lived tangible assets as well as the Company's operating lease right-of-use assets by geographic area are as follows (in thousands):

 

		December 31,
		2025				2024
Long-lived assets:
United States		$	1,093			$	1,425
Hong Kong			325				828
China			281				164
Other foreign countries			323				271
Total long-lived assets		$	2,022			$	2,688