What changed in this filing

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Item 1. Financial Statements

2025-05-08 compared with 2024-11-12 · 254 added, 245 removed, 379 unchanged (57% of the section changed)

3 unchanged sentences

(in thousands, except for share amounts)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current assets:

1 unchanged sentence

$ 373,031 $ 370,063

Accounts receivable, net of allowances for estimated credit losses of $ 11,025 and $ 6,604 at September 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowances for estimated credit losses of $ 9,476 and $ 9,597 at March 31, 2025 and December 31, 2024, respectively

23,258 27,643

16 unchanged sentences

Income tax payable 3,314 3,426

Syndeo Program reserves

Other accrued expenses 16,747 20,002

11 unchanged sentences

320,000,000 shares authorized;

124,111,434 and 122,899,002 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

125,246,286 and 124,924,185 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 569,935 566,709

8 unchanged sentences

(in thousands, except for share and per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Net sales $ 69,580 $ 81,403

Cost of sales 21,000 33,042

Gross profit (loss) 40,649 ( 12,553 ) 129,950 109,427

Gross profit 48,580 48,361

Operating expenses:

23 unchanged sentences

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for share amounts)

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders’ Equity (Deficit)

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity

Shares Amount

3 unchanged sentences

Shares withheld for tax withholdings on vested stock awards ( 289,533 ) — ( 1,005 ) — — ( 1,005 )

Issuance of common stock relating to employee stock purchase plan — — 2,034 — — 2,034

Share-based compensation — — 6,636 — — 6,636

Common stock relating to asset acquisition 109,625 — 1,310 — — 1,310

Foreign currency translation adjustment — — — ( 1,047 ) — ( 1,047 )

BALANCE, March 31, 2024 123,453,419 $ 12 $ 546,912 $ ( 4,083 ) $ ( 479,546 ) $ 63,295

Net income — — — — 3,364 3,364

Issuance of common stock pursuant to equity compensation plan 254,742 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 83,234 ) — ( 545 ) — — ( 545 )

Issuance of common stock relating to employee stock purchase plan 82,955 — 698 — — 698

Share-based compensation — — 8,524 — — 8,524

Accelerated share repurchase payment — — ( 2,240 ) — — ( 2,240 )

Foreign currency translation adjustment — — — ( 367 ) — ( 367 )

BALANCE, June 30, 2023 132,881,417 $ 14 $ 561,483 $ ( 4,009 ) $ ( 395,646 ) $ 161,842

Net loss — — — — ( 73,818 ) ( 73,818 )

Issuance of common stock pursuant to equity compensation plan 157,749 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 50,731 ) — ( 331 ) — — ( 331 )

Repurchase and retirement of common stock ( 419,242 ) — ( 4,828 ) — — ( 4,828 )

Share-based compensation — — 8,185 — — 8,185

Foreign currency translation adjustment — — — ( 1,093 ) — ( 1,093 )

BALANCE, September 30, 2023 132,569,193 $ 14 $ 564,509 $ ( 5,102 ) $ ( 469,464 ) $ 89,957

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount

BALANCE, December 31, 2024 124,924,185 $ 12 $ 566,709 $ ( 6,953 ) $ ( 507,965 ) $ 51,803

5 unchanged sentences

BALANCE, March 31, 2025 125,246,286 $ 13 $ 569,935 $ ( 5,825 ) $ ( 518,061 ) $ 46,062

Net income — — — — 202 202

Issuance of common stock pursuant to equity compensation plan 454,362 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 104,120 ) — ( 368 ) — — ( 368 )

Issuance of common stock relating to employee stock purchase plan 190,124 — 378 — — 378

Share-based compensation — — 6,498 — — 6,498

Foreign currency translation adjustment — — — ( 816 ) — ( 816 )

BALANCE, June 30, 2024 123,993,785 $ 12 $ 553,420 $ ( 4,899 ) $ ( 479,344 ) $ 69,189

Net loss — — — — ( 18,291 ) ( 18,291 )

Issuance of common stock pursuant to equity compensation plan 171,021 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 53,372 ) — ( 73 ) — — ( 73 )

Share-based compensation — — 7,712 — — 7,712

Foreign currency translation adjustment — — — 1,187 — 1,187

BALANCE, September 30, 2024 124,111,434 $ 12 $ 561,059 $ ( 3,712 ) $ ( 497,635 ) $ 59,724

The accompanying notes are an integral part of these unaudited financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

7 unchanged sentences

Inventory write-down 277 5,479

Syndeo inventory write-down — 18,809

Provision for estimated credit losses 739 656

9 unchanged sentences

Other, net ( 1,999 ) ( 1,948 )

Net cash (used for) provided by operating activities ( 338 ) 26,920

Net cash provided by (used for) operating activities 2,996 ( 16,854 )

Cash flows from investing activities:

1 unchanged sentence

Cash paid for property and equipment ( 45 ) ( 344 )

Cash paid for asset acquisitions — ( 18,458 )

Net cash used for investing activities ( 1,145 ) ( 1,802 )

2 unchanged sentences

Payment of tax withholdings on vested stock awards ( 250 ) ( 868 )

Payment of accelerated share repurchases — ( 2,240 )

Payment of contingent considerations related to acquisitions — ( 1,819 )

Other, net — 356

Net cash used for financing activities ( 250 ) ( 58,618 )

7 unchanged sentences

Note 1 — Description of Business

The Beauty Health Company (the “Company”) is a global category-creating company focused on delivering skin health experiences that help consumers reinvent their relationship with their skin, bodies, and self-confidence.

The Beauty Health Company (the “Company”) is a medtech meets beauty company that delivers skin health experiences that help consumers reinvent their relationship with their skin, bodies, and self-confidence.

The Company and its subsidiaries design, develop, manufacture, market, and sell esthetic technologies and products.

1 unchanged sentence

Hydrafacial in hydradermabrasion;

SkinStylus in microneedling;

SkinStylus in nanoneedling and microneedling;

and Keravive in scalp health.

16 unchanged sentences

These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 .

Note 2 — Revenue

The Company generates revenue through manufacturing and selling its patented hydradermabrasion delivery systems (“Delivery Systems”).

