Arcutis Biotherapeutics, Inc. 10-K

Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Based on an evaluation under the supervision of and with the participation of our management, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) were effective as of December 31, 2025 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such required information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Inherent Limitations over Controls and Procedures Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 103 Table of Contents Index to Financial Statements (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Management conducted an assessment of the effectiveness of our internal control over financial reporting based our assessment on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2025. The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by an independent registered public accounting firm, as stated in their report included in Part IV Item 15, “Exhibits, Financial Statement Schedules” of this Annual Report on Form 10-K. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with management's evaluation during the three months ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 104 Table of Contents Index to Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Arcutis Biotherapeutics, Inc. Opinion on Internal Control Over Financial Reporting We have audited Arcutis Biotherapeutics, Inc.’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Arcutis Biotherapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated February 25, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Los Angeles, California February 25, 2026 105 Table of Contents Index to Financial Statements Item 9B. OTHER INFORMATION On November 18, 2025 , Keith Leonard , a member of our Board of Directors , entered into a Rule 10b5-1 trading plan , intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The plan provided for the potential exercise and sale of up to 39,272 options held by Mr. Leonard between February 17, 2026 and February 16, 2027 . On December 13, 2025 , Sue-Jean Lin , a member of our Board of Directors , entered into a Rule 10b5-1 trading plan , intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act. The plan provided for the potential exercise and sale of up to 77,880 options, as well as the potential sale of up to 13,004 shares of Common Stock held by Ms. Lin between February 24, 2026 and February 19, 2027 . Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. Part III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE We have adopted an insider trading policy and procedures governing the purchase, sale, and/or other dispositions of our securities by directors, officers, employees and other covered persons that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing requirements of the Nasdaq Global Select Market. This policy imposes regular blackout periods during which certain individuals may not transact in our securities and pre-clearance procedures for transactions by certain specified individuals, including, among others, the members of our board of directors and our executive officers. In addition, this policy prohibits certain transactions that we have determined are higher risk or for which there is a heightened appearance of potential improper or inappropriate conduct, including short sales of our securities, options trading in puts, calls or other derivative securities involving our equity securities, hedging transactions, and margin accounts and pledging of our securities. We regularly review our insider trading policy with our board of directors and management. A copy of our insider trading policy and procedures is filed as Exhibit 19 to this Annual Report on Form 10-K. Further, the company will not transact in any of its own securities unless in compliance with U.S. securities laws. The remaining information required by this item is incorporated by reference to our definitive proxy statement relating to our 2026 Annual Meeting of Stockholders (the 2026 Proxy Statement) to be filed with the SEC within 120 days of December 31, 2025. Item 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the 2026 Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference to the 2026 Proxy Statement. Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to the 2026 Proxy Statement. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated by reference to the 2026 Proxy Statement. 106 Table of Contents Index to Financial Statements Part IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Financial Statement Schedules. The following financial statements are included herein: Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations and Comprehensive Loss F-3 Consolidated Statements of Changes in Stockholders’ Equity F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 All other schedules are omitted because they are not applicable, not required, or because the required information is included in the consolidated financial statements or notes thereto. 107 Table of Contents Index to Financial Statements (b) Exhibits. Exhibit Number Description of Document Incorporated by Reference Form Date Number Filed/Furnished Herewith 3.1 Restated Certificate of Incorporation. 10-Q 5/12/20 3.1 3.2 Restated Bylaws. 10-Q 5/12/20 3.2 4.1 Form of Common Stock Certificate. S-1/A 1/21/20 4.1 4.2† Amended and Restated Investors’ Rights Agreement, dated October 8, 2019, by and among the Registrant and certain of its stockholders. S-1/A 1/21/20 4.2 4.3 Description of Arcutis Biotherapeutics’ Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. * 4.4 Form of Pre-Funded Warrant 8-K 10/23/23 4.1 10.1# Form of Indemnity Agreement. S-1 1/6/20 10.1 10.2# 2017 Stock Incentive Plan and forms of award agreements. S-1 1/6/20 10.2 10.3# 2020 Stock Incentive Plan and forms of award agreements. S-1/A 1/21/20 10.3 10.4# 2020 Employee Stock Purchase Plan and forms of award agreements. S-1/A 1/21/20 10.4 10.5# 2022 Employment Inducement Incentive Plan and forms of award agreements. 10-K 2/22/22 10.5 10.6# Offer Letter, dated January 9, 2020, by and between the Registrant and Todd Franklin Watanabe. S-1/A 1/21/20 10.5 10.8†^ License Agreement, dated July 23, 2018, by and between AstraZeneca AB and the Registrant. S-1 1/6/20 10.12 10.10†^ Collaboration Agreement, dated June 28, 2019, by and between Hawkeye Therapeutics, Inc. and the Registrant. S-1 1/6/20 10.14 10.13# Severance & Change in Control Agreement, by and between the Registrant and Todd Franklin Watanabe. S-1/A 1/21/20 10.17 10.16†^ Supply Agreement, dated November 24, 2020, by and between Registrant and Interquim, S.A. 10-K 2/16/21 10.25 10.17†^ Exclusive Distribution Agreement, dated February 8, 2021, by and between the Registrant and Cardinal Health 105, Inc. 10-Q 5/6/21 10.1 10.18†^ Amendment No. 1, dated October 5, 2022, to the Supply Agreement, dated November 24, 2020, by and among the Registrant and Interquim, S.A. 10-Q 11/8/22 10.2 10.19† Supply and Manufacturing Agreement, dated September 15, 2021, between DPT Laboratories, Ltd. and the Registrant. 10-Q 11/4/21 10.1 10.20 Offer Letter, dated December 13, 2021, by and between the Registrant and Mas Matsuda. 10-K 2/22/22 10.31 10.21 Severance & Change in Control Agreement, by and between the Registrant and Mas Matsuda. 10-K 2/22/22 10.32 10.22† Share Purchase Agreement, dated September 7, 2022, by and among the Registrant, Ducentis Biotherapeutics LTD and the certain stockholders of Ducentis Biotherapeutics LTD. 10-Q 11/8/22 10.1 10.23^ Amended and Restated Loan and Security Agreement, dated January 10, 2023, by and among the Registrant, SLR Investment Corp. and the lenders party thereto. 10-K 2/28/23 10.35 10.24 First Amendment to Amended and Restated Loan and Security Agreement dated November 1, 2023, by and among the Registrant, SLR Investment Corp., and the lenders party thereto. 10-Q 11/3/23 10.2 108 Table of Contents Index to Financial Statements 10.25 Non-Employee Director Compensation Program 10-K 2/28/23 10.36 10.26 Form of Non-Employee Director RSU Deferral Election 10-K 2/28/23 10.37 10.27 License Agreement, dated August 10, 2023, by and between the Registrant and Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. 10-Q 11/3/23 10.1 10.32 Employment Agreement, dated September 16, 2023, by and between Todd Edwards and the Registrant 8-K 9/27/23 10.1 10.33 Severance and Change in Control Agreement, dated September 16, 2023, by and between Todd Edwards and the Registrant 8-K 9/27/23 10.2 10.34 Amended and Restated Sales Agreement, dated January 31, 2024, by and between the Registrant and Cowen and Company, LLC S-3 1/31/24 1.2 10.38† License Agreement, dated February 27, 2024, by and between the Registrant and Sato Pharmaceutical Co., Ltd. 10-Q 5/14/24 10.3 10.39 First Amendment to the License Agreement, dated February 18, 2024, by and between the Registrant and Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. 10-Q 5/14/24 10.4 10.4^ Second Amendment to Amended and Restated Loan and Security Agreement, dated August 9, 2024, by and among the Registrant, Arcutis Canada, Inc., SLR Investment Corp., and the lenders party thereto. 10-Q 8/14/24 10.1 10.41^ Manufacturing Supply Agreement, dated November 8, 2023, by and between the Registrant and Bora Pharmaceuticals Services Inc. 10-Q 8/6/25 10.1 10.42^ Amendment No. 1 to the Manufacturing Supply Agreement, dated March 22, 2024, by and between the Registrant and Bora Pharmaceuticals Services Inc. 10-Q 8/6/25 10.2 10.43^ Amendment No. 2 to the Manufacturing Supply Agreement, dated as of May 14, 2025, by and between the Registrant and Bora Pharmaceuticals Services Inc. 10-Q 8/6/25 10.3 10.44 Severance & Change in Control Agreement, dated April 10, 2025, by and between the Registrant and Latha Vairavan. 8-K 4/10/25 10.1 10.45 Amended and Restated Non-Employee Director Compensation Program. 8-K 6/17/25 10.1 10.46 Transition and Consulting Agreement, dated December 3, 2025, by and between the Company and Bhaskar Chaudhuri. 8-K 12/8/25 10.1 10.47 Offer Letter, dated July 7, 2020, by and between the Registrant and Patrick Burnett . 8-K 7/29/20 10.1 10.48 Severance & Change in Control Agreement, dated July 28, 2020, by and between the Registrant and Patrick Burnett . 8-K 7/29/20 10.2 10.49 Offer L etter, dated February 4, 2020, by and between the Registrant and Latha Vairavan. * 19 Insider Trading Policy and Procedures . 10-K 2/27/24 19 21.1 List of Subsid iaries of the Company . * 109 Table of Contents Index to Financial Statements 23.1 Consent of Independent Registered Public Accounting Firm. * 24.1 Power of Attorney (included in the signature page to this Annual Report on Form 10-K). * 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** 97.1 Arcutis Biotherapeutics, Inc. Policy for Recovery of Erroneously Awarded Compensation . 10-K 2/27/24 97.1 101.INS Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. * 101.SCH Inline XBRL Taxonomy Extension Schema Document. * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. * 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. * 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). * ______________ * Filed herewith. ** Furnished herewith. † Registrant has omitted portions of the exhibit as permitted under Item 601(b)(10) of Regulation S-K. ^ Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request. # Indicates management contract or compensatory plan. Item 16. FORM 10-K SUMMARY None. 110 Table of Contents Index to Financial Statements Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Arcutis Biotherapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Arcutis Biotherapeutics, Inc. (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2026 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. F-1 Table of Contents Index to Financial Statements Sales deductions Description of the Matter As of December 31, 2025, the Company recorded accrued sales deductions of $78.3 million. As described in Note 2 to the consolidated financial statements, revenues from product sales are recognized net of variable consideration for invoice discounts for prompt payment and distribution service fees, government and private payer rebates, chargebacks, discounts and fees, product returns and costs of co-pay assistance programs, which are collectively recorded at the time of sale. Reserves are established for the estimates of variable considerations. Auditing the accrued liabilities related to private payer rebates required significant judgment. The accrued sales deductions related to private payer rebates are based on data received from its customers, current contractual arrangements, specific known market events and trends, external historical data, and forecasted customer buying patterns and patient utilization. Auditing the Company’s accounting for accrued sales deductions related to co-pay assistance programs requires a higher degree of judgment to evaluate the relevance and reliability of audit evidence. The accrued sales deductions related to co-pay assistance programs are estimated based on historical program payments and utilization. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls over the accrued sales deduction processes. This included testing controls over management’s review of significant assumptions and inputs used in the estimate of sales deductions, including actual sales, contractual terms, historical experience, and distributor inventory levels. To test the adequacy of the Company’s accrued sales deductions for private payer rebates and co-pay assistance we obtained management’s calculations for the estimates and performed the following procedures, among others. For accrued private payer rebates, we tested management’s estimation process by developing an independent expectation of the estimated accrual balance based upon actual historical payment data. We agreed terms and conditions for a sample of contracts to the executed agreement and tested a sample of payments made throughout the year. For accrued co-pay assistance programs, we assessed the company’s assumptions of distributor inventory quantities by agreeing the quantities to third party reports. We also assessed the historical share and payment rate assumptions by testing a sample of the historical payments and program utilization. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2019. Los Angeles, California February 25, 2026 F-2 Table of Contents Index to Financial Statements ARCUTIS BIOTHERAPEUTICS, INC. Consolidated Balance Sheets (In thousands, except share and par value) December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 42,907 $ 71,335 Restricted cash 308 617 Marketable securities 178,075 156,620 Trade receivables, net 146,229 73,066 Inventory 22,634 14,526 Prepaid expenses and other current assets 21,079 19,656 Total current assets 411,232 335,820 Property, plant, and equipment, net 1,043 1,041 Intangible assets, net 14,812 9,479 Operating lease right-of-use asset 4,467 1,953 Other assets 1,419 596 Total assets $ 432,973 $ 348,889 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 12,528 $ 14,220 Current portion of long-term debt, net 1,000 — Accrued and other current liabilities 116,310 66,793 Total current liabilities 129,838 81,013 Operating lease liability, long-term 5,266 2,562 Long-term debt, net 107,959 107,203 Other long-term liabilities 431 570 Total liabilities 243,494 191,348 Commitments and contingencies (Note 8) Stockholders’ equity: Common stock, $ 0.0001 par value; 300,000,000 shares authorized; 123,332,672 and 117,848,033 shares issued and outstanding at December 31, 2025 and 2024, respectively 12 12 Additional paid-in capital 1,327,595 1,279,479 Accumulated other comprehensive loss ( 44 ) ( 7 ) Accumulated deficit ( 1,138,084 ) ( 1,121,943 ) Total stockholders’ equity 189,479 157,541 Total liabilities and stockholders’ equity $ 432,973 $ 348,889 See accompanying notes to the consolidated financial statements. F-3 Table of Contents Index to Financial Statements ARCUTIS BIOTHERAPEUTICS, INC. Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share data) Year Ended December 31, 2025 2024 2023 Revenues: Product revenue, net $ 372,072 $ 166,542 $ 29,186 Other revenue 4,000 30,000 30,420 Total revenues 376,072 196,542 59,606 Operating expenses: Cost of sales 36,695 19,128 4,987 Research and development 77,051 76,420 110,575 Selling, general and administrative 274,553 229,391 185,145 Total operating expenses 388,299 324,939 300,707 Loss from operations ( 12,227 ) ( 128,397 ) ( 241,101 ) Other income (expense): Interest income 8,897 16,126 12,517 Interest expense ( 12,083 ) ( 27,168 ) ( 29,712 ) Other income (expense), net 443 47 ( 731 ) Loss before income taxes ( 14,970 ) ( 139,392 ) ( 259,027 ) Provision for income taxes 1,171 647 3,113 Net loss $ ( 16,141 ) $ ( 140,039 ) $ ( 262,140 ) Other comprehensive income (loss): Unrealized income (loss) on marketable securities ( 206 ) 219 1,186 Foreign currency translation adjustment 169 ( 230 ) ( 96 ) Total other comprehensive income (loss) ( 37 ) ( 11 ) 1,090 Comprehensive loss $ ( 16,178 ) $ ( 140,050 ) $ ( 261,050 ) Per share information: Net loss per share, basic and diluted $ ( 0.13 ) $ ( 1.16 ) $ ( 3.78 ) Weighted-average shares used in computing net loss per share, basic and diluted 127,234 120,958 69,305 See accompanying notes to the consolidated financial statements. F-4 Table of Contents Index to Financial Statements ARCUTIS BIOTHERAPEUTICS, INC. Consolidated Statements of Changes in Stockholders’ Equity (In thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance—December 31, 2022 61,037 $ 6 $ 930,425 $ ( 1,086 ) $ ( 719,764 ) $ 209,581 Issuance of shares of common stock for public offering, net of issuance costs of $ 6,546 33,425 3 95,762 — — 95,765 Issuance of shares of common stock net of discount and issuance costs of $ 116 1,250 — 3,136 — — 3,136 Issuance of common stock upon the exercise of stock options 348 — 1,247 — — 1,247 Issuance of common stock upon the vesting of restricted stock units 440 — — — — — Lapse of repurchasing rights related to common stock issued pursuant to early exercises 15 — — — — — Shares issued pursuant to the ESPP 272 — 1,175 — — 1,175 Stock-based compensation expense — — 38,813 — — 38,813 Unrealized gain on marketable securities — — — 1,186 — 1,186 Foreign currency translation adjustment — — — ( 96 ) — ( 96 ) Net loss — — — — ( 262,140 ) ( 262,140 ) Balance—December 31, 2023 96,787 9 1,070,558 4 ( 981,904 ) 88,667 Issuance of shares of common stock for public offering, net of issuance costs of $ 10,820 18,158 3 161,679 — — 161,682 Issuance of common stock upon the exercise of stock options 649 — 2,807 — — 2,807 Issuance of common stock upon the vesting of restricted stock units 1,720 — — — — — Shares issued pursuant to the ESPP 534 — 1,713 — — 1,713 Stock-based compensation expense — — 42,722 — — 42,722 Unrealized gain on marketable securities — — — 219 — 219 Foreign currency translation adjustment — — — ( 230 ) — ( 230 ) Net loss — — — — ( 140,039 ) ( 140,039 ) Balance—December 31, 2024 117,848 12 1,279,479 ( 7 ) ( 1,121,943 ) 157,541 Issuance of common stock upon the exercise of stock options 714 — 4,597 — — 4,597 Issuance of common stock upon the vesting of restricted stock units 2,271 — — — — — Exercise of pre-funded warrants 2,285 — — — — — Shares issued pursuant to the ESPP 215 — 2,376 — — 2,376 Stock-based compensation expense — — 41,143 — — 41,143 Unrealized loss on marketable securities — — — ( 206 ) — ( 206 ) Foreign currency translation adjustment — — — 169 — 169 Net loss — — — — ( 16,141 ) ( 16,141 ) Balance—December 31, 2025 123,333 $ 12 $ 1,327,595 $ ( 44 ) $ ( 1,138,084 ) $ 189,479 See accompanying notes to the consolidated financial statements. F-5 Table of Contents Index to Financial Statements ARCUTIS BIOTHERAPEUTICS, INC. Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 16,141 ) $ ( 140,039 ) $ ( 262,140 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 40,364 41,730 38,813 Amortization of intangible assets 4,667 1,959 750 Non-cash interest expense 1,756 5,404 4,030 Net accretion on marketable securities ( 2,094 ) ( 6,901 ) ( 6,989 ) Other non-cash items, net 652 769 1,980 Changes in operating assets and liabilities: Accounts receivable, net ( 73,163 ) ( 47,259 ) ( 17,349 ) Inventories ( 7,329 ) ( 400 ) ( 5,620 ) Prepaid expenses and other current assets ( 2,007 ) ( 948 ) ( 8,621 ) Accounts payable ( 1,694 ) 2,229 3,152 Accrued liabilities 50,044 32,033 5,594 Operating lease liabilities ( 680 ) ( 735 ) ( 657 ) Net cash used in operating activities ( 5,625 ) ( 112,158 ) ( 247,057 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of marketable securities ( 246,986 ) ( 254,820 ) ( 225,840 ) Proceeds from maturities and sales of marketable securities 227,419 288,783 406,500 Purchases of property and equipment ( 686 ) ( 143 ) ( 428 ) Milestone payment for intangible asset ( 10,000 ) ( 5,000 ) — Net cash provided by (used in) investing activities ( 30,253 ) 28,820 180,232 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, net of issuance costs — 161,682 — Repayment of long-term debt — ( 100,000 ) — Proceeds from issuance of common stock upon exercise of stock options 4,597 2,807 1,247 Proceeds from issuance of common stock for ESPP 2,376 1,713 1,175 Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs — — 95,765 Proceeds from issuance of shares under ATM, net of issuance costs — — 3,136 Net cash provided by financing activities 6,973 66,202 101,323 Effect of exchange rate changes on cash 168 ( 235 ) ( 50 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 28,737 ) ( 17,371 ) 34,448 Cash, cash equivalents and restricted cash at beginning of period 71,952 89,323 54,875 Cash, cash equivalents and restricted cash at end of period $ 43,215 $ 71,952 $ 89,323 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION: Right-of-use assets obtained in exchange for operating lease liabilities $ 2,858 $ — $ — SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest expense paid in cash $ 10,327 $ 22,209 $ 25,445 See accompanying notes to the consolidated financial statements. F-6 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements 1. Description of Business Arcutis Biotherapeutics, Inc. (the Company) is a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs. The Company’s strategy is to focus on validated biological targets and to use its drug development platform and deep dermatology expertise to develop differentiated products that have the potential to address the major shortcomings of existing therapies in its targeted indications. The Company received U.S. Food and Drug Administration (FDA) approval of its first product, ZORYVE ® (roflumilast) cream 0.3% (ZORYVE cream 0.3%), in July 2022, for the treatment of plaque psoriasis, including intertriginous psoriasis, in individuals 12 years of age and older (subsequently approved down to 6 years old in October 2023), and began U.S. commercialization in August 2022. The Company also received Health Canada approval of ZORYVE cream 0.3% in plaque psoriasis in April 2023 and began Canadian commercialization in June 2023. The Company received FDA approval of ZORYVE ® (roflumilast) topical foam 0.3% (ZORYVE foam), in December 2023, for the treatment of seborrheic dermatitis in individuals 9 years of age and older, and began U.S. commercialization in January 2024. The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.15% (ZORYVE cream 0.15%) and began U.S. commercialization, in July 2024, for the topical treatment of mild to moderate atopic dermatitis in adult and pediatric patients 6 years of age and older. The Company received Health Canada approval of ZORYVE foam for seborrheic dermatitis in October 2024, and began Canadian commercialization in December 2024. The Company received Health Canada approval for ZORYVE cream 0.15% for atopic dermatitis in March 2025, and began Canadian commercialization in April 2025. The Company also received FDA approval of ZORYVE foam 0.3% for the treatment of plaque psoriasis of the scalp and body in adult and adolescents 12 years of age and older in May 2025, and began U.S. commercialization in June 2025. The Company received FDA approval of ZORYVE ® (roflumilast) cream 0.05% (ZORYVE cream 0.05%) in October 2025 and began commercialization for the topical treatment of mild to moderate atopic dermatitis in children ages 2 to 5 years of age. The Company received Health Canada approval for ZORYVE foam 0.3% for the treatment of plaque psoriasis of the scalp and body in adult and adolescents 12 years of age and older in October 2025, and began Canadian commercialization in November 2025. The Company has incurred significant annual losses and negative cash flows from operations since its inception and had an accumulated deficit of $ 1,138.1 million and $ 1,121.9 million as of December 31, 2025 and 2024, respectively. The Company may continue to incur operating losses. The Company had cash, cash equivalents, restricted cash, and marketable securities of $ 221.3 million and $ 228.6 million as of December 31, 2025 and 2024, respectively. The Company had $ 100.0 million outstanding under the Loan Agreement as of December 31, 2025. The Company believes that its existing capital resources will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of its financial statements. If the Company's available cash, cash equivalents and marketable securities and anticipated future cash flows from operations are insufficient to satisfy its liquidity requirements, the Company may need to raise additional capital to fund its operations. No assurance can be given as to whether additional financing will be available on terms acceptable to the Company or at all. If sufficient funds on acceptable terms are not available when needed, the Company may be required to curtail certain planned activities. Failure to manage discretionary spending or raise additional funds, as needed, may adversely impact the Company’s ability to achieve its intended business objectives and have an adverse effect on its results of operations and future prospects. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The Company’s consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (U.S. GAAP). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and all intercompany balances and transactions have been eliminated. F-7 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Certain prior year amounts, which are not material, have been reclassified to conform to current year presentation in the consolidated balance sheets, consolidated statements of operations and comprehensive loss, consolidated statement of cash flows and the notes to the consolidated financial statements. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions include those related to revenue recognition, accrued and prepaid research and development expenses, and income taxes. Additionally, the Company uses available market information to assess the fair value of its marketable securities. The Company regularly evaluates its estimates using historical experience, expectations of future impacts and other assumptions that the Company believes are reasonable, and the Company adjusts its estimates and assumptions when facts and circumstances indicate the need for change. If actual results differ from those estimates, the Company includes the updates in its consolidated financial statements in the period the actual amounts become known. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Marketable Securities Investments with original maturities of greater than three months are classified as marketable securities on the balance sheet. Marketable securities consist of investment grade short to intermediate-term fixed income investments that have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices or pricing models for similar securities. Management determines the appropriate classification of its investments in fixed income securities at the time of purchase. Available-for-sale securities with original maturities beyond three months at the date of purchase, including those that have maturity dates beyond one year from the balance sheet date, are classified as current assets on the consolidated balance sheets due to their highly liquid nature and availability for use in current operations. Unrealized gains and losses are excluded from earnings and are reported as a component of other comprehensive income (loss) on the consolidated balance sheets. Realized gains and losses as well as credit losses, if any, on marketable securities are included in other income (expense), net in the statements of operations and comprehensive loss. Interest on marketable securities is included in interest income in the statements of operations and comprehensive loss. The Company evaluated the underlying credit quality and credit ratings of the issuers during the period. In making this judgment, the Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost, the Company's intent to sell or whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the financial condition of the issuer and any changes thereto, and, as necessary, the portion of a decline in fair value that is credit-related. This assessment could change in the future due to new developments or changes in assumptions related to any particular security. To date, no such credit losses have occurred or have been recorded. The cost of investments sold is based on the specific-identification method. Trade Receivables, net The Company’s trade accounts receivable consists of amounts due primarily from pharmaceutical wholesalers and specialty pharmacy providers in the United States and Canada (collectively, its customers) related to sales of ZORYVE and have standard payment terms. For certain customers, the trade accounts receivable for the customer is net of distribution service fees, prompt pay discounts, and other adjustments. The Company monitors the financial performance and creditworthiness of its customers so that it can properly assess and respond to changes in their credit profile. The Company will reserve against trade accounts receivable for estimated credit losses that may arise and any amounts determined to be uncollectible will be written off against the reserve when it is probable that the receivable will not be collected. The reserve amount for estimated losses was not material as of December 31, 2025 and 2024 and the amounts of trade receivable amounts written off for the years ended December 31, 2025, 2024, and 2023 were not material. F-8 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Inventory The Company values its inventories at the lower-of-cost or net realizable value. The Company determines the cost of its inventories, which includes costs related to products held for sale in the ordinary course of business, products in process of production for such sale, and items to be currently consumed in the production of goods to be available for sale, on a first-in, first-out (FIFO) basis. Due to the nature of the Company’s supply chain process, inventory that is owned by the Company is physically stored at third-party warehouses, logistics providers, and contract manufacturers. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their net realizable value in the period in which the impairment is first identified. If they occur, such charges are recorded as a component of cost of sales in the consolidated statements of operations and comprehensive loss. The Company capitalizes inventory costs associated with products following regulatory approval when future commercialization is considered probable and the future economic benefit is expected to be realized. Products that may be used in clinical development programs are excluded from inventory and their costs are charged to research and development expense in the consolidated statement of operations as incurred, as long as they do not have an alternative use. Prior to the initial dates of regulatory approval, costs related to the production of inventory were recorded as research and development expense on the Company’s consolidated statements of operations and comprehensive loss in the period incurred. Intangible Assets, net The Company paid a milestone payment of $ 7.5 million to AstraZeneca in the third quarter of 2022 related to the FDA approval and launch of ZORYVE cream 0.3%. This milestone payment was capitalized as an intangible asset and will be amortized to cost of sales over its useful life of 10 years from the date of first commercial sale, as this is the minimum amount of time that the related License Agreement will be in effect. The Company paid additional milestone payments of $ 5.0 million related to the achievement of $ 100.0 million worldwide net sales in October 2024 and $ 10.0 million related to the achievement of $ 250.0 million worldwide net sales in May 2025. These milestone payments were recorded as cumulative catch-up adjustments to the carrying value of the intangible asset. Amortization expense was $ 4.7 million, $ 2.0 million, and $ 0.8 million for the years ended December 31, 2025, 2024, and 2023 , respectively. See Note 7. Estimated future amortization expense for the intangible assets subsequent to December 31, 2025 is as follows (in thousands): Amounts 2026 $ 2,250 2027 2,250 2028 2,250 2029 2,250 2030 2,250 Thereafter 3,562 Total amortization $ 14,812 The Company evaluates its long-lived assets, including intangibles, for impairment whenever events or changes in circumstance indicate that the carrying value of an asset might not be fully recoverable. To do so, the Company compares the carrying value of the intangible asset to the undiscounted net cash flows over its remaining useful life, and if not recoverable, will estimate the fair value of the asset. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results. No impairment losses were recorded for the years ended December 31, 2025, 2024, and 2023. F-9 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Valuation of Other Investments The Company reviews agreements it enters into with third-party entities, pursuant to which the Company may have a variable interest in the entity, in order to determine if the entity is a variable interest entity (VIE). If the entity is a VIE, the Company assesses whether or not it is the primary beneficiary of that entity. In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (i) the power to direct the economically significant activities of the entity and (ii) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. If the Company determines it is the primary beneficiary of a VIE, it consolidates that VIE into the Company’s consolidated financial statements. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation or deconsolidation event. The Company currently does not consolidate any VIEs. Concentration of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, marketable securities, and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of a default by either the financial institutions holding its cash or by its customers owing trade receivables to the extent recorded on the consolidated balance sheets. To manage accounts receivable credit risk, the Company continuously evaluates the creditworthiness of its customers and the need for an allowance for credit losses. Fair Value Measurement The Company’s financial instruments, in addition to those presented in Note 4, include cash equivalents, accounts receivable, accounts payable, accrued liabilities, and long-term debt. The carrying amount of cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate their fair values due to their short maturities. As the long-term debt is subject to variable interest rates that are based on market rates which regularly reset, the Company believes that the carrying value of the long-term debt approximates its fair value. Assets and liabilities recorded at fair value on a recurring basis on the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows: Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets which range from two to five years . Leasehold improvements are depreciated on a straight-line basis over the shorter of their estimated useful lives or lease terms. Maintenance and repairs are expensed as incurred. The Company reviews the carrying values of its property and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no impairments recognized during the years ended December 31, 2025, 2024 and 2023. F-10 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Leases The Company determines if an arrangement is or contains a lease at inception. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The classification of the Company’s leases as operating or finance leases, along with the initial measurement and recognition of the associated ROU assets and lease liabilities, is performed at the lease commencement date. The measurement of lease liabilities is based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate, based on the information available at lease commencement date, to determine the present value of lease payments when its leases do not provide an implicit rate. The Company uses the implicit rate when readily determinable. The ROU asset is based on the measurement of the lease liability, includes any lease payments made prior to or on lease commencement and is adjusted for lease incentives and initial direct costs incurred, as applicable. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. The Company considers a lease term to be the non-cancelable period that it has the right to use the underlying asset, including any periods where it is reasonably assured the Company will exercise the option to extend the contract. Periods covered by an option to extend are included in the lease term if the lessor controls the exercise of that option. The Company’s lease agreements includes lease and non-lease components and the Company has elected to not separate such components for all classes of assets. Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to leases with terms of 12 months or less (short-term leases) for all classes of assets. Accrued and Prepaid Research and Development Expenses The Company records prepaid expenses and accrued liabilities for estimated research and development activities conducted by third-party service providers, which include the conduct of nonclinical studies, clinical trials, and contract manufacturing activities. These costs are a significant component of the Company’s research and development expenses. The Company records these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities and prepaid costs balances in each reporting period. As actual costs become known, the Company adjusts its balances for these activities. Revenues Pursuant to Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers (ASC 606), the Company recognizes revenue when a customer obtains control of promised goods or services. The Company records the amount of revenue that reflects the consideration that it expects to receive in exchange for those goods or services. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that it transfers to the customer. Once a contract is determined to be within the scope of ASC 606 at contract inception, the Company reviews the contract to determine which performance obligations it must deliver and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied. Product Revenue, Net The Company sells its product to its customers in the United States and Canada. The Company’s customers subsequently resell the products to pharmacies, health care providers, and patients. In accordance with ASC 606, the Company recognizes net product revenue from sales when the customers obtain control of the F-11 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Company’s products, which typically occurs upon delivery to the customer. The Company’s payment terms are generally between 30 - 65 days. Revenue from product sales are recorded at the net sales price, or “transaction price,” which includes estimates of variable consideration that result from (a) invoice discounts for prompt payment and distribution service fees, (b) government and private payer rebates, chargebacks, discounts and fees, (c) product returns and (d) costs of co-pay assistance programs for patients, as well as other sales deductions. Reserves are established for the estimates of variable consideration based on the amounts earned or to be claimed on the related sales. The reserves are classified as reductions to trade receivables, net if payable to a customer or accrued liabilities if payable to a third-party. Where appropriate, the Company utilizes the expected value method to determine the appropriate amount for estimates of variable consideration based on factors such as the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is recognized as product revenue only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results vary from the Company’s estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known. Distribution Service Fees : The Company engages with wholesalers and specialty pharmacies to distribute its products to end customers. The Company pays the wholesalers and certain specialty pharmacies a fee for services such as: data reporting, inventory management, chargeback administration, and service level commitment. The Company estimates the amount of distribution services fees to be paid to the customers and adjusts the transaction price with the amount of such estimate at the time of sale to the customer. Prompt Pay Discounts : The Company provides some of its customers with a percentage discount on their invoice if the customers pay within the agreed upon timeframe. The Company estimates the probability of customers paying promptly based on the percentage of discount outlined in the purchase agreement between the two parties, and deducts the full amount of these discounts from its gross product revenue and accounts receivable at the time such revenue is recognized. Product Returns : The Company provides customers a credit for all products returned in accordance with the Company’s returned goods policy. Once the product is returned, it is destroyed. The Company does not record a right-of-return asset. In the early product launch period, the Company estimated its provision for sales returns based on industry data and adjusted the transaction price for such estimates at the time of sale to the customer. As the Company continues to collect data on its actual product returns, it has and will continue to refine its estimated returns rate and adjust its accrual, which affects revenue in the period of adjustment. No such material adjustments were recorded for the year ended December 31, 2025. Chargeback : A chargeback is the difference between the manufacturer's invoice price to the wholesaler and the wholesaler’s customer's contract price. The wholesaler tracks these sales and "charges back" the manufacturer for the difference between the negotiated prices paid between the wholesaler's customers and wholesaler's acquisition cost. The Company estimates the percentage of goods sold that are eligible for chargeback and adjusts the transaction price for such discount at the time of sale to the customer. Co-payment Assistance : Patients who meet certain eligibility requirements may receive co-payment assistance. The Company records contra-revenue for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. Rebates and Discounts: The Company accrues rebates for contractually agreed-upon discounts with private payers and mandated discounts under government programs such as the Medicaid Drug Rebate Program in the United States. The Company's estimates for expected utilization of private payer rebates are based on data received from its customers. The Company's estimates for rebates under government programs are based on statutory discount rates and expected utilization as well as historical data it has accumulated since product launch. F-12 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Rebates are generally invoiced and paid in arrears. The accrual balance consists of invoiced amounts not yet paid as well as an estimate of the amount expected to be incurred but not yet invoiced to the Company as of the end of the reporting period. If actual rebates vary from estimates, the Company may need to adjust accruals, which would affect product revenue, net in the period of adjustment. Other Revenue Other revenue is related to the Huadong License and Collaboration Agreement and Sato License Agreement. See Note 7. The Company evaluated the agreements with Huadong and Sato and determined that they are within the scope of ASC 606. The Company applied the five-step model as required by ASC 606 to determine revenue recognition. The nonrefundable upfront payments received in connection with the transfer of the license and related know-how to Huadong in September 2023 and to Sato in March 2024 were determined to be distinct performance obligations, and therefore were recognized in Other revenue. The Company evaluated whether the development and regulatory milestones are considered probable of being reached and determined that their achievement is highly dependent on factors outside of the Company’s control. Therefore, these payments are subject to significant revenue reversal and are therefore not included in the transaction price. At the end of each reporting period, the Company will re-evaluate the probability of achievement of each milestone and, if necessary, adjust its estimate of the overall transaction price and accordingly recognize the related revenue once the probability of significant reversal of revenue is low. Any such adjustments are recorded on a cumulative catch-up basis, and would be reported in Other revenue in the period of adjustment. The sales milestones and royalties will be recognized in Other revenue when the related sales occur. Cost of Sales Cost of sales includes direct and indirect costs related to the manufacturing and distribution of ZORYVE, including raw materials, third-party manufacturing costs, packaging services, freight-in, third-party royalties payable on the Company’s net product revenue, and amortization of certain intangible assets associated with ZORYVE. Cost of sales may also include period costs related to certain inventory warehouse and distribution operations and inventory adjustment charges. The Company began capitalizing inventory costs upon related FDA approval dates for each product. As a result, manufacturing and other inventory costs incurred prior to FDA approval were expensed and, therefore, are not included in cost of sales. Research and Development Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries, payroll taxes, employee benefits, license fees, stock-based compensation expense, materials, supplies, and the cost of services provided by outside contractors. All costs associated with research and development are expensed as incurred. Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods are received or services are rendered. Such payments are evaluated for current or long-term classification based on when they will be realized. The Company has entered into, and may continue to enter into, license agreements to access and utilize certain technology. In each case, the Company evaluates if the license agreement results in the acquisition of an asset or a business. To date, none of the Company’s license agreements have been considered an acquisition of a business. For asset acquisitions, contingent consideration is recognized when the contingency is resolved and the consideration is paid or becomes payable. The upfront payments to acquire such licenses, as well as any future milestone payments made before product approval that do not meet the definition of a derivative, are immediately recognized as research and development expense when paid or become payable, provided there is no alternative future use of the rights in other research and development projects. Selling, General and Administrative Expenses Selling, general and administrative expenses are expensed as incurred and consist primarily of salaries and related costs, including payroll taxes, benefits, stock-based compensation, and travel, and costs related to sales and marketing of ZORYVE. Other selling, general and administrative expenses include legal costs of pursuing patent protection of the Company's intellectual property, insurance, and professional services fees for auditing, tax, F-13 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements and general legal services. Advertising costs are expensed as incurred and were $ 25.3 million, $ 6.9 million, $ 11.2 million for the years ended December 31, 2025, 2024, and 2023, respectively. Stock-Based Compensation The Company accounts for share-based payments at fair value. The fair value of stock options is measured using the Black-Scholes option-pricing model. For share-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for such awards is the date of grant and the expense is recognized on a straight-line basis over the expected vesting period. For share-based awards that vest subject to a performance condition, the Company will recognize compensation cost for awards if and when the Company concludes that it is probable that the awards with a performance condition will be achieved on an accelerated attribution method. The Company accounts for forfeitures as they occur. Income Taxes Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment. The Company records a valuation allowance to reduce deferred tax assets to an amount for which realization is more likely than not. Due to the Company’s historical operating performance and the recorded cumulative net losses in prior fiscal periods, the net deferred tax assets for the United States have been fully offset by a valuation allowance. The Company has an immaterial deferred tax asset related to foreign jurisdictions which is not offset by a valuation allowance. The Company recognizes the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based on the merits of the position. The Company’s policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties incurred in relation to the unrecognized tax benefits. Foreign Currency Translation The Company translates the assets and liabilities of its foreign subsidiaries where the local currencies have been determined to be the functional currencies into U.S. dollars using current exchange rates. Adjustments for foreign currency translation adjustments are recognized in other comprehensive income (loss) in the consolidated statements of operations and comprehensive loss. The earnings or loss of these subsidiaries are translated in U.S. dollars using average exchange rates in effect during each reporting period. Promotion Agreement I n July 2024, the Company entered into a promotion agreement with Kowa Pharmaceuticals America, Inc. (Kowa) to leverage Kowa's primary care sales force to exclusively market and promote ZORYVE to primary care practitioners and pediatricians for all FDA-approved indications until July 2029. The Company recognizes all revenue and Kowa receives a commission for the net sales attributed to Kowa. The commission is recorded in selling, general and administrative expense. For the years ended December 31, 2025 and 2024, revenue from sales attributed to Kowa and related commissions paid or owed to Kowa were not material. Effective January 23, 2026, Kowa and the Company mutually agreed to terminate the promotion agreement. Following this termination, Kowa ceased all sales and promotions of ZORYVE and the Company will not be required to make any further payments to Kowa. Recently Issued Accounting Pronouncements The Company considers the applicability and impact of any recent Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB). Other than the ASUs listed below, all other ASUs were assessed and determined to be either not applicable to the Company or are expected to have minimal impact on the Company's consolidated financial statements. F-14 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures, which requires qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The Company adopted the guidance for the year ended December 31, 2025 and applied any presentational changes from this new standard to all prior years to allow for comparability. See Note 11. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03. F-15 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements 3. Revenues Revenues are recognized under guidance within ASC 606, Revenue from Contracts with Customers . The following table presents the Company's disaggregated revenue for the periods presented (in thousands): Year Ended December 31, 2025 2024 2023 ZORYVE cream 0.3% $ 120,995 $ 85,082 $ 29,186 ZORYVE foam 181,892 71,539 — ZORYVE cream 0.15% 68,274 9,921 — ZORYVE cream 0.05% 911 — — Total product revenue, net 372,072 166,542 29,186 Other revenue 4,000 30,000 30,420 Total revenues $ 376,072 $ 196,542 $ 59,606 Other revenue relates primarily to the Sato and Huadong licensing agreements. See Note 7. Product revenue, net outside the United States represented less than 10% of the Company’s consolidated product revenue, net for the years ended December 31, 2025, 2024 and 2023. Major customers are defined as customers that individually accounted for greater than 10% of the Company's revenue. The following table presents each major customer that accounted for more than 10% of its gross product sales. Year Ended December 31, % of gross product sales 2025 2024 2023 Customer A 17 % 16 % 13 % Customer B 12 % 12 % 13 % Customer C 11 % * * Customer D 11 % 14 % 21 % Customer E * 13 % * Customer F * * 22 % Total gross product sales from major customers 51 % 55 % 69 % * Represents less than 10% of respective balance As of December 31, 2025, amounts due from four of these customers each exceeded 10% of gross trade receivables and accounted for 60 % of net trade receivables on a combined basis. As of December 31, 2024, amounts due from five of these customers each exceeded 10% of gross trade receivables and accounted for 69 % of net trade receivables on a combined basis. F-16 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements 4. Fair Value Measurements The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands): December 31, 2025 Level 1 Level 2 Level 3 Total Assets: Money market funds and cash $ 37,541 $ — $ — $ 37,541 Certificates of deposit — 5,366 — 5,366 Commercial paper — 14,789 — 14,789 Corporate debt securities — 78,764 — 78,764 U.S. Treasury and agency securities 84,522 — — 84,522 Total assets $ 122,063 $ 98,919 $ — $ 220,982 December 31, 2024 Level 1 Level 2 Level 3 Total Assets: Money market funds and cash $ 71,335 $ — $ — $ 71,335 Certificates of deposit — 5,042 — 5,042 Corporate debt securities — 83,955 — 83,955 U.S. Treasury securities 67,623 — — 67,623 Total assets $ 138,958 $ 88,997 $ — $ 227,955 Money market funds and U.S. Treasury and agency securities are valued based on quoted market prices in active markets, with no valuation adjustment. Commercial paper, certificates of deposit and corporate debt securities are valued taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs. F-17 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements The following table summarizes the estimated value of the Company’s cash, cash equivalents and marketable securities, and the gross unrealized holding gains and losses (in thousands): December 31, 2025 Amortized cost Unrealized gains Unrealized losses Estimated fair value Cash and cash equivalents: Money market funds and cash $ 37,541 $ — $ — $ 37,541 Certificates of deposit 5,366 — — 5,366 Total cash and cash equivalents $ 42,907 $ — $ — $ 42,907 Marketable securities: Commercial paper $ 14,782 8 ( 1 ) $ 14,789 Corporate debt securities 78,687 81 ( 4 ) 78,764 U.S. Treasury and agency securities 84,493 45 ( 16 ) 84,522 Total marketable securities $ 177,962 $ 134 $ ( 21 ) $ 178,075 December 31, 2024 Amortized cost Unrealized gains Unrealized losses Estimated fair value Cash and cash equivalents: Money market funds and cash $ 71,335 $ — $ — $ 71,335 Total cash and cash equivalents $ 71,335 $ — $ — $ 71,335 Marketable securities: Certificates of deposit $ 5,042 $ — $ — $ 5,042 Corporate debt securities 83,855 100 — 83,955 U.S. Treasury securities 67,404 219 — 67,623 Total marketable securities $ 156,301 $ 319 $ — $ 156,620 As of December 31, 2025, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the issuers of the available-for-sale securities. The Company generally holds its marketable securities until maturity and does not intend to sell, and is not required to sell, the investments that are in an unrealized loss position before the recovery of their amortized cost basis. For all securities with a fair value less than its amortized cost basis, the Company determined the decline in fair value below amortized cost basis to be non-credit related and no allowance for losses has been recorded. As of December 31, 2025, there were no individual securities that were in a significant unrealized loss position. To date, the Company has not recorded any impairment charges on available-for-sale securities. The Company has elected the practical expedient to exclude the applicable accrued interest from both the fair value and the amortized cost basis of its available-for-sale securities for purposes of identifying and measuring an impairment. Accrued interest receivable related to available-for-sale securities is presented in prepaid expenses and other current assets, separate from marketable securities, on the consolidated balance sheet. As of December 31, 2025 and 2024, accrued interest receivable was immaterial. The Company has made an accounting policy election not to recognize an allowance for credit losses for accrued interest receivables on available-for-sale securities and to write-off any uncollectible accrued interest receivable by recognizing credit loss expense. The Company has not written off any accrued interest receivables for the years ended December 31, 2025 and 2024. F-18 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements As of December 31, 2025, the amortized cost and fair value of marketable securities by contractual maturity were as follows: December 31, 2025 December 31, 2024 Amortized cost Estimated fair value Amortized cost Estimated fair value Maturing within one year $ 138,281 $ 138,395 $ 143,708 $ 144,018 Maturing in one to five years 39,681 39,680 12,593 12,602 Total marketable securities $ 177,962 $ 178,075 $ 156,301 $ 156,620 The following table summarizes the change in the fair value of the embedded derivative instrument for the year ended December 31, 2025 and 2024 (in thousands). There was no activity for the year ended December 31, 2023. December 31, 2025 2024 Beginning balance $ 570 $ 849 Loss (gain) from changes in fair value ( 139 ) ( 279 ) Ending balance $ 431 $ 570 The fair value of the Company’s embedded derivative instrument is based on significant inputs not observed in the market, and thus represents a Level 3 measurement. See Note 9 for further discussion on the embedded derivative instrument. 