SkinHealth Systems Inc. 10-Q

Item 1. Financial Statements. THE BEAUTY HEALTH COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except for share amounts) (Unaudited) September 30, 2025 December 31, 2024 ASSETS Current assets: Cash, cash equivalents, and restricted cash $ 219,397 $ 370,063 Accounts receivable, net of allowances for estimated credit losses of $ 7,429 and $ 9,597 at September 30, 2025 and December 31, 2024, respectively 22,206 27,643 Inventories 56,146 69,113 Income tax receivable 3,186 818 Prepaid expenses and other current assets 7,432 9,487 Total current assets 308,367 477,124 Property and equipment, net 3,053 5,978 Right-of-use assets, net 13,612 13,590 Intangible assets, net 37,981 47,512 Goodwill 126,497 123,499 Deferred income tax assets, net 985 3,894 Other assets 13,141 14,086 TOTAL ASSETS $ 503,636 $ 685,683 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 17,294 $ 21,941 Accrued payroll-related expenses 18,759 17,636 Lease liabilities, current 5,041 5,147 Income tax payable 1,495 3,426 Other accrued expenses 19,315 20,002 Total current liabilities 61,904 68,152 Lease liabilities, non-current 10,551 10,813 Deferred income tax liabilities, net 112 396 Warrant liabilities 139 488 Convertible senior notes, net 363,388 552,198 Other long-term liabilities 1,882 1,833 Total liabilities 437,976 633,880 Commitments (Note 6) Stockholders’ equity: Class A Common Stock, $ 0.0001 par value; 320,000,000 shares authorized; 127,301,264 and 124,924,185 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively 13 12 Additional paid-in capital 576,802 566,709 Accumulated other comprehensive loss ( 1,775 ) ( 6,953 ) Accumulated deficit ( 509,380 ) ( 507,965 ) Total stockholders’ equity 65,660 51,803 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 503,636 $ 685,683 The accompanying notes are an integral part of these unaudited financial statements. 3 THE BEAUTY HEALTH COMPANY CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands, except for share and per share amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Net sales $ 70,655 $ 78,802 $ 218,422 $ 250,799 Cost of sales 25,021 38,153 75,096 120,849 Gross profit 45,634 40,649 143,326 129,950 Operating expenses: Selling and marketing 20,928 27,620 70,077 91,786 Research and development 1,698 1,108 3,947 5,074 General and administrative 29,250 33,436 90,267 93,707 Total operating expenses 51,876 62,164 164,291 190,567 Loss from operations ( 6,242 ) ( 21,515 ) ( 20,965 ) ( 60,617 ) Interest expense 6,311 2,468 12,953 7,949 Interest income ( 1,256 ) ( 4,876 ) ( 7,442 ) ( 14,426 ) Other income, net ( 601 ) ( 69 ) ( 18,807 ) ( 33,475 ) Change in fair value of warrant liabilities ( 210 ) ( 418 ) ( 349 ) ( 2,997 ) Foreign currency transaction loss (gain), net 159 ( 2,277 ) ( 6,190 ) 164 Loss before provision for income taxes ( 10,645 ) ( 16,343 ) ( 1,130 ) ( 17,832 ) Income tax expense 386 1,948 285 936 Net loss ( 11,031 ) ( 18,291 ) ( 1,415 ) ( 18,768 ) Comprehensive (loss) income, net of tax: Foreign currency translation adjustments 421 1,187 5,178 ( 676 ) Comprehensive (loss) income $ ( 10,610 ) $ ( 17,104 ) $ 3,763 $ ( 19,444 ) Net loss per share Basic $ ( 0.09 ) $ ( 0.15 ) $ ( 0.01 ) $ ( 0.15 ) Diluted $ ( 0.09 ) $ ( 0.15 ) $ ( 0.11 ) $ ( 0.31 ) Weighted average common stock outstanding Basic 126,890,888 124,057,602 126,020,956 123,630,811 Diluted 126,890,888 124,057,602 137,294,187 142,667,209 The accompanying notes are an integral part of these unaudited financial statements. 4 THE BEAUTY HEALTH COMPANY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except for share amounts) (Unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Shares Amount BALANCE, December 31, 2023 122,899,002 $ 12 $ 541,281 $ ( 3,036 ) $ ( 478,867 ) $ 59,390 Net loss — — — — ( 679 ) ( 679 ) Issuance of common stock pursuant to equity compensation plan 843,950 — — — — — Shares withheld for tax withholdings on vested stock awards ( 289,533 ) — ( 1,005 ) — — ( 1,005 ) Share-based compensation — — 6,636 — — 6,636 Foreign currency translation adjustments — — — ( 1,047 ) — ( 1,047 ) BALANCE, March 31, 2024 123,453,419 $ 12 $ 546,912 $ ( 4,083 ) $ ( 479,546 ) $ 63,295 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 adjustments — — — ( 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 adjustments — — — 1,187 — 1,187 BALANCE, September 30, 2024 124,111,434 $ 12 $ 561,059 $ ( 3,712 ) $ ( 497,635 ) $ 59,724 5 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 Net loss — — — — ( 10,096 ) ( 10,096 ) Issuance of common stock pursuant to equity compensation plan 483,396 — — — — — Shares withheld for tax withholdings on vested stock awards ( 161,295 ) — ( 250 ) — — ( 250 ) Share-based compensation — — 3,476 — — 3,476 Foreign currency translation adjustments — — — 1,128 — 1,128 BALANCE, March 31, 2025 125,246,286 $ 13 $ 569,935 $ ( 5,825 ) $ ( 518,061 ) $ 46,062 Net income — — — — 19,712 19,712 Issuance of common stock pursuant to equity compensation plan 2,091,026 — — — — — Shares withheld for tax withholdings on vested stock awards ( 572,750 ) — ( 708 ) — — ( 708 ) Share-based compensation — — 5,308 — — 5,308 Foreign currency translation adjustments — — — 3,629 — 3,629 BALANCE, June 30, 2025 126,764,562 $ 13 $ 574,535 $ ( 2,196 ) $ ( 498,349 ) $ 74,003 Net loss — — — — ( 11,031 ) ( 11,031 ) Issuance of common stock pursuant to equity compensation plan 774,465 — — — — — Shares withheld for tax withholdings on vested stock awards ( 237,763 ) — ( 188 ) — — ( 188 ) Share-based compensation — — 2,455 — — 2,455 Foreign currency translation adjustments — — — 421 — 421 BALANCE, September 30, 2025 127,301,264 $ 13 $ 576,802 $ ( 1,775 ) $ ( 509,380 ) $ 65,660 The accompanying notes are an integral part of these unaudited financial statements. 