NU SKIN ENTERPRISES, INC. (NUS) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes, which are included in
this Annual Report on Form 10-K.

Business Overview

Our Products

Nu Skin Enterprises, Inc. develops and distributes a comprehensive line of premium-quality beauty and wellness solutions in approximately 50 markets worldwide. In 2021, our revenue of
$2.7 billion was primarily generated by our three primary brands: our beauty products brand, Nu Skin; our wellness products brand, Pharmanex; and our anti-aging brand, ageLOC. We operate in the direct
selling channel, primarily utilizing person-to-person marketing to promote and sell our products, including through the use of social and digital platforms.  In all of our markets besides Mainland China, we refer to members of our independent sales
force as “Brand Affiliates” because their primary role is to promote our brand and products through their personal and social networks.

In addition to our core Nu Skin business, we also explore new areas of growth and opportunity through our strategic investment arm known as Rhyz Inc. Rhyz investments include beauty and wellness
product manufacturing companies and other investments. In 2021, the Rhyz companies generated $174.7 million, or 6%, of our 2021 reported revenue (excluding sales to our core Nu Skin business).

Our Global Operations

In 2021, we generated approximately 20% of our revenue from the United States and approximately 21% from Mainland China. Given the size of our international operations, our results, as reported
in U.S. dollars, are often impacted by foreign-currency fluctuations; in 2021, our revenue was positively impacted 2% from foreign-currency fluctuations compared to 2020. In addition, our results can be impacted by global economic, political,
demographic and business trends and conditions.

A Global Network of Sales Leaders and Customers

As of December 31, 2021, we had 1,367,559 persons who purchased products directly from the company during the previous three months (“Customers”). We believe a significant majority of Customers
purchase our products primarily for personal or family consumption but are not actively pursuing the opportunity to generate supplemental income by marketing and reselling products.

Our revenue is highly influenced by the number and productivity of our Sales Leaders. “Sales Leaders” are our Brand Affiliates, and sales employees and independent marketers in Mainland China,
who achieve certain qualification requirements. Our Sales Leaders are also included in our Customer numbers, as they purchase products from the company and are within the definition of our “Customers.”

We have been successful in attracting and motivating our sales force by:

Our global sales force helps us to rapidly introduce products and penetrate our markets with modest up-front promotional expense. We rely on our sales force to create consumer demand for our
products, as opposed to a traditional approach of advertising-generated consumer awareness. Our approach is particularly effective with products that benefit from personal education and demonstration. Similar to other companies in our industry, we
experience relatively high turnover among our sales force.

To enhance customer retention, we have developed product subscription and loyalty programs that provide incentives for consumers to commit to purchase a specific amount of product on a monthly
basis. All purchases under these programs are subject to our standard product payment and return policies. We believe these subscription and loyalty programs have improved consumer retention, have had a stabilizing impact on revenue and have helped
generate recurring sales.

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Product Innovation

Our sales force markets and sells our products, and attracts others to the opportunity, based on the distinguishing benefits and innovative characteristics of our products. As a result, we
leverage our scientific expertise and product development resources to introduce innovative beauty, wellness and anti-aging products. Our sales force is increasingly using social media to market and sell our products. To continue to leverage social
media, it is imperative that we develop demonstrable products that are unique and engaging to younger consumers.

Any delays or difficulties in introducing compelling products or attractive initiatives or tools into our markets may have a negative impact on our revenue and our number of Customers and Sales
Leaders.

Our Product Launch Process

We use a variety of methods to launch our products, enabling us to tailor the launch process to the specific market and the specific product. Prior to making a key product generally available for
purchase, we may do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other product introduction or promotion. These offerings may generate significant activity and a high level of
purchasing, which can result in a higher-than-normal increase in revenue during the quarter and can skew year-over-year and sequential comparisons. We believe our product launch process attracts new Customers and Sales Leaders to our business,
increases consumer trial and provides important marketing and forecasting information about the products to our company.

Beginning in the second half of 2021 and continuing into 2022, we are launching our Beauty Focus Collagen+ skin care supplement and our ageLOC Meta nutritional supplement that helps support metabolic health.