In conjunction with the sale of Delivery Systems, the Company also sells single-use tips, solutions, and serums used to provide a Hydrafacial treatment that cleanses, extracts, and hydrates the skin (collectively “Consumables”).

Original Consumables are sold solely and exclusively by the Company (and from authorized retailers) and are available for purchase separately from the purchase of Delivery Systems.

For both Delivery Systems and Consumables, revenue is recognized upon transfer of control to the customer, which generally takes place at the point of shipment.

The Company manages its business on the basis of one operating segment and one reportable segment.

As a result, the chief operating decision maker, who is the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.

The Company’s revenue disaggregated by major product line consists of the following for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

Delivery Systems

$ 27,613 $ 51,043 $ 98,605 $ 161,986

Consumables 51,189 46,370 152,194 139,184

Total net sales $ 78,802 $ 97,413 $ 250,799 $ 301,170

Net sales by geographic region were as follows for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

Americas $ 51,878 $ 51,703 $ 159,935 $ 168,325

Asia-Pacific (“APAC”)

10,829 24,657 36,436 63,525

Europe, the Middle East and Africa (“EMEA”)

16,095 21,053 54,428 69,320

Total net sales $ 78,802 $ 97,413 $ 250,799 $ 301,170

Note 2 — Balance Sheet Components

Inventories consist of the following as of the periods indicated:

(in thousands) September 30, 2024 December 31, 2023

(in thousands) March 31, 2025 December 31, 2024

Raw materials $ 24,225 $ 26,019

1 unchanged sentence

Total inventories $ 65,632 $ 69,113

During the nine months ended September 30, 2024, the Company recognized $ 22.7 million of inventory charges for discontinued, excess, obsolete inventory, including the write-down of Delivery System inventory to its net realizable value and the write-off of excess raw materials.

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands) September 30, 2024 December 31, 2023

(in thousands) March 31, 2025 December 31, 2024

Accrued compensation and payroll taxes

4 unchanged sentences

Other accrued expenses consist of the following as of the periods indicated:

(in thousands) September 30, 2024 December 31, 2023

(in thousands) March 31, 2025 December 31, 2024

Sales and VAT tax payables $ 3,254 $ 5,244

4 unchanged sentences

Total other accrued expenses $ 16,747 $ 20,002

As of September 30, 2024 and December 31, 2023, the Company has approximately $ 3 million and $ 15 million, respectively, of non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture or assemble final products for the Company, which is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company purchases components directly from suppliers and do not reflect the sale of these components to the manufacturing vendors in net sales.

During the three months ended September 30, 2024, in connection with the Company’s manufacturing optimization plans, the Company recorded approximately $ 8 million of contract termination related costs, which was recorded within cost of sales on the Condensed Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2024, the Company has accrued approximately $ 2 million for the contract termination related costs, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets.

As of September 30, 2024, total warranty reserve was approximately $ 6 million, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets.

As of December 31, 2023 , total warranty reserve was approximately $ 6 million, of which approximately $ 4 million was included in other accrued expenses and approximately $ 2 million was included in other long-term liabilities on the Consolidated Balance Sheets.

As of September 30, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards.

Note 4 — Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

The three levels of the fair value hierarchy are as follows:

Quoted prices in active markets for identical assets or liabilities.

An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Observable inputs other than Level 1 inputs.

Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

As of September 30, 2024

(in thousands) Level 1 Level 2 Level 3 Total

Cash, cash equivalents, and restricted cash:

Money market funds $ 283,977 $ — $ — $ 283,977

International treasuries $ — $ 7,569 $ — $ 7,569

Warrant liability — Private Placement Warrants $ — $ — $ 558 $ 558

As of December 31, 2023

(in thousands) Level 1 Level 2 Level 3 Total

Cash, cash equivalents, and restricted cash:

Money market funds $ 458,676 $ — $ — $ 458,676

International treasuries $ — $ 3,777 $ — $ 3,777

Warrant liability — Private Placement Warrants $ — $ — $ 3,555 $ 3,555

In October 2020, in connection with the consummation of Vesper Healthcare’s initial public offering, the Company issued 9,333,333 warrants to purchase shares of the Company’s Class A Common Stock at $ 11.50 per share (the “Private Placement Warrants”), to BLS Investor Group LLC.

As of September 30, 2024 and December 31, 2023, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation.

As of March 31, 2025 and December 31, 2024, total warranty reserve was approximately $ 3 million and $ 4 million, respectively, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets.

As of March 31, 2025 and December 31, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards, which was included in cash, cash equivalents and restricted cash on the Condensed Consolidated Balance Sheets.

The Company evaluated its global distribution strategy to align its go-to-market strategy with in-market partner capabilities and market opportunity.

The Company expects to transition sales in the China market to a distributor partner during the second quarter of 2025, and as a result, the Company intends to discontinue its direct sales presence in China.

As of March 31, 2025, the Company has accrued approximately $ 3 million of severance expense associated with these actions, which was included in accrued payroll-related expenses on the Condensed Consolidated Balance Sheets.

Note 3 — Property and Equipment, net

1 unchanged sentence

(in thousands) Useful life

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Leasehold improvements Shorter of remaining lease

6 unchanged sentences

Autos and trucks 5 60 59

Construction in progress 29 748

Total property and equipment 31,136 31,478

2 unchanged sentences

Note 4 — Goodwill and Intangible Assets, net

The changes in the carrying value of goodwill for the nine months ended September 30, 2024 is as follows (in thousands):

The changes in the carrying value of goodwill for the three months ended March 31, 2025 is as follows (in thousands):

December 31, 2024 $ 123,499

Foreign currency translation impact

September 30, 2024 $ 125,455

March 31, 2025 $ 124,260

Intangible Assets, Net

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of September 30, 2024 were as follows:

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of March 31, 2025 were as follows:

(in thousands) Gross

21 unchanged sentences

Total intangible assets $ 153,450 $ ( 105,938 ) $ 47,512

Acquisition of Esthetic Medical, Inc.

and Anacapa Aesthetics LLC

In February 2023, Edge Systems Intermediate, LLC, an indirect, wholly-owned subsidiary of the Company, acquired all of the outstanding shares of Esthetic Medical, Inc.

(“EMI”) in exchange for (i) a cash payment of $ 11.8 million and (ii) 109,625 shares of Class A Common Stock of the Company ($ 1.3 million).

