Beauty Health (SKIN) Q4 2025 Earnings Transcript

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DATE

Thursday, March 12, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Pedro Malha
• Chief Financial Officer — Michael Monahan
• Investor Relations — Norberto Aja

TAKEAWAYS

• Total Revenue -- $82.4 million, down 1.3% due to lower delivery system sales but improving from the double-digit decline reported in the preceding quarter.
• Consumables Revenue -- $57.7 million, an increase of 1.7% year over year, underscoring stability in recurring revenue.
• Device Revenue -- $24.7 million, a decrease of 7.9% year over year, although performance showed sequential improvement.
• Adjusted Gross Margin -- 67.4% for the quarter, compared to 67.1% in the prior period, driven by a mix shift to consumables.
• GAAP Gross Margin -- 64.4% for the quarter, up from 62.7%, with the improvement attributed to lower inventory-related charges and favorability in product mix, partially offset by lower average selling prices on equipment.
• Adjusted EBITDA -- $15 million quarter result, reflecting approximately 700 basis points of margin expansion and a significant increase versus $9 million in the comparable prior period.
• Full-Year Net Sales -- $300.8 million, down from $334.3 million previously, influenced by softer device sales and the China distribution shift.
• Full-Year Adjusted EBITDA -- $45.1 million, up significantly from $12.3 million, representing a 268% increase due to focus on expense discipline and margin improvement.
• Global Installed Base -- Over 36,000 systems at year end, supporting the recurring consumables model.
• Device Placements -- 1,032 delivery systems in the quarter, compared to 1,087 in the corresponding period, signaling continued equipment market pressure.
• Q4 Churn Rate -- 1.1%, an improvement from the 1.8% rate noted in Q3, with elevated churn primarily among smaller accounts without assigned business development managers.
• Operating Expenses -- $52.9 million for the quarter, reduced from $59.5 million in the prior-year period, reflecting headcount reduction and tighter spend management.
• Cash Position -- $232.7 million in cash, cash equivalents, and restricted cash at year end after repurchasing convertible notes and refinancing debt, down from $370.1 million previously.
• Guidance for 2026 -- Projected revenue of $285 million to $305 million with positive adjusted EBITDA between $35 million and $45 million, anticipating a back-half-weighted performance as execution initiatives progress.
• Q1 2026 Outlook -- Expected revenue of $63 million to $68 million and positive adjusted EBITDA of $3.5 million to $5.5 million, reflecting typical seasonal weakness and lower first-quarter orders.
• Booster Attachment -- Booster sales accounted for high single-digit full-year growth; average U.S. spend per treatment up 10% due to premium boosters.
• Pricing Action -- Consumables prices increased by 5% at the start of Q3, implemented with minimal provider pushback.
• Innovation Pipeline -- Next-generation HydraFacial system targeted for launch in 2028, positioned to drive upgrades and new adoption across the provider network.
• International Segments -- EMEA region, led by Germany, exhibited robust consumables and booster growth attributed to multiple booster launches; China pressured due to a distribution transition.
• Organizational Discipline -- Company is creating shared service centers and enhancing back-end infrastructure to centralize and control global costs.

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RISKS

• Management expects fiscal 2026 "to come in modestly below the prior year," citing macro pressure on capital equipment, intensified competitive activity extending sales cycles, and ongoing transition challenges in China and other international markets.
• Q1 2026 guidance incorporates a projected mid-single-digit sequential revenue decline, attributed to APAC region softness, equipment demand pressure in the Americas, and lower consumables sales following strong distributor orders at the end of Q4.
• Full-year cash declined 37% due to repurchase and refinancing of convertible senior notes, reducing balance sheet cash reserves.
• Elevated churn in 2025 was explicitly noted—though improved in Q4—and was particularly pronounced among smaller accounts lacking dedicated business development support.

SUMMARY

The Beauty Health Company (NASDAQ:SKIN) reported stabilized quarterly results marked by higher recurring consumables sales, sequential device market improvement, and notable operating leverage gains. Management is executing a strategic transition from a device placement-driven growth model to a utilization-focused platform, leveraging an expansive installed base exceeding 36,000 systems. Expectations for 2026 are for flat-to-lower top-line performance, with planned investment in R&D and targeted cost controls, preceding anticipated revenue growth in 2027 as innovation and commercial initiatives mature.