5. Balance Sheet Components Inventories The components of inventory are summarized as follows (in thousands): December 31, 2025 2024 Raw materials $ 5,047 $ 4,300 Work in progress 5,033 584 Finished goods 12,554 9,642 Total inventories $ 22,634 $ 14,526 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): December 31, 2025 2024 Prepaid co-pay assistance program and rebates $ 9,485 $ 7,369 Prepaid clinical trial costs 2,577 3,244 Other prepaid expenses and current assets 9,017 9,043 Total prepaid expenses and other current assets $ 21,079 $ 19,656 F-19 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Accrued Liabilities Accrued liabilities consist of the following (in thousands): December 31, 2025 2024 Accrued sales deductions $ 78,308 $ 38,430 Accrued compensation 20,533 20,747 Clinical trial accruals 425 — Accrued expenses and other current liabilities 17,044 7,616 Total accrued liabilities $ 116,310 $ 66,793 6. Property and Equipment, net Property and equipment, net consists of the following (in thousands): December 31, 2025 2024 Computer hardware $ 1,349 $ 1,272 Furniture and fixtures 1,270 661 Software 104 104 Leasehold improvements 1,568 1,568 Property and equipment, gross 4,291 3,605 Less accumulated depreciation ( 3,248 ) ( 2,564 ) Property and equipment, net $ 1,043 $ 1,041 Depreciation expense was $ 0.7 million, $ 0.6 million, and $ 0.8 million for the years ended December 31, 2025, 2024, and 2023 respectively. Leasehold improvements are depreciated over the term of the lease, which is the shorter of the improvements' expected useful lives and the lease term. All other fixed asset depreciation is recorded using the straight-line method over the estimated useful lives of the assets ( two to five years ). 7. License Agreements & Ducentis Acquisition Sato License Agreement On February 27, 2024, the Company entered into a license agreement with Sato Pharmaceutical Co., Ltd. (Sato). Pursuant to the terms of the license agreement with Sato (the Sato Agreement), the Company grants to Sato an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Sato to develop, conduct medical affairs activities for, manufacture, commercialize and otherwise exploit roflumilast formulations (the Sato Licensed Products) for all therapeutic uses for certain dermatological indications in humans (the Sato Field) in Japan. The Sato Agreement sets forth each party’s respective obligations with respect to the development, medical affairs activities, manufacture, supply and commercialization of the Sato Licensed Products. Pursuant to the terms of the Sato Agreement, Sato will, at its expense, develop, obtain regulatory approval for, commercialize and conduct medical affairs activities related to the Sato Licensed Products in the Sato Field in Japan, subject to certain of the Company’s approval and oversight rights. Pursuant to the terms of the Sato Agreement, the Company received an upfront payment of $ 25.0 million and will potentially receive additional payments (i) up to an aggregate amount of $ 10.0 million upon the achievement of certain regulatory milestones and (ii) up to an aggregate amount of $ 30.0 million upon the achievement of certain sales milestones. In addition, on a Sato Licensed Product-by-Sato Licensed Product basis, commencing from the first commercial sale of such Sato Licensed Product in Japan until the latest of (i) the expiration of the last valid claim in the intellectual property rights licensed by the Company to Sato under the Sato Agreement covering such Sato Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Sato Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Sato Licensed Product in Japan, F-20 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements the Company will receive low double-digit to mid-teen double-digit percentage royalties on Sato’s, its affiliates’ and sublicensees’ total annual net sales of all Sato Licensed Products, subject to certain royalty reductions. The term of the Sato Agreement continues until, on a Sato Licensed Product-by-Sato Licensed Product basis, the expiration of the Royalty Term, which is the (i) the expiration of the last valid claim in the licensed technology covering such Sato Licensed Product in Japan, (ii) the expiration of regulatory exclusivity for such Licensed Product in Japan, or (iii) ten years after the first commercial sale of such Licensed Product in Japan. The Sato Agreement may be terminated by either party in its entirety if the other party commits a material breach, subject to a cure period, or if the other party becomes insolvent. Sato may terminate the Sato Agreement at-will in its entirety upon 90 days’ written notice. Unless unenforceable under applicable law, the Company may terminate the Sato Agreement in its entirety if Sato, its affiliate or sublicensee contests or assists a third party in contesting the scope, validity or enforceability of any patent or patent application licensed by the Company to Sato. The Company may also terminate the Sato Agreement if Sato or any director, officers, employee, agent, affiliate, sublicensee or subcontractor is charged by a governmental authority for a violation of any anti-corruption, anti-money laundering, sanctions or export or import control laws or regulations, or, subject to the terms of the Sato Agreement, if Sato, its affiliates and sublicensees do not conduct any material development or commercialization activities of a Sato Licensed Product in Japan for a certain period of time. There was no other revenue recorded pursuant to the Sato Agreement for the year ended December 31, 2025 and $ 25.0 million recorded for the year ended December 31, 2024. Huadong License Agreement In August 2023, the Company entered into a license agreement with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd (Huadong), a wholly owned subsidiary of Huadong Medicine Co., Ltd. Pursuant to the terms of the agreement, the Company granted to Huadong an exclusive, sublicensable (under certain circumstances) license under certain patent rights and know-how controlled by the Company for Huadong to develop, conduct medical affairs activities for, manufacture, commercialize, and otherwise exploit both cream and foam topical roflumilast for all therapeutic uses for certain dermatological indications (Huadong Licensed Products) in Greater China (mainland China, Hong Kong, Macau, and Taiwan) and Southeast Asia (Indonesia, Singapore, The Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos, Malaysia, and Vietnam) (Huadong Territories). Huadong will, at its expense, develop, obtain regulatory approval for, commercialize, and conduct medical affairs activities for the Huadong Licensed Products, subject to certain of the Company’s approval and oversight rights. The Company will retain exclusive rights for the development, manufacture and commercialization of topical roflumilast outside the Huadong Territories. As consideration for the rights granted under the license agreement with Huadong (the Huadong Agreement), Huadong paid the Company a non-refundable upfront fee pursuant to the terms of the agreement, upon closing in September 2023. The Company received a net payment of $ 27.0 million, which consisted of a $ 30.0 million upfront payment less the applicable tax withholding obligation in China of $ 3.0 million. In addition, the Company received a net payment of $ 2.7 million in March 2024 related to the achievement of a development and regulatory milestone less the applicable tax withholding. The Company received a net payment of $ 1.8 million in each of December 2024, March 2025 and November 2025, related to the achievement of development and regulatory milestones less the applicable tax withholding. The Company may also potentially receive additional payments: (i) up to an aggregate amount of $ 15.0 million upon the achievement of certain development and regulatory milestones, (ii) up to an aggregate amount of $ 40.3 million upon the achievement of certain sales milestones, and (iii) low double-digit to high-teen double-digit tiered percentage royalties on net sales of the Huadong Licensed Products, all of which would be subject to applicable tax withholding obligations. The term of the Huadong Agreement continues on a Huadong Licensed Product-by-Huadong Licensed Product and country or region-by-country or region basis, until the expiration of the Royalty Term, which is: (i) the date of expiration of the last valid patent claim related to the Huadong Licensed Products, (ii) ten years after the first commercial sale of a Huadong Licensed Product and (iii) the expiration of any regulatory exclusivity as to a Huadong Licensed Product. The Huadong Agreement may be terminated by both parties under certain circumstances. F-21 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Other revenue and related income tax expense related to the Huadong agreement was $ 4.0 million and $ 0.4 million, respectively, for the year ended December 31, 2025. Other revenue and related tax income expense related to the Huadong agreement was $ 5.0 million and $ 0.5 million, respectively, for the year ended December 31, 2024. Other revenue and related income tax expense related to the Huadong agreement was $ 30.0 million and $ 3.0 million, respectively, for the year ended December 31, 2023. AstraZeneca License Agreement In July 2018, the Company entered into an exclusive license agreement with AstraZeneca AB (AstraZeneca), granting the Company a worldwide exclusive license, with the right to sublicense through multiple tiers, under certain AstraZeneca-controlled patent rights, know-how and regulatory documentation, to research, develop, manufacture, commercialize and otherwise exploit products containing roflumilast in topical forms, as well as delivery systems sold with or for the administration of roflumilast (collectively, the AZ-Licensed Products), for all diagnostic, prophylactic and therapeutic uses for human dermatological indications (the Dermatology Field). Under the license agreement with AstraZeneca (the AstraZeneca Agreement), the Company has sole responsibility for development, regulatory and commercialization activities for the AZ-Licensed Products in the Dermatology Field, at its expense, and it shall use commercially reasonable efforts to develop, obtain and maintain regulatory approvals for, and commercialize the AZ-Licensed Products in the Dermatology Field in each of the United States, Italy, Spain, Germany, the United Kingdom, France, China and Japan. In the third quarter of 2022, the Company paid $ 7.5 million to AstraZeneca as a result of the approval of ZORYVE cream 0.3%, which was recorded as an intangible asset. In October 2024, the Company paid $ 5.0 million to AstraZeneca upon achievement of $ 100.0 million in worldwide net sales, which was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset. In May 2025, the Company paid $ 10.0 million to AstraZeneca upon achievement of $ 250.0 million in worldwide net sales and was recorded as a cumulative catch-up adjustment to the carrying value of the intangible asset. The Company is amortizing the intangible asset to cost of sales over its useful life of 10 years from the date of first commercial sale as this is the minimum amount of time that the related AstraZeneca Agreement will be in effect. Amortization expense was $ 4.7 million, $ 2.0 million and $ 0.8 million for the years ended December 31, 2025, 2024, and 2023, respectively. The Company has agreed to make additional cash payments to AstraZeneca of up to an aggregate of $ 5.0 million upon the achievement of specified regulatory approval milestones with respect to the AZ-Licensed Products. With respect to any AZ-Licensed Products the Company commercializes under the AstraZeneca Agreement, it will pay AstraZeneca a low to high single-digit percentage royalty rate on the Company’s, its affiliates’ and its sublicensees’ net sales of such AZ-Licensed Products, subject to specified reductions, until, as determined on an AZ-Licensed Product-by-AZ-Licensed Product and country-by-country basis, the later of the date of the expiration of the last-to-expire AstraZeneca-licensed patent right containing a valid claim in such country and ten years from the first commercial sale of such AZ-Licensed Product in such country. As a result of the commercialization of ZORYVE cream in August 2022, the Company began accruing royalties payable to AstraZeneca, which are recorded in cost of sales and accrued liabilities. Royalty expense during the years ended December 31, 2025, 2024 and 2023 was $ 11.2 million, $ 5.0 million and $ 0.9 million, respectively. Hengrui Exclusive Option and License Agreement In January 2018, the Company entered into an exclusive option and license agreement, or the Hengrui License Agreement, with Jiangsu Hengrui Medicine Co., Ltd. (Hengrui), whereby Hengrui granted the Company an exclusive option to obtain certain exclusive rights to research, develop, and commercialize products containing the compound designated by Hengrui as ivarmacitinib, a Janus kinase type 1 inhibitor, in topical formulations for the treatment of skin diseases, disorders, and conditions in the United States, Japan, and the European Union (including for clarity the United Kingdom). In December 2019, the Company exercised its exclusive option under the agreement and contemporaneously amended the agreement to expand the territory to additionally include Canada. In addition, the Company has agreed to make cash payments of up to an aggregate of $ 20.5 million upon achievement of specified clinical development and regulatory approval milestones with respect to the licensed products and cash payments of up to an additional aggregate of $ 200.0 million in sales-based milestones based on certain aggregate annual net sales volumes with respect to a licensed product. With respect to any products the Company commercializes under the Hengrui License Agreement, it will pay tiered royalties to Hengrui on net sales of each licensed product by the Company, or its affiliates, or its sublicensees, ranging from mid single-digit to sub-teen percentage rates based on tiered annual net sales bands F-22 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements subject to specified reductions. The Company is obligated to pay royalties until the later of (1) expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (2) expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis. Additionally, the Company is obligated to pay Hengrui a specified percentage, ranging from the low-thirties to the sub-teens, of certain non-royalty sublicensing income it receives from sublicensees of its rights to the licensed products, such percentage decreasing as the development stage of the licensed products advance. In June 2022, the Company entered into a side letter agreement with Hengrui and one of its subsidiaries to extend certain rights and obligations under the Hengrui License Agreement to the subsidiary under specified circumstances, including a change of control of such subsidiary. There were no payments made or due in connection with Hengrui for the years ended December 31, 2025, 2024 and 2023. Following the completion of a Phase 1b study in the middle of 2025, the Company elected to halt further development of ARQ-255, a topical formulation of ivarmacitinib, for the treatment of alopecia areata. Ducentis Biotherapeutics LTD Acquisition On September 7, 2022, the Company entered into a Share Purchase Agreement with Ducentis Biotherapeutics LTD (Ducentis) and certain stockholders of Ducentis, pursuant to which the Company acquired all of the outstanding equity interests in Ducentis for (i) 610,258 shares of the Company's common stock, valued at approximately $ 12.5 million and $ 15.9 million in cash, inclusive of liabilities acquired, and (ii) contingent payments of up to an aggregate of $ 400 million, which may become payable upon the achievement of certain development, regulatory, and commercial milestones (the Acquisition). Such contingent payments include a $ 10.0 million payment due within one year from the first dosing of the first human subject enrolled in the first Phase 1 clinical trial of a therapeutic drug containing Ducentis' DS-234 product candidate, now ARQ-234. The Company anticipates commencing such Phase 1 study in the first quarter of 2026. In addition, if applicable, the Company will make payments amounting to a mid-single-digit percentage of any annual net sales of certain products exceeding $ 1.5 billion. The Company accounted for this purchase of equity interests in Ducentis as an in-process research and development (IPR&D) asset acquisition as it has no alternative future use, and recorded a $ 29.6 million charge to research and development expense on the acquisition date. Any contingent payments made under the Share Purchase Agreement will be recorded when it is probable that they will occur and they can be reasonably estimated, at which point the Company will determine whether the payment should be expensed or capitalized depending on whether the IPR&D has achieved market acceptance. There were no payments made or due for the years ended December 31, 2025, 2024 and 2023. Under the terms of the Share Purchase Agreement, the Company will develop and seek FDA approval of a therapeutic product containing ARQ-234 for an atopic dermatitis indication, and if FDA approval of ARQ-234 is obtained by the Company, to commercially launch it in the United States. 