SkinHealth Systems Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 102 Consolidated Balance Sheets 104 Consolidated Statements of Comprehensive Income (Loss ) 105 Consolidated Statements of Stockholders’ Equity 106 Consolidated Statements of Cash Flows 107 Notes to Consolidated Financial Statements 108 101 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of The Beauty Health Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of The Beauty Health Company and its subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2026, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Inventories — Provision for obsolete and excess inventory – Refer to Notes 2 and 3 to the financial statements Critical Audit Matter Description Inventories are stated at the lower of cost or net realizable value. The Company estimates the net realizable value and makes a provision as necessary based on economic trends, future demand for products, and technological obsolescence to value goods that are obsolete or in excess. As of December 31, 2025, the Company’s inventories balance was $48.0 million. We identified the provision for obsolete and excess inventories as a critical audit matter because of the significant judgment required by management in developing its assumptions about future demand for products. Testing management’s assumptions and estimates used in calculating the provision required a high degree of auditor judgment and the use of more experienced audit professionals. 102 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to testing the provision for obsolete and excess inventories included the following, among others: • We tested the operating effectiveness of internal controls over management's review of the provision for obsolete and excess inventories. • We observed the physical condition of inventories during physical inventory counts. • We performed a retrospective review on the prior year provision for obsolete and excess inventories by considering current year write-off activity. • We compared on-hand inventories to current year sales to assess the projected future demand and to identify potential indicators of excess inventory. • For a sample of inventory products, we estimated the future demand based on historical usage, and compared the projected sell through to the quantity on hand, including consideration of expiration dates, if applicable. • We corroborated the assumptions with individuals outside of the accounting department to identify whether any changes in the business would impact the future demand, based on economic trends and technological obsolescence. /s/ Deloitte & Touche LLP Los Angeles, California March 12, 2026 We have served as the Company's auditor since 2020. 103 THE BEAUTY HEALTH COMPANY CONSOLIDATED BALANCE SHEETS (in thousands, except for share amounts) December 31, 2025 December 31, 2024 ASSETS Current assets: Cash, cash equivalents, and restricted cash $ 232,673 $ 370,063 Accounts receivable, net of allowances for estimated credit losses of $ 6,022 and $ 9,597 at December 31, 2025 and December 31, 2024, respectively 21,741 27,643 Inventories 48,012 69,113 Income tax receivable 1,696 818 Prepaid expenses and other current assets 5,395 9,487 Total current assets 309,517 477,124 Property and equipment, net 2,538 5,978 Right-of-use assets, net 11,570 13,590 Intangible assets, net 35,763 47,512 Goodwill 126,621 123,499 Deferred income tax assets, net 1,925 3,894 Other assets 11,869 14,086 TOTAL ASSETS $ 499,803 $ 685,683 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of convertible senior notes, net $ 123,959 $ — Accounts payable 15,631 21,941 Accrued payroll-related expenses 24,947 17,636 Lease liabilities, current 5,128 5,147 Income tax payable 1,226 3,426 Other accrued expenses 15,384 20,002 Total current liabilities 186,275 68,152 Lease liabilities, non-current 9,238 10,813 Deferred income tax liabilities, net 393 396 Convertible senior notes, net 240,431 552,198 Other long-term liabilities 2,410 2,321 Total liabilities 438,747 633,880 Commitments and Contingencies (Note 8) Stockholders’ equity: Class A Common Stock, $ 0.0001 par value; 320,000,000 shares authorized; 127,520,823 and 124,924,185 shares issued and outstanding at December 31, 2025 and December 31, 2024, respectively 13 12 Additional paid-in capital 579,961 566,709 Accumulated other comprehensive loss ( 1,434 ) ( 6,953 ) Accumulated deficit ( 517,484 ) ( 507,965 ) Total stockholders’ equity 61,056 51,803 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 499,803 $ 685,683 The accompanying notes are an integral part of these consolidated financial statements. 104 THE BEAUTY HEALTH COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands, except for share and per share amounts) Year Ended December 31, 2025 2024 2023 Net sales $ 300,790 $ 334,294 $ 397,991 Cost of sales 104,426 151,998 242,878 Gross profit 196,364 182,296 155,113 Operating expenses: Selling and marketing 93,590 118,311 144,496 Research and development 5,628 6,296 10,102 General and administrative 117,949 125,463 131,432 Total operating expenses 217,167 250,070 286,030 Loss from operations ( 20,803 ) ( 67,774 ) ( 130,917 ) Interest expense 19,326 10,412 13,649 Interest income ( 8,954 ) ( 16,644 ) ( 23,173 ) Other income, net ( 18,931 ) ( 33,563 ) ( 5,200 ) Change in fair value of warrant liabilities ( 487 ) ( 3,067 ) ( 11,919 ) Foreign currency transaction (gain) loss, net ( 5,819 ) 4,638 ( 2,385 ) Loss before provision for income taxes ( 5,938 ) ( 29,550 ) ( 101,889 ) Income tax expense (benefit) 3,581 ( 452 ) ( 1,773 ) Net loss ( 9,519 ) ( 29,098 ) ( 100,116 ) Comprehensive loss, net of tax: Foreign currency translation adjustments 5,519 ( 3,917 ) 1,494 Comprehensive loss $ ( 4,000 ) $ ( 33,015 ) $ ( 98,622 ) Net loss per share Basic $ ( 0.08 ) $ ( 0.23 ) $ ( 0.76 ) Diluted $ ( 0.16 ) $ ( 0.36 ) $ ( 0.76 ) Weighted average common stock outstanding Basic 126,378,509 123,827,372 131,680,605 Diluted 135,798,202 142,492,575 131,680,605 The accompanying notes are an integral part of these consolidated financial statements. 105 THE BEAUTY HEALTH COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except for share amounts) Common Stock Additional Paid-in Capital Accumulated other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Shares Amount BALANCE, December 31, 2022 132,214,695 $ 14 $ 550,320 $ ( 4,530 ) $ ( 378,751 ) $ 167,053 Net loss — — — — ( 100,116 ) ( 100,116 ) Repurchase and retirement of common stock ( 10,350,749 ) ( 2 ) ( 30,455 ) — — ( 30,457 ) Accelerated share repurchase payment — — ( 2,240 ) — — ( 2,240 ) Issuance of common stock in connection with asset acquisition 109,625 — 1,310 — — 1,310 Issuance of common stock pursuant to equity compensation plan 1,039,176 — — — — — Issuance of common stock relating to employee stock purchase plan 241,342 — 3,036 — — 3,036 Shares withheld for tax withholdings on vested stock awards ( 355,087 ) — ( 3,234 ) — — ( 3,234 ) Share-based compensation — — 22,544 — — 22,544 Foreign currency translation adjustment — — — 1,494 — 1,494 BALANCE, December 31, 2023 122,899,002 $ 12 $ 541,281 $ ( 3,036 ) $ ( 478,867 ) $ 59,390 Net loss — — — — ( 29,098 ) ( 29,098 ) Issuance of common stock pursuant to equity compensation plan 2,407,671 — — — — — Issuance of common stock relating to employee stock purchase plan 373,245 — 629 — — 629 Shares withheld for tax withholdings on vested stock awards ( 755,733 ) — ( 1,897 ) — — ( 1,897 ) Share-based compensation — — 26,696 — — 26,696 Foreign currency translation adjustment — — — ( 3,917 ) — ( 3,917 ) BALANCE, December 31, 2024 124,924,185 $ 12 $ 566,709 $ ( 6,953 ) $ ( 507,965 ) $ 51,803 Net loss — — — — ( 9,519 ) ( 9,519 ) Issuance of common stock pursuant to equity compensation plan 3,658,904 — — — — — Shares withheld for tax withholdings on vested stock awards ( 1,062,266 ) — ( 1,572 ) — — ( 1,572 ) Share-based compensation — — 14,824 — — 14,824 Foreign currency translation adjustment — — — 5,519 — 5,519 BALANCE, December 31, 2025 127,520,823 $ 13 $ 579,961 $ ( 1,434 ) $ ( 517,484 ) $ 61,056 The accompanying notes are an integral part of these consolidated financial statements. 106 THE BEAUTY HEALTH COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities: Net loss $ ( 9,519 ) $ ( 29,098 ) $ ( 100,116 ) Adjustments to reconcile net loss to net cash from operating activities Share-based compensation 14,824 26,696 22,544 Amortization of intangible assets 16,988 19,537 20,907 Depreciation of property and equipment 3,848 9,940 11,332 Amortization of other assets 4,513 4,203 2,436 Amortization of debt issuance costs 3,636 3,319 4,229 Inventory write-down 7,219 28,041 18,272 Syndeo inventory write-down — — 19,568 Provision for estimated credit losses 2,067 5,134 5,153 Change in fair value of warrant liabilities ( 487 ) ( 3,067 ) ( 11,919 ) Gain on exchange and repurchases of convertible senior notes, net ( 18,089 ) ( 33,411 ) — Deferred income taxes 2,219 ( 3,748 ) ( 1,079 ) Other, net ( 107 ) 15,981 7,067 Changes in operating assets and liabilities: Accounts receivable 5,162 20,804 16,520 Inventories 15,792 ( 10,500 ) ( 22,617 ) Prepaid expenses, other current assets, and income tax receivable 3,423 15,479 ( 6,951 ) Accounts payable, accrued expenses, and income tax payable ( 7,179 ) ( 43,776 ) 44,001 Other, net ( 6,825 ) ( 9,400 ) ( 7,597 ) Net cash provided by operating activities 37,485 16,134 21,750 Cash flows from investing activities: Cash paid for intangible assets ( 4,860 ) ( 6,038 ) ( 9,224 ) Cash paid for property and equipment ( 303 ) ( 756 ) ( 3,825 ) Cash paid for asset acquisitions — — ( 18,458 ) Net cash used for investing activities ( 5,163 ) ( 6,794 ) ( 31,507 ) Cash flows from financing activities: Repurchase of 2026 Notes in connection with exchange ( 392,583 ) — — Issuance of 2028 Notes in connection with exchange, net 237,601 — — Repurchase of 2026 Notes ( 18,372 ) ( 156,082 ) — Payment of tax withholdings on vested stock awards ( 1,572 ) ( 1,957 ) ( 3,234 ) Repurchase of common stock — — ( 30,155 ) Payment of accelerated share repurchases — — ( 2,240 ) Payment of contingent considerations related to acquisitions — — ( 1,819 ) Other, net — ( 302 ) — Net cash used for financing activities ( 174,926 ) ( 158,341 ) ( 37,448 ) Net change in cash, cash equivalents, and restricted cash ( 142,604 ) ( 149,001 ) ( 47,205 ) Effect of foreign currency translation on cash 5,214 ( 3,961 ) 2,033 Cash, cash equivalents, and restricted cash beginning of period 370,063 523,025 568,197 Cash, cash equivalents, and restricted cash end of period $ 232,673 $ 370,063 $ 523,025 Supplemental disclosures of cash flow information and non-cash investing activities: Cash paid for interest $ 14,440 $ 8,014 $ 9,375 Class A Common Stock issued for asset acquisition — — 1,310 The accompanying notes are an integral part of these consolidated financial statements 107 THE BEAUTY HEALTH COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 — Description of Business The Beauty Health Company (the “Company”) is a global medical aesthetics company delivering an integrated ecosystem of clinically proven solutions designed to help consumers achieve superior skin health and support the success of providers. Anchored by Hydrafacial, a leading and widely requested professional skincare treatment, and supported by complementary offerings including SkinStylus microneedling and HydraScalp powered by Keravive, the Company combines advanced device technology, proprietary consumables, and clinical validation to deliver trusted treatment experiences through an omnichannel network of providers worldwide. 