In addition, Dr.

Lawrence Groop (the “Seller”) is entitled to receive up to an additional $ 3.2 million in contingent consideration based upon the achievement of certain conditions defined in the purchase agreement, of which $ 1.9 million was considered probable as of the acquisition date.

Applicable tax guidance was used to apply the simultaneous equation method to incrementally assign $ 4.6 million to the book value of the intangible asset in excess of the purchase price.

The Company accounted for this transaction as an asset acquisition and allocated substantially all of the purchase price and the tax basis difference totaling $ 19.9 million to intangible assets, primarily related to developed technology.

In July 2023, EMI obtained clearance from the U.S.

Food and Drug Administration that the SkinStylus Sterilock MicroSystem is cleared for use as a treatment to improve the appearance of facial acne scars in Fitzpatrick skin types I, II, and III in adults aged 22 years and older (the “Facial Indication Approval”).

Obtaining the Facial Indication Approval triggered a $ 1.3 million contingent payment made in July 2023 by the Company to the Seller, which was previously not considered probable of payment.

In March 2023, the Company acquired assets from Anacapa Aesthetics LLC and recognized approximately $ 5 million of intangible assets, primarily related to non-compete agreements .

Note 5 — Long-Term Debt

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $ 750.0 million in principal amount of its 1.25 % Convertible Senior Notes due 2026 (the “Notes”).

On September 14, 2021, the Company issued an aggregate of $ 750.0 million in principal amount of its 1.25 % Convertible Senior Notes due October 1, 2026 (the “Notes”).

The Notes were issued pursuant to, and are governed by, an indenture dated as of September 14, 2021, between the Company and U.S.

2 unchanged sentences

The Notes issued on September 14, 2021 include the $ 100.0 million principal amount of Notes issued pursuant to the full exercise by the initial purchasers of such option.

During the three months ended March 31, 2024, the Company repurchased $ 75.0 million principal amount of the Notes for $ 57.8 million and recognized a net gain of $ 16.1 million, which is included in other income, net on the Condensed Consolidated Statements of Comprehensive Income (Loss).

During the year ended December 31, 2024, the Company repurchased $ 192.3 million principal amount of the Notes for $ 156.1 million.

During the three months ended March 31, 2025, there were no repurchases related to the Notes.

The following is a summary of the Company’s Notes for the periods indicated:

(in thousands) September 30, 2024 December 31, 2023

(in thousands) March 31, 2025 December 31, 2024

Notes due in 2026 $ 557,700 $ 557,700

3 unchanged sentences

$ 552,984 $ 552,198

During the three months ended September 30, 2024, there were no repurchases related to the Notes.

During the nine months ended September 30, 2024, the Company repurchased $ 192.3 million principal amount of the Notes for $ 156.1 million and recognized a net gain of $ 33.4 million, which includes $ 2.8 million of unamortized debt issuance costs related to the repurchase.

The net gain is included in other income, net in the Condensed Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2024 and December 31, 2023 , the estimated fair value of the Notes was approximately $ 461 million and $ 558 million, respectively.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on September 30, 2024 and December 31, 2023, and are classified as Level 2 within the fair value hierarchy.

Capped Call Transactions

On September 9, 2021, in connection with the pricing of the offering of Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with Bank of Montreal, Credit Suisse Capital LLC, Deutsche Bank AG, London Branch, Goldman Sachs & Co.

LLC, JPMorgan Chase Bank, National Association, Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (collectively, the “Option Counterparties”).

In addition, on September 10, 2021, in connection with the initial purchasers’ exercise of their option to purchase additional Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions,” and, together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties.

The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s Class A Common Stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s Class A Common Stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions is initially $ 47.94 , which represents a premium of 100 % over the last reported sale price of the Company’s Class A Common Stock on September 9, 2021.

The cost of the Capped Call Transactions was $ 90.2 million.

The Capped Call Transactions are separate transactions, each between the Company and the applicable Option Counterparty, and are not part of the terms of the Notes and do not affect any holder’s rights under the Notes or the Indenture.

Holders of the Notes will not have any rights with respect to the Capped Call Transactions.

Amended and Restated Credit Facility

On November 14, 2022, the Company, as successor by assumption to Hydrafacial, a California limited liability company, entered into an Amended and Restated Credit Agreement (as it may be further amended, restated, supplemented or modified from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A.

(the “Administrative Agent”).

The Credit Agreement provided the Company with a $ 50.0 million revolving credit facility that had a maturity date of November 14, 2027.

On August 6, 2024, the Company prepaid all obligations and terminated all commitments, liabilities, and other obligations under the Credit Agreement.

There were no material early termination penalties incurred in connection therewith, all outstanding obligations and commitments under the Credit Agreement were satisfied and terminated, and all related security interests and liens securing such obligations and commitments were released.

Note 8 — Income Taxes

The Company is required to calculate its interim income tax provision using the estimated annual effective tax rate (“AETR”) method prescribed by Accounting Standards Codification (“ASC”) 740-270, and as such, excludes losses in jurisdictions where the Company cannot benefit in computing its worldwide AETR.

A separate AETR is computed and applied to ordinary losses in the U.S.

jurisdiction as required by ASC 740-270-30-36(a).

For the three and nine months ended September 30, 2024 , the Company recorded foreign income tax expense of $ 1.9 million and $ 0.9 million, respectively, and U.S.

income tax expense of zero .

The Company’s effective tax rate for the three months ended September 30, 2024 was affected by a mix of ordinary income in foreign jurisdictions that are tax-effected using a blended worldwide AETR of 30 %, and ordinary loss in the U.S.

jurisdiction that was tax-effected using a separate U.S.

The separate U.S.

AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to a full valuation allowance against the Company’s U.S.

deferred tax assets.

For the three and nine months ended September 30, 2023 , the Company recorded income tax expense of $ 3.5 million and income tax benefit of $ 2.4 million, respectively.

The estimated worldwide AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to income in foreign jurisdictions that are taxed at higher rates than the U.S.

federal rate, a full valuation allowance against the Company's U.S.

deferred tax assets, and the impact of accounting for business combination.

The Company has established a valuation allowance in the U.S.

against its deferred tax assets because it is more likely than not that the deferred tax assets will not be realized.