8. Commitments and Contingencies Operating Lease The Company's lease for its corporate headquarters ( 22,643 square feet of office space) commenced in February 2019 and was amended in April 2020 in order to relocate to a new expanded space. In August 2025, the Company entered into a second amendment to extend the term of the lease by five years , extending the lease expiration from August 2028 to July 2033. This second amendment had a net effect of increasing the Company's future lease payments by approximately $ 5.4 million, primarily due to the five additional years of rent payments. In accordance with ASC 842, the Company remeasured the present value of the aggregate lease payments over the amended lease term and recorded an increase to the Company’s operating lease liabilities and existing right-of-use lease asset of approximately $ 2.9 million in the third quarter 2025 as a result of this remeasurement. The lease also requires the Company to have an available letter of credit which has a related restricted cash account of $ 0.3 million and $ 0.6 million as of December 31, 2025 and 2024, respectively. F-23 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements The minimum annual rental payments of the Company’s operating lease liability as of December 31, 2025 are as follows (in thousands): Amounts 2026 $ 792 2027 545 2028 862 2029 1,255 2030 1,292 Thereafter 3,398 Total minimum lease payments 8,144 Less: Amounts representing interest ( 2,584 ) Present value of future minimum lease payments $ 5,560 Accrued and other current liabilities 294 Operating lease liability, long-term 5,266 Total operating lease liability $ 5,560 Operating lease costs recognized was $ 0.8 million, $ 0.7 million, and $ 0.7 million for the years ended December 31, 2025, 2024, and 2023, respectively. The following information represents supplemental disclosure for the consolidated statements of cash flows related to the Company’s operating lease (in thousands): December 31, 2025 2024 2023 Cash flows from operating activities Cash paid for amounts included in the measurement of lease liabilities $ 1,027 $ 994 $ 965 The following summarizes additional information related to the operating lease: December 31, 2025 December 31, 2024 Weighted-average remaining lease term (in years) 7.6 3.6 Weighted-average discount rate 9.3 % 7.0 % Manufacturing Agreements In the normal course of business, the Company enters into manufacturing supply agreements for the commercial supply of ZORYVE which include certain minimum purchase commitments. As of December 31, 2025, firm future purchase commitments that are subject to these agreements with a term of greater than one year, excluding those recognized on the consolidated balance sheets, are $ 1.7 million in 2026 and $ 0.9 million in 2027, respectively. These future purchase commitments do not represent all of the Company’s anticipated purchases, but instead represents only the contractually obligated minimum purchases or firm commitments of non-cancelable minimum amounts. Indemnification In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless, and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by F-24 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements reason of their status or service as directors or officers to the fullest extent permitted by the provisions of the Company's Bylaws and the Delaware General Corporation Law. The Company currently has directors’ and officers’ insurance coverage that reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes any potential loss exposure under these indemnification agreements in excess of applicable insurance coverage is minimal. Contingencies From time to time, the Company may be involved in legal proceedings, as well as demands, claims, and threatened litigation, which arise in the normal course of business or otherwise. The ultimate outcome of any litigation is uncertain, and unfavorable outcomes could have a negative impact on the Company's results of operations and financial condition. Regardless of outcome, litigation can have an adverse impact on the Company because of the defense costs, the diversion of management resources, and other factors. As of December 31, 2025 and 2024, the Company determined that no loss contingencies from legal proceedings—including the patent infringement complaint filed against the Company by Teva Pharmaceutical Industries, Ltd.—met the threshold of "probable" and "reasonably estimable", as defined in ASC 450. 9. Debt On December 22, 2021, the Company entered into a loan and security agreement (the Prior Loan Agreement) with SLR Investment Corp. (SLR) and the lenders party thereto. The Prior Loan Agreement was amended and restated on January 10, 2023 (the AR Loan Agreement) to include Arcutis Canada, Inc. as a borrower and party. On November 1, 2023, the Company entered into an amendment to the AR Loan Agreement to, among others, (i) modify the financial covenant relating to minimum net product revenue, and (ii) include an additional minimum financing covenant. On August 9, 2024, the Company entered into a second amendment to the AR Loan Agreement (the AR Loan Agreement, as amended by the first and second amendments, the Loan Agreement), which it determined to be a modification, to, among others, (i) permit, during the period commencing on October 7, 2024 and ending on December 15, 2024, an optional partial prepayment of term loans outstanding, subject to a 1.0 % prepayment penalty (the 2024 Partial Prepayment), (ii) add the tranche C-1 and tranche C-2 term loans, and (iii) facilitate certain other changes, including with respect to the applicable interest rate and maturity date in the event of a 2024 Partial Prepayment. As security for the obligations under the Loan Agreement, the Company granted SLR, for the benefit of the lenders, a continuing security interest in substantially all of the Company's assets, including its intellectual property, subject to certain exceptions. The term loan facility is comprised of (i) a tranche A term loan of $ 75.0 million, (ii) a tranche B-1 term loan of $ 50.0 million, (iii) a tranche B-2 term loan of up to $ 75.0 million, (iv) a tranche C-1 term loan of up to $ 50.0 million, and (v) a tranche C-2 term loan of up to $ 50.0 million (collectively, the Term Loans). The tranche A term loan was funded on December 22, 2021. With the approval of ZORYVE cream 0.3% on July 29, 2022, the tranche B term loans were funded on August 2, 2022. As of December 31, 2025 and 2024, the aggregate principal amount outstanding under the Loan Agreement was $ 100.0 million. On October 8, 2024, the Company made a 2024 Partial Prepayment of $ 100.0 million, which reduced the aggregate principal amount outstanding under the Loan Agreement to $ 100.0 million. In connection with the 2024 Partial Prepayment, the Company is obligated to pay a prepayment penalty of $ 1.0 million by June 30, 2026 and a final fee of $ 6.95 million, representing the final fee applicable to the amount of the 2024 Partial Prepayment, on January 1, 2027. As a result of such 2024 Partial Prepayment, subject to the Company generating a minimum net product revenue for the trailing six ( 6 ) month period ending as of the month prior to the borrowing date equal to 80 % of the Company’s projected net product revenue as set forth in its annual plan for the respective period, the Company will be able to draw down the tranche C-1 and tranche C-2 term loans. The tranche C-1 term loan availability will expire on March 31, 2026 and the tranche C-2 term loan availability will expire on June 30, 2026. In addition, as a result of the 2024 Partial Prepayment, (i) the maturity date of the Loan Agreement is August 1, 2029, (ii) the applicable per annum interest rate is equal to 5.95 % plus the greater of (a) 2.50 % per annum and (b) the one-month Secured Overnight Financing Rate (SOFR), (iii) the Company is no longer subject to certain cost and purchase price restrictions regarding acquisitions, and (iv) the Company may prepay principal amounts outstanding under the Term Loans in minimum increments of $ 25.0 million, subject to a prepayment premium of (a) 3.0 % for any prepayment made prior to the first anniversary of the second amendment, (b) 2.0 % for any prepayment made prior after the first anniversary of the second amendment and prior to the second anniversary of the second amendment, or (c) 1.0 % F-25 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements for any prepayment made prior after the second anniversary of the second amendment and prior to the maturity date. Principal amounts outstanding under the Term Loans will accrue interest at a floating rate equal to the applicable rate in effect from time to time, as determined by SLR on the third business day prior to the funding date of the applicable Term Loan and on the first business day of the month prior to each payment date of each Term Loan. Prior to the 2024 Partial Prepayment, the applicable rate was a per annum interest rate equal to 7.45 % plus the greater of (a) 0.10 % and (b) the one-month SOFR. As a result of such 2024 Partial Prepayment, the applicable interest rate will be a per annum interest rate equal to 5.95 % plus the greater of (a) 2.50 % and (b) the one-month SOFR. On December 31, 2025, the rate was 9.79 %. The benchmark SOFR is subject to change in the event of certain events with respect to the benchmark rate. Interest payments are payable monthly following the funding of any Term Loan. If the Term Loans are accelerated due to, among others, the occurrence of a bankruptcy or insolvency event, the Company is required to make mandatory prepayments of (i) all principal amounts outstanding under the Term Loans, plus accrued and unpaid interest thereon through the prepayment date, (ii) any fees applicable by reason of such prepayment, (iii) the prepayment premiums set forth in the paragraph above, plus (iv) all other obligations that are due and payable, including expenses and interest at the Default Rate (as defined below) with respect to any past due amounts. The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among others, requirements as to financial reporting and insurance and restrictions on the Company’s ability to dispose of its business or property, to change its line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on its property, to pay any dividends or other distributions on capital stock other than dividends payable solely in capital stock or to redeem capital stock. The Company also agreed to a financial covenant whereby the Company must generate a minimum net product revenue equal to 75 % of its projected net product revenue as set forth in the Company's annual plan for the respective period, tested on a trailing six-month basis, as of the end of each month. Each annual plan shall be approved by the Company’s board of directors and SLR, in its capacity as collateral agent, in its reasonable discretion. Any failure by the Company to deliver such annual plan on or before December 15 of the prior year shall be an immediate event of default. The Company was in compliance with all covenants under the Loan Agreement as of December 31, 2025. In addition, the Loan Agreement contains customary events of default that entitle the lenders to cause any indebtedness under the Loan Agreement to become immediately due and payable, and to exercise remedies against the Company and the collateral securing the Term Loans. Under the Loan Agreement, an event of default will occur if, among other things, the Company fails to make payments under the Loan Agreement, the Company breaches any of the covenants under the Loan Agreement, subject to specified cure periods with respect to certain breaches, the lenders determine that a material adverse change has occurred, or the Company or the Company's assets become subject to certain legal proceedings, such as bankruptcy proceedings. Upon the occurrence and for the duration of an event of default, an additional default interest rate, or the Default Rate, equal to 4.0 % per annum will apply to all obligations owed under the Loan Agreement. The prepayment upon default and other potential additional interest provisions under the Loan Agreement were determined to be a compound embedded derivative instrument to be bifurcated from the loan and accounted for as a separate liability for accounting purposes under the guidance in ASC 815, Derivatives and Hedging. At the inception of the Loan Agreement, the fair value of the embedded derivative was determined to be immaterial. The embedded derivative instrument is remeasured at fair value each reporting period with any future changes in fair value reported in Other income, net in the consolidated statement of operations and comprehensive loss. The amounts recognized in Other income, net related to the change in fair value of the embedded derivative instrument during the year ended December 31, 2025 and 2024 were not material. No gain or loss was recognized during the