Income Statement Presentation

We report revenue in ten segments, and we translate revenue from each market’s local currency into U.S. dollars using weighted-average exchange rates. Revenue is measured as the amount of
consideration we expect to receive in exchange for transferring products. All revenue is recognized when we satisfy our performance obligations under the contract. We recognize revenue by transferring the promised products to the customer, with
revenue recognized at shipping point, the point in time the customer obtains control of the products. We recognize revenue for shipping and handling charges at the time the products are delivered to or picked up by the customer. In most markets, we
offer a return policy that allows our sales force to return unopened and unused product for up to 12 months subject to a 10% restocking fee. Reported revenue is net of returns, which have historically been less than 5% of annual revenue. Sales
taxes and value added taxes in foreign jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.

Cost of sales primarily consists of:

For markets other than Mainland China, in 2021, we sourced most of our beauty products and wellness products from trusted third-party suppliers and manufacturers. In Mainland China, we operate
manufacturing facilities where we produce the majority of our beauty and wellness products sold in Mainland China. We also produce some products at these facilities that are exported to other markets. In the United States, we have beauty and wellness
manufacturing companies that sell to third-party vendors and are also producing some of our products. Cost of sales and gross profit, on a consolidated basis, may fluctuate as a result of changes in the ratio between self-manufactured products and
products sourced from third-party vendors. In addition, because we purchase a significant amount of our goods in U.S. dollars and recognize revenue in local currencies, our gross margin is subject to exchange rate risks. Because our gross margins
vary from product to product and due to higher pricing in some markets, changes in product mix and geographic revenue mix can impact our gross margin on a consolidated basis.

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Selling expenses are our most significant expense and are classified as operating expenses. Selling expenses include sales commissions paid to our sales force, special incentives, costs for
incentive trips and other rewards, as well as salaries, service fees, benefits, bonuses and other labor and unemployment expenses we pay to our sales force in Mainland China. Selling expenses do not include amounts we pay to our sales force based
on their personal purchases; rather, such amounts are reflected as reductions to revenue. Our global sales compensation plan, which we employ in all our markets except Mainland China, is an important factor in our ability to attract and retain our
Sales Leaders. Under our global sales compensation plan, Sales Leaders can earn “multi-level” compensation, where they earn commissions for product sales to their consumer groups as well as the product sales made through the sales network they have
developed and trained. We do not pay commissions on sales materials. Fluctuations occur in the amount of commissions paid as our numbers of Customers and Sales Leaders change from month to month, but the fluctuation in the overall payout as a
percentage of revenue tends to be relatively small. Selling expenses as a percentage of revenue typically increase in connection with a significant product offering, due to growth in the number of Sales Leaders qualifying for increased sales
compensation and promotional incentives. From time to time, we make modifications and enhancements to our global sales compensation plan in an effort to help motivate our sales force and develop leadership characteristics, which can have an impact
on selling expenses. For example, in the fourth quarter of 2017, we began to implement significant enhancements to our global sales compensation plan, which we have now rolled out across all markets other than Mainland China. One of the changes is
a new bonus program for our sales force, which has an increasing effect on our selling expenses as a percentage of revenue.

Outside of Mainland China, Brand Affiliates also have the opportunity to make profits by purchasing products from us at a discount and selling them to consumers with a mark-up. We do not account
for, nor pay, additional commissions on these mark-ups received by Brand Affiliates. In many markets, we also allow individuals who are not part of our sales force, whom we refer to as “preferred customers,” to buy products directly from us at a
discount. We pay commissions on preferred customer purchases to the referring member of our sales force.

General and administrative expenses include:

Labor expenses are the most significant portion of our general and administrative expenses. Promotion and advertising expenses include costs of sales force conventions held in various markets
worldwide, which we generally expense in the period in which they are incurred. Because our various sales force conventions are not held during each fiscal year, or in the same period each year, their impact on our general and administrative
expenses may vary from year to year and from quarter to quarter. For example, we held our global convention in October 2019 and will have another global convention in the fall of 2023, as we currently plan to hold a global convention every other
year. Our 2021 global convention was held virtually due to the ongoing pandemic. In addition, we hold regional conventions and conventions in our major markets at different times during the year. These conventions have significant expenses
associated with them. Because we have not incurred expenses for these conventions during every fiscal year or in comparable interim periods, year-over-year comparisons have been impacted accordingly.

Provision for income taxes depends on the statutory tax rates and the withholding taxes in each of the jurisdictions in which we operate. For example, statutory tax rates in 2021 were
approximately 17% in Hong Kong, 20% in Taiwan, 25% in South Korea, 32% in Japan and 25% in Mainland China. We are subject to taxation in the United States at the statutory corporate federal tax rate of 21% in 2021, and we pay taxes in multiple
states within the United States at various tax rates. Our overall effective tax rate was 36.6% for the year ended December 31, 2021.

