SkinHealth Systems Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q for the three months ended June 30, 2026 (the “Quarterly Report on Form 10-Q”) contains “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled Risk Factors of this filing and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2026 (the “Annual Report on Form 10-K”). Important factors that may affect actual results or outcomes include, among others: the inability to recognize the benefits of the business combination consummated on May 4, 2021 pursuant to a certain Agreement and Plan of Merger entered into by and among the Company and other parties (the “Business Combination”); the Company’s availability of cash for debt service and exposure to risk of default under debt obligations; the Company’s ability to manage growth; the Company’s ability to execute its business plan; potential negative reactions or outcomes related to the Company’s name change in general and focused shift in operations; potential litigation involving the Company; changes in applicable laws or regulations; and the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and also with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. Unless the context otherwise requires, references to the “Company”, “Hydrafacial”, “we”, “us”, and “our” in this section are intended to mean the business and operations of SkinHealth Systems Inc. and its consolidated subsidiaries. Company Overview SkinHealth Systems Inc. (the “Company” or “SkinHealth Systems”) 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. 24 Business and Macroeconomic Conditions During the three and six months ended June 30, 2026 , we continued to strengthen the foundation of the business while expanding our footprint by selling and placing our patented hydradermabrasion delivery systems (“Delivery Systems”) worldwide, driving consumables, which consist of single-use tips, solutions, serums, and other products used to provide a Hydrafacial treatment (collectively “Consumables”), investing in our community of providers, partners, and consumers, driving brand awareness, advancing our science-backed innovation product pipeline, and optimizing our global infrastructure. Although we believe we can be successful in our current operating environment, various factors may impact our business in unpredictable ways such as: • Global economic conditions, including inflation, recession, changes in foreign currency exchange rates, higher interest rates, and other changes in economic conditions; • Market conditions, including increased competition and the interest rate environment, affecting the ability of potential customers to obtain credit on acceptable terms and longer sales cycles; • The imposition of tariffs and/or trade restrictions, due to geopolitical tensions or otherwise, may impact material costs and pricing; • Changes in applicable laws, regulations, regulatory interpretations, or enforcement policies in countries in which we operate; • Disruptions in transportation and other supply chain related constraints, such as labor strife in the transportation industry or geopolitical tensions; and • Issues related to older models of Syndeo and our actions to remediate such issues. We may be able to offset cost pressures through increasing the selling prices of some of our products, increasing value engineering efforts to optimize product costs, increasing the diversification of our suppliers and supplier contracts, increasing natural foreign currency hedging, as applicable, and reducing discretionary spending. However, our pricing actions could have an adverse impact on demand, and may in turn, cause our providers to halt or decrease Delivery Systems and/or Consumables spending, and our actions may not be sufficient to cover unexpected increased costs that we may experience. Business and macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, the beauty health industry, our providers and their budgets with us, our business, the Company’s brand reputation, financial condition, and results of operations. We remain attentive to these business and macroeconomic conditions that may materially impact our business, and we continue to explore and implement reporting and quality management systems and risk mitigation strategies in the face of these unfolding conditions to remain agile in adapting to changing circumstances. Australia and New Zealand Market After evaluating the Company's global distribution strategy to align with its go-to-market strategy with in-market partner capabilities and market opportunity, the Company transitioned sales in the Australia and New Zealand market to a distributor partner in June 2026. As a result, the Company has discontinued its direct sales presence in Australia and New Zealand. The change in go-to-market strategy is expected to be accretive to the Company’s long-term profitability, as reductions in operating spend are partially offset by a reduction to revenue. 