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”). Note 2 — Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The Consolidated Financial Statements in this Annual Report on Form 10-K are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the Company’s consolidated domestic and international subsidiaries. Intercompany accounts and transactions have been eliminated. Use of Estimates In preparing its consolidated financial statements in conformity with GAAP, the Company makes assumptions, estimates, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to revenue related reserves, allowance for estimated credit losses, the realizability of inventory, fair value measurements including common stock and warrant liabilities, useful lives of property and equipment, goodwill and finite-lived intangible assets, accounting for income taxes, stock-based compensation expense and commitments and contingencies. The Company’s estimates are based on historical experience and on its future expectations that are believed to be reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from current estimates and those differences may be material. 108 Cash and Cash Equivalents All highly liquid investments, including credit card receivables due from banks, with original maturities of 90 days or less at date of purchase, are reported at fair value and are considered to be cash equivalents. The balances of cash at financial institutions may exceed the federally insured limit. Accounts Receivable Accounts receivable primarily arise out of product purchases by customers and from various distribution channels. Typical payment terms provide that customers pay within less than a year of the invoice. The allowance for estimated credit losses represents management's best estimate of probable credit losses in accounts receivable. The allowance is based upon a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the specific customer’s ability to pay its obligation and any other forward-looking data regarding customers’ ability to pay which may be available, and other qualitative factors. Receivables are written off against the allowance when management believes that the amount receivable will not be recovered. Inventories Inventories are stated at the lower of cost (determined using the average cost method which approximates the first-in, first-out method) or net realizable value. Obsolete inventory or inventory in excess of management’s estimated usage is written-down to its estimated net realizable value. Inherent in the net realizable value are management’s estimates related to economic trends, future demand for products, and technological obsolescence of our products. Cost is determined using weighted average costs, and includes all costs incurred to deliver inventory to the Company’s distribution centers including freight, non-refundable taxes, duty, and other landing costs. The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete or in excess, have quality issues, or are damaged. The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions. If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would decrease its basis in the inventory in the period in which it made such a determination. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Repair and maintenance costs are expensed as incurred. Depreciation commences when an asset is ready for its intended use. Depreciation is recorded on a straight-line basis over each asset’s estimated useful life. Leasehold improvements are depreciated on a straight-line basis over the lesser of the length of the lease or the estimated useful life of the improvement. Leased Property and Equipment Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company uses an incremental borrowing rate to determine the present value of lease payments as the rate implicit in the lease is generally not readily determinable. The Company excludes right-of-use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and combines lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance expenses, property taxes, and management fees. The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Renewal and termination options are included in the lease term when it is reasonably certain that the Company will exercise the option. Certain of these leases include escalation clauses that adjust rental expense to reflect changes in price indices, as well as renewal and termination options. Operating lease costs are recognized on a straight-line basis over the lease term. Intangible Assets Intangible assets primarily consist of developed technology, capitalized software, customer relationships and trademarks and are amortized on a straight-line basis over the estimated useful life of the asset. 109 Impairment of Long-lived Assets Long-lived assets, including property and equipment, right-of-use assets, and intangible assets with finite lives are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition. Impaired assets are recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual disposition. Reductions in asset values resulting from impairment valuations are recognized in income in the period that the impairment is determined. Goodwill Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the assets acquired and liabilities assumed. Goodwill is not amortized but is evaluated for impairment at least annually or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist. The Company has one reporting unit and management evaluates the carrying value of the Company’s goodwill annually in the fourth quarter of its fiscal year or whenever events or changes in circumstances indicate that an impairment may exist. When testing goodwill for impairment, management has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis to determine if it is necessary to perform a quantitative goodwill impairment test. In performing the qualitative assessment, management considers the extent to which unfavorable events or circumstances identified, such as changes in economic conditions, industry and market conditions or company specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount. If management concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management is required to perform a quantitative impairment test. Quantitative impairment testing for goodwill is based upon the fair value of the reporting unit as compared to its carrying value. The impairment loss recognized would be the difference between the reporting unit’s carrying value and fair value in an amount not to exceed the carrying value of the reporting unit’s goodwill. Testing goodwill for impairment requires management to estimate fair value of the reporting unit using significant estimates and assumptions. The assumptions made will impact the outcome and ultimate results of the testing. Management will use industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, we will engage independent third-party valuation specialists for advice. The key estimates and factors used in the valuation models may include as applicable, the most recent price of our Class A common stock, fair value of our Notes, revenue growth rates and profit margins based on internal forecasts, weighted-average cost of capital used to discount future cash flows, comparable market multiples for the industry segment, and historical operating trends. Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumer consumption and demands, could result in changes to these assumptions and judgments and could cause the fair value of the reporting unit to fall below its respective carrying value, resulting in a non-cash impairment charge. Such charge could have a material effect on the consolidated financial statements. Warrant Liabilities In October 2020, in connection with Vesper’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. The Company classifies the Private Placement Warrants as liabilities on its Consolidated Balance Sheets as these instruments are precluded from being indexed to its own stock given the terms allow for a settlement adjustment that does not meet the scope of the fixed-for-fixed exception in Accounting Standards Codification (“ ASC”) 815, Derivatives and Hedging . In certain events outside of the Company’s control, the Private Placement Warrant holders are entitled to receive cash while in certain scenarios the holders of the Company’s Class A common stock are not entitled to receive cash or may receive less than 100% of any proceeds in cash, which precludes these instruments from being classified within equity pursuant to ASC 815-40. The Private Placement Warrants are included in other long-term liabilities on the Consolidated Balance Sheets. The Private Placement Warrants were initially measured at fair value at inception and are subsequently adjusted to fair value at each subsequent reporting date. The fair value of the Private Placement Warrants was determined using a Monte Carlo simulation model. Changes in the fair value of these instruments are recognized within change in fair value of warrant liabilities in the Consolidated Statements of Comprehensive Income (Loss) . 