6 THE BEAUTY HEALTH COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 2025 2024 Cash flows from operating activities: Net loss $ ( 1,415 ) $ ( 18,768 ) Adjustments to reconcile net loss to net cash from operating activities Share-based compensation 11,239 20,846 Amortization of intangible assets 13,513 15,314 Depreciation of property and equipment 3,204 8,486 Amortization of other assets 3,281 3,321 Amortization of debt issuance costs 2,621 2,532 Inventory write-down 3,643 22,704 Provision for estimated credit losses 1,933 5,135 Change in fair value of warrant liabilities ( 349 ) ( 2,997 ) Gain on exchange and repurchases of convertible senior notes, net ( 18,089 ) ( 33,411 ) Deferred income taxes 2,893 ( 250 ) Other, net ( 2,679 ) 9,938 Changes in operating assets and liabilities: Accounts receivable 4,769 13,348 Inventories 11,114 ( 7,468 ) Prepaid expenses, other current assets, and income tax receivable ( 110 ) 7,956 Accounts payable, accrued expenses, and income tax payable ( 7,117 ) ( 39,501 ) Other, net ( 6,162 ) ( 7,523 ) Net cash provided by (used for) operating activities 22,289 ( 338 ) Cash flows from investing activities: Cash paid for intangible assets ( 3,617 ) ( 5,250 ) Cash paid for property and equipment ( 164 ) ( 682 ) Net cash used for investing activities ( 3,781 ) ( 5,932 ) Cash flows from financing activities: Repurchase of 2026 Notes in connection with exchange ( 392,583 ) — Issuance of 2028 Notes in connection with exchange, net 237,686 — Repurchase of 2026 Notes ( 18,372 ) ( 156,082 ) Payment of tax withholdings on vested stock awards ( 1,145 ) ( 1,489 ) Net cash used for financing activities ( 174,414 ) ( 157,571 ) Net change in cash, cash equivalents, and restricted cash ( 155,906 ) ( 163,841 ) Effect of foreign currency translation on cash 5,240 ( 292 ) Cash, cash equivalents, and restricted cash beginning of period 370,063 523,025 Cash, cash equivalents, and restricted cash end of period $ 219,397 $ 358,892 The accompanying notes are an integral part of these unaudited financial statements 7 THE BEAUTY HEALTH COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 — Description of Business 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. The Company’s brands are pioneers: Hydrafacial in hydradermabrasion; SkinStylus in nanoneedling and microneedling; and Keravive in scalp health. Together, with its powerful global community of estheticians, partners, and consumers, the Company is personalizing skin health for all ages, genders, skin tones, and skin types. Historical Information The Company (f.k.a. Vesper Healthcare Acquisition Corp.) was incorporated in the State of Delaware on July 8, 2020. On May 4, 2021, we consummated the business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020, by and among Vesper Healthcare Acquisition Corp. (“Vesper Healthcare”), Hydrate Merger Sub I, Inc. (“Merger Sub I”), Hydrate Merger Sub II, LLC (“Merger Sub II”), LCP Edge Intermediate, Inc., the indirect parent of HydraFacial LLC, f.k.a. Edge Systems LLC (“Hydrafacial”), and LCP Edge Holdco, LLC (“LCP,” or “Former Parent,” and, in its capacity as the stockholders’ representative, the “Stockholders’ Representative”) (the “Merger Agreement”), which provided for: (a) the merger of Merger Sub I with and into Hydrafacial, with Hydrafacial continuing as the surviving corporation (the “First Merger”), and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Hydrafacial with and into Merger Sub II, with Merger Sub II continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). As a result of the First Merger, the Company owns 100 % of the outstanding common stock of Hydrafacial and each share of common stock and preferred stock of Hydrafacial was cancelled and converted into the right to receive a portion of the consideration payable in connection with the Mergers. As a result of the Second Merger, the Company owns 100 % of the outstanding interests in Merger Sub II. In connection with the closing of the Business Combination (the “Closing”), the Company owns, directly or indirectly, 100 % of the stock of Hydrafacial and its subsidiaries and the stockholders of Hydrafacial as of immediately prior to the effective time of the First Merger (the “Hydrafacial Stockholders”) hold a portion of the Company’s Class A common stock, par value $ 0.0001 per share (the “Class A Common Stock”). Basis of Presentation The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. 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 . 8 Note 2 — Balance Sheet Components Inventories consist of the following as of the periods indicated: (in thousands) September 30, 2025 December 31, 2024 Raw materials $ 23,001 $ 26,019 Finished goods 33,145 43,094 Total inventories $ 56,146 $ 69,113 Accrued payroll-related expenses consist of the following as of the periods indicated: (in thousands) September 30, 2025 December 31, 2024 Accrued compensation and payroll taxes $ 12,701 $ 10,708 Accrued sales commissions 4,124 4,784 Accrued benefits 1,934 2,144 Total accrued payroll-related expenses $ 18,759 $ 17,636 Other accrued expenses consist of the following as of the periods indicated: (in thousands) September 30, 2025 December 31, 2024 Sales and VAT tax payables $ 2,852 $ 5,244 Accrued interest 7,624 1,743 Royalty liabilities 1,504 1,897 Deferred revenue 534 2,375 Other 6,801 8,743 Total other accrued expenses $ 19,315 $ 20,002 As of September 30, 2025 and December 31, 2024, total warranty reserve was approximately $ 2 million and $ 4 million, respectively, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets. As of September 30, 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. Note 3 — Property and Equipment, net Property and equipment, net consist of the following as of the periods indicated: (in thousands) Useful life (years) September 30, 2025 December 31, 2024 Leasehold improvements Shorter of remaining lease term or estimated useful life $ 10,965 $ 12,019 Machinery and equipment 2 - 5 5,076 7,076 Furniture and fixtures 2 - 7 5,954 6,096 Computers and equipment 3 - 5 5,302 5,496 Tooling 5 732 732 Autos and trucks 5 61 59 Construction in progress 26 — Total property and equipment 28,116 31,478 Less: accumulated depreciation and amortization ( 25,063 ) ( 25,500 ) Property and equipment, net $ 3,053 $ 5,978 9 Note 4 — Goodwill and Intangible Assets, net Goodwill The changes in the carrying value of goodwill for the nine months ended September 30, 2025 is as follows (in thousands): December 31, 2024 $ 123,499 Foreign currency translation impact 2,998 September 30, 2025 $ 126,497 Intangible Assets, Net The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of September 30, 2025 were as follows: (in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value Estimated Useful Life (Years) Developed technology $ 91,629 $ ( 77,995 ) $ 13,634 3 - 10 Capitalized software 25,282 ( 14,176 ) 11,106 3 - 5 Customer relationships 19,031 ( 16,746 ) 2,285 5 - 10 Trademarks 11,700 ( 6,807 ) 4,893 15 Non-compete agreement 5,905 ( 3,455 ) 2,450 3 Patents 4,588 ( 975 ) 3,613 3 - 19 Total intangible assets $ 158,135 $ ( 120,154 ) $ 37,981 The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2024 were as follows: (in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value Estimated Useful Life (Years) Developed technology $ 91,629 $ ( 74,655 ) $ 16,974 3 - 10 Capitalized software 22,983 ( 8,027 ) 14,956 3 - 5 Customer relationships 17,569 ( 13,696 ) 3,873 5 - 10 Trademarks 11,674 ( 6,189 ) 5,485 15 Non-compete agreement 5,814 ( 2,605 ) 3,209 3 Patents 3,781 ( 766 ) 3,015 3 - 19 Total intangible assets $ 153,450 $ ( 105,938 ) $ 47,512 10 Note 5 — Long-Term Debt Convertible Senior Notes - 2026 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 “2026 Notes”). The 2026 Notes were issued pursuant to, and are governed by, an indenture dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchasers of the 2026 Notes, the Company granted the initial purchasers an option to purchase, for settlement within a period of 13 days from, and including, the date the 2026 Notes were first issued, up to an additional $ 100.0 million principal amount of 2026 Notes. The 2026 Notes issued on September 14, 2021 include the $ 100.0 million principal amount of 2026 Notes issued pursuant to the full exercise by the initial purchasers of such option. During the three months ended September 30, 2024, there were no repurchases related to the 2026 Notes. During the nine months ended September 30, 2024, the Company repurchased $ 192.3 million principal amount of the 2026 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. During the three months ended September 30, 2025, there were no repurchases related to the 2026 Notes. During the nine months ended September 30, 2025, the Company repurchased $ 20.0 million principal amount of the 2026 Notes for $ 18.4 million and recognized a net gain of $ 1.5 million, which includes $ 0.1 million of unamortized debt issuance costs related to the repurchase. Convertible Senior Secured Notes - 2028 On May 21, 2025, the Company entered into privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders (the “Exchanging Holders”) of the 2026 Notes (the “Existing Notes”). Pursuant to the Exchange Agreements, the Company exchanged and repurchased $ 413.2 million aggregate principal amount of the Existing Notes. Of the $ 413.2 million aggregate principal amount of the Existing Notes, $ 263.2 million principal amount were exchanged at a weighted-average price equal to 95 % for $ 250.0 million principal amount of new 7.95 % Convertible Senior Secured Notes due November 15, 2028 (the “2028 Notes”, and together with the 2026 Notes, the “Notes”), and $ 150.1 million principal amount were repurchased at a weighted-average price equal to 95 % for $ 142.6 million. The exchange and repurchase resulted in a net gain of $ 16.6 million, which includes $ 3.1 million of unamortized debt issuance costs and $ 0.9 million of other related fees. On May 27, 2025, the Company issued the 2028 Notes to the Exchanging Holders. The 2028 Notes were issued pursuant to, and are governed by, an indenture (the “2028 Indenture”), dated as of May 27, 2025, between the Company, the guarantors party thereto, and U.S. Bank Trust Company, National Association, as trustee and collateral agent. The 2028 Notes are the Company’s senior, secured obligations and are guaranteed by certain of the Company’s subsidiaries (including the Company’s material domestic, wholly-owned subsidiaries) and are secured on a first-priority basis by substantially all assets of the Company and such guarantors, subject to certain exceptions. The 2028 Notes will accrue interest at a rate of 7.95 % per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2025. The 2028 Notes will mature on November 15, 2028 (the “Maturity Date”), unless earlier repurchased, redeemed or converted. Subject to certain restrictions, noteholders may convert their 2028 Notes at any time at their election until the close of business on the second scheduled trading day immediately before the Maturity Date. The initial conversion rate is 349.6503 shares of Class A Common Stock per $1,000 principal amount of 2028 Notes, which represents an initial conversion price of approximately $ 2.86 per share of Class A Common Stock. The conversion rate and conversion price is subject to adjustment upon the occurrence of certain events. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Class A Common Stock or a combination of cash and shares of its Class A Common Stock, at the Company’s election. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the 2028 Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. The 2028 Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after September 1, 2028, and on or before the 40 th scheduled trading day immediately before the Maturity Date, but only if certain liquidity conditions are satisfied. The redemption price will be a cash amount equal to the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, the calling of any 2028 Notes for redemption will constitute a Make-Whole Fundamental Change with respect to that 2028 Note, in which case the conversion rate applicable to the conversion of that 2028 Note will be increased in certain circumstances if it is converted after it is called for redemption. 11 If certain corporate events that constitute a “Fundamental Change” (as defined in the 2028 Indenture) occur, then, subject to a limited exception, noteholders may require the Company to repurchase their 2028 Notes at a cash repurchase price equal to the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A Common Stock. The 2028 Indenture also contains a number of restrictive covenants and limitations, including restrictions on the Company’s ability to incur certain indebtedness and other limitations on liens, investments and restricted payments, as further described in the 2028 Indenture. The Company incurred $ 11.4 million of debt issuance costs related to the exchange and repurchase of the Existing Notes, which was recorded as a reduction to convertible senior notes, net on the Condensed Consolidated Balance Sheets. The debt issuance costs are being amortized over the term of the 2028 Notes using the effective interest method. Additionally, the Company incurred $ 0.9 million of other fees related to the exchange and repurchase of the Existing Notes. The following is a summary of the Company’s Notes for the periods indicated: (in thousands) September 30, 2025 December 31, 2024 2026 Notes $ 124,485 $ 557,700 2028 Notes 250,000 — Unamortized debt issuance costs ( 11,097 ) ( 5,502 ) Convertible senior notes, net $ 363,388 $ 552,198 As of September 30, 2025 and December 31, 2024 , the estimated fair value of the Notes were $ 390.9 million (compared to a carrying amount of $ 374.5 million ) and $ 446.2 million (compared to a carrying amount of $ 557.7 million ), respectively. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on September 30, 2025 and December 31, 2024, and are classified as Level 2 within the fair value hierarchy. The net gain recognized related to the exchange and repurchases is included in other income, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). 12 Note 6 — Commitments and Contingencies The Company is a party to various lawsuits, claims, and other legal proceedings that arise from time to time in the ordinary course of business, including but not limited to commercial disputes, product liability, and employment related matters. In addition, the Company may bring claims or initiate lawsuits from time to time against various third parties with respect to matters arising out of the ordinary course of the Company’s business, including but not limited to commercial and intellectual property related matters. With respect to all such lawsuits, claims, and proceedings, if the Company determines a loss is probable and its amount can be reasonably estimated, the Company accrues an amount equal to the estimated loss. The assessment of whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success, and taking into account, among other things, negotiations with claimants, discovery, settlements and payments, judicial rulings, arbitration and mediation decisions, advice of internal and external legal counsel, and other information and events pertaining to a particular matter. Costs incurred for litigation are expensed as incurred. 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 as otherwise disclosed below, we believe that none of our pending lawsuits, claims, and other proceedings are expected to have a material adverse effect on the Company’s business, consolidated financial position, results of operations, or cash flows. However, management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation. Securities Class Action On November 16, 2023, a putative class action was filed in the United States District Court for the Central District of California against the Company, its then-current President and Chief Executive Officer, Andrew Stanleick, its former Chief Financial Officer, Liyuan Woo, and its current Chief Financial Officer, Michael Monahan (the “Defendants”). The complaint, styled Abduladhim A. Alghazwi, individually and on behalf of all others similarly situated, v. The Beauty Health Company, Andrew Stanleick, Liyuan Woo, and Michael Monahan, Case No. 2:23-cv-09733 (C.D. Ca.) (the “Securities Class Action”), asserts claims for violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants (First Claim), and violation of Section 20(a) of the Exchange Act against the individual defendants (Second Claim). The complaint alleges that, between May 10, 2022 and November 13, 2023, defendants materially misled the investing public by publicly issuing false and/or misleading statements and/or omissions relating to Hydrafacial's business, operations, and prospects, specifically with respect to the performance of and demand for the Syndeo 1.0 and 2.0 devices. The relief sought in the complaint includes a request for compensatory damages suffered by the plaintiff and other members of the putative class for damages allegedly sustained as a result of the alleged securities violations. 13 On January 16, 2024, putative class members Jeff and Kevin Brown (the “Browns”), Priscilla and Martjn Dijkgraaf (the “Dijkgraafs”), and Joseph Jou filed three competing motions for appointment as lead plaintiff under the Private Securities Litigation Reform Act (“PSLRA”), 17 U.S.C. § 78u-4(a)(3). On January 31, 2024, Joseph Jou filed a notice of non-opposition to the Browns’ and Dijkgraafs’ motions for appointment as lead plaintiff. 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 July 1, 2024, lead plaintiffs filed a consolidated amended class action complaint asserting the same causes of action as the original complaint. The Securities Class Action case is assigned to U.S. District Judge Sherilyn Peace Garnett. On September 30, 2024, the Company filed a motion to dismiss the consolidated amended class action complaint in its entirety. 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. On July 11, 2025, Defendants filed a motion to dismiss the amended complaint in its entirety. The Court scheduled a hearing on Defendants’ motion for September 17, 2025. On September 15, 2025, the Court vacated the hearing sua sponte . On September 25, 2025, the Court denied Defendants’ motion to dismiss. Defendants’ answer to the amended complaint is due November 24, 2025. The Company believes that the claims asserted in the Securities Class Action have no merit and intends to vigorously defend them. Customer 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 “Customer 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. Hydrafacial LLC dba The Hydrafacial Company, and The Beauty Health Company, Case No. 24-cv-8073 (S.D.N.Y.) (Caproni, J.) The complaint alleges that all three versions of the Syndeo machine (Syndeo 1.0, Syndeo 2.0, and Syndeo 3.0) were defective and did not perform in the manner in which it had been represented by Class Action Defendants. Class Action Plaintiffs claim that Class Action Defendants made various misrepresentations in its marketing and sales of the Syndeo machines and, rather than provide a refund to customers for the defective machines, replaced them with another Syndeo machine that exhibited the same defects. Class Action Plaintiffs purport to bring claims on behalf of themselves, and all other similarly situated purchasers within the United States, of Class Action Defendants’ Syndeo machines. The complaint asserts five causes of action: (1) violations of N.Y. G.B.L., § 349, the state consumer production statute; (2) violations of N.Y. G.B.L., § 350, the state’s false advertising statute; (3) breach of contract; (4) breach of the implied warranty of merchantability; and (5) breach of the implied warranty of fitness. The relief sought in the complaint includes monetary damages allegedly suffered by Class Action Plaintiffs and other members of the putative class as a result of Class Action Defendants’ alleged violations and breaches, including a trebling of any money damages award for alleged violations of N.Y. G.B.L., § 349 and § 350. 14 On December 30, 2024, the Class Action Defendants filed a motion to dismiss the Customer 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. R. Civ. P. 41(a)(1)(A)(i), leaving Plaintiff Sol Tan as the sole remaining Customer 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. On June 2, 2025, Plaintiff and fifteen other alleged purchasers of the Syndeo machines filed an amended complaint asserting: (1) violations of N.Y. G.B.L., § 349 (Count IV), the state consumer protection statute; (2) violations of N.Y. G.B.L., § 350 (Count V), the state’s false advertising statute; (3) breach of the implied warranty of merchantability (Count I); (4) breach of express and implied contract and class-wide rescission (Count II); and (5) breach of express warranty (Count III). The relief sought in the amended complaint includes monetary damages allegedly suffered by Class Action Plaintiffs and other members of the putative class as a result of Class Action Defendants’ alleged violations and breaches, including a trebling of any money damages award for alleged violations of N.Y. G.B.L., § 349 and § 350. On June 23, 2025, Defendants moved to (i) dismiss Counts I, II, IV, and V in full; (ii) partially dismiss Count III to the extent it alleges design defects; (iii) dismiss all claims brought by plaintiff Jennifer Skuratov d/b/a Spa Thirsty in full; (iv) dismiss all claims against the Company in full; and (v) dismiss Plaintiffs’ claim for injunctive relief. The parties are currently engaged in discovery while they await the Court’s ruling on Defendants’ partial motion to dismiss. The Company believes that the claims asserted in the Customer Class Action have no merit and Class Action Defendants intend to vigorously defend them. Consolidated Derivative Action On February 8, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former President and Chief Executive Officer, Andrew Stanleick; its former Chief Financial Officer, Liyuan Woo, and current members of the Company’s Board of Directors (the “Board of Directors”): Brenton Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, with the Company as the nominal defendant. The complaint, styled Margie Elstein, derivatively on behalf of The Beauty Health Company v. Brenton Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, Doug Schillinger, Andrew Stanleick, and Liyuan Woo, C.A. No. 2024-0114-LWW (Del. Ch.) (the “Elstein Derivative Action”), asserts a single claim for breach of fiduciary duty against the individual defendants based on the alleged disclosure of knowingly false information and/or the alleged failure to respond to red flags relating to Hydrafacial’s business, operations, and prospects, specifically with respect to the performance of and demand for the Syndeo 1.0 and 2.0 devices. The plaintiff-stockholder further maintains that no demand was made upon the Company’s Board of Directors prior to the initiation of the Elstein Derivative Action based on allegations that a majority of the Board of Directors was not disinterested or independent with respect to the fiduciary duty claim, such that demand should be excused as futile. The relief sought in the complaint includes a finding of demand futility, a finding that the individual defendants are liable for breaching their fiduciary duties (as current/former officers and directors), and an award of compensatory damages for harm suffered by the Company and its stockholders for harm allegedly sustained as a result of the alleged fiduciary duty violation. 15 On May 1, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former President and Chief Executive Officer, Andrew Stanleick; its former Chief Financial Officer, Liyuan Woo, and current members of the Company’s Board of Directors: Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, with the Company as the nominal defendant. The complaint, styled Richard Montague, derivatively on behalf of The Beauty Health Company v. Andrew Stanleick, Liyuan Woo, Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, C.A. No. 2024-0463-LWW (Del. Ch.) (the “Montague Derivative Action”), asserts claims for (i) breach of fiduciary duty, (ii) gross mismanagement, (iii) waste of corporate assets, (iv) unjust enrichment, and (v) aiding and abetting against the individual defendants based on allegations that the individual defendants made materially false and/or misleading statements, as well as failing to disclose material adverse facts about the Company’s business, operations, and prospects, specifically relating to the Syndeo 1.0 and 2.0 devices. The relief sought in the Montague Derivative Action includes (a) awarding damages for harm suffered by the Company allegedly sustained as a result of the individual defendants’ alleged breach of fiduciary duties, gross mismanagement, waste of corporate assets, and unjust enrichment, (b) awarding damages for harm suffered by the Company allegedly sustained as a result of the Company’s directors’ alleged aiding and abetting of breaching their fiduciary duties, (c) directing the Company to reform and improve its corporate governance and internal procedures, to comply with its existing governance obligations and all applicable laws, and to protect its investors from a recurrence of the alleged damaging events, and (d) awarding the plaintiff-stockholder the costs and disbursements of the Montague Derivative Action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses. On May 22, 2024, the parties to the Elstein Derivative Action and Montague Derivative Action submitted a Stipulation and Proposed Order Governing Consolidation, Appointment of Lead, and Deadline to Respond to Operative Complaint. On May 24, 2024, Vice Chancellor Will, who was assigned to both the Elstein Derivative Action and the Montague Derivative Action, entered the Stipulation and Order Governing Consolidation, Appointment of Lead, and Deadline to Respond to Operative Complaint (the “Consolidation Order”). Per the Consolidation Order, the Elstein Derivative Action and the Montague Derivative Action were consolidated into a single derivative action, styled In re The Beauty Health Company Consolidated Stockholder Derivative Litigation, C.A. No. 2024-0114-LWW (Del. Ch.) (the “Consolidated Derivative Action”). The Consolidation Order designated the law firms of Gainey McKenna & Egleston and Komlossy Law, P.A. as co-lead counsel for plaintiffs in the Consolidated Derivative Action, and designated the law firm of Cooch and Taylor, P.A. as Delaware counsel for plaintiffs in the Consolidated Derivative Action. Additionally, the Consolidation Order designated the complaint filed in the Elstein Derivative Action as the operative complaint for the Consolidated Derivative Action, further providing that defendants are not obligated to answer or otherwise respond to the complaint filed in the Montague Derivative Action. The Consolidation Order further provided that defendants shall answer or otherwise respond to the complaint filed in the Elstein Derivative Action by August 25, 2024. This response deadline was subsequently vacated, prior to plaintiffs’ filing, on September 9, 2024, of their Verified Consolidated Amended Stockholder Derivative Complaint (the “Operative Complaint”). On September 16, 2024, defendants filed their Motion to Dismiss the Operative Complaint, or Alternatively, Stay the Proceedings (the “Motion to Dismiss”). 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 was filed on June 3, 2025. Although oral argument before the Delaware Court of Chancery on the Motion to Dismiss is scheduled for January 7, 2026, the parties held a mediation on November 4, 2025 and have reached agreement on certain terms of a mutually agreeable resolution. However, the settlement discussions are ongoing and any final resolution is subject to the parties’ execution of a final settlement agreement and the Delaware Court of Chancery’s approval. 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 On January 11, 2024, the Company was informed that the SEC is conducting a formal investigation of the Company related to, among other things, the allegations brought against the Company in the Securities Class Action lawsuit. The Company has subsequently received subpoenas from the SEC for the production of documents and information related to its investigation. 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. Note 7 — Related-Party Transactions 16 Registration Rights Agreement In connection with the consummation of the Business Combination, on May 4, 2021, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with BLS Investor Group LLC and the Hydrafacial Stockholders. Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding shares of Class A Common Stock or any other equity securities (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by BLS Investor Group LLC (the “Sponsor”) or the Hydrafacial Stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 shares of Class B common stock (the “Founder Shares”) that were owned by the Sponsor and converted into shares of Class A Common Stock in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the Hydrafacial Stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of Class A Common Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights. The Registration Rights Agreement provides that the Company will, within 60 days after the consummation of the Business Combination, file with the SEC a shelf registration statement registering the resale of the shares of Class A Common Stock held by the Restricted Stockholders and will use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 60 days following the filing deadline. The Company filed such registration statement on July 19, 2021 and it was declared effective by the SEC on July 26, 2021. The Hydrafacial Stockholders are entitled to make up to an aggregate of two demands for registration, excluding short form demands, that the Company register shares of Class A Common Stock held by these parties. In addition, the Restricted Stockholders have certain “piggy-back” registration rights. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Registration Rights Agreement. The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of Class A Common Stock effected pursuant to the terms of the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Sponsor agreed to restrictions on the transfer of its securities issued in the Company’s initial public offering, which (i) in the case of the Founder Shares is one year after the completion of the Business Combination unless (A) the closing price of the Class A Common Stock equals or exceeds $ 12.00 per share for 20 days out of any 30 -trading-day period commencing at least 150 days following the Closing of the Business Combination or (B) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property, and (ii) in the case of the Private Placement Warrants and the respective Class A Common Stock underlying the Private Placement Warrants is 30 days after the completion of the Business Combination. The Sponsor and its permitted transferees will also be required, subject to the terms and conditions in the Registration Rights Agreement, not to transfer their Private Placement Warrants (as defined in the Registration Rights Agreement) or shares of Class A Common Stock issuable upon the exercise thereof for 30 days following the Closing. Investor Rights Agreement In connection with the consummation of the Business Combination, on May 4, 2021, the Company and LCP Edge Holdco, LLC entered into that certain Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, LCP has the right to designate a number of directors for appointment or election to the Company’s Board of Directors as follows: (i) one director for so long as LCP holds at least 10 % of the outstanding Class A Common Stock, (ii) two directors for so long as LCP holds at least 15 % of the outstanding Class A Common Stock, and (iii) three directors for so long as LCP holds at least 40 % of the outstanding Class A Common Stock. Pursuant to the Investor Rights Agreement, for so long as LCP holds at least 10 % of the outstanding Class A Common Stock, LCP will be entitled to have at least one of its designees represented on the compensation committee and nominating committee and corporate governance committee of the Company’s Board of Directors. 17 Note 8 — Stockholders' Equity Common Stock The Company is authorized to issue 320,000,000 shares of Class A Common Stock, par value of $ 0.0001 per share. Holders of Class A Common Stock are entitled to one vote for each share. As of September 30, 2025 and December 31, 2024, there were 127,301,264 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 . 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, 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 September 30, 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: Level 1: 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. Level 2: 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. Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. As of September 30, 2025 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash, cash equivalents, and restricted cash: Money market funds $ 126,580 $ — $ — $ 126,580 Liabilities Warrant liability — Private Placement Warrants $ — $ — $ 139 $ 139 As of December 31, 2024 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash, cash equivalents, and restricted cash: Money market funds $ 284,462 $ — $ — $ 284,462 Liabilities Warrant liability — Private Placement Warrants $ — $ — $ 488 $ 488 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, which will expire five years after the Business Combination. As of September 30, 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. 18 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 September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Net Sales Delivery Systems $ 20,819 $ 27,613 $ 63,394 $ 98,605 Consumables 49,836 51,189 155,028 152,194 Total net sales $ 70,655 $ 78,802 $ 218,422 $ 250,799 Net sales by geographic region were as follows for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Americas $ 48,263 $ 51,878 $ 146,568 $ 159,935 Europe, the Middle East and Africa 16,056 16,095 49,465 54,428 Asia-Pacific 6,336 10,829 22,389 36,436 Total net sales $ 70,655 $ 78,802 $ 218,422 $ 250,799 19 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. 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. Share-based compensation expense was as follows for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Cost of sales $ 121 $ 193 $ 395 $ ( 81 ) Selling and marketing 581 2,393 1,925 7,021 Research and development 125 168 417 216 General and administrative 1,628 4,958 8,502 13,690 Total share-based compensation $ 2,455 $ 7,712 $ 11,239 $ 20,846 Total share-based compensation expense for the three and nine months ended September 30, 2025 includes reversal of expense related to the forfeiture of unvested awards of $ 2.6 million and $ 5.1 million, respectively. As of September 30, 2025 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 19.4 million and is expected to be recognized over a weighted-average period of 1.9 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 RSU Shares PSU Shares RSU PSU Outstanding - January 1, 2025 7,254,391 1,237,822 $ 4.56 $ 5.93 Granted 10,396,409 1,676,134 1.34 2.12 Vested ( 2,907,129 ) ( 441,558 ) 4.99 3.11 Forfeited ( 3,994,026 ) ( 1,007,055 ) 2.61 4.09 Outstanding - September 30, 2025 10,749,645 1,465,343 $ 2.06 $ 3.69 Stock Options The following table summarizes the Company’s stock option activity: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Outstanding - January 1, 2025 3,483,070 $ 13.64 5.29 Granted — — Exercised — — Forfeited ( 74,475 ) 15.45 Expired ( 867,750 ) 13.74 Outstanding - September 30, 2025 2,540,845 13.55 5.45 Vested and Exercisable - September 30, 2025 2,528,490 13.49 5.44 Options vested and expected to vest - September 30, 2025 2,540,845 $ 13.55 5.45 20 Note 12 — 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, 2025, the Company recorded income tax expense of $ 0.4 million and $ 0.3 million, respectively. 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 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. For the three and nine months ended September 30, 2024, the Company recorded income tax expense of $ 1.9 million and $ 0.9 million, respectively. 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. 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 $ 1.5 million and $ 1.2 million as of September 30, 2025 and December 31, 2024, respectively. On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted in the United States. The Act includes corporate tax provisions that make 100% bonus depreciation permanent, allow for the expensing of domestic research costs, and modify the business interest expense limitation calculation. The Company has completed its initial assessment of the provisions relevant to its U.S. operations. Based on this assessment, the Act is expected to reduce the Company’s U.S. federal income taxes. The Company has incorporated the Act's changes in its income tax provision for the nine months ended September 30, 2025, which did not have a material impact on the U.S. effective tax rate and net deferred tax assets as the Company maintains a full valuation allowance in the United States. 21 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, (in thousands, except share and per share amounts) 2025 2024 2025 2024 Net loss available to common stockholders - basic $ ( 11,031 ) $ ( 18,291 ) $ ( 1,415 ) $ ( 18,768 ) Adjustments related to the 2026 Notes (1) — — ( 13,117 ) ( 25,186 ) Net loss available to common stockholders - diluted $ ( 11,031 ) $ ( 18,291 ) $ ( 14,532 ) $ ( 43,954 ) Weighted average common stock outstanding - basic 126,890,888 124,057,602 126,020,956 123,630,811 Effect of dilutive shares: 2026 Notes — — 11,273,231 19,036,398 Weighted average common stock outstanding - diluted 126,890,888 124,057,602 137,294,187 142,667,209 Basic net loss per share: $ ( 0.09 ) $ ( 0.15 ) $ ( 0.01 ) $ ( 0.15 ) Dilutive net loss per share: $ ( 0.09 ) $ ( 0.15 ) $ ( 0.11 ) $ ( 0.31 ) (1) For the nine months ended September 30, 2025 and 2024, the adjustments related to the 2026 Notes include the net gain related to the exchange and repurchases offset by interest expense and amortization of debt issuance costs related to the 2026 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, 2025 2024 2025 2024 2026 Notes 3,919,522 17,559,686 — — 2028 Notes 87,412,575 — 87,412,575 — RSUs 10,749,645 7,827,861 10,749,645 7,827,861 Stock Options 2,540,845 3,571,820 2,540,845 3,571,820 PSUs 1,465,343 2,302,162 1,465,343 2,302,162 For the three and nine months ended September 30, 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. 22 The following summarizes the components of operating expenses for the periods indicated: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2025 2024 2025 2024 Total operating expenses: Personnel-related expenses $ 25,645 $ 31,101 $ 81,903 $ 99,406 Other segment expenses 26,231 31,063 82,388 91,161 Total operating expenses $ 51,876 $ 62,164 $ 164,291 $ 190,567 Note 15 — New Accounting Pronouncements 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 consolidated 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. ASU 2024-03 is 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 consolidated financial statement disclosures. In November 2024, the FASB issued ASU 2024-04 “Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments” which is intended to clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. ASU 2024-04 is effective for annual periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU 2025-05 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” which simplifies the application of the current expected credit loss model for current accounts receivable and current contract assets under ASC 606. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted, and should be applied prospectively. The Company is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements and related disclosures. In September 2025, the FASB issued ASU 2025-06 “Intangibles: Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” which modernizes the accounting for internal-use software to current development practices, clarifies when to begin capitalizing costs, and enhances disclosure requirements. ASU 2025-06 is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted, and should be applied either prospectively, retrospectively, or under a modified prospective transition approach. The Company is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements and related disclosures. 23