• CEO Malha detailed a "shift it from a model of device placement to a model of device utilization," emphasizing that improved utilization is now central to driving the margin-generating consumables stream.
• CFO Monahan explained the 2025 gross margin expansion and EBITDA growth were underpinned by operating cost discipline, favorable product mix, and debt restructuring, not revenue growth.
• The company’s guidance assumes no significant rebound in macro-driven equipment demand; growth projections rely instead on execution of internal commercial strategies.
• New booster launches and high attachment rates in EMEA and the Americas reinforced the strategic focus on clinical innovation and outcome-driven protocols as key to future competitiveness.
• Planned organizational transformation includes centralizing shared services, modernizing IT infrastructure, and realigning the sales and marketing approach to strengthen provider relationships and account retention.

INDUSTRY GLOSSARY

• ASP: Average Selling Price, reflecting the mean revenue earned per device or product sold within a period.
• Booster: A proprietary HydraFacial consumable applied during treatment to enhance specific targeted skin outcomes, contributing to higher treatment spend and attachment rates for providers.
• Churn Rate: The proportion of accounts or systems no longer active in a period, used to monitor installed base retention.
• Elite FRC Device: Legacy HydraFacial delivery system phased out in favor of the newer Syndeo device with different average selling price characteristics.
• Installed Base: The total number of HydraFacial systems placed with providers and actively serviced, underpinning consumables-driven recurring revenue.
• Syndeo: Current HydraFacial delivery platform aimed at modernizing provider and patient experience.

Full Conference Call Transcript

Operator: Good day, and welcome to The Beauty Health Company 2025 Fourth Quarter Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star then two. Please note this event is being recorded. I will now turn the conference over to Mr. Norberto Aja, Investor Relations. Please go ahead.

Norberto Aja: Thank you, Operator, and good afternoon, everyone. Thank you for joining The Beauty Health Company's fourth quarter 2025 conference call. We released our results earlier this afternoon via an earnings press release, which can be found on our corporate website at beautyhealth.com. Joining me on the call today is The Beauty Health Company's Chief Executive Officer, Pedro Malha, along with our Chief Financial Officer, Michael Monahan. Before we begin, I would like to remind everyone of the company's safe harbor language. Management may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including guidance and underlying assumptions.

Forward-looking statements are based on current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially. Listeners are cautioned not to place undue reliance on forward-looking statements. For further discussion of risks related to our business, please refer to the risk factors contained in the company's filings with the SEC. This call will present non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is in the earnings press release furnished to the SEC and available on our website. Following management's prepared remarks, we will open the call for a question-and-answer session. I will now turn the call over to our CEO, Pedro Malha. Please go ahead, Pedro.

Pedro Malha: Good afternoon, everybody, and thank you for joining us today. The Beauty Health Company has built one of the most recognized platforms in professional skin health, and my first five months with the company have reinforced my conviction in the long-term opportunity ahead of us. But before we review the quarter, I would like to share a few observations here. My background is in global medtech businesses built around differentiated technology and disciplined commercial execution to drive growth. And what attracted me to The Beauty Health Company was the opportunity to bring the same model to the company. The foundation is already in place.

We have a globally recognized brand, we have a large installed base of systems placed with providers around the world, and we operate a consumables model that, when executed well, generates meaningful operating leverage. So our task now is straightforward: to unlock the full economic potential of these assets. That means strengthening the commercial engine behind the platform with greater discipline and operating rigor consistent with established medtech companies. It all begins with activating the installed base, improving utilization, reinforcing the economics of our providers, and continuing to invest in clinically meaningful innovation.

But before discussing the progress we are making, I think it will be useful to step back a little and look at the broader market. First, the fundamentals of the aesthetic category remain strong. Research shows that consumers continue to invest in their skin even when they pull back in other areas. Skin health is increasingly becoming a lifestyle category, one that is built around prevention, routine care, and clinically proven outcomes. We have seen this evolution before in areas like oral health or wellness, where treatments that once happened occasionally became part of everyday consumer behavior. We believe skin health is following a similar trajectory, which can make the long-term opportunity for this category significant. The market itself has expanded dramatically. According to industry data, the U.S. medspa market has grown from roughly 1,600 locations in 2010 to more than 13,000 today. At the same time, the consumer has evolved. We are seeing broader demographics entering the category: men, Gen Z, and younger consumers are engaging with treatments earlier. Today's consumers are seeking outcomes that look healthy, natural, and authentic. Also, consumers are more informed than ever before. They understand ingredients, treatment mechanisms, and outcomes. They are not simply purchasing a brand; they are looking for results.

Providers have evolved as well. They are more focused on return on investment and are increasingly building treatment protocols that combine multiple modalities to deliver better clinical outcomes. Taken together, we believe that all of these trends are well aligned with our core product strengths. HydraFacial treatments are noninvasive, clinically credible, and repeatable. They also serve as an accessible entry price point for consumers into the aesthetic category, which helps to bring new patients into providers’ practices and creates opportunities for additional procedures. HydraFacial is also uniquely versatile. The treatment works across genders, ages, and skin types—a combination that very few technologies in the medical aesthetic space can match.