110 Convertible Senior Notes On September 14, 2021, the Company issued an aggregate of $ 750.0 million in principal amount of 1.25 % Convertible Senior Notes due 2026 (the “2026 Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2026 Notes were issued pursuant to, and are governed by, an indenture (the “2026 Indenture”), dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee (the “Trustee”). On May 21, 2025, the Company exchanged and repurchased approximately $ 413.2 million aggregate principal amount of the 2026 Notes. Of the $ 413.2 million aggregate principal amount of the 2026 Notes, $ 263.2 million principal amount were exchanged 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”). The Company accounts for the Notes under ASC 470-20 - Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity's Own Equity . The Company records the Notes as a long-term liability at face value net of issuance costs. If any of the conditions to the convertibility of the Notes is satisfied, or the Notes become due within one year, then the Company may be required under applicable accounting standards to reclassify the carrying value of the Notes as a current, rather than a long-term liability. Refer to Note 7 – Long-term Debt for further detail. Issuance Costs Issuance costs related to our Notes offering were capitalized and offset against proceeds from the Notes. Issuance costs consist of legal and other direct costs related to the issuance of the Notes and are amortized to interest expense over the term of the Notes using the effective interest method. Refer to Note 7 – Long-term Debt for further detail. Revenue Recognition 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. The Company distributes products to customers both through national and international retailers as well as direct-to-consumers through its e-commerce and store channels. The Company sells to direct customers, including non-corporate customers (such as spas and dermatologist offices), corporate customers, and international distributors. For non-corporate customers, a contract exists when the customer initiates an order by submitting a purchase request. Such requests are accepted by the Company upon issuance of a corresponding invoice. For corporate customers, a contract exists when the customer submits a purchase order and is accepted upon issuance of a subsequent invoice. For distributors, a customer submits an order request which is processed in the system by a sales representative. This is also considered accepted upon the subsequent issuance of an invoice by the Company. For all customers, each invoice is considered a separate contract for accounting purposes. Revenue is recognized in an amount that reflects the consideration that the Company expects to be entitled to in exchange for the sale of its products which is determined based upon the sales price per the invoice or contract and the estimated fair market value for any non-cash consideration received in connection with the trade-in program. 111 During the year ended December 31, 2023, the Company provided certain customers with the option to trade-in their existing Delivery System and applied the fair value of their old Delivery System towards the transaction price of a Syndeo device. The Company determined that the trade-in is viewed as a marketing offer due to the fact that it did not constitute the Company’s customary business practice and was not offered at contract inception. Therefore, the trade-in was accounted for under ASC 606, Revenue from Contracts with Customers, and represented a type of noncash consideration, which the Company measured at its estimated fair value. The estimated fair value represented the estimated selling price, less the cost to refurbish the inventory and the expected margin to be earned on the refurbishment, along with the expected margin to be earned on the selling effort. The estimated selling price was determined based on the Company’s historical experience of reselling refurbished Delivery Systems. The Company recognized revenue based on the estimated fair value of such Delivery Systems for the year ended December 31, 2023 of approximately $ 17 million. No trade-in revenue was recognized for the years ended December 31, 2025 and 2024. Discounts applied to invoices are not associated with future purchases and solely relate to the product invoiced. As a result, the invoice and transaction price are recorded net of any discounts. The Company’s sales terms for its Delivery Systems generally allow for the right of return within 30 days, subject to a restocking fee. Estimates for variable consideration, which relate to sales returns associated with Delivery Systems, are based on the expected amount the Company will be expected to be entitled to, subject to constraint, and is recorded as a reduction against net sales. Sales returns are estimated based on historical sales and returns data and have not significantly impacted net sales because sales returns are not material. Payment terms vary by customer but typically provide for the customer to pay within less than a year; however, the Company provides options for qualified customers through third party financing companies, generally without recourse to the Company, or through internal financing to pay for Delivery Systems over 12 monthly installments or less. Under certain limited arrangements, which are not material, the customer’s receivable balance is with recourse whereby we are responsible for repaying the financing company should the customer default. The Company performs credit evaluations of customers and evaluates the need for allowances for potential credit losses based on historical experience, as well as current and expected general economic conditions. The Company elected the practical expedient and does not evaluate contracts of one year or less for the existence of a significant financing component. Depending on the type of Delivery System that was purchased, the Company offers its customers with a one to two-year standard type warranty from point of sale that provides the customer with the assurance that its Delivery Systems will function as intended. The warranty reserve is assessed periodically, and the reserve is adjusted as necessary based on a review of historical warranty experience as well as the length and actual terms of the warranties. As of December 31, 2025 and 2024, total warranty reserve was approximately $ 1 million and $ 4 million, respectively, which was included in other accrued expenses on the Consolidated Balance Sheets. The Company also has a loyalty program that allows members to receive points based on qualifying Consumable purchases that may be redeemed as a discount on future Consumable purchases. This customer option is a material right and, accordingly, represents a separate performance obligation to the customer. The related loyalty program deferred revenue included in other accrued expenses on the Consolidated Balance Sheets was approximately $ 1 million as of December 31, 2025 and 2024. Cost of Sales Cost of sales primarily consists of Delivery Systems and Consumables product costs, including the cost of materials, labor costs, overhead, depreciation and amortization of developed technology, shipping and handling costs, and the costs associated with excess and obsolete inventory. Selling and Marketing Expense Selling and marketing expense primarily consists of personnel-related expenses, sales commissions, travel costs, training, and advertising expenses incurred in connection with the sale of our products. Advertising costs are expensed in the period in which they are incurred. Advertising costs primarily include costs related to digital media, social media, television, events, and various other media outlets. Total advertising costs were $ 6.0 million, $ 8.7 million, and $ 9.9 million for the years ended December 31, 2025, 2024, and 2023 respectively. 112 Research and Development Expense Research and development expense primarily consists of personnel-related expenses, tooling and prototype materials, technology investments, and other expenses incurred in connection with the development of new products and internal technologies. Research and development expenses are expensed in the period in which they are incurred. General and Administrative Expense General and administrative expense primarily consists of personnel-related expenses, credit card and wire fees and facilities-related costs primarily for our executive, corporate affairs, finance, accounting, legal, human resources, and information technology (“IT”) functions. General and administrative expense also includes fees for professional services principally comprising legal, audit, tax and accounting services, and insurance. Interest Expense Interest expense consists of interest accrued on the Company’s Notes and amortization of debt issuance costs relating to the Notes. The 2026 Notes mature on October 1, 2026 and accrue interest at a rate of 1.25 % per annum. The 2028 Notes mature on November 15, 2028 and accrue interest at a rate of 7.95 % per annum. Debt issuance costs are being amortized over the term of the Notes using the effective interest method. If the Notes are repurchased, redeemed, or converted prior to the maturity date, the interest on the Notes would no longer be accrued and the amortization of debt issuance costs would be accelerated for the portion of the Notes which are repurchased, redeemed, or converted. Interest Income Interest income primarily consists of interest earned from investments in money market funds that the Company classifies as cash equivalents. Income Taxes The Company follows the asset and liability method for accounting for income taxes. This approach requires recognizing deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) based on the expected future tax consequences of events recorded in the financial statements. DTAs and DTLs are determined by the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates applicable to the periods in which these differences are expected to reverse. Any changes in tax rates affecting DTAs and DTLs are recorded in income during the period the tax rate change is enacted. The Company recognizes DTAs only when it believes they are more likely than not to be realized. This assessment considers various factors, including future reversals of taxable temporary differences, projected taxable income, tax-planning strategies, potential carrybacks (if permitted by law), and recent operating results. A valuation allowance is applied when necessary to reduce DTAs to the amount expected to be realized. If the Company later determines that additional DTAs can be utilized, it will adjust the valuation allowance, reducing income tax expense. For uncertain tax positions, the Company applies ASC 740, Income Taxes , using a two-step approach: (1) determining whether a tax position is more likely than not to be upheld based on its technical merits, and (2) recognizing the largest amount of tax benefit that is more than 50 percent likely to be realized upon settlement with the tax authority. Any interest and penalties related to unrecognized tax benefits are recorded in income tax (benefit) expense on the Consolidated Statements of Comprehensive Loss. Foreign Currency The Company’s reporting currency is the U.S. Dollars. The functional currency for each entity included in these consolidated financial statements that is domiciled outside of the United States is generally the applicable local currency. Assets and liabilities of each foreign entity are translated into U.S. dollars at the foreign currency exchange rate in effect on the balance sheet date. Net revenue and expenses are translated at the average foreign currency rate in effect during the period. The resulting foreign currency translation adjustments are recorded as a component of accumulated other comprehensive loss within Consolidated Statements of Stockholders' Equity. 