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Critical Accounting Policies and Estimates

The following critical accounting policies and estimates should be read in conjunction with our audited consolidated financial statements and related notes thereto. Management considers our
critical accounting policies to be accounting for income taxes and accounting for intangible assets. In each of these areas, management makes estimates based on historical results, current trends and future projections.

Income Taxes. We account for income taxes in accordance with the Income Taxes Topic of the Financial Accounting Standards Codification. This Topic
establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise’s activities during the current and preceding years. We take an asset and liability approach for financial accounting and
reporting of income taxes. We pay income taxes in many foreign jurisdictions based on the profits realized in those jurisdictions, which can be significantly impacted by terms of intercompany transactions between Nu Skin affiliates around the
world. Deferred tax assets and liabilities are created in this process. As of December 31, 2021, we had net deferred tax assets of $24.1 million. We net these deferred tax assets and deferred tax liabilities by jurisdiction. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts expected to be ultimately realized. These deferred tax assets assume sufficient future earnings will exist for their realization, and are calculated using anticipated tax
rates. In certain jurisdictions, valuation allowances have been recorded against the deferred tax assets specifically related to use of foreign tax credits, research and development credits and net operating losses. When we determine that there is
sufficient taxable income to utilize the foreign tax credits, the research and development credits, or the net operating losses, the valuation allowances will be released. In the event we were to determine that we would not be able to realize all
or part of our deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to earnings in the period such determination was made.

We evaluate our indefinite reinvestment assertions with respect to foreign earnings for each period. Other than earnings we intend to reinvest indefinitely, we accrue for the U.S. federal and
state income taxes applicable to the earnings. For all foreign earnings, we accrue the applicable foreign income taxes. We intend to utilize the offshore earnings to fund foreign investments, specifically capital expenditures. Undistributed
earnings that we have indefinitely reinvested aggregate to $60.0 million as of December 31, 2021. If this amount were repatriated to the United States, the amount of incremental taxes would be approximately $6.0 million.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. In 2009, we entered into a voluntary program with the IRS called Compliance Assurance
Process (“CAP”). Under the CAP program, the IRS audits the tax position of the Company to identify and resolve any tax issues that may arise throughout the tax year.  As of December 31, 2021, tax years through 2020 have been audited and are
effectively closed to further examination. For tax years 2021 and 2022, the Company is in the Bridge phase of the CAP program, pursuant to which the IRS will not accept disclosures, will not conduct reviews and will not provide letters of assurance
for the Bridge years. There are limited circumstances that tax years in the Bridge phase will be opened for examination. With a few exceptions, we are no longer subject to state and local income tax examination by tax authorities for the years
before 2018. In major foreign jurisdictions, we are generally not subject to income tax examinations for years before 2015. However, statutes in certain markets may be as long as ten years for transfer pricing related issues. We are currently under
examination in certain foreign jurisdictions; however, the outcomes of those reviews are not yet determinable.

Our unrecognized tax benefits are related to multiple foreign and domestic jurisdictions. Due to potential changes in unrecognized tax benefits from the multiple jurisdictions in which we
operate, as well as the expiration of various statutes of limitation, it is reasonably possible that our gross unrecognized tax benefits, net of foreign currency adjustments, may increase within the next 12 months by a range of approximately $0.1
to $1.0 million.

At December 31, 2021, we had $15.1 million in unrecognized tax benefits of which $15.1 million, if recognized, would affect the effective tax rate. In comparison, at December 31, 2020, we had
$17.6 million in unrecognized tax benefits of which $17.6 million, if recognized, would affect the effective tax rate. We recognized an increase of approximately $1.6 million in interest and penalties expense during the year ended December 31, 2021
and $1.5 million in interest and penalties during the year ended December 31, 2020. We had approximately $6.7 million, $5.1 million and $3.6 million of accrued interest and penalties related to uncertain tax positions at December 31, 2021, 2020 and
2019, respectively. Interest and penalties related to uncertain tax positions are recognized as a component of income tax expense.

We are subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. We account for such contingent liabilities in accordance
with relevant accounting standards and believe we have appropriately provided for income taxes for all years. Several factors drive the calculation of our tax reserves. Some of these factors include: (i) the expiration of various statutes of
limitations; (ii) changes in tax law and regulations; (iii) issuance of tax rulings; and (iv) settlements with tax authorities. Changes in any of these factors may result in adjustments to our reserves, which would impact our reported financial
results.