25 Comparison of Three Months Ended June 30, 2026 to Three Months Ended June 30, 2025 The following tables set forth our consolidated results of operations in dollars and as a percentage of net sales for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data for the three months ended June 30, 2026 and June 30, 2025, have been derived from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts and percentages may not foot due to rounding. Three Months Ended June 30, (in millions) 2026 % of Net Sales 2025 % of Net Sales Net sales $ 72.1 100.0 % $ 78.2 100.0 % Cost of sales 22.8 31.6 29.1 37.2 Gross profit 49.3 68.4 49.1 62.8 Operating expenses Selling and marketing 21.0 29.1 23.1 29.6 Research and development 1.4 2.0 1.3 1.6 General and administrative 23.3 32.4 27.5 35.1 Total operating expenses 45.8 63.5 51.8 66.3 Income (loss) from operations 3.6 5.0 (2.7) (3.5) Interest expense 6.3 8.7 4.1 5.3 Interest income (1.3) (1.8) (3.2) (4.0) Other income, net — — (18.1) (23.2) Change in fair value of warrant liabilities — — 0.2 0.3 Foreign currency transaction loss (gain), net — — (4.5) (5.7) (Loss) income before provision for income taxes (1.5) (2.0) 18.7 23.9 Income tax expense (benefit) 1.2 1.7 (1.0) (1.3) Net (loss) income $ (2.7) (3.7) % $ 19.7 25.2 % Net Sales Three Months Ended June 30, Change (in millions) 2026 2025 Amount % Net sales Delivery Systems $ 18.3 $ 22.4 $ (4.1) (18.4) % Consumables 53.9 55.8 (2.0) (3.5) % Total net sales $ 72.1 $ 78.2 $ (6.1) (7.8) % Three Months Ended June 30, Percentage of net sales 2026 2025 Delivery Systems 25.3% 28.6% Consumables 74.7% 71.4% Total 100.0% 100.0% Total net sales for the three months ended June 30, 2026 decreased $6.1 million, or 7.8%, compared to the three months ended June 30, 2025. Delivery Systems net sales for the three months ended June 30, 2026 decreased $4.1 million, or 18.4%, compared to the three months ended June 30, 2025, with decreases across all regions. Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions. Consumables net sales for the three months ended June 30, 2026 decreased $2.0 million, or 3.5%, compared to the three months ended June 30, 2025, with decreases in Europe, the Middle East, and Africa, and the Americas, impacted by pressure on treatment volume and timing of booster launches in the prior year. 26 Cost of Sales, Gross Profit, and Gross Margin Three Months Ended June 30, Change (in millions) 2026 2025 Amount % Cost of sales $ 22.8 $ 29.1 $ (6.3) (21.7)% Gross profit $ 49.3 $ 49.1 $ 0.2 0.5% Gross margin 68.4 % 62.8 % Cost of sales for the three months ended June 30, 2026 decreased $6.3 million, compared to the three months ended June 30, 2025, primarily due to lower net sales in 2026 and higher product costs related to the sell through associated with Delivery Systems received back as part of the Company’s previous trade-in program and higher inventory related charges in 2025. Gross margin increased to 68.4% for the three months ended June 30, 2026 from 62.8% for the three months ended June 30, 2025 primarily due to higher product costs related to the sell through associated with Delivery Systems received back as part of the Company’s previous trade-in program and higher inventory related charges in 2025. Selling and Marketing Three Months Ended June 30, Change (in millions) 2026 2025 Amount % Selling and marketing $ 21.0 $ 23.1 $ (2.1) (9.0) % As a percentage of net sales 29.1 % 29.6 % Selling and marketing expense for the three months ended June 30, 2026 decreased $2.1 million, or 9.0%, compared to the three months ended June 30, 2025. The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense and severance, partially offset by higher marketing-related spend. Research and Development Three Months Ended June 30, Change (in millions) 2026 2025 Amount % Research and development $ 1.4 $ 1.3 $ 0.2 12.5 % As a percentage of net sales 2.0 % 1.6 % Research and development expense for the three months ended June 30, 2026 increased $0.2 million, or 12.5%, compared to the three months ended June 30, 2025, reflecting increased investment in future product development. General and Administrative Three Months Ended June 30, Change (in millions) 2026 2025 Amount % General and administrative $ 23.3 $ 27.5 $ (4.1) (15.0) % As a percentage of net sales 32.4 % 35.1 % General and administrative expense for the three months ended June 30, 2026 decreased $4.1 million, or 15.0%, compared to the three months ended June 30, 2025. The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense, legal fees, and professional fees, partially offset by the costs associated with the proposed settlement the Company has reached with the plaintiffs in the Securities Class Action. 27 Interest Expense, Interest Income, and Other Income, Net Three Months Ended June 30, Change (in millions) 2026 2025 Amount % Interest expense $ 6.3 $ 4.1 $ 2.2 51.9 % Interest income $ (1.3) $ (3.2) $ 1.9 (59.2) % Other income, net $ — $ (18.1) $ 18.1 N/M N/M - Not meaningful Interest expense for the three months ended June 30, 2026 increased $2.2 million compared to the three months ended June 30, 2025, primarily due to interest and amortization of debt issuance costs related to the 7.95% Convertible Senior Secured Notes due November 15, 2028 (the “2028 Notes”), partially offset by lower outstanding balances related to the 1.25% Convertible Senior Notes due October 2026 (the “2026 Notes”). Interest income for the three months ended June 30, 2026 decreased $1.9 million compared to the three months ended June 30, 2025 primarily due to lower average invested balances and interest rates during the three months ended June 30, 2026. Other income, net for the three months ended June 30, 2025 included $18.1 million net gain related to the exchange and repurchases of the 2026 Notes. 28 Comparison of Six Months Ended June 30, 2026 to Six Months Ended June 30, 2025 The following tables set forth our consolidated results of operations in dollars and as a percentage of net sales for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data for the six months ended June 30, 2026 and June 30, 2025 have been derived from the condensed consolidated financial statements included elsewhere in this Form 10-Q. Amounts and percentages may not foot due to rounding. Six Months Ended June 30, (in millions) 2026 % of Net Sales 2025 % of Net Sales Net sales $ 137.0 100.0 % $ 147.8 100.0 % Cost of sales 43.2 31.6 50.1 33.9 Gross profit 93.8 68.4 97.7 66.1 Operating expenses Selling and marketing 44.2 32.3 49.1 33.3 Research and development 2.5 1.8 2.2 1.5 General and administrative 45.3 33.0 61.0 41.3 Total operating expenses 92.0 67.1 112.4 76.1 Income (loss) from operations 1.8 1.3 (14.7) (10.0) Interest expense 12.6 9.2 6.6 4.5 Interest income (2.8) (2.0) (6.2) (4.2) Other income, net (1.1) (0.8) (18.2) (12.3) Change in fair value of warrant liabilities — — (0.1) (0.1) Foreign currency transaction loss (gain), net 1.2 0.9 (6.3) (4.3) (Loss) income before provision for income taxes (8.3) (6.0) 9.5 6.4 Income tax expense (benefit) 1.0 0.7 (0.1) (0.1) Net (loss) income $ (9.3) (6.8) % $ 9.6 6.5 % Net Sales Six Months Ended June 30, Change (in millions) 2026 2025 Amount % Net sales Delivery Systems $ 36.8 $ 42.6 $ (5.8) (13.6) % Consumables 100.2 105.2 (5.0) (4.7) % Total net sales $ 137.0 $ 147.8 $ (10.7) (7.3) % Six Months Ended June 30, Percentage of net sales 2026 2025 Delivery Systems 26.9% 28.8% Consumables 73.1% 71.2% Total 100.0% 100.0% Total net sales for the six months ended June 30, 2026 decreased $10.7 million , or 7.3% , compared to the six months ended June 30, 2025. Delivery Systems net sales for the six months ended June 30, 2026 decreased $5.8 million , or 13.6% , compared to the six months ended June 30, 2025, with decreases across all regions. Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions. Consumables net sales for the six months ended June 30, 2026 decreased $5.0 million , or 4.7% , compared to the six months ended June 30, 2025, with decreases across all regions, impacted by pressure on treatment volume and the transition to a distributor model in China in the prior year. 29 Cost of Sales, Gross Profit, and Gross Margin Six Months Ended June 30, Change (in millions) 2026 2025 Amount % Cost of sales $ 43.2 $ 50.1 $ (6.8) (13.6)% Gross profit $ 93.8 $ 97.7 $ (3.9) (4.0)% Gross margin 68.4 % 66.1 % Cost of sales for the six months ended June 30, 2026 decreased $6.8 million, compared to the six months ended June 30, 2025, primarily due to lower net sales in 2026 and higher product costs related to the sell through associated with Delivery Systems received back as part of the Company’s previous trade-in program and higher inventory related charges in 2025. Gross margin increased to 68.4% for the six months ended June 30, 2026 from 66.1% for the six months ended June 30, 2025 primarily due to higher product costs related to the sell through associated with Delivery Systems received back as part of the Company’s previous trade-in program and higher inventory related charges in 2025. Operating Expenses Selling and Marketing Six Months Ended June 30, Change (in millions) 2026 2025 Amount % Selling and marketing $ 44.2 $ 49.1 $ (4.9) (10.0) % As a percentage of net sales 32.3 % 33.3 % Selling and marketing expense for the six months ended June 30, 2026 decreased $4.9 million, or 10.0%, compared to the six months ended June 30, 2025. The decrease is primarily driven by lower personnel-related expenses, including severance, share-based compensation expense and sales commission expense, and depreciation expense. Research and Development Six Months Ended June 30, Change (in millions) 2026 2025 Amount % Research and development $ 2.5 $ 2.2 $ 0.3 11.6 % As a percentage of net sales 1.8 % 1.5 % Research and development expense for the six months ended June 30, 2026 increased $0.3 million, or 11.6%, compared to the six months ended June 30, 2025, reflecting increased investment in future product development. General and Administrative Six Months Ended June 30, Change (in millions) 2026 2025 Amount % General and administrative $ 45.3 $ 61.0 $ (15.7) (25.8) % As a percentage of net sales 33.0 % 41.3 % General and administrative expense for the six months ended June 30, 2026 decreased $15.7 million, or 25.8%, compared to the six months ended June 30, 2025. The decrease is primarily driven by lower legal fees, personnel-related expenses, including share-based compensation expense and severance, professional fees, and depreciation and amortization expense, partially offset by the costs associated with the proposed settlement the Company has reached with the plaintiffs in the Securities Class Action. 30 Interest Expense, Interest Income, and Other Income, Net Six Months Ended June 30, Change (in millions) 2026 2025 Amount % Interest expense $ 12.6 $ 6.6 $ 6.0 90.3 % Interest income $ (2.8) $ (6.2) $ 3.4 (55.1) % Other income, net $ (1.1) $ (18.2) $ 17.1 N/M N/M - Not meaningful Interest expense for the six months ended June 30, 2026 increased $6.0 million compared to the six months ended June 30, 2025, primarily due to interest and amortization of debt issuance costs related to the 2028 Notes, partially offset by lower outstanding balances related to the 2026 Notes. Interest income for the six months ended June 30, 2026 decreased $3.4 million compared to the six months ended June 30, 2025 primarily due to lower average invested balances and interest rates during the six months ended June 30, 2026 . Other income, net for the six months ended June 30, 2026 included $1.0 million net gain related to the repurchase of the 2026 Notes. Other income, net for the six months ended June 30, 2025 included $18.1 million net gain related to the exchange and repurchases of the 2026 Notes. Liquidity and Capital Resources Our primary sources of capital are (i) cash flow from operating activities, (ii) net proceeds received from the consummation of the Business Combination, and (iii) net proceeds received from the Notes. As of June 30, 2026, we had cash, cash equivalents, and restricted cash of $206.1 million. Our operating cash flows result primarily from cash received from sales of Delivery Systems and Consumables, offset primarily by cash payments made for products and services, employee compensation, payment processing and related transaction costs, operating leases, marketing expenses, and interest payments for our Notes. Cash received from our customers and other activities generally corresponds to our net sales. Our sources of liquidity and cash flows are used to fund ongoing operations, research and development projects for new products, services, and technologies, and provide ongoing support services for our providers and customers. As part of our business strategy, we occasionally evaluate potential acquisitions of businesses and products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products, services, or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. Based on our sources of capital, management believes that we have sufficient liquidity to satisfy our anticipated working capital requirements for our ongoing operations and obligations for at least the next 12 months. However, we will continue to evaluate our capital expenditure needs based upon factors including, but not limited to, our rate of revenue growth, potential acquisitions, the timing and amount of spending on research and development, growth in sales and marketing activities, the timing of new product launches, timing and investments needed for international expansion, the continuing market acceptance of the Company’s products and services, expansion, and overall economic conditions. We may, from time to time, seek to redeem or repurchase our outstanding debt or equity securities through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. 