113 Foreign currency transaction gains and losses are generated by intercompany balances and transactions denominated in other currencies other than the functional currency of the entity and are recorded in foreign currency transaction loss (gain), net on the Consolidated Statements of Comprehensive Income (Loss) in the period in which the foreign currency exchange rate changes. Concentration of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company primarily maintains its operating cash balance with a major financial institution. At times, cash balances may be in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in these accounts and does not believe it is exposed to any significant credit risk in this area. Accounts receivable are unsecured and the Company is at risk to the extent such amounts become uncollectible. Concentration of credit risk with respect to accounts receivable is generally mitigated by the Company performing ongoing credit evaluations of its customers. Share-Based Compensation The Company accounts for share-based compensation transactions using a fair-value method and recognizes the fair value of each award as an expense over the service period. The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The use of the Black-Scholes model requires a number of estimates, including the expected option term, the expected volatility in the price of the Company’s Class A Common Stock, the risk-free rate of interest and the dividend yield on the Company’s Class A Common Stock. The fair value of the Company’s restricted stock units is the closing price of the Company’s Class A Common Stock on the grant date. The fair value of the Company’s performance-based restricted stock units is estimated using a Monte Carlo simulation model. The consolidated financial statements include amounts that are based on the Company’s best estimates and judgments. The Company classifies compensation expense related to these awards on the Consolidated Statements of Comprehensive Income (Loss) based on the department to which the recipient reports. Forfeitures are accounted for in the period they occur. Earnings per Share Earnings per share is calculated using the weighted average number of common and exchangeable shares outstanding during the period. Exchangeable shares are the equivalent of common shares in all material respects. Diluted earnings per share is calculated by dividing net income available to stockholders for the period by the diluted weighted average number of shares outstanding during the period. Diluted earnings per share reflects the potential dilution from common shares issuable through stock options, performance-based restricted stock units, restricted stock units, and Private Placement Warrants using the treasury stock method and the "if-converted" met hod related to the Notes. Fair Value of Financial Instruments The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities: 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. 114 Recently Adopted 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. The Company adopted ASU 2023-09 on a prospective basis for the 2025 annual reporting period. Refer to Note 14 - Income Taxes for further detail. New Accounting Pronouncements Not Yet Adopted 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 reporting 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 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 reporting 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 does not expect the updated standard will have a material impact 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 reporting 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. In December 2025, the FASB issued ASU 2025-11 “Interim Reporting (Topic 270): Narrow Scope Improvements” which clarifies and reorganize GAAP interim reporting guidance to improve navigability, applicability, and consistency without changing the fundamental nature or volume of required interim disclosures. This amendment clarifies when ASC 270 is applicable, establishes a disclosure principle requiring disclosure of material events or changes occurring since the most recent annual reporting period, and consolidates into ASC Topic 270 a comprehensive list of interim disclosures required by other Codification Topics. The amendment also clarifies the form and content of interim financial statements, including guidance for condensed interim reporting. ASU 2025-11 is effective for interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-12 “Codification Improvements” to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors or (3) make minor improvements. ASU 2025-12 is effective for annual reporting periods beginning after December 15, 2026, 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. 115 Note 3 — Balance Sheet Components Inventories consist of the following as of the periods indicated: (in thousands) December 31, 2025 December 31, 2024 Raw materials $ 18,546 $ 26,019 Finished goods 29,466 43,094 Total inventories $ 48,012 $ 69,113 During the years ended December 31, 2025 and 2024, the Company recognized $ 7.2 million and $ 28.0 million, respectively, 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) December 31, 2025 December 31, 2024 Accrued compensation and payroll taxes $ 17,905 $ 10,708 Accrued sales commissions 4,791 4,784 Accrued benefits 2,251 2,144 Total accrued payroll-related expenses $ 24,947 $ 17,636 Other accrued expenses consist of the following as of the periods indicated: (in thousands) December 31, 2025 December 31, 2024 Sales and VAT tax payables $ 3,571 $ 5,244 Accrued interest 2,929 1,743 Royalty liabilities 1,571 1,897 Deferred revenue 1,012 2,375 Other 6,301 8,743 Total other accrued expenses $ 15,384 $ 20,002 As of December 31, 2025 and December 31, 2024, total warranty reserve was approximately $ 1 million and $ 4 million, respectively, which was included in other accrued expenses on the Consolidated Balance Sheets. As of December 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 Consolidated Balance Sheets. The changes in allowance for estimated credit losses are as follows: Year Ended December 31, (in thousands) 2025 2024 2023 Beginning balance $ 9,597 $ 6,604 $ 2,929 Provision for estimated credit losses 2,067 5,134 5,153 Write-offs, recoveries of previous write-offs, and foreign currency translation impact ( 5,642 ) ( 2,141 ) ( 1,478 ) Ending balance $ 6,022 $ 9,597 $ 6,604 116 Note 4 — Property and Equipment, net Property and equipment, net consist of the following as of the periods indicated: (in thousands) Useful life (years) December 31, 2025 December 31, 2024 Leasehold improvements Shorter of remaining lease term or estimated useful life $ 11,080 $ 12,019 Machinery and equipment 2 - 5 4,723 7,076 Furniture and fixtures 2 - 7 5,320 6,096 Computers and equipment 3 - 5 3,556 5,496 Tooling 5 541 732 Autos and trucks 5 61 59 Construction in progress 55 — Total property and equipment 25,336 31,478 Less: accumulated depreciation and amortization ( 22,798 ) ( 25,500 ) Property and equipment, net $ 2,538 $ 5,978 117 Note 5 — Leases Operating leases primarily consist of property leases related to the Company’s warehouse, which also serves as its production, manufacturing, and distribution facility, corporate offices, experience centers, and sales and marketing offices. Operating right-of-use assets and lease liabilities as of December 31, 2025 and December 31, 2024 comprises the following: (in thousands) December 31, 2025 December 31, 2024 Right-of-use assets, net $ 11,570 $ 13,590 Lease liabilities, current $ 5,128 $ 5,147 Lease liabilities, non-current 9,238 10,813 Total lease liabilities $ 14,366 $ 15,960 Operating lease costs for the years ended December 31, 2025, 2024, and 2023 were $ 5.4 million, $ 5.9 million, and $ 5.2 million, respectively. Short-term lease costs and variable lease costs were immaterial for the years ended December 31, 2025, 2024, and 2023. The following table summarizes future operating lease payments as of December 31, 2025 : (in thousands) Future Minimum Payments 2026 $ 5,736 2027 4,549 2028 1,182 2029 1,105 2030 1,091 Thereafter 1,962 Total 15,625 Less: Imputed Interest ( 1,259 ) Present value of net lease payments $ 14,366 The following table includes supplemental operating lease information (dollars in thousands): Year Ended December 31, 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities $ 5,881 $ 5,123 $ 5,419 Right-of-use assets obtained in exchange for new and modified lease liabilities $ 2,355 $ 6,593 $ 1,181 Weighted average remaining lease term (in years) 4.0 5.0 6.1 Weighted average discount rate 5.4 % 4.6 % 3.2 % Subsequent to December 31, 2025, the Company amended the terms its principal executive office lease agreement to expire in November 2032, which will result in an increase to its future operating lease payments by approximately $ 14 million. 118 Note 6 — Goodwill and Intangible Assets, net Goodwill The changes in the carrying value of goodwill for the years ended December 31, 2025 and 2024 are as follows (in thousands): December 31, 2023 $ 125,818 Foreign currency translation impact ( 2,319 ) December 31, 2024 123,499 Foreign currency translation impact 3,122 December 31, 2025 $ 126,621 The Company performed its annual impairment test and determined that goodwill was not impaired since the reporting unit’s fair value exceeded its carrying value. Intangible Assets, Net The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2025 were as follows: (in thousands) Gross Carrying Value Accumulated Amortization Net Carrying Value Estimated Useful Life (Years) Developed technology $ 91,629 $ ( 79,405 ) $ 12,224 3 - 10 Capitalized software 26,260 ( 15,082 ) 11,178 3 - 5 Customer relationships 19,112 ( 17,461 ) 1,651 5 - 10 Trademarks 11,730 ( 7,019 ) 4,711 15 Non-compete agreement 5,908 ( 3,711 ) 2,197 3 Patents 4,855 ( 1,053 ) 3,802 3 - 19 Total intangible assets $ 159,494 $ ( 123,731 ) $ 35,763 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 ) $ 47,512 119 Acquisition of Esthetic Medical, Inc. 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. Acquisition of Anacapa Aesthetics LLC 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. The estimated future intangible asset amortization expense as of December 31, 2025 is as follows: (in thousands) Amortization Expense 2026 $ 13,464 2027 11,293 2028 4,458 2029 2,361 2030 1,855 Thereafter 2,332 $ 35,763 120 Note 7 — 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 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. The 2026 Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the 2026 Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries. The 2026 Notes accrue interest at a rate of 1.25 % per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The 2026 Notes mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before April 1, 2026, noteholders have the right to convert their 2026 Notes only upon the occurrence of certain events. From and after April 1, 2026, noteholders may convert their 2026 Notes at any time at their election until the close of business on the second scheduled trading day immediately before October 1, 2026. 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. The initial conversion rate is 31.4859 shares of Class A Common Stock per $1,000 principal amount of 2026 Notes, which represents an initial conversion price of approximately $ 31.76 per share of Class A Common Stock . The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defi ned in the 2026 Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. The conversion price as of December 31, 2025 was $ 31.76 per share of Class A Common Stock. The 2026 Notes are 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 October 6, 2024, and on or before the 40 th scheduled trading day immediately before October 1, 2026, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company’s Class A Common Stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding notes unless at least $ 100.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. The redemption price will be a cash amount equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption. If certain corporate events that constitute a “Fundamental Change” (as defined in the 2026 Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their 2026 Notes at a cash repurchase price equal to the principal amount of the 2026 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 . 121 The 2026 Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the 2026 Indenture), which include the following: (i) certain payment defaults on the 2026 Notes (which, in the case of a default in the payment of interest on the 2026 Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the 2026 Indenture within specified periods of time; (iii) the Company’s failure to convert a 2026 Note upon the exercise of the conversion right with respect to such 2026 Note, subject to a three business-day cure period; (iv) the Company’s failure to comply with certain covenants in the 2026 Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the 2026 Indenture or the 2026 Notes if such default is not cured or waived within 60 days after notice is given in accordance with the 2026 Indenture; (vi) certain defaults by the Company or any of its subsidiaries with respect to indebtedness for money borrowed of at least $ 45.0 million; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $ 45.0 million, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished and (viii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries. If an Event of Default (as defined in the 2026 Indenture) involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2026 Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default (as defined in the 2026 Indenture) occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of 2026 Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2026 Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default (as defined in the 2026 Indenture) relating to certain failures by the Company to comply with certain reporting covenants in the 2026 Indenture consists exclusively of the right of the noteholders to receive special interest on the 2026 Notes for up to 180 days at a specified rate per annum not exceeding 1.00 % on the principal amount of the 2026 Notes. The 2026 Notes were issued to the initial purchasers of such 2026 Notes in transactions not involving any public offering in reliance upon Section 4(a)(2) of the Securities Act. The 2026 Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act. The Company incurred $ 21.3 million of debt issuance costs related to the 2026 Notes, which was recorded as a reduction to convertible senior notes, net in the Consolidated Balance Sheets. 2026 Notes Repurchase During the year ended December 31, 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 year ended December 31, 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. Additionally, in February 2026, the Company repurchased $ 21.3 million principal amount of the 2026 Notes at a weighted-average price equal to 94.875 % for $ 20.2 million. 122 Convertible Senior Secured Notes - 2028 On May 21, 2025, the Company entered into Exchange Agreements with Exchanging Holders of 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, 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, 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 November 15, 2028. 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 November 15, 2028, 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. 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 Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the 2028 Indenture), which include the following: (i) certain payment defaults on the 2028 Notes (which, in the case of a default in the payment of interest on the 2028 Notes, will be subject to a five business-day cure period); (ii) the Company’s failure to send certain notices under the 2028 Indenture within specified periods of time; (iii) the Company’s failure to convert a 2028 Note upon the exercise of the conversion right with respect to such 2028 Note, subject to a three business-day cure period; (iv) the Company’s failure to comply with certain covenants in the 2028 Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the 2028 Indenture or the 2028 Notes if such default is not cured or waived within 30 days after notice is given in accordance with the 2028 Indenture; (vi) certain defaults by the Company or any of its subsidiaries with respect to indebtedness for money borrowed of at least $ 15.0 million; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $ 15.0 million, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished, (viii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries, and (ix) the Company’s failure to perfect, or otherwise become unenforceable, a lien on certain of its collateral in favor of the secured parties under the 2028 Indenture. 123 If an Event of Default (as defined in the 2028 Indenture) involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the 2028 Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default (as defined in the 2028 Indenture) occurs and is continuing, then, the trustee, by notice to the Company, or noteholders of at least 25 % of the aggregate principal amount of 2028 Notes then outstanding, by notice to the Company and the trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the 2028 Notes then outstanding to become due and payable immediately. 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 $ 11.5 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 Consolidated Balance Sheets. 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) December 31, 2025 December 31, 2024 2026 Notes $ 124,485 $ 557,700 2028 Notes 250,000 — Unamortized debt issuance costs ( 10,095 ) ( 5,502 ) Total convertible senior notes, net 364,390 552,198 Current portion of convertible senior notes, net ( 123,959 ) — Convertible senior notes, net $ 240,431 $ 552,198 During the years ended December 31, 2025, 2024, and 2023, the Company recognized $ 3.6 million, $ 3.3 million, and $ 4.2 million, respectively, in interest expense related to the amortization of the debt issuance costs related to the 2026 Notes and 2028 Notes. The net gain recognized related to the exchange and repurchases is included in other income, net in the Consolidated Statements of Comprehensive Income (Loss). 124 Note 8 — 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”), asserted 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 alleged 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 included 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. 125 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 was assigned to U.S. District Judge Sherilyn Peace Garnett. On September 30, 2024, Defendants filed a motion to dismiss the consolidated amended class action complaint in its entirety. Plaintiffs filed their opposition brief on November 22, 2024, and Defendants filed their 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 could 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 May 5, 2025, the plaintiffs filed a second amended complaint (the “SAC”), pursuant to the parties’ stipulation, which was so-ordered by the Court on April 16, 2025. On July 11, 2025, Defendants filed a motion to dismiss the SAC 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. On November 24, 2025, each Defendant filed an answer to the SAC. On November 26, 2025, the parties filed a Fed. R. Civ. P. 26(f) joint report and proposed stipulated pretrial schedule. On December 15, 2025, the Court so-ordered the parties’ stipulated pretrial schedule, set the final pretrial conference for November 17, 2027, and set trial for December 7, 2027. On the same day, the Court referred the parties to a private mediation before a private mediator of their choice, to be completed by October 13, 2027. The parties are currently in the discovery phase of the case. 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 (the “Complaint”) against Hydrafacial LLC d/b/a The Hydrafacial Company (“Hydrafacial”) and The Beauty Health Company (“BHC” and collectively with Hydrafacial, 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 alleged 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 purported 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 asserted 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 included 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. 126 On December 30, 2024, the Class Action Defendants filed a motion to dismiss the 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 (“Plaintiffs”) filed an amended complaint (the “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 included 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. For Counts IV (violations of N.Y. G.B.L., § 349) and V (violations of N.Y. G.B.L., § 350), plaintiff Jennifer Skuratov d/b/a Spa Thirsty, Inc. (“Spa Thirsty”), sought certification of an alternative subclass of New York purchasers of Syndeo devices (the “Putative New York Subclass”). 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 Spa Thirsty in full; (iv) dismiss all claims against BHC in full; and (v) dismiss Plaintiffs’ claim for injunctive relief. On December 22, 2025, the Court granted Defendants’ motion to dismiss in its entirety, except it denied Defendants’ request that the claims brought by plaintiff Spa Thirsty be dismissed with prejudice. Specifically, the Court dismissed (i) all of Plaintiffs’ claims against BHC; (ii) Plaintiffs’ claims for breach of the implied warranty of merchantability (Count I), breach of express and implied contract and class-wide rescission based on fraudulent inducement (Count II), and violations of N.Y. G.B.L., §§ 349 and 350 (Counts IV and V), and their request for injunctive relief; and (iii) the Class Action Plaintiffs’ claim for breach of express warranty (Count III) to the extent it arises out of alleged defects affirmatively identified as “design defects” in the amended complaint. In addition, the Court denied the Class Action Plaintiffs’ request for leave to amend as to all of the dismissed causes of action except for plaintiff Spa Thirsty’s claims pursuant to N.Y. G.B.L. §§ 349 and 350. The Court gave plaintiff Spa Thirsty until January 9, 2026 to move for leave to file a second amended complaint that addresses the deficiencies with plaintiff Spa Thirsty’s §§ 349 and 350 claims. Those deficiencies included plaintiff Spa Thirsty’s failure to allege that it “was aware of any of Defendants’ purportedly deceptive statements ‘before [it] purchased or came into possession’ of the Syndeo.” 127 On January 9, 2026, Class Action Plaintiffs filed a letter motion for leave to file a second amended complaint and for reconsideration of the Court’s dismissal of Plaintiffs’ claims for breach of express and implied contract and class-wide rescission based on fraudulent inducement (Count II). Class Action Plaintiffs appended a proposed second amended complaint (the “Second Amended Complaint”) to their letter motion. The Second Amended Complaint alleged that plaintiff Spa Thirsty purchased a Syndeo in reliance on representations made by Hydrafacial to plaintiff Spa Thirsty at an aesthetic conference in New York, including that Syndeo was “top of the line,” “hands free,” “had superior cleanliness,” “superior,” “a major upgrade,” “works great,” and “yielded ‘more than 15 uses per bottle of solution serum.” The Second Amended Complaint alleged that those representations were deceptive in violation of N.Y. G.B.L. §§ 349 and 350 because the Syndeo allegedly lacked attributes Hydrafacial had represented to plaintiff Spa Thirsty and did not yield the promised treatments per bottle of solution serum. On January 23, 2026, Hydrafacial filed its opposition to Class Action Plaintiffs’ letter motion. Hydrafacial argued that the Second Amended Complaint was futile because all of its alleged representations about the Syndeo were inactionable puffery, except for, arguably, the representation regarding the number of treatments per bottle of solution serum. For that representation, Hydrafacial argued that plaintiff Spa Thirsty did not allege that its Syndeo yielded fewer than 15 treatments per bottle and failed to allege other facts required to state §§ 349 and 350 claims. Hydrafacial also argued that Class Action Plaintiffs’ request for reconsideration of the dismissal of Count II should be denied as untimely. On January 27, 2026, the Court issued an order granting Class Action Plaintiffs’ motion for leave to file the Second Amended Complaint but denied their request that the Court reconsider its order dismissing the claim for breach of contract in Count II of the Amended Complaint. Although the Court agreed with Hydrafacial that “many of the claims attributed to HydraFacial in the Second Amended Complaint are non-actionable puffery, the claim that the Syndeo ‘yielded more than 15 uses per bottle of serum’ is a verifiable statement of fact,” and the Court could “infer that plaintiff Spa Thirsty’s machine failed to yield the promised number of uses per bottle of serum …. From plaintiff Spa Thirsty’s allegation that its ‘machines run through serums faster than Defendant states it should.’” The Court denied reconsideration because Class Action Plaintiffs’ request was both untimely and “would fail on the merits,” as Class Action Plaintiffs “failed to allege the specific provisions of the contract upon which liability was predicated.” Pursuant to the Court’s order, Class Action Plaintiffs filed the Second Amended Complaint on January 29, 2026. As a result of the Court’s ruling, the only claims still pending before the Court in the Customer Class Action are (i) the Class Action Plaintiffs’ claim against Hydrafacial for breach of its express warranty against defects in materials and workmanship; and (ii) plaintiff Spa Thirsty’s claim, asserted on behalf of itself and the Putative New York Subclass against Hydrafacial, for alleged violations of N.Y. G.B.L., § 349 and § 350. On February 26, 2026, the parties jointly notified the Court that a settlement-in-principle had been reached and requested that all deadlines be stayed for sixty (60) days. On March 2, 2026, the Court ordered Class Action Plaintiffs to file the necessary motion papers for preliminary approval of the settlement on or before May 29, 2026, and canceled all other deadlines in the case. The Company believes that the claims asserted in the Customer Class Action have no merit and it intends 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. 128 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. The parties held a mediation on November 4, 2025 and have reached agreement on terms of a mutually agreeable resolution. The parties are finalizing settlement papers for submission to, and the approval of, the Delaware Court of Chancery . 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. Contractual Obligations and Other Commercial Commitments As of December 31, 2025, the Company has $ 20.3 million of non-cancelable contractual obligations and other commercial commitments related to the purchase of inventory, service, other items, of which $ 19.9 million will be paid within the next twelve months. 129 Note 9 — Related-Party Transactions 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. 130 Note 10 — 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 December 31, 2025 and December 31, 2024, there were 127,520,823 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 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 years ended December 31, 2025 and 2024, the Company did not repurchase any shares of its Class A Common Stock. On September 26, 2022, the Company’s Board of Directors approved a common stock repurchase program pursuant to which the Company may repurchase up to $ 200.0 million of its outstanding shares of 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, or accelerated share repurchase programs. The Company entered into two accelerated share repurchase agreements on September 27, 2022 and November 9, 2022, respectively, with a financial institution to repurchase a total of $ 200.0 million of Class A Common Stock. Under the September 27, 2022 accelerated share repurchase agreement, the Company repurchased and retired 9.3 million shares for $ 100.0 million. Under the November 9, 2022 accelerated share repurchase agreement, the Company made a payment of $ 100.0 million and received initial deliveries of 9.5 million shares, which were also retired, which represented 80 % of the payment amount divided by the Company’s closing stock price on that date. During the year ended December 31, 2023, the Company paid $ 2.2 million as the final settlement of the November 9, 2022 accelerated share repurchase agreement, which was based upon the average daily volume weighted average price of the Company’s Class A Common Stock during the repurchase period, less an agreed upon discount. 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 December 31, 2025 and December 31, 2024 , there were no shares of preferred stock issued or outstanding. Note 11 — 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 December 31, 2025 and December 31, 2024, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. As of December 31, 2025 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash, cash equivalents, and restricted cash: Money market funds $ 149,927 $ — $ — $ 149,927 Liabilities Warrant liability — Private Placement Warrants $ — $ — $ 1 $ 1 131 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 Money Market Funds The Company’s investment in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly bas is. As of December 31, 2025 , the Company’s U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value. Private Placement Warrants As of December 31, 2025 and 2024, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation model because these warrants are not subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share. The warrants will expire in May 2026. Long-Term Debt As of December 31, 2025 and December 31, 2024 , the estimated fair value of the Notes were $ 383.1 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 December 31, 2025 and December 31, 2024, and are classified as Level 2 within the fair value hierarchy. Note 12 — Share-Based Compensation The Beauty Health Company 2021 Incentive Award Plan (the “2021 Plan”) became effective upon the consummation of the Business Combination. Pursuant to the 2021 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. The aggregate number of shares of the Company’s Class A Common Stock that may be issued pursuant to awards granted under the 2021 Plan is the sum of (i) 14,839,640 and (ii) an annual increase on January 1 of each calendar year (commencing with January 1, 2022 and ending on and including January 1, 2031) equal to a number of shares equal to 4 % of the aggregate shares outstanding as of December 31 of the immediately preceding calendar year (or such lesser number of shares as is determined by the Company’s Board of Directors), subject to adjustment by the plan administrator in the event of certain changes in our corporate structure. The maximum number of shares that may be granted with respect to incentive stock options under the 2021 Plan is 7,500,000 . At December 31, 2025 , approximately 14 million shares of the Company’s Class A Common Stock were reserved for the issuance of awards under the 2021 Plan. Restricted Stock Units (“RSU”) and Performance-based Restricted Stock Units (“PSU”) The Company reserves the right to grant RSUs to certain employees, executives and directors. The RSUs granted are eligible to vest over the service period, which is generally over three to four years , subject to the recipient’s continued employment through each vesting date. PSUs are granted to select executive officers pursuant to the 2021 Plan and vest based on either (i) the performance of the Company’s Class A Common Stock (“Top-hat”) or (ii) the total shareholder return of the Company’s Class A Common Stock relative to a defined peer group (“TSR”). Top-hat PSUs are earned over a three or four-year performance period, based on the attainment of pre-determined goals related to the performance of the Company’s Class A Common Stock, and subject to the recipient’s continued employment 132 through the end of the performance period. The actual number of shares of the Company’s Class A Common Stock to be issued related to Top-hat PSUs will range from 0 % to 100 % of the number of PSUs granted. TSR PSUs are earned over a three-year performance period, based on the attainment of pre-determined goals related to the Company’s total shareholder return relative to a defined peer group, and subject to the recipient’s continued employment through the end of the performance period. The actual number of shares of the Company’s Class A Common Stock to be issued related to TSR PSUs will range from 0 % to 200 % of the number of PSUs granted. The fair value of PSUs is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved. The fair value of PSUs was determined using a Monte Carlo simulation subject to the performance conditions of the underlying PSUs with the following assumptions: Input 2025 Grants 2024 Grants 2023 Grants Risk-free interest rate 3.6 % - 4.0 % 4.5 % 3.5 % Expected volatility of the Company’s Class A Common Stock 102.6 % - 120.1 % 101.5 % 74.9 % The following table summarizes the Company’s RSU and PSU activity for the year ended December 31, 2025: 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 12,696,497 2,406,261 1.38 2.28 Vested ( 3,217,346 ) ( 441,558 ) 4.72 3.11 Forfeited ( 4,422,096 ) ( 1,007,055 ) 2.53 4.09 Cancelled (1) — ( 41,240 ) — 20.21 Outstanding - December 31, 2025 12,311,446 2,154,230 $ 1.97 $ 3.02 (1) Cancelled PSU shares represent TSR PSUs that were not earned for the performance period that ended during the year ended December 31, 2025. The fair value of RSUs that vested, determined based on their respective fair values at vesting date, during the years ended December 31, 2025, 2024, and 2023 was $ 4.6 million, $ 5.9 million, and $ 9.7 million, respectively. The fair value of PSUs that vested, determined based on their respective fair values at vesting date, during the year ended December 31, 2025 was $ 0.9 million. There were no PSUs that vested during the years ended December 31, 2024 and 2023. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2024 and 2023 was $ 3.17 and $ 8.58 , respectively. The weighted average grant date fair value of PSUs granted during the years ended December 31, 2024 and 2023 was $ 5.27 and $ 17.54 , respectively. At December 31, 2025, the aggregate unrecognized compensation cost for unvested RSUs and PSUs was $ 16.3 million and $ 4.2 million, respectively, recognized over a weighted average period of 1.9 years and 1.8 years, respectively. 133 Stock Options The following table summarizes the Company’s stock option activity: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding - January 1, 2025 3,483,070 $ 13.64 5.29 $ — Granted — — Exercised — — Forfeited ( 74,475 ) 15.45 Expired ( 948,675 ) 13.81 Outstanding - December 31, 2025 2,459,920 13.51 5.37 — Vested and Exercisable - December 31, 2025 2,457,295 13.50 5.37 — Options vested and expected to vest - December 31, 2025 2,459,920 $ 13.51 5.37 $ — At December 31, 2025, aggregate unrecognized compensation cost for unvested stock options was immaterial . The stock options granted generally vest over a four year period. There were no stock options granted during the year ended December 31, 2024 and 2023. The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option. There were no stock options exercised during the year ended December 31, 2024. For the year ended December 31, 2023, t he total intrinsic value of stock options exercised was immaterial . Employee Stock Purchase Plan (“ESPP”) In 2024, the Company suspended the ESPP for employees located in the United States, which became effective upon the consummation of the Business Combination. Under the ESPP, eligible employees can have up to 10 % of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s Class A Common Stock at certain purchase dates. The price of the Company’s Class A Common Stock purchased under the ESPP for the offering periods is equal to 85 % of the lesser of the fair market value of a share of Class A Common Stock of the Company on the beginning or the end of the offering period. The aggregate number of shares of the Company’s Class A Common Stock initially reserved for issuance pursuant to rights granted under the ESPP was 2,000,000 . In addition, on the first day of each calendar year beginning on January 1, 2022 and ending on (and including) January 1, 2031, the number of shares available for issuance under the ESPP will be increased by a number of shares equal to the lesser of (1) one percent ( 1 %) of the shares outstanding on the final day of the immediately preceding calendar year, and (2) such smaller number of shares as determined by the Company’s Board of Directors. As of December 31, 2025, approximately 6 million shares were reserved for the future issuance under the ESPP. Share-Based Compensation Expense Share-based compensation expense was as follows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Cost of sales $ 519 $ 52 1,513 Selling and marketing 2,710 7,716 7,962 Research and development 512 345 1,425 General and administrative 11,083 18,583 11,644 Total share-based compensation $ 14,824 $ 26,696 $ 22,544 134 Note 13 — Employee Benefit Plan The Company sponsors a defined contribution 401(k) plan that all regular domestic employees are eligible to participate in after one month of service. Contributions to the 401(k) plan include voluntary contributions by eligible employees and employer matching contributions by the Company. Certain international employees participate in other defined contribution retirement plans with varying vesting and contribution provisions. Defined contributions expense was $ 2.3 million, $ 2.7 million and $ 3.0 million for the years ended December 31, 2025, 2024 and 2023, respectively. Note 14 — Income Taxes The following table presents domestic and foreign components of loss before income taxes as follows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Domestic $ ( 12,462 ) $ ( 28,332 ) $ ( 104,161 ) Foreign 6,524 ( 1,218 ) 2,272 Loss before taxes $ ( 5,938 ) $ ( 29,550 ) $ ( 101,889 ) The federal, state and foreign components of the income tax expense (benefit) are summarized as follows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Current: Federal $ 146 $ 9 $ 34 State 224 133 216 Foreign 1,332 3,001 3,793 Total current income tax expense 1,702 3,143 4,043 Deferred: Federal — — ( 4,137 ) State — — ( 633 ) Foreign 1,879 ( 3,595 ) ( 1,046 ) Total deferred tax expense (benefit) 1,879 ( 3,595 ) ( 5,816 ) Total income tax expense (benefit) $ 3,581 $ ( 452 ) $ ( 1,773 ) 135 The Company adopted ASU 2023-09 on a prospective basis beginning December 31, 2025. The following table presents the required disclosure pursuant to ASU 2023-09 and is a reconciliation of the Company's income tax expense at the statutory federal tax rate to the Company's effective tax rate for the year ended December 31, 2025: Year Ended December 31, (in thousands) 2025 U.S. federal statutory income tax rate $ ( 1,247 ) 21.0 % State and local taxes, net of federal benefit (1) 227 ( 3.8 ) Foreign tax effects China Statutory tax rate difference between China and U.S. ( 217 ) 3.7 Changes in valuation allowance 2,745 ( 46.2 ) Other ( 916 ) 15.4 United Kingdom Statutory tax rate difference between United Kingdom and U.S. 189 ( 3.2 ) Other 388 ( 6.5 ) Other foreign jurisdictions 111 ( 1.9 ) Tax credits - research and development ( 108 ) 1.8 Change in valuation allowance ( 1,871 ) 31.5 Nontaxable or nondeductible items Officer compensation 700 ( 11.8 ) Share-based compensation 1,870 ( 31.5 ) Change in fair value of warrants ( 102 ) 1.7 Other 729 ( 12.3 ) Changes in worldwide unrecognized tax benefits 208 ( 3.5 ) Other provision adjustments 875 ( 14.7 ) Income tax expense $ 3,581 ( 60.3 ) % (1) State taxes in Texas comprise the majority (greater than 50%) of the tax effect in this category. The following table presents the required disclosures prior to the adoption of ASU 2023-09 and is a reconciliation of the Company's income tax benefit at the statutory federal tax rate to the Company's effective tax rate for the years ended December 31, 2024 and 2023: Year Ended December 31, (in thousands) 2024 2023 Federal statutory income tax rate $ ( 6,206 ) 21.0 % $ ( 21,398 ) 21.0 % State taxes, net of federal benefit 475 ( 1.6 ) ( 3,083 ) 3.0 Officer compensation 905 ( 3.1 ) 844 ( 0.8 ) Change in fair value of warrants ( 644 ) 2.2 ( 2,503 ) 2.5 Share-based compensation 5,130 ( 17.4 ) 2,922 ( 2.9 ) Foreign rate differential ( 64 ) 0.2 338 ( 0.3 ) R&D credit ( 289 ) 1.0 ( 824 ) 0.8 Permanent differences 296 ( 1.0 ) 2,183 ( 2.1 ) Change in valuation allowance 1,006 ( 3.4 ) 18,400 ( 18.1 ) Other ( 1,061 ) 3.6 1,348 ( 1.3 ) Income tax benefit $ ( 452 ) 1.5 % $ ( 1,773 ) 1.7 % 136 The following table presents cash paid for income taxes, net of refunds received, by jurisdiction during the year ended December 31, 2025: (in thousands) Federal Aggregated state and local jurisdictions (2) $ 84 Foreign United Kingdom 3,218 Germany 275 Australia 249 China 245 All other foreign (2) ( 121 ) Total cash paid for income taxes, net of refunds $ 3,950 (2) The amount of income taxes paid during the year ended December 31, 2025 does not meet the 5% disaggregation threshold. Cash paid for income taxes, net of refunds, during the years ended December 31, 2024 and 2023 was $ 2.8 million and $ 2.3 million, respectively. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized. The components of the deferred tax assets are as follows for the periods indicated: (in thousands) December 31, 2025 December 31, 2024 Deferred income tax assets State taxes $ 28 $ 20 Accrued expenses 4,029 3,497 Inventories 4,848 6,226 Accounts receivable 821 1,840 Section 163(j) limitation 7,427 6,822 Net operating loss carryforwards 15,499 11,722 Share-based compensation 2,421 2,927 Lease liabilities 3,572 3,983 Capitalized research 2,592 5,249 Property and equipment 1,119 — Other 2,580 3,480 Total deferred income tax assets 44,936 45,766 Deferred income tax liabilities Goodwill and intangibles ( 2,260 ) ( 3,710 ) Prepaid expenses — ( 283 ) Convertible debt premium ( 3,415 ) — Right-of-use assets ( 2,889 ) ( 3,401 ) Property and equipment — ( 630 ) Total deferred tax liabilities ( 8,564 ) ( 8,024 ) Valuation allowance ( 34,840 ) ( 34,244 ) Net deferred income tax assets $ 1,532 $ 3,498 137 The Company’s net deferred income tax assets as presented on the Consolidated Balance Sheets consists of the following items as of the dates indicated: (in thousands) December 31, 2025 December 31, 2024 Deferred income tax assets $ 1,925 $ 3,894 Deferred income tax liabilities ( 393 ) ( 396 ) Net deferred income tax assets $ 1,532 $ 3,498 The Company increased the valuation allowance on the net deferred tax assets by $ 0.6 million for the year ended December 31, 2025. In determining whether deferred tax assets are realizable, the Company considered numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize the deferred tax assets. The Company has provided a full valuation allowance against the China and U.S. federal and state net deferred tax assets that management believes is not more likely than not to be realized. If the Company were to release the valuation allowance upon management determining that it is more likely than not the deferred tax assets could be recognized, $ 34.8 million of income tax benefit would be recorded to continuing operations. At December 31, 2025, the Company had gross federal and state net operating loss carryforwards of $ 46.3 million and $ 20.8 million, respectively, that can be carried forward indefinitely, subject to an 80% taxable income limitation, and state net operating loss carryforward of $ 39.1 million, which will expire in varying amounts beginning in 2028. The Company has federal and state research and development credit carryforwards of $ 1.1 million and $ 0.9 million, respectively. The federal credits will expire in 2042 and the state credits are available indefinitely. As of December 31, 2025 and December 31, 2024, the Company had recorded gross unrecognized tax benefits of $ 1.7 million and $ 1.2 million, respectively. As of December 31, 2025, the Company has $ 0.7 million of unrecognized tax benefits that, if recognized and realized, will affect the effective tax rate. The Company recognizes interest expense and penalties associated with uncertain tax positions as a component of income tax expense. Accruals for interest and penalties related to income tax matters were not material as of December 31, 2025. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows: (in thousands) December 31, 2025 December 31, 2024 Unrecognized tax benefits at beginning of period $ 1,194 $ 1,104 Increases for tax positions in prior periods 422 — Decreases for tax positions in prior periods — ( 54 ) Increases for tax positions in current period 121 261 Settlements/statute expirations — ( 117 ) Unrecognized tax benefits at end of period $ 1,737 $ 1,194 The Company is subject to taxation and files income tax returns in the U.S. federal and various state and foreign jurisdictions. The Company’s tax returns remain open for examination in the United States for years 2021 through 2024, while tax returns in the foreign jurisdictions in which the Company operates are generally subject to examination up to three years following the year in which the tax obligation originated. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions. APB 23 (codified as FASB ASC 740-10-25-3) allows an exception to the general rule that a U.S. multinational company must accrue U.S. taxes on foreign earnings of its controlled non-U.S. subsidiaries. Under this exception, a U.S. multinational company is not required to accrue U.S. taxes on foreign earnings that are indefinitely reinvested in its foreign subsidiaries. The Company will continue to indefinitely reinvest earnings from its foreign subsidiaries, which are not significant. 138 On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. The Act includes significant changes to U.S. tax and related laws. Some of the provisions of the Act affecting corporations include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the Global Intangible Low-Taxed Income and Foreign-Derived Intangible Income international tax provisions, an increase in the limit of the deduction of interest expense to thirty percent of earnings before interest, taxes, depreciation, and amortization, and reinstatement of one hundred percent bonus depreciation deduction from the Tax Cuts and Jobs Act for eligible property acquired after January 19, 2025. The Act has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Act's financial reporting implications have been recognized in the Company's income tax provision for the year ended December 31, 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. Note 15 — 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: Year Ended December 31, (in thousands, except share and per share amounts) 2025 2024 2023 Net loss available to common stockholders - basic $ ( 9,519 ) $ ( 29,098 ) $ ( 100,116 ) Adjustments related to the 2026 Notes (1) ( 12,590 ) ( 22,671 ) — Net loss available to common stockholders - diluted $ ( 22,109 ) $ ( 51,769 ) $ ( 100,116 ) Weighted average common stock outstanding - basic 126,378,509 123,827,372 131,680,605 Effect of dilutive shares: 2026 Notes 9,419,693 18,665,203 — Weighted average common stock outstanding - diluted 135,798,202 142,492,575 131,680,605 Basic net loss per share: $ ( 0.08 ) $ ( 0.23 ) $ ( 0.76 ) Dilutive net loss per share: $ ( 0.16 ) $ ( 0.36 ) $ ( 0.76 ) (1) For the year ended December 31, 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: Year Ended December 31, 2025 2024 2023 2026 Notes — — 23,614,425 2028 Notes 87,412,575 — — RSUs 12,311,446 7,254,391 5,242,680 Stock Options 2,459,920 3,483,070 3,732,420 PSUs 2,154,230 1,237,822 1,306,558 For the years ended December 31, 2025, 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. Note 16 — Segment, Geographic, and Other 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 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 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: Year Ended December 31, (in thousands) 2025 2024 2023 Total operating expenses: Personnel-related expenses $ 111,338 $ 131,134 $ 152,625 Other segment expenses 105,829 118,936 133,405 Total operating expenses $ 217,167 $ 250,070 $ 286,030 Net sales disaggregated by major product line were as follows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Net Sales Delivery Systems $ 88,079 $ 125,400 $ 206,630 Consumables 212,711 208,894 191,361 Total net sales $ 300,790 $ 334,294 $ 397,991 Net sales by geographic region were as follows for the periods indicated: Year Ended December 31, (in thousands) 2025 2024 2023 Americas $ 203,980 $ 216,993 $ 227,709 Europe, the Middle East and Africa 68,295 71,633 88,089 Asia-Pacific 28,515 45,668 82,193 Total net sales $ 300,790 $ 334,294 $ 397,991 No single customer accounted for 10% or more of consolidated net sales during the years ended December 31, 2025, 2024, and 2023. No single customer accounted for 10% or more of the Company’s accounts receivable balance as December 31, 2025 and 2024. Long-lived assets, which includes property and equipment, net and right-of-use assets, net, by geographic region were as follows for the periods indicated: (in thousands) December 31, 2025 December 31, 2024 U.S. $ 10,284 $ 13,285 United Kingdom 1,954 2,066 Germany 1,169 1,595 China 101 1,406 Rest of World 600 1,216 Total long-lived assets $ 14,108 $ 19,568 140 Note 17 — Syndeo Program The Company launched Syndeo in March 2022, the first new Delivery System model in five years. Subsequent to launch, many customers with Syndeo 1.0 and Syndeo 2.0 builds began to experience frequent treatment interruptions and unacceptable device conditions. In addition to issues such as distractive noise and difficult bottle insertion, a significant issue was low flow and clogs in the system, due to recommended maintenance requiring overly rigorous levels to prevent serum build-up inside the system’s fluidics manifold. Throughout 2022 and the first half of 2023, the Company made several enhancements to each version of the Syndeo in an effort to address and remediate these issues, but despite these efforts, performance interruptions that negatively impacted customer productivity and satisfaction continued to persist. In July 2023 the Company developed Syndeo 3.0 and has noted a significant improvement in user experience and a substantial decline in initial return rates, primarily due to hardware and software enhancements that automate and force effective rinse cycles and manifold cleaning with an air blast procedure that reduce build-up and clogging as well as improvements in the connector to the handpiece to facilitate user cleaning. During the third quarter of 2023, the Company announced announced its Syndeo Enhancement Program (the “Syndeo Program”) to upgrade devices to Syndeo 3.0 build standards via field service. 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. 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. The Company incurred costs of $ 45.6 million during the year ended December 31, 2023, associated with the costs to upgrade, replace, and remediate Syndeo 1.0 or 2.0 devices, which was included in cost of sales on the Consolidated Statements of Comprehensive Income (Loss). As of December 31, 2024, the Syndeo Program was complete. Additionally, with respect to Syndeo devices, as a result of the decision to market and sell Syndeo 3.0 devices exclusively, the Company designated all Syndeo 1.0 and 2.0 builds on-hand as obsolete, resulting in an inventory write-down of $ 19.6 million during the year ended December 31, 2023. 141 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.