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Intangible Assets. Acquired intangible assets may represent indefinite-lived assets, determinable-lived intangibles or goodwill. Of these, only the costs of determinable-lived intangibles
are amortized to expense over their estimated life. The value of indefinite-lived intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. Our impairment testing for goodwill is performed separately
from our impairment testing of indefinite-lived intangibles. We test goodwill for impairment, at least annually, by reviewing the book value compared to the fair value at the reportable unit level. We have the option to perform a qualitative
assessment to determine whether further impairment testing is necessary or to perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Under the qualitative assessment, an entity
is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. If under the quantitative assessment the fair value of a reporting
unit is less than its carrying amount, then the amount of the impairment loss, if any, must be measured. We elected to perform the qualitative assessment for fiscal years 2021 and 2019. We used the quantitative assessment for fiscal year 2020.
Considerable management judgment is necessary to measure fair value. During 2021, we recognized an impairment charge associated with our exit of the Grow Tech segment. We did not recognize any impairment charges for goodwill or intangible assets
during 2020 and 2019.

Results of Operations

The following table sets forth our operating results as a percentage of revenue for the periods indicated:

2021 Compared to 2020

Overview

Revenue in 2021 increased 4% to $2.70 billion from $2.58 billion in 2020. As of the end of the fourth quarter of 2021, Sales Leaders decreased 13% and Customers decreased 12% compared to the
prior year.

Our results benefited from continued growth in social commerce, along with strong product launches of Beauty Focus Collagen+ and ageLOC
Meta, which combined generated approximately $119 million in revenue for 2021. The decline in Customers and Sales Leaders is primarily attributable to continued declines in our Mainland China business, ongoing COVID-related operational
disruptions in Southeast Asia and economical challenges in Latin America. The decline in Customers and Sales Leaders is consistent with our 10% decline in revenue for the fourth quarter of 2021, compared to the same period in 2020. During the
second half of 2022, we currently plan to launch two connected, “input/output” devices.

Earnings per share in 2021 decreased 21% to $2.86 from $3.63 in 2020. In the fourth quarter of 2021, we adopted a restructuring program as we determined to exit our Grow Tech segment, resulting in charges totaling
$65.5 million. The impact of these charges was partially offset by increased revenue in 2021, lower weighted-average outstanding shares due to our stock repurchases.

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Segment Results

We report our business in ten segments to reflect our current management approach. These segments consist of our seven geographic Nu Skin segments—Mainland China, Americas, South Korea, Southeast Asia/Pacific, EMEA,
Japan and Hong Kong/Taiwan—and our three Rhyz Investment segments—Manufacturing, Grow Tech and Rhyz other. The Nu Skin Other category includes miscellaneous corporate revenue and related adjustments. The Rhyz other segment includes other investments
by our Rhyz strategic investment arm, which were entered into during 2021.

The following table sets forth revenue for the years ended December 31, 2021 and 2020 for each of our reportable segments (U.S. dollars in thousands):

The table below sets forth segment contribution for the years ended December 31, 2021 and 2020 for each of our reportable segments (U.S. dollars in thousands). Segment contribution excludes
certain intercompany charges, specifically royalties, license fees, transfer pricing and other miscellaneous items. We use segment contribution to measure the portion of profitability that the segment managers have the ability to control for their
respective segments. For additional information regarding our segments and the calculation of segment contribution, see Note 15 to the consolidated financial statements contained in this report.

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The following table provides information concerning the number of Customers and Sales Leaders as of December 31, 2021 and 2020. “Customers” are persons who have purchased products directly from
the Company during the three months ended as of the date indicated. Our Customer numbers do not include consumers who purchase products directly from members of our sales force. “Sales Leaders” are our Brand Affiliates, and sales employees and
independent marketers in Mainland China, who achieve certain qualification requirements.

Following is a narrative discussion of our results in each segment, which supplements the tables above.

Mainland China. Our Mainland China market continued to be challenged during 2021, as the COVID-19 delta and omicron variants and corresponding government restrictions negatively impacted our
selling and promotional activities. Our reported revenue benefited 6% from favorable foreign currency fluctuations. While we continue to invest in technology solutions to better support our social commerce business model in the Mainland China market,
we are anticipating the challenges will remain in 2022.