In determining whether deferred tax assets are realizable, the Company considers numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize deferred tax assets.

The Company applies ASC 740, the accounting standard addressing the accounting for uncertainty in income taxes, which prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return.

The Company has gross unrecognized tax benefits of $ 1.4 million and $ 1.1 million as of September 30, 2024 and December 31, 2023, respectively.

Note 9 — Share-Based Compensation

The Company has various stock compensation plans, which are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Equity-Based Compensation” in the Company’s 2023 Annual Report on Form 10-K.

Under the Beauty Health Company 2021 Incentive Award Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other stock or cash-based awards to eligible service providers.

Additionally, the Company maintains the Employee Stock Purchase Plan for employees located in the United States, whereby eligible employees can have up to 10 % of their earnings withheld, subject to certain maximums, to be used to purchase shares of the Company’s Class A Common Stock at certain purchase dates.

Share-based compensation expense was as follows for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

Cost of sales $ 193 $ 471 $ ( 81 ) $ 1,175

Selling and marketing 2,393 2,499 7,021 5,978

Research and development 168 465 216 829

General and administrative 4,958 4,750 13,690 12,304

Total share-based compensation $ 7,712 $ 8,185 $ 20,846 $ 20,286

As of September 30, 2024 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 38.2 million and is expected to be recognized over a weighted-average period of 1.8 years.

As of March 31, 2025 and December 31, 2024 , the estimated fair value of the Notes were approximately $ 478 million and $ 446 million, respectively.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on March 31, 2025 and December 31, 2024, and are classified as Level 2 within the fair value hierarchy.

Note 6 — Commitments and Contingencies

For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

Until the final resolution of such matters, if any of our estimates and assumptions change or prove to have been incorrect, we may experience losses in excess of the amounts recorded, which could have a material effect on our business, consolidated financial position, results of operations, or cash flows.

Except for the matters discussed below, we do not believe that any of our pending litigation, claims, and other proceedings are material to our business:

Cartessa Aesthetics, LLC

5 unchanged sentences

On June 6, 2023, the New York Court granted Hydrafacial’s Motion for Summary Judgment of No Invalidity of the fourth patent-in-suit and granted Cartessa’s Motion for Summary Judgment of non-infringement of that same patent.

The parties have agreed to dimiss the remaining claims without prejudice so that Hydrafacial can appeal the New York Court’s grant of Cartessa’s Motion for Summary Judgment.

The parties agreed to dismiss the remaining claims without prejudice so that Hydrafacial can appeal the New York Court’s grant of Cartessa’s Motion for Summary Judgment.

Final judgment was entered on October 15, 2024.

On October 8, 2024, Hydrafacial filed an appeal in the New York Court challenging the New York Court’s final judgment and summary judgment decision of Cartessa’s non-infringement regarding the fourth patent-in-suit.

On November 13, 2024, Cartessa filed a cross-appeal challenging the New York Court’s final judgment and summary judgment decision of granting Hydrafacial’s motion for summary judgment of no invalidity regarding the fourth patent-in-suit.

The appeal is in its early stages and the parties exchanged their opening briefs on March 12, 2025.

On June 11, 2024, Hydrafacial filed a complaint against Cartessa and its foreign manufacturer, Eunsung Global Corp (“Eunsung”), in the United States International Trade Commission.

3 unchanged sentences

Eunsung has consented to an exclusion order during the term of the Hydrafacial patent-in-suit.

The ITC Cartessa Matter is in its early stages, and Hydrafacial continues to seek an exclusion order preventing importation or sale of Cartessa’s hydrodermabrasion systems within the United States.

In the ITC Cartessa Matter, the parties recently concluded the evidentiary hearing on April 9-15, 2025.

The parties will file post-hearing briefs in May 2025 and will await the judge’s decision in July 2025.

Hydrafacial continues to seek an exclusion order preventing importation or sale of Cartessa’s hydrodermabrasion systems within the United States.

Cartessa Aesthetics, LLC - Second Complaint

On June 14, 2024, Hydrafacial filed a complaint (the “Second Cartessa Complaint”) against Cartessa in the New York Court, captioned HydraFacial LLC v.

Cartessa Aesthetics, LLC, Case No.

2:24-cv-04253 (the “Second Cartessa Case”), for patent infringement arising from Cartessa’s sale of Cartessa’s hydrodermabrasion system that Hydrafacial alleged has infringed Hydrafacial’s U.S.

The Second Cartessa Case has been stayed pending resolution of the ITC Cartessa Matter and there will be no activity until the conclusion of the ITC Cartessa Matter.

After conclusion of the ITC Cartessa Matter, Hydrafacial plans to reopen the Second Cartessa Case to seek monetary damages and plans to vigorously pursue its claims against Cartessa.

Eunsung Global Corp (and Sinclair Pharma Ltd)

On September 30, 2024, Eunsung filed a Petition for inter partes review (“IPR”), IPR2024-01491, challenging the validity of Hydrafacial’s U.S.

11,865, 287 (the “’287 Patent”).

On November 25, 2024, Sinclair Pharma Ltd filed a similar IPR Petition, IPR2025-00145, challenging the same patent and relying on the same arguments.

On January 10, 2025, Eunsung filed an IPR Petition, IPR2025-00445, challenging the validity of Hydrafacial’s U.S.

On January 13, 2025, Eunsung filed an IPR Petition, IPR2025-00452, challenging the validity of Hydrafacial’s U.S.

On January 14, 2025, Eunsung filed an IPR Petition, IPR2025-00453, challenging the validity of Hydrafacial’s U.S.

On April 11, 2025, the U.S.P.T.O.

Board denied institution of the first IPR challenging the ’287 Patent (IPR2024-01491).

The rest of the IPR proceedings are in their early stages, with initial briefing due between April-May 2025, and Hydrafacial plans to vigorously defend its patents against each of these challenges.

Medicreations LLC

On May 6, 2024, Hydrafacial filed a complaint against Medicreations LLC (“Medicreations”) in the United States District Court for Nevada, Case Number 2:24-cv-00855 (the “Medicreations Case”), for patent infringement arising from Medicreations’ sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed twelve of Hydrafacial’s patents.

The Medicreations Case is in its early stages, and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Medicreations.