Because our treatment is repeatable and easy to integrate, it also fits naturally into preventive skin health routines and combination protocols, which is exactly where the market is moving. So The Beauty Health Company is uniquely positioned at the intersection of clinical skin health and consumer aesthetics.

However, our commercial model was built for an early phase of the market, one where the category was newer, competition was lighter, and placing devices was the primary growth driver. That playbook worked well for a long time, but markets mature, and we need to evolve our model ahead of that curve and shift it from a model of device placement to a model of device utilization, which is where we believe the long-term growth of the business is. Over the past year, the company strengthened its balance sheet, improved its cost structure, and restored financial discipline across the organization. Our fourth quarter results reflect that progress.

At the same time, we hold the view that these results do not yet reflect the full potential of The Beauty Health Company. What they do demonstrate is that the foundation of the business has stabilized. For the fourth quarter, total revenue was $82.4 million, representing a decrease of 1.3% compared to the prior-year quarter, a meaningful improvement from the double-digit decline we experienced in Q3. Consumables revenue increased to $57.7 million from $56.7 million in the prior year, representing growth of 1.7% year over year and reinforcing the resilience of our recurring revenue model. Device revenue was $24.7 million, still down 7.9% year over year, but performance improved meaningfully here relative to the third quarter.

These numbers still reflect some pressure in the capital equipment segment, which is consistent with the broader macroeconomic environment. That said, the trend is moving in the right direction, and the improvement we saw from the prior quarter is an encouraging sign that the capital equipment business is stabilizing. Adjusted gross margin expanded to 67.4%, while GAAP gross margin expanded to 64.4%, driven primarily by a favorable mix shift towards consumables revenue. Additionally, profitability improved significantly. Adjusted EBITDA was $15 million in the fourth quarter compared to $9 million in last year’s quarter, representing approximately 700 basis points of margin expansion.

For the full year, adjusted EBITDA increased to $45.1 million compared to $12.3 million in the prior year—again, a significant improvement.

So the results for this quarter highlight two important characteristics of our model. First, this business has meaningful operating leverage. Second, that leverage responds directly to disciplined execution. Operationally, we placed more than 1,000 devices in the quarter and ended the year with over 36,000 systems in our global installed base. That installed base is the strategic core of this company, and it represents a recurring revenue infrastructure that is already in place. While this base has already been built, we think it remains underutilized. We believe that even modest improvements in utilization can drive significant consumables revenue and margin expansion. So our job now is to unlock the full productivity of that installed base.

Now, looking ahead, the message here is that we remain optimistic about the category in which we operate. Demand for non- or minimally invasive science-based treatments continues to grow globally. The market is shifting away from procedures driven primarily by short-term trends toward outcomes-driven protocols. The market is also shifting from individual treatments toward combination therapies and from soft marketing claims toward more clinically validated results. These trends favor companies with scale, clinical credibility, stronger provider education, and durable recurring economics, which is exactly where The Beauty Health Company is positioned. At the center of our strategy is a powerful commercial model. Our brand credibility drives consumer demand. Consumer demand drives patient traffic into providers’ practices.

Patient traffic drives higher treatment utilization per device. Utilization drives consumables revenue, which is our margin engine. For providers, this generates additional revenue and motivates them to expand, upgrade, and deepen their relationship with us. Utilization is the center of gravity, and we believe that when utilization improves, it creates positive momentum across the model.

To accelerate this flywheel, we are focused on three priorities: first, salesforce excellence; second, marketing discipline; and third, focused innovation. Starting with salesforce excellence, historically much of our commercial success was relationship-driven. That worked well in the early stages of the company, but the next phase of growth requires a much more structured, disciplined commercial approach. We are now transitioning to a value-based selling model, one where our teams clearly demonstrate how HydraFacial drives revenue, patient demand, and attractive returns for provider practices. That also means sharpening our clinical economic differentiation, improving how we segment and prioritize accounts, and implementing more structured sales plans. These plans focus not only on acquiring new practices but also on expanding utilization across our installed base and reactivating low-utilization accounts.

We are also deploying stronger commercial tools and analytics so we can track activation, utilization, and retention across the installed base in real time. This gives us better visibility into performance and allows us to manage the business with greater precision.