year ended December 31, 2023. The fair value of the embedded derivative instrument as of December 31, 2025 and 2024 was a liability of $ 0.4 million and $ 0.6 million, respectively, and is included in Other-long term liabilities in the accompanying consolidated balance sheets. See Note 4. I n connection with the Loan Agreement, the Company is obligated to pay (i) a final fee equal to 6.95 % of the aggregate original principal amount of the Term Loans outstanding as of the date of the second amendment (x) with respect to any 2024 Partial Prepayment, upon the earliest to occur of (a) January 1, 2027, (b) the acceleration of all F-26 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, and (y) with respect to the Term Loans outstanding as of the date of the second amendment (other than the 2024 Partial Prepayment), upon the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (ii) a 2.00 % fee with respect to tranche C term loans, due and payable on the earliest to occur of (a) the maturity date, (b) the acceleration of all outstanding Term Loans and (c) the prepayment, or refinancing, substitution or replacement of all outstanding Term Loans, (iii) a 2.00 % extension fee with respect to tranche C term loans which remain unfunded after December 31, 2025, which shall accrue during the period commencing January 1, 2026, and ending on the earliest to occur of (a) the expiration of the tranche C term loan availability, and (b) the date on which tranche C term loan is fully drawn, and (iv) a certain amount of lenders’ expenses incurred in connection with the execution of the Loan Agreement. Additionally, in connection with the original Prior Loan Agreement, the Company previously had entered into an Exit Fee Agreement, whereby the Company agreed to pay an exit fee in the amount of 3.0 % of each Term Loan funded upon (i) any change of control transaction or (ii) a revenue milestone, calculated on a trailing six-month basis. Notwithstanding the prepayment or termination of the Term Loan, the exit fee will expire 10 years from the date of the Loan Agreement. The debt issuance costs have been recorded as a debt discount which are being accreted to interest expense through the maturity date of the term loan. Interest expense is calculated using the effective interest method, and is inclusive of non-cash amortization of debt issuance costs. The final maturity payment of $ 13.9 million is recognized over the life of the term loan through interest expense. At December 31, 2025 and 2024, the effective interest rate was 10.92 % and 11.57 %, respectively. Interest expense relating to the term loan was $ 12.1 million, $ 27.2 million and $ 29.7 million, respectively, for the years ended December 31, 2025, 2024 and 2023. The following summarizes additional information related to the Company's long-term debt (in thousands): December 31, 2025 2024 Long-term debt, gross $ 100,000 $ 100,000 Accrued final fee 8,824 7,324 Accrued prepayment penalty 1,000 1,000 Unamortized debt issuance costs ( 865 ) ( 1,121 ) Total carrying value of debt 108,959 107,203 Less current portion ( 1,000 ) — Long-term debt, net $ 107,959 $ 107,203 Upon the contractual maturity of the Company's long term debt, a payment of principal and final fees of $ 107.0 million is due on August 1, 2029. 10. Stockholders' Equity The Company's authorized capital stock consists of 310,000,000 shares, all with a par value of $ 0.0001 per share, of which 300,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. There were no shares of preferred stock outstanding as of December 31, 2025 and 2024. F-27 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Equity Offerings In October 2023, the Company completed a public sale of its common stock, receiving aggregate net proceeds of $ 95.8 million. In addition to the sale of common stock, the Company issued prefunded warrants to purchase 7,500,000 shares of the Company's common stock at $ 2.4999 per underlying share of common stock. The exercise price of the warrants is $ 0.0001 per underlying share of common stock, were fully exercisable upon issuance, and have no expiration date. In October 2025, certain prefunded warrants were exercised, resulting in the issuance of 2,285,000 shares. As of December 31, 2025, prefunded warrants to purchase 5,215,000 shares of the Company's common stock remained outstanding. In February 2024, the Company completed a public sale of its common stock, receiving aggregate net proceeds of $ 161.7 million. At-the-Market (ATM) Offerings On May 6, 2021, the Company entered into a sales agreement (Sales Agreement) with Cowen and Company, LLC (Cowen), under which the Company may from time to time issue and sell shares of its common stock through ATM offerings for an aggregate offering price of up to $ 100.0 million. Cowen will act as the Company's sales agent for the ATM program and is entitled to compensation for its services up to 3 % of the gross proceeds of any shares of common stock sold under the Sales Agreement. In December 2023, the Company sold 1,250,000 shares under the ATM for $ 2.60 per share and received $ 3.1 million in net proceeds. In January 2024, the Company amended and restated its Sales Agreement with Cowen to reset the ATM program and provide for the offer and sale of shares of common stock having an aggregate gross offering price of up to $ 100.0 million. All other terms of the amended and restated Sales Agreement are substantially the same as the original Sales Agreement. The Company has not yet issued or sold any common stock under the amended and restated Sales Agreement. Equity Incentive Plans In January 2020, the Company’s board of directors approved the 2020 Equity Incentive Plan (2020 Plan), which became effective January 30, 2020 in connection with the IPO. The 2020 Plan serves as the successor incentive award plan to the Company’s 2017 Equity Incentive Plan (2017 Plan) and initially reserved 2,134,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit (RSU) awards, and other stock-based awards, plus 1,550,150 shares of common stock that were reserved for issuance pursuant to future awards under the 2017 Plan at the time the 2020 Plan became effective, plus shares represented by awards outstanding under the 2017 Plan that are forfeited or lapsed unexercised and which following the effective date of the 2020 Plan are not issued under the 2017 Plan. In addition, the 2020 Plan reserve will increase on January 1 of each year beginning in 2021 through 2030, by an amount equal to the lesser of (a) 4 % of the shares of stock outstanding (on an as converted basis) on the day immediately prior to the date of increase and (b) such smaller number of shares of stock as determined by the Company's board of directors; provided, however, that no more than 11,000,000 shares of stock may be issued upon the exercise of incentive stock options. Accordingly, on January 1, 2026, 2025 and 2024, the 2020 Plan reserve increased by 4,933,306 , 4,713,921 , and 3,871,494 shares, respectively. As of December 31, 2025, the Company had 4,093,603 shares available for future grant under the 2020 Plan. The 2020 Plan provides for the Company to sell or issue common stock or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the board of directors, and consultants of the Company under terms and provisions established by the board of directors. Under the terms of the 2020 Plan, options may be granted at an exercise price not less than fair market value. The Company generally grants stock-based awards with service conditions. Options granted typically vest over a four-year period but may be granted with different vesting terms. Following the Company’s IPO and in connection with the effectiveness of the Company’s 2020 Plan, the 2017 Plan terminated and no further awards will be granted under that plan. However, all outstanding awards under the 2017 Plan will continue to be governed by their existing terms. F-28 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements In December 2021, the Company’s board of directors approved the 2022 Employment Inducement Incentive Plan (2022 Plan). The 2022 Plan initially reserved 1,250,000 shares of common stock available for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, RSU awards, and other stock-based awards. In November 2022, the 2022 Plan reserve was increased by 1,500,000 . As of December 31, 2025, the Company had 111,533 shares available for future grant under the 2022 Plan. Stock Option Exchange Program On January 16, 2024, the Company commenced an offer to certain eligible employees and consultants to exchange certain outstanding eligible options to purchase shares of the Company’s common stock for a lesser number of restricted stock unit (RSU) awards pursuant to an option exchange program (the Option Exchange). The Option Exchange expired on February 12, 2024. Pursuant to the Option Exchange, eligible option holders elected to exchange, and the Company accepted for cancellation, eligible options to purchase an aggregate of 5,059,129 shares of the Company’s common stock, representing approximately 98 % of the total shares of common stock underlying the eligible options. On February 13, 2024, immediately following the expiration of the Option Exchange, the Company granted 2,129,594 shares of Replacement RSU Awards, pursuant to the terms of the Option Exchange. The Replacement RSU Awards will vest based on continued service with the Company over a period of either 1 , 2 or 3 years, depending on the grant date of the exchanged options. The exchange of stock options was treated as a modification for accounting purposes, which requires an incremental expense of $ 8.6 million to be recognized for the Replacement RSU Awards over their new service periods ( 1 - 3 years). In addition, any unamortized expense remaining on the exchanged options as of the modification will be recognized over their original remaining service period. Stock Option Activity The following summarizes option activity: Number of Options Weighted- Average Exercise Price Remaining Contractual Term (Years) Aggregate Intrinsic Value ($ in thousands) Balance—December 31, 2024 5,342,909 $ 6.69 8.01 $ 43,120 Granted 2,345,398 14.10 Exercised ( 714,125 ) 6.44 Forfeited ( 534,345 ) 9.55 Expired ( 2,865 ) 26.87 Balance—December 31, 2025 6,436,972 $ 9.17 7.75 $ 127,945 Exercisable—December 31, 2025 2,903,391 $ 8.46 6.63 $ 59,750 The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock as of December 31, 2025. The intrinsic value of options exercised for the years ended December 31, 2025, 2024, and 2023 were $ 10.0 million, $ 4.2 million and $ 1.2 million, respectively. The total grant-date fair value of the options vested during the years ended December 31, 2025, 2024, and 2023 were $ 8.5 million, $ 4.0 million and $ 28.0 million, respectively. The weighted-average grant-date fair value of options granted during the years ended December 31, 2025, 2024, and 2023 were $ 9.94 , $ 3.70 and $ 8.01 , respectively. F-29 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Restricted Stock Unit Activity The following table summarizes information regarding the Company's RSUs: Number of Units Weighted-Average Grant Date Fair Value Balance—December 31, 2024 6,055,087 $ 8.04 Granted 3,063,418 14.23 Vested ( 2,275,607 ) 8.24 Forfeited ( 835,383 ) 10.12 Unvested Balance—December 31, 2025 6,007,515 $ 10.83 The grant date fair value of an RSU equals the closing price of the Company's common stock on the grant date. The total grant-date fair value of the RSUs vested during the years ended December 31, 2025, 2024, and 2023 were $ 18.8 million, $ 17.4 million, and $ 9.3 million, respectively. RSUs generally vest equally over four years , except for those issued in connection with the Option Exchange, as previously described. Stock-Based Compensation Expense Stock-based compensation expense included in the consolidated statements of operations and comprehensive loss was as follows (in thousands): Year Ended December 31, 2025 2024 2023 Research and development $ 12,336 $ 13,509 $ 15,544 Selling, general and administrative 28,028 28,221 23,269 Total stock-based compensation expense $ 40,364 $ 41,730 $ 38,813 As of December 31, 2025, there was $ 25.7 million of total unrecognized compensation cost related to unvested options that are expected to vest, which is expected to be recognized over a weighted-average period of 2.6 years. As of December 31, 2025, there was $ 47.5 million of total unrecognized compensation cost related to RSUs that are expected to vest, which is expected to be recognized over a weighted-average period of 2.8 years. In determining the fair value of the stock options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment. Fair value of common stock— The Company uses its closing stock price as reported on Nasdaq on the grant date for the fair value of its stock. Expected Term —The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The Company uses the simplified method (based on the mid-point between the vesting date and the end of the contractual term) to determine the expected term as it does not have sufficient prior exercise data to calculate based on historical data. Expected Volatility — The Company uses its own historical stock price for expected volatility. Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option. Dividend Yield —The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero . F-30 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements The fair value of stock option awards granted was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions: Year Ended December 31, 2025 2024 2023 Expected term (in years) 5.3 – 6.1 1.8 – 6.1 5.0 – 6.1 Expected volatility 72.9 – 79.5 % 79.1 – 83.2 % 75.2 % – 78.4 % Risk-free interest rate 3.7 – 4.4 % 3.6 – 5.0 % 3.5 – 4.7 % Dividend yield — % — % — % 2020 Employee Stock Purchase Plan The Company adopted the 2020 Employee Stock Purchase Plan, or the ESPP, which became effective on January 30, 2020 in connection with the IPO. The ESPP is designed to allow the Company’s eligible employees to purchase shares of the Company’s common stock, at semi-annual intervals, with their accumulated payroll deductions. Under the ESPP, participants are offered the option to purchase shares of the Company’s common stock at a discount during a series of successive offering periods. The option purchase price will be the lower of 85 % of the closing trading price per share of the Company’s common stock on the first trading date of an offering period in which a participant is enrolled or 85 % of the closing trading price per share on the purchase date, which will occur on the last trading day of each offering period. The ESPP is intended to qualify under Section 423 of the U.S. Internal Revenue Service Code of 1986, as amended. The maximum number of the Company’s common stock which will be authorized for sale under the ESPP is equal to the sum of (a) 351,000 shares of common stock and (b) an annual increase on the first day of each year beginning in 2021 and ending in 2030, equal to the lesser of (i) 1 % of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the Company’s board of directors; provided, however, no more than 5,265,000 shares of the Company’s common stock may be issued under the ESPP. Accordingly, on January 1, 2026, 2025 and 2024, the ESPP reserve increased by 1,216,890 , 1,178,480 , and 967,873 shares, respectively. As of December 31, 2025, the Company had 2,806,818 shares available for future grant under the ESPP. Stock-based compensation expense related to the ESPP was $ 1.0 million, $ 0.9 million, and $ 0.9 million for the years ended December 31, 2025, 2024 and 2023, respectively. 