On July 26, 2024, Medicreations filed a motion to dismiss the complaint.

On March 3, 2025, the court issued an order dismissing a few of Hydrafacial’s claims to specific remedies, but the majority of the case and claims will move forward.

The Medicreations Case will now proceed to discovery and Hydrafacial plans to file a motion for preliminary injunction.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Medicreations.

Sinclair Pharma US, Inc

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2:24-cv-06250 (the “Sinclair Case”), for patent infringement arising from Sinclair’s sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The Sinclair Case is in its early stages.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Sinclair and Viora.

On August 2, 2024, Hydrafacial filed a complaint against Sinclair, Aesthetic Management Partners, their foreign manufacturer, EMA Aesthetics, Ltd.

The Sinclair Case was stayed pending the resolution of the ITC Sinclair Matter, discussed below.

Now that the ITC Sinclair Matter has been terminated, the judge lifted the stay in the Sinclair Case and it will proceed to discovery.

Hydrafacial will seek monetary damages and plans to vigorously pursue its claims against Sinclair and Viora.

On August 2, 2024, Hydrafacial filed a complaint against Sinclair, Aesthetic Management Partners, Inc.

(“AMP”), their foreign manufacturer, EMA Aesthetics, Ltd.

(“EMA Aesthetics”), and H.R.

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A Notice of Institution of Investigation was issued on September 10, 2024, and the investigation was assigned investigation number 337-TA-1416 (the “ITC Sinclair Matter”).

In the ITC Sinclair Matter, Hydrafacial has asserted that Sinclair, Aesthetic Management Partners, EMA Aesthetics, and H.R.

In the ITC Sinclair Matter, Hydrafacial has asserted that Sinclair, AMP, EMA Aesthetics, and H.R.

Meditech infringe Hydrafacial’s U.S.

11,865,287 and 9,550,052, which relate to hydrodermabrasion systems.

The ITC Sinclair Matter is in its early stages, and Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

On February 19, 2025, the Administrative Law Judge issued an Initial Determination granting Hydrafacial’s motion to terminate the ITC Sinclair Matter, and as a result, the ITC Sinclair Matter is now terminated.

Aesthetic Management Partners Inc.

On July 8, 2024, Hydrafacial filed a complaint against Aesthetic Management Partners Inc.

(“Aesthetic Management Partners”) in the United States District Court for the Western District of Tennessee, Case No.

On July 8, 2024, Hydrafacial filed a complaint against AMP in the United States District Court for the Western District of Tennessee, Case No.

2:24-cv-02480-JPM-TMP (the “AMP Case”), for patent infringement arising from Aesthetic Management Partners’ sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The AMP Case is now stayed, and there will be no activity until the conclusion of the ITC Sinclair Matter.

After conclusion of the ITC Sinclair Matter, Hydrafacial plans to reopen the AMP Case to seek monetary damages and plans to vigorously pursue its claims against Aesthetic Management Partners.

The AMP Case was stayed due to the corresponding ITC Sinclair Matter.

Now that the ITC Sinclair Matter has been terminated, Hydrafacial filed a motion to lift the stay in the AMP Case.

After the judge lifts the stay, Hydrafacial plans to file a motion for preliminary injunction, will seek monetary damages, and plans to vigorously pursue its claims against AMP.

Medical Purchasing Resource, LLC

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2:24-cv-4655 (the “MPR Case”), for trademark infringement, false designation of origin, unfair competition, tortious interference, and other causes of action relating to Hydrafacial’s trademark rights.

The MPR Case is in its early stages, and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Medical Purchasing Resource.

On April 3, 2025, the parties participated in a mediation and came to a tentative agreement to settle the case.

In the mediation, the parties tentatively agreed that Medical Purchasing Resource will stop using Hydrafacial’s trademarks and any marks that are confusingly similar to those marks.

Medical Purchasing Resource also tentatively agreed to stop the other activities identified by Hydrafacial in its complaint, including selling products to known Hydrafacial customers.

Medical Purchasing Resource also tentatively agreed to take additional measures to ensure that customers are aware that Medical Purchasing Resource and its products have no relation or affiliation with Hydrafacial.

Medical Purchasing Resource also tentatively agreed to pay Hydrafacial a total of $ 105,000 for past damages which will be paid to Hydrafacial in four quarterly payments of $ 26,250 upon execution of a definitive settlement agreement between the parties, and the parties agreed to file a consent judgment with the court and end the lawsuit.

All deadlines in the MPR Case have been postponed while the parties finalize the settlement agreement.

Luvo Medical Technologies Inc

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2:24-cv-00587 (the “Luvo Case”), for patent infringement arising from Healthcare Markets’ sale of Luvo’s hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The Luvo Case is now stayed, and there will be no any activity until the conclusion of the ITC Luvo Matter.

After conclusion of the ITC’s investigation, Hydrafacial plans to reopen the Luvo Case to seek monetary damages and plans to vigorously pursue its claims against Luvo, Healthcare Markets, and Eunsung.

The Luvo Case was stayed due to the corresponding ITC Luvo Matter, but pursuant to the ITC settlement agreement, the parties filed a consent judgment in the Luvo Case that terminated the case as to Luvo and Healthcare Markets.

Hydrafacial plans to reopen the Luvo Case to seek monetary damages from Eunsung and plans to vigorously pursue its claims against Eunsung who was not a party to the ITC settlement agreement.

On August 7, 2024, Hydrafacial filed a complaint against Luvo, its distributor Healthcare Markets, Medical Purchasing Resource, eMIRAmed, and its manufacturer, MIRAmedtech, in the United States International Trade Commission.

2 unchanged sentences

11,446,477, which is not asserted in the ITC Cartessa Matter or ITC Sinclair Matter, and relates to hydrodermabrasion systems.

The ITC Luvo Matter is in its early stages, and Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

After a mediation between the parties, on March 17, 2025, Hydrafacial signed a settlement agreement with Luvo and Healthcare Markets.

As a result, the ITC has terminated the investigation as to Luvo and Healthcare Markets, but Hydrafacial continues to pursue default judgment against the remaining respondents.

eMIRAmed USA, LLC

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2:24-cv-01865 (the “eMIRAmed Case”), for patent infringement arising from eMIRAmed’s sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The eMIRAmed Case is in its early stages.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against eMIRAmed and MIRAmedtech.