Second, marketing discipline. Our marketing strategy needs to be more focused on demand generation that directly supports provider growth. We are refining the positioning of HydraFacial as a clinical-grade skin health platform—one that is supported by science, outcomes, and stronger provider education. At the same time, we are activating an underleveraged asset in our portfolio, SkinStylus. It is a strong technology in the growing microneedling category that historically has never received the commercial focus it deserves, and we see a meaningful opportunity to expand its role within providers’ practices. We are also expanding consumer demand generation programs designed to bring new patients into providers’ offices and strengthen the economic value proposition for these providers.

Additionally, we recently brought in a new Brand and Clinical Strategy Office with deep medtech experience to lead our brand and marketing strategy and strengthen the clinical positioning of our technology.

Third, focused innovation. Innovation will remain disciplined and targeted at opportunities that strengthen our platform. This includes the development of a next-generation HydraFacial system designed to drive upgrades across the installed base and expand our market share. We are also investing in a much more selective portfolio of clinically backed boosters designed to increase booster attachment rates, improve provider economics, and expand treatment protocols. If we look back, HydraFacial has historically been viewed primarily as a single treatment, but we see it differently. We see HydraFacial as the foundation of a broader skin health platform—one that integrates devices, boosters, protocols, and complementary technology into a comprehensive ecosystem for providers and customers.

We are also exploring selective commercial and technology external partnerships aimed at broadening our product ecosystem and enlarging our relationship and offering to providers. All in all, we believe that taken together, these initiatives will strengthen the installed base, expand HydraFacial’s role in providers’ practices, and accelerate the compounding economics of our model. This means that we will shift from a single-product company to a skin health platform. For that reason, 2026 will be an execution year, focused on stabilization and investment into the next phase of growth. With the operational changes that we are implementing, we expect to return to growth in 2027 and accelerate beyond that as innovation and product launches scale.

The Beauty Health Company has one of the largest installed bases in the aesthetics industry, one of the most recognized brands in skin health, a proven device-plus-consumables model, and a global commercial infrastructure across North America, Europe, and Asia Pacific. These are proven and durable advantages. Our task now is to match those advantages with the commercial discipline and operating rigor of a best-in-class medtech company. Before I turn it over to Michael, let me quickly frame our expectations for the year.

2026 is likely to come in modestly below the prior year, but as our initiatives take hold, we expect momentum to build through the second half, positioning the company to exit 2026 on a stronger trajectory and setting the stage for returning to growth in 2027. I will now turn the call over to Michael Monahan to walk you through the financials and our 2026 guidance in more detail. Michael?

Michael Monahan: Good afternoon, everyone. Key financial metrics for 2025 reflected meaningful improvement. Our global footprint surpassed 36,000 systems. We increased our adjusted gross margins from 62% to over 68%, and GAAP gross margins increased from 54.5% to 65.3%. We grew adjusted EBITDA from $12.3 million to $45.1 million, or 268%. We generated over $37 million in operating cash flows, and we strengthened our balance sheet by proactively restructuring our debt. Because of this, we exited 2025 a stronger company than we were a year earlier. These improvements did not happen overnight and are the result of the hard work of our dedicated teams.

As we continue to stabilize the company and prepare to return to growth, we believe we are positioned to drive improved profitability and increased margins in the future.

For the full 2025 fiscal year, net sales were $300.8 million compared to $334.3 million in 2024. Consumables revenue totaled $212.7 million, while device revenue was $88.1 million. We ended the year with an installed base of over 36,000 systems globally, which remains the foundation of our recurring consumables revenue model. We delivered adjusted EBITDA of $45.1 million, representing a significant improvement from $12.3 million in the year prior. The year-over-year change was driven by our continued focus on expense discipline and sustained margin improvement, demonstrating the operating leverage of our business model.

On the balance sheet, we ended the year with approximately $232.7 million in cash, cash equivalents, and restricted cash compared to approximately $370.1 million at the end of 2024, representing a 37% decrease. The year-over-year change was primarily driven by the repurchase of convertible senior notes during 2025 which, along with the refinancing of our notes, significantly strengthened our capital structure and extended our debt maturity profile.

For the fourth quarter, net sales were $82.4 million, a slight decrease of approximately 1.3% compared to the previous year. The year-over-year decline primarily reflects lower delivery system sales. We placed 1,032 delivery systems during the quarter compared to 1,087 units in the prior-year period. GAAP gross margin was 64.4% in the fourth quarter compared to 62.7% in Q4 of last year. The improvement in gross margin was primarily driven by lower inventory-related charges and a favorable mix shift towards consumables, partially offset by lower average selling prices on equipment. As planned, we successfully sold through the majority of our Elite FRC devices during the quarter, which are sold at a lower ASP than our new Syndeo devices.