11. Income Taxes The Company recorded income tax expense of $ 1.2 million during the year ended December 31, 2025. Of the $ 1.2 million recorded, $ 0.4 million was related to foreign withholding taxes on the milestone payments received in connection with the Huadong Agreement and the remaining related to U.S. state income tax expense and other foreign tax expense. The Company recorded income tax expense of $ 0.6 million during the year ended December 31, 2024. Of the $ 0.6 million recorded, $ 0.5 million was related to foreign withholding taxes on the up-front fee in connection with the Huadong Agreement and the remaining was related to other foreign tax expense. The Company recorded income tax expense of $ 3.1 million during the year ended December 31, 2023. Of the $ 3.1 million recorded, $ 3.0 million was related to foreign withholding taxes on the up-front fee in connection with the Huadong Agreement and the remaining was related to other foreign tax expense. A reconciliation of loss before income taxes for domestic and foreign locations for the years ended December 31, 2025, 2024 and 2023 (in thousands): Year Ended December 31, 2025 2024 2023 United States $ ( 8,244 ) $ ( 130,372 ) $ ( 255,653 ) Foreign ( 6,726 ) ( 9,020 ) ( 3,374 ) Loss before income taxes $ ( 14,970 ) $ ( 139,392 ) $ ( 259,027 ) F-31 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements A reconciliation of provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands): Year Ended December 31, 2025 2024 2023 Current tax provision: Federal $ — $ — $ — State 273 — — Foreign 844 799 3,113 Total current 1,117 799 3,113 Deferred tax provision: Federal — — — State — — — Foreign 54 ( 152 ) — Total deferred 54 ( 152 ) — Provision for income taxes $ 1,171 $ 647 $ 3,113 A reconciliation of income tax computed at federal statutory rates to the reported provision for income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands) (1) : Year Ended December 31, 2025 2024 2023 Tax U.S. federal statutory rate $ ( 3,144 ) 21.0 % $ ( 29,272 ) 21.0 % $ ( 54,396 ) 21.0 % State and local income tax, net of federal income tax effect (2) 836 ( 5.6 ) % ( 11,367 ) 8.2 % 1,512 ( 0.6 ) % Foreign tax effects United Kingdom Statutory tax rate differential ( 319 ) 2.1 % ( 389 ) 0.3 % ( 160 ) 0.1 % Change in valuation allowances 2,071 ( 13.8 ) % 2,427 ( 1.7 ) % 999 ( 0.4 ) % Other ( 77 ) 0.5 % — — % — — % China 402 ( 2.7 ) % 500 ( 0.4 ) % 3,000 ( 1.2 ) % Other 233 ( 1.6 ) % — — % ( 6 ) — % Tax credits ( 1,288 ) 8.6 % ( 804 ) 0.6 % ( 4,763 ) 1.8 % Change in valuation allowances ( 3,145 ) 21.1 % 37,731 ( 27.1 ) % 52,716 ( 20.2 ) % Nontaxable or nondeductible items Sec. 162(m) limitation 1,426 ( 9.5 ) % 633 ( 0.5 ) % 3,386 ( 1.3 ) % Stock-based compensation 3,197 ( 21.4 ) % ( 185 ) 0.1 % 1,787 ( 0.7 ) % Other 857 ( 5.7 ) % 654 ( 0.5 ) % ( 95 ) — % Other adjustments 122 ( 0.8 ) % 719 ( 0.5 ) % ( 867 ) 0.3 % Provision for income taxes $ 1,171 ( 7.8 ) % $ 647 ( 0.5 ) % $ 3,113 ( 1.2 ) % (1) The prior years included in the effective tax rate table have been recast from the financial statements filed previously to align with the new presentation created through adherence to ASU 2023-09. Consideration has only been given to 2025 amounts in terms of the balances that are separately stated within the table. (2) The states and local jurisdictions that contribute to a majority (greater than 50%) of the tax effect in this category include Texas, California and New York based on the distribution of sales and the current year state income tax obligations. F-32 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements The components deferred tax assets and liabilities were as follows (in thousands): December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 180,809 $ 171,681 Intangibles 1,958 1,400 Research and development tax credits 15,698 14,944 Research and expenditure capitalization 23,848 36,255 Accruals and reserves 25,226 16,085 Lease liability 1,413 837 Stock-based compensation 7,744 15,761 Gross deferred tax assets 256,696 256,963 Less valuation allowance ( 255,482 ) ( 256,270 ) Net deferred tax assets 1,214 693 Deferred tax liabilities: Property and equipment — ( 58 ) Right-of-use asset ( 1,110 ) ( 483 ) Gross deferred tax liabilities ( 1,110 ) ( 541 ) Total net deferred tax assets $ 104 $ 152 The Company regularly evaluates the positive and negative evidence in determining the realizability of its deferred tax assets. Based upon the weight of available evidence, which includes historical operating performance and reported cumulative net losses since inception, a valuation allowance on the majority of net deferred tax assets has been recorded as of December 31, 2025 and 2024. The Company intend to maintain its substantially full valuation allowance on its deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The Company has an immaterial deferred tax asset related to a foreign jurisdiction. The valuation allowance decreased by approximately $ 0.8 million and increased by approximately $ 40.1 million during the years ended December 31, 2025 and 2024, respectively, due to similar changes in the underlying deferred tax asset balances. The Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of $ 761.3 million and $ 636.1 million, respectively, as of December 31, 2025. Of the federal NOLs, $ 3.5 million originated before the 2018 tax year and will expire beginning in 2036. Under the Tax Cuts and Jobs Act of 2017, the remaining $ 757.8 million of NOLs generated after December 31, 2017 will be carried forward indefinitely and will be available to offset 80% of taxable income in future years. Of the $ 636.1 million in state net operating loss carryforwards, $ 550.2 million will begin to expire in 2027 and the remaining NOLs carry forward indefinitely. In addition, the Company has foreign NOL carry forwards of $ 23.2 million as of December 31, 2025, which can be carried forward indefinitely. As of December 31, 2025, the Company also had federal and California research and development tax credit carryforwards of $ 23.2 million and $ 4.6 million, respectively. The federal research and development tax credit carryforwards will begin to expire in 2037. The California research and development tax credit carryforwards are available indefinitely. Under Internal Revenue Code Sections 382, as amended, and 383, substantial restrictions exist on the utilization of tax attributes in the event a corporation experienced an “ownership change.” Generally, a Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Accordingly, the Company's ability to utilize net operating loss and tax credit carryforwards may be limited as a result of such ownership changes, and such a limitation could result in the F-33 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements expiration of carryforwards before they are utilized. The Company has completed Section 382 studies that concluded the Company has experienced ownership changes since inception. However, this is not expected to result in the expiration of federal tax attribute carryforwards prior to utilization. Similar rules may apply under state tax laws. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA contains numerous business tax provisions, including business extenders made permanent such as restoration of 100% bonus depreciation, IRC Section 174 expensing for US-based research, and the EBITDA-based business interest expense limitation under Section 163(j). The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended December 31, 2025. The following table summarizes the activity related to the unrecognized tax benefits (in thousands): Year Ended December 31, 2025 2024 2023 Beginning balance $ 42,286 $ 41,390 $ 42,505 Increases related to tax positions taken during a prior year 403 — — Decreases related to tax positions taken during a prior year ( 91 ) ( 131 ) ( 3,097 ) Increases related to tax positions taken during the current year 784 1,027 1,982 Ending balance $ 43,382 $ 42,286 $ 41,390 Included in unrecognized tax benefits of $ 43.4 million at December 31, 2025 was $ 36.2 million of tax benefits that, if recognized, would not impact the Company's income tax benefit or effective tax rate to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets. The Company files tax returns in the United States, state jurisdictions, Canada, and the United Kingdom. The tax years for 2016 and forward are subject to examination by the U.S. tax authorities and the tax years for 2016 and forward are subject to examination by the state tax authorities. Due to net operating loss carryforwards and research and development credits in the United States and state tax jurisdictions, all years effectively remain open. The Company is subject to examination by the tax authorities in Canada and the United Kingdom for the year ended December 31, 2022 to the present period. It is the Company's policy to recognize interest and/or penalties related to uncertain tax benefits as a component of the provision for income taxes. For the years ended December 31, 2025, 2024 and 2023, the Company has no t recognized any interest or penalties related to income taxes. The Company has no accrued interest and penalties as of December 31, 2025 and 2024 due to available tax losses. The amount of cash income taxes paid were not material for the years ended December 31, 2025, 2024 and 2023. 12. Net Loss Per Share Basic net loss per share is calculated by dividing the net loss by the weighted-average common shares outstanding. Pre-funded warrants to purchase 6,941,438 , 7,500,000 , and 1,417,808 shares of the Company's stock were included in the weighted-average common shares outstanding used in calculating net loss per share for the years ended December 31, 2025, 2024 and 2023, respectively, as the exercise price of the pre-funded warrants is negligible and the pre-funded warrants are fully vested and exercisable. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Since the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share since the effects of potentially dilutive securities are antidilutive. Shares of common stock subject to repurchase are excluded from the weighted-average shares. F-34 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements Potential dilutive securities, which include unvested RSUs and unvested performance-based RSUs for which established performance criteria have been achieved as of the end of the respective periods, vested and unvested options to purchase common stock and shares to be issued under the Company's employee stock purchase plan (ESPP), have been excluded from the calculation of diluted net loss per common share in each period in which the Company recorded a net loss, as the effect is antidilutive. The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the periods presented due to their anti-dilutive effect: As of December 31, 2025 2024 2023 Stock options to purchase common stock 6,436,972 5,342,909 7,919,699 RSUs subject to future vesting 6,007,515 6,055,087 2,929,602 ESPP shares subject to future issuance 11,616 16,338 26,368 Total 12,456,103 11,414,334 10,875,669 F-35 Table of Contents ARCUTIS BIOTHERAPEUTICS, INC. Notes to Consolidated Financial Statements 13. Segment Reporting The Company has one reportable segment relating to the development and commercialization of treatments for dermatological diseases. The Company’s Chief Operating Decision Maker (CODM) is its Chief Executive Officer. The CODM evaluates financial information on a consolidated basis for the purposes of allocating resources and assessing performance. Substantially all of the Company's assets are located in the United States. The table below is a summary of the segment profit or loss, including significant segment expenses (in thousands): Year Ended December 31, 2025 2024 2023 Total revenues $ 376,072 $ 196,542 $ 59,606 Less: Cost of sales 32,028 17,169 4,237 Topical roflumilast program costs 10,938 5,210 35,607 Topical JAK inhibitor program costs 741 2,945 3,334 Other early-stage programs costs 6,372 11,477 5,681 Research and development compensation and personnel-related expenses 39,779 39,216 44,613 Selling, general and administrative expenses 274,033 228,908 184,628 Other segment expenses (1) 24,408 20,014 22,607 Total operating expenses 388,299 324,939 300,707 Operating loss ( 12,227 ) ( 128,397 ) ( 241,101 ) Interest income 8,897 16,126 12,517 Interest expense ( 12,083 ) ( 27,168 ) ( 29,712 ) Other income (expense), net 443 47 ( 731 ) Provision for income taxes 1,171 647 3,113 Segment and consolidated net loss $ ( 16,141 ) $ ( 140,039 ) $ ( 262,140 ) (1) Other segment expenses include professional services related to research and development, medical affairs, depreciation and amortization expenses. F-36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. ARCUTIS BIOTHERAPEUTICS, INC. Date: February 25, 2026 By: /s/ Todd Franklin Watanabe Todd Franklin Watanabe President, Chief Executive Officer and Director (Principal Executive Officer) Date: February 25, 2026 By: /s/ Latha Vairavan Latha Vairavan Chief Financial Officer (Principal Financial and Accounting Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Todd Franklin Watanabe, Latha Vairavan and Mas Matsuda, his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the U.S. Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or their, his or her substitutes or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Title Date /s/ Todd Franklin Watanabe President, Chief Executive Officer and Director (Principal Executive Officer) February 25, 2026 Todd Franklin Watanabe /s/ Latha Vairavan Chief Financial Officer (Principal Accounting and Financial Officer) February 25, 2026 Latha Vairavan /s/ Keith R. Leonard Director, Chairman February 25, 2026 Keith R. Leonard /s/ Terrie Curran Director February 25, 2026 Terrie Curran /s/ Halley E. Gilbert Director February 25, 2026 Halley E. Gilbert /s/ Patrick J. Heron Director February 25, 2026 Patrick J. Heron /s/ Neha Krishnamohan Director February 25, 2026 Neha Krishnamohan /s/ Sue-Jean Lin Director February 25, 2026 Sue-Jean Lin /s/ Amit Munshi Director February 25, 2026 Amit Munshi /s/ Howard G. Welgus Director February 25, 2026 Howard G. Welgus, M.D.