On January 22, 2025, Hydrafacial moved for default judgment against eMIRAmed and MIRAmedtech.

On January 30, 2025, eMIRAmed filed notice of Chapter 7 bankruptcy.

On March 21, 2025, the court granted default judgment against MIRAmedtech but denied default judgment against eMIRAmed due to its bankruptcy filing.

As a result, the eMIRAmed Case has been closed.

Med Spa Essentials, LLC

On March 6, 2025, Hydrafacial filed a complaint against Med Spa Essentials, LLC (“MS Essentials”) in the United States District Court for the Central District of California, Case No.

2:25-cv-01994 (the “MS Essentials Case”), for trademark infringement, false designation of origin, unfair competition, tortious interference, and other causes of action relating to Hydrafacial’s trademark rights.

The MS Essentials Case is still in its early stages and MS Essentials’ answer to the complaint is due in June 2025.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against MS Essentials.

Candela Corp.

On April 3, 2025, Hydrafacial filed a complaint against Candela Corp.

(“Candela”), and its manufacturer Termosalud S.L.

(“Termosalud”), in the United States District Court for the District of Delaware, Case No.

1:25-cv-00418-JLH (the “Candela Case”), for patent infringement arising from Candela’s sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The Candela Case is in its early stages and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Candela and Termosalud.

Securities Class Action

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On May 2, 2024, the court granted the Dijkgraafs’ motion for appointment as lead plaintiff and approved the Dijkgraafs’ counsel, Hagens Berman, as lead counsel.

On May 9, 2024, the parties submitted a joint stipulation to the court setting forth a proposed schedule for the filing of an amended complaint and defendants’ response thereto.

The proposed schedule has not yet been approved by the court.

On July 1, 2024, lead plaintiffs filed a consolidated amended class action complaint asserting the same causes of action as the original complaint.

2 unchanged sentences

On September 30, 2024, the Company filed a motion to dismiss the consolidated amended class action complaint in its entirety.

Plaintiffs’ opposition brief is due on November 22, 2024, the Company’s reply brief is due December 23, 2024, and the hearing on the motion is set for January 15, 2025.

Plaintiffs filed their opposition brief on November 22, 2024, and the Company filed its reply brief on December 23, 2024.

A hearing on the Defendants’ motion to dismiss was scheduled for January 15, 2025.

On January 10, 2025, the court granted the parties’ joint stipulation to adjourn the January 15, 2025 hearing.

On January 17, 2025, the court granted the parties’ joint stipulation to withdraw briefing on Defendants’ motion to dismiss without prejudice to refiling and to briefly stay proceedings so that the parties can complete a private mediation.

The parties conducted the private mediation on March 27, 2025.

The parties were unable to reach a settlement at the mediation.

On April 16, 2025, the court so-ordered the parties’ stipulation.

On May 5, 2025, the plaintiffs filed an amended complaint.

The parties will submit a proposed briefing schedule on Defendants’ anticipated motion to dismiss on May 12, 2025.

The Company believes that the claims asserted in the Securities Class Action have no merit and intends to vigorously defend them.

The Company is unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, and, accordingly, it has not accrued any liability associated with the Securities Class Action.

Consumer Class Action

On October 24, 2024, Jason Davalos, Sonia Davalos, and Sol Tan Tanning & Spa LLC (“Class Action Plaintiffs”), individually and on behalf of all others similarly situated, filed a putative class action complaint against Hydrafacial LLC d/b/a The Hydrafacial Company and The Beauty Health Company (collectively, the “Class Action Defendants”) for alleged violations of New York consumer fraud statutes, breach of contract, and common law breach of implied warranties (the “Consumer Class Action”).

On October 24, 2024, Jason Davalos (“Jason Davalos”), Sonia Davalos (“Sonia Davalos”, and collectively with Jason Davalos, the “Davaloses”), and Sol Tan Tanning & Spa LLC (“Sol Tan”, and collectively with the Davaloses, the “Class Action Plaintiffs”), individually and on behalf of all others similarly situated, filed a putative class action complaint against Hydrafacial LLC d/b/a The Hydrafacial Company and The Beauty Health Company (collectively, the “Class Action Defendants”) for alleged violations of New York consumer fraud statutes, breach of contract, and common law breach of implied warranties (the “Consumer Class Action”).

The case is captioned Jason Davalos, Sonia Davalos, Sol Tan Tanning & Spa LLC, on behalf of themselves and all others similarly situated v.

13 unchanged sentences

G.B.L., § 349 and § 350.

On December 30, 2024, the Class Action Defendants filed a motion to dismiss the Consumer Class Action complaint in its entirety.

On January 3, 2025, the Class Action Defendants filed a motion to stay discovery during the pendency of their motion to dismiss.

On January 8, 2025, the Davaloses voluntarily dismissed their claims against the Class Action Defendants pursuant to Fed.

41(a)(1)(A)(i), leaving Plaintiff Sol Tan as the sole remaining Consumer Class Action Plaintiff.

Plaintiff Sol Tan filed their opposition brief on January 9, 2025, and the Class Action Defendants filed their reply brief on January 13, 2025.

On January 16, 2025, the court granted the parties’ joint stipulation to adjourn the January 17, 2025 initial pretrial conference and stay the action pending the parties’ completion of a private mediation.

As part of its order, the court also (1) adjourned Plaintiff Sol Tan’s deadline to respond to the Class Action Defendants’ motion to dismiss sine die pending the outcome of mediation;

(2) denied as moot the Class Action Defendants’ motion to stay discovery in light of the parties’ agreement to stay discovery pending the outcome of mediation;

and (3) directed the parties to (a) file a joint letter on or before February 7, 2025, indicating the date (not later than May 8, 2025) on which the mediation is scheduled to occur;

and (b) within seven days after the mediation, either (i) file a joint letter indicating that settlement was reached;

or (ii) file a revised proposed case management plan and a revised joint letter required by the court’s Notice of Initial Pretrial Conference.

On February 7, 2025, the parties filed a joint letter notifying the court that they had agreed to mediate before Greg Danilow of Phillips ADR Enterprises.

The parties conducted the private mediation on April 29, 2025;

however, the parties were unable to reach a settlement at the mediation.