31 If cash generated from operations is insufficient to satisfy our capital requirements, we may have to sell additional equity or debt securities or obtain expanded credit facilities to fund our operating expenses. The sale of additional equity would result in additional dilution to our stockholders. Also, the incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. In the event such additional capital is needed in the future, there can be no assurance that such capital will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional capital were obtained, then management would restructure the Company in a way to preserve our business while maintaining expenses within operating cash flows. Convertible Senior Notes, Net Convertible Senior Secured Notes - 2028 On May 21, 2025, the Company entered into privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders (the “Exchanging Holders”) of the 2026 Notes. Pursuant to the Exchange Agreements, the Company exchanged and repurchased $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 at a weighted-average price equal to 95% for $250.0 million principal amount of new 2028 Notes, and $150.1 million principal amount were repurchased at a weighted-average price equal to 95% for $142.6 million. The exchange and repurchase resulted in a net gain of $16.6 million, which includes $3.1 million of unamortized debt issuance costs and $0.9 million of other related fees. On May 27, 2025, the Company issued the 2028 Notes to the Exchanging Holders. The 2028 Notes were issued pursuant to, and are governed by, an indenture, 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. Convertible Senior Notes - 2026 On September 14, 2021, the Company issued an aggregate of $750.0 million in principal amount of its 2026 Notes pursuant to, and governed by, an indenture dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchasers of the 2026 Notes, the Company granted the initial purchasers an option to purchase, for settlement within a period of 13 days from, and including, the date the 2026 Notes were first issued, up to an additional $100.0 million principal amount of 2026 Notes. The 2026 Notes issued on September 14, 2021 include the $100.0 million principal amount of 2026 Notes issued pursuant to the full exercise by the initial purchasers of such option. During the three months ended June 30, 2026, there were no repurchases related to the 2026 Notes. During the six months ended June 30, 2026, the Company repurchased $21.3 million principal amount of its 2026 Notes at a weighted-average price equal to 94.875% for $20.2 million and recognized a net gain of $1.0 million, which includes $0.1 million of unamortized debt issuance costs. During the three and six months ended June 30, 2025, the Company repurchased $20.0 million principal amount of the 2026 Notes for $18.4 million and recognized a net gain of $1.5 million, which includes $0.1 million of unamortized debt issuance costs related to the repurchase. Since inception through December 31, 2025, the Company exchanged and repurchased in total $625.5 million principal amount of its 2026 Notes. For more information, see Part I, Item 1 “Financial Statements — Note 5 - “Long-term Debt” in this Quarterly Report on Form 10-Q. Known Trends or Uncertainties The majority of our customers operate within the medical industry (dermatologists and plastic surgeons), esthetician industry, and beauty retail industry. Although we have not seen any significant reduction in revenues to date due to consolidations, we have seen some consolidation in these industries during economic downturns. These consolidations have not had a negative effect on our total net sales; however, should consolidations and downsizing in the industries continue to occur, those events could adversely impact our revenues and earnings going forward. 32 In addition, we continue to face macroeconomic challenges such as the possibility of recession or financial market instability, and the impact of any governmental actions on the economy, such as tariffs and/or trade restrictions. Furthermore, the geopolitical landscape poses inherent risks that could significantly impact the operations and financial performance of the Company. In the event of a military conflict, supply chain disruptions, geopolitical uncertainties, and economic repercussions may adversely affect the Company’s ability to develop, test and manufacture products, and distribute them globally. This could lead to delays in product development, interruptions in the supply of critical materials, thereby impeding the Company’s commercialization plans. These factors may adversely impact consumers, business, and government spending as well as our customers' ability to pay for our products and services on an ongoing basis. If economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, our revenues could be adversely affected. Furthermore, the impact of a conflict on global financial markets may result in increased volatility and uncertainty in the capital markets, thereby affecting the valuation of the Company’s Class A Common Stock. Investor confidence, market sentiment, and access to capital could all be negatively influenced. Such geopolitical risks are outside the control of the Company, and the actual effects on the Company’s business, financial condition and results of operations may differ from current estimates. Macroeconomic challenges and credit conditions have negatively impacted our revenues in 2026. We are continuing to monitor these and other risks that may affect our business so that we can respond appropriately. Negative trends in our financial performance or financial condition may result in a sustained decline in our stock price, which may result in a triggering event necessitating an interim goodwill impairment assessment and potential goodwill impairment. The Company continues to evaluate options to address its 2026 Notes maturity based on our cash needs and market conditions; however, the Company currently intends to repay its 2026 Notes maturity with cash on hand at the end of the third quarter of 2026. Cash Flows The following table summarizes the activities from our statements of cash flows. Amounts may not foot due to rounding. Six Months Ended June 30, (Dollars in millions) 2026 2025 Cash, cash equivalents, and restricted cash at beginning of period $ 232.7 $ 370.1 Operating activities: Net (loss) income (9.3) 9.6 Non-cash adjustments 20.9 4.6 Changes in working capital (14.5) (1.6) Net cash (used for) provided by operating activities (2.9) 12.6 Net cash used for investing activities (2.9) (2.7) Net cash used for financing activities (21.1) (173.6) Net change in cash, cash equivalents, and restricted cash (26.9) (163.7) Effect of foreign currency translation 0.3 5.6 Cash, cash equivalents, and restricted cash at end of period $ 206.1 $ 212.0 Operating Activities Net cash used for operating activities for the six months ended June 30, 2026 was $2.9 million, as compared to net cash provided by operating activities of $12.6 million for the six months ended June 30, 2025. The change in cash used for operating activities was primarily related to changes in working capital, net loss, and non-cash adjustments. The prior year net income and non-cash adjustments include $18.1 million of net gain, as compared to $1.0 million of net gain in the current year related to the 2026 Notes. Investing Activities Net cash used for investing activities for the six months ended June 30, 2026 was $2.9 million, as compared to $2.7 million for the six months ended June 30, 2025. The change in cash used for investing activities was due to higher capital expenditures during the six months ended June 30, 2026. 33 Financing Activities Net cash used for financing activities for the six months ended June 30, 2026 was $21.1 million, as compared to $173.6 million for the six months ended June 30, 2025. The cash used for financing activities for the six months ended June 30, 2026 was primarily related to the repurchase of the Company’s 2026 Notes. The cash used for financing activities for the six months ended June 30, 2025 was primarily related to the exchange and repurchases of the Company’s 2026 Notes. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity/deficit, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions. There have been no changes to our critical accounting policies since our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Recent Accounting Pronouncements See Part I, Item 1 "Financial Statements—Note 15 to the Consolidated Financial Statements—New Accounting Pronouncements" of this Quarterly Report on Form 10-Q. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market risks relating to our operations result primarily from changes in interest rates, foreign currency, and inflation risk. There were no material changes to our market risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.