Adjusted gross margin was 67.4% in the fourth quarter versus 67.1% in the prior year. We continued to manage costs tightly throughout the quarter, with GAAP total operating expenses coming in at $52.9 million in Q4, down from $59.5 million in the prior year. Selling and marketing expenses declined to $23.5 million, reflecting lower headcount and disciplined spend management. Research and development expense was $1.7 million, up modestly year over year, reflecting professional services related to early-stage product investments. General and administrative expense declined to $27.7 million, driven primarily by cost controls, lower bad debt expense, and reduced expenses resulting from our shift from direct to distributor distribution in China.

As a result, adjusted EBITDA for the quarter came in much stronger than the prior year at $15 million compared to $9 million in Q4 of last year. Net loss for the quarter improved to $8.1 million compared to a net loss of $10.3 million in the prior year.

Moving to guidance, 2026 projections reflect the execution priorities Pedro outlined earlier. For the full year, we expect revenue in the range of $285 million to $305 million with positive adjusted EBITDA of $35 million to $45 million. At the midpoint, this implies revenue broadly consistent with 2025 when normalizing for our go-to-market change and softness in China, with a more back-half-weighted cadence as execution initiatives take hold. We believe this is the appropriate framing for 2026 given the work underway to strengthen the commercial foundation of the business, including sales execution, installed base activation, and targeted investments in marketing, education, and innovation.

From a cadence perspective, we currently expect 2026 to be modestly below the prior year. This expectation reflects continued macro pressure in capital equipment, increased competitive activity that has lengthened the device sales cycle, the transition work underway within our sales organization, and ongoing adjustments in certain international markets, including China. It is also worth noting that fourth quarter results typically benefit from year-end ordering patterns, which do not repeat in the first quarter. As these actions take hold, we expect improving momentum in the second half, with the business exiting 2026 on a stronger underlying trajectory than where we began.

We believe these actions will strengthen the underlying productivity of our installed base and reinforce the durability of our recurring consumables model, positioning the company for a return to growth in 2027.

For the first quarter of 2026, we expect revenue of $63 million to $68 million and positive adjusted EBITDA of $3.5 million to $5.5 million. As a reminder, the first quarter is historically our lowest revenue quarter due to seasonal dynamics, including increased sales and marketing activity early in the year and typical ordering patterns among providers. Overall, our outlook reflects a disciplined approach, prioritizing operational execution while investing in long-term growth. With that, I will turn the call back to Pedro.

Pedro Malha: Thanks, Michael. To close, our fourth quarter reflects meaningful structural progress in margins, profitability, balance sheet strength, and in the operating foundations of the business. Key characteristics that make The Beauty Health Company a compelling long platform remain unchanged: the scale, the brand equity, a recurring revenue model with operating leverage, and a global distribution. What is changing is the disciplined operational focus we are bringing to those assets. We believe that as utilization improves and innovation strengthens the platform, the compounding economics of this business will become increasingly visible. We expect 2026 to be the year we demonstrate that operationally, and 2027 is when we expect that progress to translate into sustainable revenue growth.

We look forward to updating you on our progress in the next quarter. I will now turn the call back to the Operator for questions. Thank you.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We will now pause momentarily to assemble our roster. The first question will come from Alan Gong with J.P. Morgan. Please go ahead.

Alan Gong: Hi, thanks for taking the question. So I guess my first is going to be on the guide. I think following, you know, you have been taking the last couple of years to really stabilize the underlying Syndeo business, and I understand that you are doing a pretty substantive overhaul of the underlying sales organization. But when I look at your outlook for next year, despite the fact that you have another year of, you know, sales declines on tap, it looks like you are still expecting to generate pretty good adjusted EBITDA. So just help me to right-set expectations for these investments into the sales force and this overhaul with being able to drive continued leverage.

Pedro Malha: I will just—thanks for the question. So I will just summarize back on what we are guiding here. On revenue at the midpoint, we are expecting to be flat year on year once you normalize, actually, most for the China transition, and that is pretty intentional, the guide, because in the end, we view 2026 as an execution year. On adjusted EBITDA, that number means that at the midpoint of the guidance, this will be slightly below 2025 largely because of the reinvestment that we are doing into the business with an increase in R&D for basically fueling future innovation.

So the expectation, and Michael alluded to this, is that, all in, the first half of the year we expect to be down mid-single digits, and in the second half, we expect to be flat. Without APAC, which is majorly a China impact here, the first half is expected to be down low single digits and the second half to be positive low single digits in terms of growth. The main drivers are actually both consumables and devices here as we ramp up towards the back half of the year. Michael, I do not know if you want to—

Michael Monahan: Sure, Alan. I can add if you also wanted to know where, in the middle of the P&L, how we are thinking about the guide on the gross margin side. I would expect we modeled in gross margin for the full year to be relatively consistent with where we have been in 2025. The team has made a lot of improvements on the cost side of the business to get leverage within overall gross margin. We expect that to continue for the full year of 2026.

On the OpEx side of the business, as you mentioned, we still are driving savings and cost efficiencies through the G&A line of the business, but we are reinvesting that back into the R&D line of the business into innovation for new products into the future.

Alan Gong: Got it, thanks. And then I guess just on the underlying—I know you called out continued challenges on the capital side, but you clearly had a very, very strong systems placement performance to close out the year. So when we think about the underlying assumptions for the market, especially given all the volatility from a broader macro perspective, can you just help us with your underlying assumptions for trends throughout the year and in first quarter?

Pedro Malha: Sure. So in terms of the overall, I will say end consumer signals that we are basing ourselves into, our data shows that the consumer is still spending but is being more select in choosing treatments that deliver clinically proven results at an accessible—we can call it accessible—price point. That actually is exactly the space that HydraFacial occupies. The aesthetics category has been pressured and has been pressured for the last couple of years, and this is mainly due to the tightness of credit and the capital spending decisions taking longer because of that. If these conditions improve, then we can see procedure volume pick up, and after that, we typically see device placements pick up as well.

Our ability to return to growth is not relying on a change in these macro trends. Rather, it hinges on our ability to execute on our strategy. If you wanted to go down and dip a little bit to a lower level, in terms of the provider trends that are shaping this market: in the medical segment, which, by the way, is 70% in the U.S. of our business, medical spas occupy a large percentage of that segment and continue to be the engine of this market. We believe that this engine will continue to grow because they are indeed using HydraFacial as a way to bring patients in and upselling them into higher-ticket treatments.

Plastic surgeons seem to be losing some traction, and dermatologists are more stable, but this is driven more by the specific patient skin treatments needed rather than just pure discretionary spending. At the high end, the more invasive side of aesthetics seems to be softening, while the noninvasive skin quality treatments like ours are holding up. If you look at the nonmedical segment, which is 30% of our business and includes day spas and single-room estheticians, we see that playing out more stable throughout the year.

Operator: The next question will come from Oliver Chen with TD Cowen. Please go ahead.

Jonah: Hi, this is Jonah on for Oliver. Thank you for taking our question. Would love to get additional color just around the churn trend that you saw in the quarter, and what is baked in, in terms of the trend rate in your guide? And how do you anticipate tackling the churn rate throughout the year? Another question is you mentioned men and Gen Z are the newer customers. How are you repositioning your marketing messaging, if at all, to target those new customers? Appreciate the color there. Thank you so much.

Pedro Malha: No problem. Michael will take the first part of that question. I will take the second.

Michael Monahan: Sure. Thanks for the question. Churn was a little bit higher than usual for the full year 2025, but it improved in Q4 both year over year and sequentially from what we saw in Q3. In the fourth quarter, it was about 1.1%. When you look versus the year prior, as I said, it was a little bit higher than that. In Q3, it averaged around 1.8%. So we are moving in the right direction. The driver of the churn is mostly our smaller accounts that do not have a business development manager assigned to them. We began over the last few months restructuring our inside sales and customer service teams to better meet the needs of these accounts.

Our focus in 2026 is to potentially improve in that area. The guide, however, assumes that we will hold churn on a year-over-year basis flat, so our hope is that there is upside to the guide that we gave in that particular line item.

Pedro Malha: In terms of segments that are moving in our way, as I mentioned in my initial remarks, the strategy is based on three assets. We have a great brand, a very large installed base, and a razor-razorblade model that basically means that every device we place can become an annuity from high-margin consumables that potentially can last many years. Our job as different customers and segments get into the fold is to unlock the full potential of these assets. To support this strategy, we have a market that is moving in various ways our way. As I mentioned, the medspas continue to grow.

There is a set of new demographics entering the category, and we are building and addressing their needs and specific concerns in terms of skin health. We are seeing more and more consumers getting into treatments earlier in age, and they want to treat skin very much like a lifestyle routine, which is definitely positioning HydraFacial and The Beauty Health Company well to take advantage of this shift. We are indeed moving towards much more of an outcome-driven protocol, combination therapies, clinically validated results, which is exactly us.

All in all, as more consumers and more demographics expand into the category, we are very well positioned to be at the forefront and to offer the exact solution that they are looking for.

Operator: The next question will come from Susan Anderson with Canaccord Genuity. Please go ahead.

Alex Legg: Hi, good afternoon. Alex Legg on for Susan. Thanks for taking our question. You hinted that you have a potential new system in the works as a focus of your innovation. Is there a timeline that you are targeting for that launch, if you are able to talk about it? And then what type of additional services would that system potentially offer?

Pedro Malha: Thank you. Sure. Let me bring you back into our innovation strategy and the initiatives that we have to support that same strategy. We are improving—let me start by saying that we are improving the discipline around new product launches, period. We are not going to go and chase trends. Instead, we are going to invest in and launch products, technologies, and solutions that materially add value to our providers, that are differentiated versus our competitors, that provide outcomes consumers want, and that are accretive financially to our business in terms of margin. That is the framework we are using for innovation.

Now, when it comes to the next-gen HydraFacial, the goal here is to build one that will give our existing more than 36,000 providers a compelling reason for upgrade and new providers a compelling reason to get into the HydraFacial universe. I do not want to go too much into the specific features of the next-gen HydraFacial device at this moment, but what I can tell you and commit is that we will launch a device that will materially advance the value proposition and the return on investment of HydraFacial to our providers.

In terms of timeline, we are right now at the early stages of development, but the plans are to launch the next gen of HydraFacial in 2028, and we will keep you updated as we get closer to those timelines.

Alex Legg: Thanks, Pedro. That is pretty exciting. And then just thinking longer term about sales between consumables and new device placements. Right now, it is around 70% consumables, 30% new devices. Is that the rate that we should think about it? Is there a different target that you are thinking about longer term? Thank you.

Michael Monahan: We are not in a position to give a target right now. Our expectation is that as we move through not just this year and into next year, we return to device growth. We have not been able to give the specifics outside of focusing on growing both of those categories into the future. Later in the year and into next year, we will continue to provide updates on where we think that can be.

Operator: The next question will come from Jon Block with Stifel. Please go ahead.

Joseph Federico: Hey, everyone. Joe Federico on for Jon Block. Maybe just to dig a little bit deeper into the consumables performance in the quarter. EMEA has been pretty strong in terms of consumable sales over the past three or so quarters and in the back half of the year off of more difficult comps as well. Can you just give us some color on what is driving that? Is it just a healthier end market, or is there any sales execution drivers that can be replicated in some of the other regions? Any thoughts would be helpful.

Pedro Malha: Sure, Joe. Overall, at the highest level in terms of the full-quarter performance, on consumables we grew low single digits compared to negative substantial growth in Q3. For the full year, we grew as well low single digits, but booster sales grew much more, and that is an important point—high single digits. If you want to break that out by region, in the U.S., looking at the larger provider groups and dermatology practices, both of these are growing, while small independent providers are still under pressure. You touched on a good point, which was EMEA, and within EMEA specifically, Germany is performing exceptionally well.

The only pressure that we saw in the quarter when it comes to consumables performance was coming from China, as a direct result of the China transition. If you add this to the underlying trends driving this consumables demand, the core demand is still there. Consumers continue to prioritize our treatments as part of their skin health routine and also because of our price position versus other aesthetic treatments. The average spend per treatment in the U.S. in consumables is up 10% year over year, driven by our premium boosters and the strategy of the booster.

Michael Monahan: If I could just add one thing additionally to that, EMEA was a little bit different than the other regions last year because they launched five new boosters throughout the year. Some of them got regulatory approval later. These were boosters that launched earlier in the Americas, and the booster growth that we saw there really demonstrates the power of innovation in this business. When you can launch new, innovative products, that can actually drive demand. Within EMEA, we saw that not just in the direct markets but also in the distributor channel, where we saw really good consumables and specifically booster growth.

Joseph Federico: Okay, that is really helpful color. Thank you. And then maybe just a follow-up on guidance. The Q1 2026 revenue guidance at the midpoint implies a more sequential decline than we have seen over the past handful of years. The past couple of quarters’ actual performance has come in pretty solidly ahead of guidance and expectations. Should we assume any more conservatism to the guidance going forward, or is there a specific reason to point to for a more pronounced decline in Q1 quarter over quarter?

Michael Monahan: The Q1 midpoint does assume a decline in the mid-single digits. It is primarily due to softness in the APAC region and equipment softness in the Americas. That is reason number one. The second point is on consumables revenue for Q1. We are projecting that to be lower year over year on a consolidated basis for a couple of reasons. First, distributor orders that came in Q4—there is some timing a lot of times that happens with the distributor channel—they came in strong at the end of the quarter, so we are factoring in a bit of a decline in Q1 just due to timing. Also, overall, as Pedro mentioned, we are seeing lower Signature treatments due to macro pressures.