Pursuant to the parties’ so-ordered January 16 joint stipulation, on May 7, 2025, the parties filed a revised proposed case management plan and a revised joint letter in accordance with the court’s Notice of Initial Pretrial Conference.

On the same day, the court endorsed the joint submission and ordered Plaintiff to file an amended complaint no later than June 2, 2025, and scheduled an initial pretrial conference for July 18, 2025.

Under the court’s so-ordered May 7 endorsement, Defendants’ response to the amended complaint is due June 23, 2025.

The Company believes that the claims asserted in the Consumer Class Action have no merit and Class Action Defendants intend to vigorously defend them.

Consolidated Derivative Action

28 unchanged sentences

On September 16, 2024, defendants filed their Motion to Dismiss the Operative Complaint, or Alternatively, Stay the Proceedings (the “Motion to Dismiss”).

A briefing schedule for the Motion to Dismiss has not yet been set.

Defendants filed their opening brief in support of their Motion to Dismiss and stay on February 28, 2025.

Pursuant to a scheduling order entered by the court, Plaintiffs’ answering brief was filed on May 2, 2025, and Defendants’ reply brief is due June 3, 2025.

The Company believes that the claims asserted in the Consolidated Derivative Action have no merit and intends to vigorously defend them.

Securities and Exchange Commission (the “SEC”) Subpoena

The Division of Enforcement of the SEC has issued a subpoena in connection with a formal order of investigation of the Company seeking documents and information from us.

The Company is in the process of responding to the subpoena and intends to fully cooperate with the SEC investigation.

The Division of Enforcement of the SEC has issued three subpoenas in connection with a formal order of investigation of the Company seeking documents and information from us.

The Company is in the process of responding to the subpoenas and intends to fully cooperate with the SEC investigation.

We cannot predict the duration, scope, or outcome of this matter at this time.

19 unchanged sentences

Holders of Class A Common Stock are entitled to one vote for each share.

As of September 30, 2024 and December 31, 2023, there were 124,111,434 and 122,899,002 , respectively, of Class A Common Stock issued and outstanding.

As of March 31, 2025 and December 31, 2024, there were 125,246,286 and 124,924,185 , respectively, of Class A Common Stock issued and outstanding.

The Company has not declared or paid any dividends with respect to its Class A Common Stock .

Common Stock Repurchases

Share Repurchase Program

On September 12, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $ 100.0 million of the Company’s Class A Common Stock.

Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing.

Under this share repurchase program, for the year ended December 31, 2023, the Company repurchased and retired 10.4 million shares for $ 30.2 million excluding taxes.

During the three and nine months ended September 30, 2024, the Company did no t repurchase any shares of its Class A Common Stock.

During the three months ended March 31, 2025, the Company did not repurchase any shares of its Class A Common Stock.

As of March 31, 2025, the Company had a remaining authorization of $ 69.8 million under the program.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors.

At September 30, 2024 and December 31, 2023 , there were no shares of preferred stock issued or outstanding.

At March 31, 2025 and December 31, 2024 , there were no shares of preferred stock issued or outstanding.

Note 9 — Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

The three levels of the fair value hierarchy are as follows:

Quoted prices in active markets for identical assets or liabilities.

An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Observable inputs other than Level 1 inputs.

Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

As of March 31, 2025

(in thousands) Level 1 Level 2 Level 3 Total

Cash, cash equivalents, and restricted cash:

Money market funds $ 285,638 $ — $ — $ 285,638

Warrant liability — Private Placement Warrants $ — $ — $ 139 $ 139

As of December 31, 2024

(in thousands) Level 1 Level 2 Level 3 Total

Cash, cash equivalents, and restricted cash:

Money market funds $ 284,462 $ — $ — $ 284,462

Warrant liability — Private Placement Warrants $ — $ — $ 488 $ 488

As of March 31, 2025 and December 31, 2024, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation.

Note 10 — Revenue

Net sales consist of the sale of products to retail and wholesale customers through e-commerce and distributor sales.

The Company generates revenue through manufacturing and selling its patented hydradermabrasion delivery systems (“Delivery Systems”).

In conjunction with the sale of Delivery Systems, the Company also sells single-use tips, solutions, and serums used to provide a Hydrafacial treatment (collectively “Consumables”).

Original Consumables are sold solely and exclusively by the Company (and from authorized retailers) and are available for purchase separately from the purchase of Delivery Systems.

For both Delivery Systems and Consumables, revenue is recognized upon transfer of control to the customer, which generally takes place at the point of shipment.

Net sales disaggregated by major product line were as follows for the periods indicated:

Three Months Ended March 31,

(in thousands) 2025 2024

Delivery Systems

$ 20,218 $ 35,783

Consumables 49,362 45,620

Total net sales $ 69,580 $ 81,403

Net sales by geographic region were as follows for the periods indicated:

Three Months Ended March 31,

(in thousands) 2025 2024

Americas $ 46,257 $ 50,326

Europe, the Middle East and Africa

14,987 19,105

Total net sales $ 69,580 $ 81,403

Note 11 — Share-Based Compensation

The Company has various stock compensation plans, which are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data—Note 12 to the Consolidated Financial Statements—Share-Based Compensation” in the Company’s 2024 Annual Report on Form 10-K.

Share-based compensation expense was as follows for the periods indicated:

Three Months Ended March 31,

(in thousands) 2025 2024

Cost of sales $ 150 $ ( 404 )

Selling and marketing 217 2,424

Research and development 143 676

General and administrative 2,966 3,940

Total share-based compensation $ 3,476 $ 6,636

As of March 31, 2025 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 36.2 million and is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units (“RSU”) and Performance-based Restricted Stock Units (“PSU”)

The following table summarizes the Company’s RSU and PSU activity:

Weighted Average Grant Date Fair Value

Outstanding - January 1, 2025

7,254,391 1,237,822 $ 4.56 $ 5.93

Granted 9,698,526 1,676,134 1.33 2.12

Vested ( 483,396 ) — 10.76 —

Forfeited ( 656,513 ) ( 68,339 ) 5.57 10.40

Outstanding - March 31, 2025

15,813,008 2,845,617 $ 2.34 $ 3.58

Stock Options

The following table summarizes the Company’s stock option activity:

Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years)

Outstanding - January 1, 2025

3,483,070 $ 13.64 5.29

Forfeited ( 71,500 ) 14.90

Expired ( 266,250 ) 13.76

Outstanding - March 31, 2025

3,145,320 13.60 5.03

Vested and Exercisable - March 31, 2025

2,505,615 13.60 4.75

Options vested and expected to vest - March 31, 2025

3,145,320 $ 13.60 5.03

Note 12 — Income Taxes

A separate AETR is computed and applied to ordinary losses in the U.S.

jurisdiction as required by ASC 740-270-30-36(a).