The year-over-year decrease in segment contribution primarily reflects lower revenue in 2021 and a 2.2 percentage point increase in selling expenses as a percentage of revenue. The salaries and
service fees of our Sales Leaders in Mainland China are fixed until they are adjusted in a quarterly evaluation process. As a result, we have variations in our selling expenses as percentage of revenue, particularly when there is a sequential
change in revenue.

Americas. Our Americas segment continued to benefit from increased sharing of innovative products by our Brand Affiliates via the social

commerce business model, which drove increased revenue in 2021. In addition, approximately $33 million of the increase in revenue is attributable to new product launches during 2021. The decline in Customers and Sales Leaders is predominately
attributable to the economic challenges being felt in our Latin America markets. The U.S. market, through strong social commerce adoption increased revenue 32% in 2021.

The year-over-year increase in segment contribution primarily reflects the increase in revenue in our U.S. market, which carries a more favorable gross margin than our Latin America markets.

South Korea. Our South Korea market grew 9% in 2021, as it benefited from successful product promotions and the fourth quarter launch of ageLOC Meta, which

contributed $29 million in revenue.  The 8% decline in Customers is primarily a result of the types of promotions we ran during the year, which focused more on increasing the number and productivity of our Sales Leaders.

The year-over-year increase in segment contribution primarily reflects the increased revenue, along with the fixed nature of general and administrative expenses on increased revenue.

Southeast Asia/Pacific. Our Southeast Asia/Pacific segment continued to be challenged by the COVID-19 outbreak and the associated government restrictions in 2021, which led to a decline in
revenue, Customers and Sales Leaders. We are experiencing slower adoption of our social commerce business in our Southeast Asia markets, which is also contributing to the decline in revenue.

The year-over-year decrease in segment contribution for 2021 primarily reflects the decline in revenue.

EMEA. The increase in revenue is primarily attributable to strong adoption by Brand Affiliates of the social commerce business model. In addition, approximately $17 million of the increase
in revenue is attributable to new product launches during 2021. Our reported revenue reflects a 5% benefit from favorable foreign-currency fluctuations. The decline in our  Customers and Sales Leaders is primarily attributable to a strong first half
of 2021, followed by some softening of momentum attributable to the loosening of COVID-19 restrictions, which resulted in a prolonged summer vacation period. The softening of momentum also contributed to an 18% decline in revenue for the fourth
quarter of 2021, compared to the prior-year period.

The year-over-year increase in segment contribution primarily reflects the increased revenue for 2021, along with a 2.0 percentage point increase in gross margin, attributable to a more favorable
product mix along with reduced air freight expense in 2021, and the fixed nature of general and administrative expenses on increased revenue.

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Japan. The decline in revenue is primarily attributable to unfavorable foreign-currency fluctuations. The decline in Customers and Sales Leaders is attributable to the ongoing COVID-19
outbreak, as our Japan market is more reliant on the in-person connections.

The year-over-year decrease in segment contribution is primarily attributable to the decline in reported revenue, partially offset by a decline in general and administrative expenses from lower
labor expenses in 2021.

Hong Kong/Taiwan. Our Hong Kong /Taiwan segment reported a 1% increase in revenue for 2021, with a 3% benefit from favorable foreign-currency fluctuations.  Our Customers and Sales Leaders
decline is primarily attributable to the continued pressure from COVID-19 and a higher reliance on in-person business.

The year-over-year increase in segment contribution is primarily attributable a 1.1 percentage point decrease in selling expenses and a $1.7 million decline in general and administrative expenses
from cost saving measures and lower labor expense for the year.

Manufacturing. Our Manufacturing segment generated a 15% increase in revenue for 2021.  Our previous investments in additional capacity have allowed our manufacturing
companies to continue to increase revenue as the demand for nutrition and personal care products continues to expand.

The 13% decline in segment contribution primarily reflects a $4.8 million increase in inventory reserve.

Grow Tech. On December 22, 2021, we determined to exit our Grow Tech segment, which had been pursuing the commercialization of
controlled-environment agriculture technology for use in the agriculture feed industry. We believe this decision will help us to focus more resources on key strategic initiatives to achieve our future growth objectives and priorities in our core
business. We expect that the actions to wind down this segment’s operations will be substantially completed during the first half of 2022. It is possible that certain contract terminations and legal matters might continue for additional time.
During the fourth quarter of 2021, we recognized a $58.5 million pre-tax charge in connection with the exit, with $6.6 million recorded in cost of goods sold, associated with inventory write-off, $51.9 million in restructuring and impairment, and
a $6.4 million income tax charge. The segment contribution for 2021 includes the $58.5 million impact from the write-off.

Consolidated Results

Revenue

Revenue for the year ended December 31, 2021 increased 4% to $2.70 billion, compared to $2.58 billion in the prior-year period. For a discussion and analysis of this increase in revenue, see
“Overview” and “Segment Results,” above.

Gross profit

Gross profit as a percentage of revenue increased to 75.0% in 2021, compared to 74.5% in 2020. Gross profit as a percentage of revenue for core Nu Skin increased 1.2 percentage points
to 78.2%, reflecting lower freight cost as compared to 2020, when we needed to expedite more orders to meet a spike in demand. Our consolidated gross profit was negatively impacted $6.6 million from inventory write-off associated with our
fourth quarter 2021 restructuring and our increase in inventory reserve at our Manufacturing segment.

Selling expenses

Selling expenses as a percentage of revenue increased to 39.6% in 2021,  compared to 39.5% for 2020. Our core Nu Skin business’s selling expense as a percentage of revenue increased 0.5
percentage points to 42.4% for 2021, compared to 41.9% for 2020. Selling expenses for our core Nu Skin business are driven by the specific performance of our individual Sales Leaders.  Given the size of our sales force and the various components of
our compensation and incentive programs, selling expenses as a percentage of revenue typically fluctuate plus or minus approximately 100 basis points from period to period.

General and administrative expenses

General and administrative expenses increased to $666.4 million in 2021, compared to $646.8 million in 2020. The $19.6 million increase primarily relates to an increase in
IT expense, associated with our cloud transition and ongoing development of digital tools. As a percentage of revenue, general and administrative decreased 0.3 percentage points to 24.7% for 2021, compared to
25.0% for 2020.

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Restructuring and impairment expenses

In the fourth quarter of 2021, we adopted a restructuring program. We determined to exit our Grow Tech segment, as a strategic shift to better align our resources on key strategic initiatives to
achieve the future growth objectives and priorities of the core Nu Skin business. As a result of the restructuring program, we recorded $51.9 million in restructuring and impairment charges in 2021, consisting primarily of a non-cash charge of
$31.9 million for impairment of goodwill, intangibles and fixed assets, and $20.0 million of cash charges, including $6.5 million for employee severance and $13.5 million for other related cash charges associated with our restructuring. The
restructuring charges were recorded in the Grow Tech segment.

Other income (expense), net

Other income (expense), net for 2021 was $(1.5) million of expense, compared to $(1.3) million of expense in 2020.

Provision for income taxes

Provision for income taxes increased to $85.2 million in 2021 from $64.9 million in 2020. Our effective tax rate increased to 36.6% of pre-tax income in 2021 from 25.3% in 2020. The

increase in the effective tax rate for 2021 is primarily due to the disposal of the Grow Tech segment.

For 2022, we currently anticipate that our effective tax rate will be approximately 24-30%. Our actual 2022 effective tax rate could differ materially from this estimate. Our future effective tax
rates could fluctuate significantly, being affected by numerous factors, such as intercompany transactions, changes in our business operations, foreign audits, increases in uncertain tax positions, acquisitions, entry into new markets, the amount
of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have a lower statutory rate and higher than anticipated in jurisdictions where we have a higher statutory rate, losses incurred in jurisdictions, the
inability to realize tax benefits, withholding taxes, changes in foreign currency exchange rates, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation.

Net income

As a result of the foregoing factors, net income in 2021 decreased to $147.3 million, compared to $191.4 million in 2020.

2020 Compared to 2019

For a comparison of our operating results for 2020 compared to 2019, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations beginning on page 42 of our Annual Report on Form
10-K for the fiscal year ended December 31, 2020, as filed with the SEC on February 11, 2021.

Liquidity and Capital Resources

Historically, our principal uses of cash have included operating expenses (particularly selling expenses) and working capital (principally inventory purchases), as well as capital
expenditures, stock repurchases, dividends, debt repayment and the development of operations in new markets. We have at times incurred long-term debt, or drawn on our revolving line of credit, to fund strategic transactions, stock repurchases,
capital investments and short-term operating needs. We typically generate positive cash flow from operations due to favorable margins and have generally relied on cash from operations to fund operating activities. We generated $141.6 million in
cash from operations during 2021, compared to $379.1 million in cash from operations during 2020. The decrease in cash flow from operations primarily reflects an increase in inventory partially attributable to our strategic decision to
carry more inventory to meet customer demand for our new products and build some protection from potential supply chain disruptions, along with the first quarter of 2021 payout of the accrued commission and accrued employee incentive payments
attributable to our growth in the fourth quarter of 2020.

As of December 31, 2021, cash and cash equivalents, including current investments, were $354.8 million compared to $423.9 million as of December 31, 2020. The decrease in cash and
cash equivalents primarily reflects the purchases of property and equipment, our quarterly dividend payments and repurchases of our stock, partially offset by our operating cash flow described above and our net borrowings under our revolving
credit facility during the year, which were primarily to fund our acquisitions, stock repurchases and other expenses for operations. Working capital as of December 31, 2021 was $343.3 million compared to $360.3 million as of December 31, 2020.
The decrease in working capital was primarily attributable to the decrease in cash and cash equivalents, and borrowings under our revolving credit facility during the year, partially offset by increased inventory and lower accrued
expenses, as discussed above.

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Cash requirements. For 2022, we currently expect that our material cash requirements will include the following:

For 2023 and onward, we currently expect the above material cash requirements will remain.  See Note 6 and Note 7 to the consolidated financial statements contained in this report for our future
cash requirements related to our debt principal repayment and our maturities of lease liabilities.

We intend to fund the aforementioned cash requirements with our cash from operations and draw on our revolving credit facility, as needed, to address any short-term funding requirements.

Capital expenditures. Capital expenditures in 2021 totaled $68.6 million. As with 2021, we expect that the capital expenditures in 2022 will be primarily related to:

We estimate that capital expenditures for the uses listed above will total approximately $85–105 million for 2022. We are currently in the building phase of the new manufacturing plant in
Mainland China. We have spent approximately $37.3 million on this project through the end of 2021, and expect that our capital expenditures for this project will total approximately $52-57 million, including $15-20 million during 2022.

Credit agreement. In April 2018, we entered into a Credit Agreement (the “Credit Agreement”) with various financial institutions as lenders and Bank of America, N.A., as administrative agent. The Credit
Agreement provides for a $400.0 million term loan facility and a $350.0 million revolving credit facility, each with a term of five years. We used the proceeds of the term loan and the draw on the revolving facility to pay off our previous credit
agreement and the outstanding balance on our 2016 convertible notes that were converted at the election of the holder in the first quarter of 2018. The interest rate applicable to the facilities is subject to adjustments based on our consolidated
leverage ratio. The term loan facility amortizes in quarterly installments in amounts resulting in an annual amortization of 5.0% during the first and second years, 7.5% during the third and fourth years and 10.0% during the fifth year after the
closing date of the Credit Agreement, with the remainder payable at final maturity. As of December 31, 2021 and 2020, $70.0 million and no outstanding borrowings under our revolving credit facility, and $307.5 million and $337.5 million remaining
balance on our term loan facility. The carrying value of the debt also reflects debt issuance costs of $1.2 million and $2.1 million as of December 31, 2021 and 2020, respectively, related to the Credit Agreement.  The Credit Agreement requires us to
maintain a consolidated leverage ratio not exceeding 2.25 to 1.00 and a consolidated interest coverage ratio of no less than 3.00 to 1.00. We are currently in compliance with all debt covenants under the Credit Agreement.  We are planning to
refinance our Credit Agreement during the first half of 2022.

Derivative instruments. As of December 31, 2021, we had four interest rate swaps, with a total notional principal amount of $200 million and a maturity date of July 31, 2025. We entered into these interest rate
swap arrangements during the third quarter of 2020 to hedge the variable cash flows associated with our variable-rate debt under the Credit Agreement.

Stock repurchase plan. In 2018, our board of directors approved a stock repurchase plan authorizing us to repurchase up to $500.0 million of our outstanding shares of Class A common stock on
the open market or in private transactions. During 2021, we repurchased approximately 1.6 million shares of our Class A common stock under the plan for $80.4 million. As of December 31, 2021, $245.4 million was available for repurchases under the
plan. Our stock repurchases are used primarily to offset dilution from our equity incentive plans and for strategic initiatives.

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Dividends. We paid quarterly cash dividends of $0.38 per share in March, June, September and December of 2021, for a total of $19.3 million, $19.0 million, $19.0 million
and $18.9 million, respectively. In February 2022, our board of directors declared a quarterly cash dividend of $0.385 per share to be paid on March 9, 2022 to stockholders of record on February 28, 2022. Currently, we anticipate that our board of
directors will continue to declare quarterly cash dividends and that the cash flows from operations will be sufficient to fund our future dividend payments. However, the continued declaration of dividends is subject to the discretion of our board of
directors and will depend upon various factors, including our net earnings, financial condition, cash requirements, future prospects and other relevant factors.

Cash from foreign subsidiaries. As of December 31, 2021 and 2020, we held $354.8 million and $423.9 million, respectively, in cash and cash equivalents, including current investments.
These amounts include $274.9 million and $374.7 million as of December 31, 2021 and 2020, respectively, held in our operations outside of the United States. Substantially all of our non-U.S. cash and cash equivalents are readily convertible into
U.S. dollars or other currencies, subject to procedural or other requirements in certain markets, as well as an indefinite-reinvestment designation, as described below.

We typically fund the cash requirements of our operations in the United States through intercompany dividends, intercompany loans and intercompany charges for products, use of
intangible property, and corporate services. However, some markets impose government-approval or other requirements for the repatriation of dividends. For example, in Mainland China, we are unable to repatriate cash from current operations in the
form of dividends until we file the necessary statutory financial statements for the relevant period. As of December 31, 2021 and 2020, we had $50.3 million and $103.0 million, respectively, in cash denominated in Chinese RMB. We also
have experienced delays in repatriating cash from Argentina. As of December 31, 2021 and 2020, we had $11.3 million and $10.6 million, respectively, in intercompany receivable with our Argentina subsidiary. We
also have intercompany loan arrangements with some of our markets, including Mainland China, that allow us to access available cash, subject to certain limits in Mainland China and other jurisdictions. We also have drawn on our revolving line of
credit to address cash needs until we can repatriate cash from Mainland China or other markets, and we may continue to do so. Except for $60 million of earnings in Mainland China that we designated as indefinitely reinvested during the second
quarter of 2018, we currently plan to repatriate undistributed earnings from our non-U.S. operations as necessary, considering the cash needs of our non-U.S. operations and the cash needs of our U.S. operations for dividends, stock repurchases,
capital investments, debt repayment and strategic transactions. Repatriation of non-U.S. earnings is subject to withholding taxes in certain foreign jurisdictions. Accordingly, we have accrued the necessary withholding taxes related to the
non-U.S. earnings.

We currently believe that existing cash balances, future cash flows from operations and existing lines of credit will be adequate to fund our cash needs on both a short- and long-term basis. The
majority of our historical expenses have been variable in nature and as such, a potential reduction in the level of revenue would reduce our cash flow needs. In the event that our current cash balances, future cash flow from operations and current
lines of credit are not sufficient to meet our obligations or strategic needs, we would consider raising additional funds in the debt or equity markets or restructuring our current debt obligations. Additionally, we would consider realigning our
strategic plans, including a reduction in capital spending, stock repurchases or dividend payments.

Non-GAAP Financial Measures

Constant-currency revenue change is a non-GAAP financial measure that removes the impact of fluctuations in foreign-currency exchange rates, thereby facilitating period-to-period comparisons of the Company’s
performance. It is calculated by translating the current period’s revenue at the same average exchange rates in effect during the applicable prior-year period and then comparing that amount to the prior-year period’s revenue.  We believe that
constant-currency revenue change is useful to investors, lenders, and analysts because such information enables them to gauge the impact of foreign-currency fluctuations on our revenue from period to period.

Contingent Liabilities

Please refer to Note 16 to the consolidated financial statements contained in this report for information regarding our contingent liabilities.

Seasonality and Cyclicality

In addition to general economic factors, we are impacted by seasonal factors and trends such as major cultural events and vacation patterns. For example, most Asian markets celebrate their
respective local New Year in the first quarter, which generally has a negative impact on that quarter. We believe that direct selling is also generally negatively impacted during the third quarter, when many individuals, including our sales force,
traditionally take vacations.

Prior to making a key product generally available for purchase, we often do one or more introductory offerings of the product, such as a preview of the product to our Sales Leaders or other
product introduction or promotion. These offerings may generate significant activity and a high level of purchasing, which can result in a higher-than-normal increase in revenue, Sales Leaders and/or Customers during the quarter and can skew
year-over-year and sequential comparisons.

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Recent Accounting Pronouncements

A description of new accounting pronouncements is contained in Note 2 to consolidated financial statements contained in this report..