Even though consumers who are coming in to get treatments are electing more boosters than they have in the past, which is driving up the overall treatment, we factored in that lower consumables revenue and treatments into the first quarter. I would suggest the way we guide is towards the midpoint, so we do not really factor in deliberate conservatism. That is what we are seeing in the business. We are obviously always striving to do as best we can, and if we can outperform, we will certainly do so.

Joseph Federico: Great. Thank you for taking the questions.

Operator: The next question will come from Bruce Jackson with The Benchmark Company. Please go ahead.

Bruce Jackson: Looking at the strength in consumables this quarter, was there anything going on in terms of average selling price increases or additional upselling? Can you provide any color on that? And then given the importance of the boosters, what is the anticipated launch cadence for 2026?

Pedro Malha: Bruce, in terms of the boosters themselves, roughly they are about a fifth of the treatments. A fifth of the treatments use a booster, and we are seeing that ratio keep improving. For Q4, booster revenue was up 7% year on year, driven by the clinically proven Hydrophillic and HydroLoc boosters launched in the medical channel. Providers and consumers saw the results, and that was a major engine of growth for boosters. This speaks exactly to the strategy that we are putting forward, which is we are going to be over-indexing in launching clinically differentiated boosters with a very disciplined cadence. We are also equipping providers with impactful marketing tools and continuing to invest in education.

We are going to amp the post-sales onboarding, making sure that every provider knows how to maximize their return on investment. Finally, we are going to invest our marketing into driving consumer mindshare and investing in the brand. That is the backdrop of the Q4 performance—mainly heavy on the way boosters are taking share out of the main treatments. In terms of 2026, yes, we just spoke that Q1 will be pressured modestly with a modest decline versus prior year, but as Michael said, that is largely driven by the APAC region, the majority due to the change in China. As the year progresses, in terms of consumables, we expect to see modest growth in the Americas to happen.

Operator: The next question will come from John-Paul Wollam with ROTH Capital Partners. Please go ahead.

John-Paul Wollam: Great. I appreciate you guys taking my questions. If we could maybe start on the consumables side. I think April would have been kind of the first promo or busy season for consumables following the price increase. Just curious if you can talk about reception to the pricing increase and what that means for whether price might be a lever going forward. And just as a follow-up there, when you think about consumable utilization between your best partners and your worst, what is separating them? What does that difference look like?

Michael Monahan: I can speak to a couple of those questions. On the price increase, we did the price increase on consumables at the beginning of Q3, so the third quarter was the first quarter where you saw the impact. We did a 5% increase, and we really did not have a lot of complaints or pushback on that. So far, that has been very successful for us. Going forward, the sales and marketing team continue to evaluate the overall pricing strategy. We do not have any plans at this point to make any changes, but we will keep you posted if anything changes there.

Pedro Malha: I will just chime in terms of what we see being the reasons why boosters get higher attachment rates in certain specific segments of customers versus others. Our data shows that a provider who understands how to use a booster uses roughly three times as many boosters as one that does not. That is exactly why we are investing in marketing and investing in education to these providers.

John-Paul Wollam: Understood. And maybe, Michael, for you as a follow-up, as we think about OpEx—and you have done such a great job managing expenses—understanding the need to invest from here, but just curious as you think about some offsets to the investment: where are you in terms of maybe centralizing some international double costs, whether that is accounting, finance, anything of that nature? Are there still offsets that you see in terms of the OpEx line for the upcoming investments?

Michael Monahan: Yes. In terms of shared service centers, we are creating them. That has been a process ongoing over the last year and will continue. We are continuing to see two things: we are making investments in the back-end system infrastructure that enables us to manage the global business effectively through shared service centers, which is helping us with cost. We expect that to be finalized more so by the end of this year. We made a lot of progress in some of the global entities the past year, and we have a few more to do this year and will continue to do that.

Our guide this year assumes that G&A as a whole is stable to slightly up, and then there is additional reinvestment back into R&D. Over the long term, there is opportunity to continue to gain efficiencies in this business. Most importantly, when you look at the overall OpEx, there is a huge opportunity as we return to growth to get leverage out of that fixed-cost infrastructure going forward. As we continue to get more focused on system innovation and processes—we have done a lot of work there—we are positioning the company, in our view, to start to have a lot more of that gross profit drop down to adjusted EBITDA when we return to growth.

John-Paul Wollam: Really helpful. Thanks, and best of luck going forward.

Operator: This will conclude our question-and-answer session, as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.

Pedro Malha: Goodbye.

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