For the three months ended March 31, 2025, the Company recorded U.S.

federal, state, and foreign income tax expense of $ 0.9 million.

The AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to a full valuation allowance against the Company’s U.S.

deferred tax assets, income in foreign jurisdictions that are taxed at varying rates, the tax effect of unrealized foreign exchange, and the tax impact of executive and share-based compensation expense.

For the three months ended March 31, 2024, the Company recorded income tax benefit of $ 0.7 million.

The estimated worldwide AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to a full valuation allowance against the Company’s U.S.

deferred tax assets, income in foreign jurisdictions that are taxed at higher rates than the U.S.

federal rate, and the impact of discrete items that may occur in any given year but are not consistent from year to year.

The Company has established a valuation allowance in the U.S.

against its deferred tax assets because it is more likely than not that the deferred tax assets will not be realized.

The Company has gross unrecognized tax benefits of $ 1.5 million and $ 1.2 million as of March 31, 2025 and December 31, 2024, respectively.

Note 13 — Net Loss Attributable to Common Stockholders

The following table sets forth the calculation of both basic and diluted net loss per share as follows for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except share and per share amounts) 2025 2024

1 unchanged sentence

Adjustments related to the Notes (1)

— — ( 25,186 ) —

Net loss available to common stockholders - diluted $ ( 10,096 ) $ ( 13,751 )

8 unchanged sentences

$ ( 0.08 ) $ ( 0.10 )

(1) For the nine months ended September 30, 2024, the adjustments related to the Notes include the net gain on repurchase offset by interest expense and amortization of debt issuance costs related to the Company’s Notes (net of taxes).

(1) For the three months ended March 31, 2024, the adjustments related to the Notes include the net gain on repurchase offset by interest expense and amortization of debt issuance costs related to the Company’s Notes (net of taxes).

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

Three Months Ended March 31,

Notes 17,559,686 —

Restricted Stock Units

7,827,861 4,471,807 7,827,861 4,471,807

RSUs 15,813,008 4,133,118

Stock Options 3,145,320 3,671,120

Performance-based Restricted Stock Units

PSUs 2,845,617 1,179,487

For the three months ended March 31, 2025 and 2024, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net loss per share of Class A Common Stock because their effect would be anti-dilutive.

Note 14 — Segment Information

The Company manages its business on the basis of one operating segment and one reportable segment.

The chief operating decision maker (“CODM”), who is the Chief Executive Officer, assesses performance for the one operating segment and decides how to allocate resources based on consolidated net income (loss) and consolidated income (loss) from operations, which is also reported on the Condensed Consolidated Statements of Comprehensive Income (Loss).

Significant expenses within consolidated net (loss) income include cost of sales, total operating expenses, interest expense, interest income, other (income) expense, net, change in fair value of warrant liabilities, foreign currency transaction loss (gain), net, and income tax expense (benefit), all of which are each separately reported on the Condensed Consolidated Statements of Comprehensive Income (Loss).

The CODM also reviews the disaggregation of total operating expenses, of which significant segment expenses are related to personnel-related expenses, which includes sales commission and share-based compensation expense.

Other segment expenses included in total operating expenses primarily consist of fees for professional services principally comprising legal, audit, tax and accounting services, depreciation and amortization expenses, advertising and marketing related expenses, software, facilities-related costs, credit card and wire fees, and insurance.

The following summarizes the components of operating expenses for the periods indicated:

Three Months Ended March 31,

(in thousands) 2025 2024

Total operating expenses:

Personnel-related expenses

$ 28,819 $ 34,875

For the three and nine months ended September 30, 2024 and 2023, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net loss per share of Class A Common Stock because their effect would be anti-dilutive.

Other segment expenses

31,784 30,477

Total operating expenses

$ 60,603 $ 65,352

Note 15 — New Accounting Pronouncements

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update 2023-07 "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740):

In December 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on its annual financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses” which expands interim and annual requirements to disclose about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

The guidance will be effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, which was clarified in ASU 2025-01.

The standard allows for early adoption of these requirements.

The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In March 2024, the FASB issued ASU 2024-02 "Codification Improvements—Amendments to Remove References to the Concepts Statements." ASU 2024-02 amends the FASB Accounting Standards Codification to remove references to various FASB Concept Statements.

The amendments are considered to be codification improvements only and are effective for annual periods beginning January 1, 2025, with early adoption permitted.

Adoption of ASU 2024-02 is not expected to have a material impact to our consolidated financial statements or related disclosures.

Note 15 — Syndeo Program

To stand behind its commitment to its customers and protect the Company’s brand reputation, in October 2023, the Company’s management decided that, with respect to Syndeo devices, the Company would only market and sell Syndeo 3.0 devices.

The Company provided, at no cost to the customer, the option of (i) a technician upgrade to their Syndeo 1.0 or 2.0 devices to 3.0 standards in the field;

or (ii) a replacement Syndeo 3.0 device for their existing device (the “Syndeo Program”).

Additionally, the Company extended the customer’s warranty by one year for each system from the date it was either brought to the 3.0 standards or the customer received a Syndeo 3.0 device.

As of September 30, 2024, the Syndeo Program is complete.

As of December 31, 2023, the Company accrued costs of $ 21.0 million, primarily for the estimated cost to remediate, upgrade or exchange the remaining Syndeo 1.0 and 2.0 builds.

The following table summarizes the Syndeo Program usage for the three and nine months ended September 30, 2024 (in thousands):

Program liability as of December 31, 2023

Program liability as of March 31, 2024 $ 8,314

Usage ( 7,402 )

Program liability as of June 30, 2024 $ 912

Usage ( 912 )

Program liability as of September 30, 2024 $ —

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements