SkinHealth Systems Inc. (SKIN)
SIC breadcrumb: Manufacturing > SIC Major Group 38 > SIC 3841 Surgical & Medical Instruments & Apparatus
SEC company page: https://www.sec.gov/edgar/browse/?CIK=1818093. Latest filing source: 0001628280-26-017376.
Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
|---|---|---|---|---|
| Revenue | 300,790,000 | USD | 2025 | 2026-03-12 |
| Net income | -9,519,000 | USD | 2025 | 2026-03-12 |
| Assets | 499,803,000 | USD | 2025 | 2026-03-12 |
Financials
Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001818093.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.
| Metric | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|
| Revenue | 166,623,000 | 119,092,000 | 260,086,000 | 365,876,000 | 397,991,000 | 334,294,000 | 300,790,000 | |
| Net income | -1,638,000 | -29,175,000 | -378,764,000 | 44,224,000 | -100,116,000 | -29,098,000 | -9,519,000 | |
| Operating income | 13,462,000 | -17,182,000 | -39,928,000 | -25,841,000 | -130,917,000 | -67,774,000 | -20,803,000 | |
| Gross profit | 106,512,000 | 67,199,000 | 178,538,000 | 248,779,000 | 155,113,000 | 182,296,000 | 196,364,000 | |
| Diluted EPS | -0.05 | -0.85 | -3.71 | -0.23 | -0.76 | -0.36 | -0.16 | |
| Operating cash flow | 1,728,000 | -12,436,000 | -28,361,000 | -106,600,000 | 21,750,000 | 16,134,000 | 37,485,000 | |
| Capital expenditures | 8,774,000 | 3,501,000 | 11,201,000 | 10,847,000 | 3,825,000 | 756,000 | 303,000 | |
| Share buybacks | 0.00 | 154,000 | 0.00 | 160,000,000 | 30,155,000 | 0.00 | 0.00 | |
| Assets | 222,835,000 | 1,218,806,000 | 1,003,083,000 | 929,113,000 | 685,683,000 | 499,803,000 | ||
| Liabilities | 252,795,000 | 916,509,000 | 836,030,000 | 869,723,000 | 633,880,000 | 438,747,000 | ||
| Stockholders' equity | 294,000 | -1,208,000 | -30,567,000 | 298,034,000 | 167,053,000 | 59,390,000 | 51,803,000 | 61,056,000 |
| Free cash flow | -7,046,000 | -15,937,000 | -39,562,000 | -117,447,000 | 17,925,000 | 15,378,000 | 37,182,000 |
Ratios
| Metric | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|---|---|---|
| Net margin | -0.98% | -24.50% | -145.63% | 12.09% | -25.16% | -8.70% | -3.16% | |
| Operating margin | 8.08% | -14.43% | -15.35% | -7.06% | -32.89% | -20.27% | -6.92% | |
| Return on equity | -127.09% | 26.47% | -168.57% | -56.17% | -15.59% | |||
| Return on assets | -13.09% | -31.08% | 4.41% | -10.78% | -4.24% | -1.90% | ||
| Liabilities / equity | 3.08 | 5.00 | 14.64 | 12.24 | 7.19 | |||
| Current ratio | 1.91 | 13.09 | 10.92 | 6.07 | 7.00 | 1.66 |
Financial Charts
Quarterly
Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-07. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001818093.json.
| Quarter | End Date | Revenue | Net Income | Diluted EPS | Method |
|---|---|---|---|---|---|
| 2022-Q2 | 2022-06-30 | -0.05 | reported discrete quarter | ||
| 2022-Q3 | 2022-09-30 | -0.03 | reported discrete quarter | ||
| 2023-Q1 | 2023-03-31 | -0.17 | reported discrete quarter | ||
| 2023-Q2 | 2023-03-31 | -20,259,000 | reported discrete quarter | ||
| 2023-Q2 | 2023-06-30 | 117,479,000 | 0.03 | reported discrete quarter | |
| 2023-Q3 | 2023-06-30 | 3,364,000 | reported discrete quarter | ||
| 2023-Q3 | 2023-09-30 | 97,413,000 | -0.56 | reported discrete quarter | |
| 2023-Q4 | 2023-12-31 | 96,821,000 | -9,403,000 | derived Q4 = FY annual - nine-month YTD | |
| 2024-Q1 | 2024-03-31 | 81,403,000 | -679,000 | -0.10 | reported discrete quarter |
| 2024-Q2 | 2024-03-31 | -679,000 | reported discrete quarter | ||
| 2024-Q2 | 2024-06-30 | 90,594,000 | -0.10 | reported discrete quarter | |
| 2024-Q3 | 2024-06-30 | 202,000 | reported discrete quarter | ||
| 2024-Q3 | 2024-09-30 | 78,802,000 | -0.15 | reported discrete quarter | |
| 2024-Q4 | 2024-12-31 | 83,495,000 | -10,330,000 | derived Q4 = FY annual - nine-month YTD | |
| 2025-Q1 | 2025-03-31 | 69,580,000 | -10,096,000 | -0.08 | reported discrete quarter |
| 2025-Q2 | 2025-03-31 | -10,096,000 | reported discrete quarter | ||
| 2025-Q2 | 2025-06-30 | 78,187,000 | 0.03 | reported discrete quarter | |
| 2025-Q3 | 2025-06-30 | 19,712,000 | reported discrete quarter | ||
| 2025-Q3 | 2025-09-30 | 70,655,000 | -0.09 | reported discrete quarter | |
| 2025-Q4 | 2025-12-31 | 82,368,000 | -8,104,000 | derived Q4 = FY annual - nine-month YTD | |
| 2026-Q1 | 2026-03-31 | 64,910,000 | -6,630,000 | -0.05 | reported discrete quarter |
Quarterly Charts
Macro Cross-References
- CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- UNRATE - Unemployment Rate
- FEDFUNDS - Federal Funds Effective Rate
- CES0500000003 - Average Hourly Earnings of All Employees, Total Private
- DFEDTARU - Federal Funds Target Range - Upper Limit
- DFEDTARL - Federal Funds Target Range - Lower Limit
- DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
- CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
- CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
- PCEPI - Personal Consumption Expenditures: Chain-type Price Index
- PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- PPIACO - Producer Price Index by Commodity: All Commodities
- T10YIE - 10-Year Breakeven Inflation Rate
- U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- PAYEMS - All Employees, Total Nonfarm
- CIVPART - Labor Force Participation Rate
- EMRATIO - Employment-Population Ratio
- UNEMPLOY - Unemployed
- CE16OV - Employment Level
- ICSA - Initial Claims
- JTSJOL - Job Openings: Total Nonfarm
- JTSQUR - Quits: Total Nonfarm
- GDPC1 - Real Gross Domestic Product
- A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
- INDPRO - Industrial Production: Total Index
- TCU - Capacity Utilization: Total Index
- HOUST - New Privately-Owned Housing Units Started: Total Units
- PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- RSAFS - Advance Retail Sales: Retail Trade
- PCE - Personal Consumption Expenditures
- DSPIC96 - Real Disposable Personal Income
- PSAVERT - Personal Saving Rate
- M2SL - M2
- BOPGSTB - U.S. International Trade in Goods and Services: Balance
- MSPUS - Median Sales Price of Houses Sold for the United States
- HSN1F - New One Family Houses Sold: United States
- RHORUSQ156N - Homeownership Rate in the United States
- TTLCONS - Total Construction Spending: Total Construction in the United States
- RRVRUSQ156N - Rental Vacancy Rate in the United States
- TOTALSL - Total Consumer Credit Owned and Securitized
- REVOLSL - Revolving Consumer Credit Owned and Securitized
- DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
- GDP - Gross Domestic Product
- GPDI - Gross Private Domestic Investment
- GCE - Government Consumption Expenditures and Gross Investment
- PCEC - Personal Consumption Expenditures
- NETEXP - Net Exports of Goods and Services
- GFDEBTN - Federal Debt: Total Public Debt
- GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- FYFSD - Federal Surplus or Deficit
- FGRECPT - Federal Government Current Receipts
- FGEXPND - Federal Government: Current Expenditures
- MANEMP - All Employees, Manufacturing
- USCONS - All Employees, Construction
- USTRADE - All Employees, Retail Trade
- USFIRE - All Employees, Financial Activities
- USGOVT - All Employees, Government
- AWHAETP - Average Weekly Hours of All Employees, Total Private
- DGORDER - Manufacturers' New Orders: Durable Goods
- NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- BUSINV - Total Business Inventories
- EXPGS - Exports of Goods and Services
- IMPGS - Imports of Goods and Services
- IR - Import Price Index (End Use): All Commodities
- PPIFIS - Producer Price Index by Commodity: Final Demand
Latest quarter (10-Q)
Latest 10-Q source: 0001628280-26-032326.
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 March 31, 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 months ended March 31, 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 adopting to changing circumstances. 25 Comparison of Three Months Ended March 31, 2026 to Three Months Ended March 31, 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 March 31, 2026 and March 31, 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 March 31, (in millions) 2026 % of Net Sales 2025 % of Net Sales Net sales $ 64.9 100.0 % $ 69.6 100.0 % Cost of sales 20.5 31.5 21.0 30.2 Gross profit 44.4 68.5 48.6 69.8 Operating expenses Selling and marketing 23.2 35.7 26.0 37.4 Research and development 1.1 1.7 1.0 1.4 General and administrative 21.9 33.8 33.6 48.2 Total operating expenses 46.2 71.2 60.6 87.1 Loss from operations (1.8) (2.8) (12.0) (17.3) Interest expense 6.3 9.8 2.5 3.6 Interest income (1.5) (2.3) (3.0) (4.4) Other income, net (1.0) (1.6) (0.1) (0.1) Change in fair value of warrant liabilities — — (0.3) (0.5) Foreign currency transaction loss (gain), net 1.2 1.8 (1.9) (2.7) Loss before provision for income taxes (6.8) (10.5) (9.2) (13.2) Income tax (benefit) expense (0.2) (0.3) 0.9 1.3 Net loss $ (6.6) (10.2) % $ (10.1) (14.5) % Net Sales Three Months Ended March 31, Change (in millions) 2026 2025 Amount % Net sales Delivery Systems $ 18.5 $ 20.2 $ (1.7) (8.3) % Consumables 46.4 49.4 (3.0) (6.1) % Total net sales $ 64.9 $ 69.6 $ (4.7) (6.7) % Three Months Ended March 31, Percentage of net sales 2026 2025 Delivery Systems 28.6% 29.1% Consumables 71.4% 70.9% Total 100.0% 100.0% Total net sales for the three months ended March 31, 2026 decreased $4.7 million, or 6.7%, compared to the three months ended March 31, 2025. Delivery Systems net sales for the three months ended March 31, 2026 decreased $1.7 million, or 8.3%, compared to the three months ended March 31, 2025, with decreases in the Americas and Europe, the Middle East, and Africa. Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions. Consumables net sales for the three months ended March 31, 2026 decreased $3.0 million, or 6.1%, compared to the three months ended March 31, 2025, with decreases across all regions. Consumables net sales were negatively impacted by the transition to a distributor model in China, the timing of distributor orders, and promotions in the fourth quarter of 2025. 26 Cost of Sales, Gross Profit, and Gross Margin Three Months Ended March 31, Change (in millions) 2026 2025 Amount % Cost of sales $ 20.5 $ 21.0 $ (0.5) (2.5)% Gross profit $ 44.4 $ 48.6 $ (4.1) (8.5)% Gross margin 68.5 % 69.8 % Cost of sales for the three months ended March 31, 2026 decreased $0.5 million, compared to the three months ended March 31, 2025. Gross margin decreased to 68.5% for the three months ended March 31, 2026 from 69.8% for the three months ended March 31, 2025 primarily due to higher amortization expense. Operating Expenses Selling and Marketing Three Months Ended March 31, Change (in millions) 2026 2025 Amount % Selling and marketing $ 23.2 $ 26.0 $ (2.8) (10.9) % As a percentage of net sales 35.7 % 37.4 % Selling and marketing expense for the three months ended March 31, 2026 decreased $2.8 million, or 10.9%, compared to the three months ended March 31, 2025. The decrease is primarily driven by lower depreciation expense, sales commission expense, and marketing-related spend. Research and Development Three Months Ended March 31, Change (in millions) 2026 2025 Amount % Research and development $ 1.1 $ 1.0 $ 0.1 10.4 % As a percentage of net sales 1.7 % 1.4 % Research and development expense for the three months ended March 31, 2026 increased slightly compared to the three months ended March 31, 2025, reflecting increased investment in future product development. General and Administrative Three Months Ended March 31, Change (in millions) 2026 2025 Amount % General and administrative $ 21.9 $ 33.6 $ (11.6) (34.6) % As a percentage of net sales 33.8 % 48.2 % General and administrative expense for the three months ended March 31, 2026 decreased $11.6 million, or 34.6%, compared to the three months ended March 31, 2025. The decrease is primarily driven by lower personnel-related expenses, including severance and share-based compensation expense, legal fees, and depreciation and amortization expense. 27 Interest Expense, Interest Income, and Other Income, Net Three Months Ended March 31, Change (in millions) 2026 2025 Amount % Interest expense $ 6.3 $ 2.5 $ 3.8 154.0 % Interest income $ (1.5) $ (3.0) $ 1.5 (51.0) % Other income, net $ (1.0) $ (0.1) $ (1.0) N/M N/M - Not meaningful [Excerpt truncated for page length; source filing is linked above.]
Latest 10-K MD&A
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K. This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included in this Annual Report on Form 10-K, and can be found in Part II, Item 7 of the Company’s Annual Report on Form 10-K filed on March 12, 2025 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Company Overview The Beauty Health 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. Factors Affecting Our Performance We remain attentive to economic and geopolitical conditions that may materially impact our business. We continue to explore and implement risk mitigation strategies in the face of these unfolding conditions and remain agile in adapting to changing circumstances. Such conditions have or may have global implications which may impact the future performance of our business in unpredictable ways. Business and Macroeconomic Conditions In 2025, we continued to strengthen the foundation of the business while expanding our footprint by selling and placing Delivery Systems worldwide, driving 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. Consumables include serums, solutions, tips, and other products. 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; •The imposition of tariffs and/or trade restrictions 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; 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 adopting to changing circumstances. 89 China Market The Company evaluated its global distribution strategy to align its go-to-market strategy with in-market partner capabilities and market opportunity. During the second quarter of 2025, the Company transitioned sales in the China market to a distributor partner, and as a result, the Company has discontinued direct sales to customers in China. Components of our Results of Operations Net Sales The Company generates revenue through manufacturing and selling Delivery Systems. In conjunction with the sale of Delivery Systems, the Company also sells its Consumables. Original Consumables are sold solely and exclusively by the Company and our 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. Cost of Sales Costs 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 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. Selling and marketing expense as a percentage of net sales may fluctuate from period to period based on net sales, and the timing of our investments in our sales and marketing functions may vary in scope and scale over future periods. Research and Development 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. General and Administrative 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. Interest income, as a percentage of revenue, will fluctuate period to period along with fluctuations in interest rates, which are not related to normal business operations. 90 Change in Fair Value of 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 Private Placement Warrants are accounted for as liabilities on the Consolidated Balance Sheets and measured at fair value at inception and on a recurring basis. The fair value of the Private Placement Warrants was determined using a Monte Carlo simulation model. Changes in fair value of warrant liabilities as a percentage of revenue will fluctuate period to period along with fluctuations in fair value, which are not related to normal business operations. Foreign Currency Transaction (Gain) Loss, Net 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. Foreign currency transaction gains and losses as a percentage of revenue will fluctuate period to period along with fluctuations in exchange rates, which are not related to normal business operations. Income Tax Expense (Benefit) The provision for income taxes consists of income taxes related to federal, state and foreign jurisdictions in which we conduct business. Results of Operations 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 years ended December 31, 2025 and December 31, 2024 have been derived from the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Amounts and percentages may not foot due to rounding. Comparison of Year Ended December 31, 2025 to Year Ended December 31, 2024 Year Ended December 31, (Dollars in millions) 2025 % of Net Sales 2024 % of Net Sales Net sales $ 300.8 100.0 % $ 334.3 100.0 % Cost of sales 104.4 34.7 152.0 45.5 Gross profit 196.4 65.3 182.3 54.5 Operating expenses Selling and marketing 93.6 31.1 118.3 35.4 Research and development 5.6 1.9 6.3 1.9 General and administrative 117.9 39.2 125.5 37.5 Total operating expenses 217.2 72.2 250.1 74.8 Loss from operations (20.8) (6.9) (67.8) (20.3) Interest expense 19.3 6.4 10.4 3.1 Interest income (9.0) (3.0) (16.6) (5.0) Other income, net (18.9) (6.3) (33.6) (10.0) Change in fair value of warrant liabilities (0.5) (0.2) (3.1) (0.9) Foreign currency transaction (gain) loss, net (5.8) (1.9) 4.6 1.4 Loss before provision for income taxes (5.9) (2.0) (29.6) (8.8) Income tax expense (benefit) 3.6 1.2 (0.5) (0.1) Net loss $ (9.5) (3.2) % $ (29.1) (8.7) % 91 Net Sales Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % Net sales Delivery Systems $ 88.1 $ 125.4 $ (37.3) (29.8)% Consumables 212.7 208.9 3.8 1.8% Total net sales $ 300.8 $ 334.3 $ (33.5) (10.0)% Percentage of net sales Delivery Systems 29.3% 37.5% Consumables 70.7% 62.5% Total 100.0% 100.0% Total net sales for the year ended December 31, 2025, decreased $33.5 million, or 10.0%, compared to the year ended December 31, 2024. Delivery Systems net sales for the year ended December 31, 2025, decreased $37.3 million, or 29.8%, compared to the year ended December 31, 2024, with decreases across all regions. Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions. Consumables net sales for the year ended December 31, 2025, increased $3.8 million, or 1.8%, compared to the year ended December 31, 2024. The increase in Consumables net sales was primarily attributable to increased placements of Delivery Systems and the adjoining consumption of Consumables during the year ended December 31, 2025, and price increases, partially offset by declines related to the China transition to a distributor partner. Cost of Sales, Gross Profit, and Gross Margin Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % Cost of sales $ 104.4 $ 152.0 $ (47.6) (31.3)% Gross profit $ 196.4 $ 182.3 $ 14.1 7.7% Gross margin 65.3 % 54.5 % Cost of sales for the year ended December 31, 2025 decreased by $47.6 million, or 31.3%, compared to the year ended December 31, 2024. The decrease is primarily due to lower inventory-related charges and net sales. Cost of sales for the year ended December 31, 2024 include $28.0 million of inventory charges for discontinued, excess, or obsolete inventory, including the write-down of Delivery System inventory to its net realizable value and the write-off of excess raw materials, and also approximately $8 million of manufacturing optimization related costs. Gross margin increased to 65.3% for the year ended December 31, 2025 from 54.5% for the year ended December 31, 2024, primarily due to lower inventory related charges and favorable mix shift towards consumable net sales, partially offset by lower average selling price of equipment net sales. Operating Expenses Selling and Marketing Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % Selling and marketing $ 93.6 $ 118.3 $ (24.7) (20.9) % As a percentage of net sales 31.1 % 35.4 % Selling and marketing expense for the year ended December 31, 2025 decreased $24.7 million, or 20.9%, compared to the year ended December 31, 2024. The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense and sales commission expense, and lower marketing-related spend, and depreciation and amortization expense. 92 Research and Development Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % Research and development $ 5.6 $ 6.3 $ (0.7) (10.6) % As a percentage of net sales 1.9 % 1.9 % Research and development expense for the year ended December 31, 2025 decreased $0.7 million, or 10.6%, compared to the year ended December 31, 2024. The decrease is primarily driven by lower personnel-related expenses, partially offset by higher other professional services expenses. General and Administrative Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % General and administrative $ 117.9 $ 125.5 $ (7.5) (6.0) % As a percentage of net sales 39.2 % 37.5 % General and administrative expense for the year ended December 31, 2025 decreased $7.5 million, or 6.0%, compared to the year ended December 31, 2024. The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense, depreciation expense, and other general corporate spend, and bad debt recoveries. The decrease is partially offset by higher legal fees, amortization expense, and severance expense. Interest Expense, Interest Income, Change in Fair Value of Warrant Liabilities, and Other Income, Net Year Ended December 31, Change (Dollars in millions) 2025 2024 Amount % Interest expense $ 19.3 $ 10.4 $ 8.9 85.6 % Interest income $ (9.0) $ (16.6) $ 7.7 (46.2) % Change in fair value of warrant liabilities $ (0.5) $ (3.1) $ 2.6 (84.1) % Other income, net $ (18.9) $ (33.6) $ 14.6 N/M N/M - Not meaningful Interest expense for the year ended December 31, 2025 increased $8.9 million compared to the year ended December 31, 2024, 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 year ended December 31, 2025 decreased $7.7 million compared to the year ended December 31, 2024, primarily due to lower average invested balances during the year ended December 31, 2025. During the year ended December 31, 2025, the Company recognized income of $0.5 million related to the change in the fair value of the warrant liabilities, as compared to income of $3.1 million during the year ended December 31, 2024, driven primarily by the fluctuation of the price of the Class A Common Stock underlying the Private Placement Warrants. Other income, net for the year ended December 31, 2025 included $18.1 million net gain related to the exchange and repurchases of the 2026 Notes. Other income, net for the year ended December 31, 2024 included $33.4 million net gain related to the repurchase of the 2026 Notes. Liquidity and Capital Resources Our primary sources of capital have been (i) cash flow from operating activities, (ii) net proceeds received from the consummation of the Business Combination, (iii) net proceeds received from the Notes, and (iv) net proceeds received from the exercise of public and private placement warrants. As of December 31, 2025, we had cash, cash equivalents, and restricted cash of $232.7 million. 93 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. Capital expenditures for property and equipment and intangible assets for the year ended December 31, 2025 were $5.2 million. 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. For information regarding the Company’s exchange and repurchases of its Notes during the year ended December 31, 2025, see Note 7, Long-Term Debt, to the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information. 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. 94 Notes 2026 Notes On September 14, 2021, the Company issued an aggregate of $750.0 million in principal amount of its 2026 Notes. The 2026 Notes were issued pursuant to, and are governed by, an indenture dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. 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, which began on April 1, 2022. The 2026 Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before April 1, 2026, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our Class A Common Stock or a combination of cash and shares of our Class A Common Stock, at our election. The initial conversion rate is 31.4859 shares of Class A Common Stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $31.76 per share of Class A Common Stock. 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. 2028 Notes On May 21, 2025, the Company entered into privately negotiated exchange agreements (the “Exchange Agreements”) with certain holders (the “Exchanging Holders”) of the 2026 Notes (the “Existing Notes”). Pursuant to the Exchange Agreements, the Company exchanged and repurchased $413.2 million aggregate principal amount of the Existing Notes. Of the $413.2 million aggregate principal amount of the 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 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. The 2028 Notes 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 net gain recognized related to the exchange and repurchases of the Notes is included in other income, net in the Condensed Consolidated Statements of Comprehensive Income (Loss). See Note 7 – Long-term Debt, to the Notes to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information with respect to the Notes. 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. 95 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. 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. Macroeconomic challenges and credit conditions have negatively impacted our revenues in 2025. 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. Contractual Obligations and Other Commercial Commitments The following table summarizes the Company’s contractual obligations and other commercial commitments as of December 31, 2025. In regards to future capital expenditures, we intend to use cash-on-hand and cash from operations to help satisfy future requirements. Payments Due by Fiscal Period (Dollars in millions) Total Less Than 1 Year 1-3 years 3-5 Years More than 5 Years 2026 Notes (1) $ 124.5 $ 124.5 $ — $ — $ — 2028 Notes (2) 250.0 — 250.0 — — Interest on Notes (1) (2) 61.2 21.4 39.8 — — Operating leases (3) 15.6 5.7 5.7 2.2 2.0 Purchase of inventory, service, and other 20.3 19.9 0.4 — — Total contractual obligations $ 471.6 $ 171.5 $ 295.9 $ 2.2 $ 2.0 (1) The 2026 Notes mature on October 1, 2026 and are due either in cash or shares of the Company’s Class A Common Stock. From and after April 1, 2026, noteholders may convert their 2026 Notes into shares of Class A Common Stock until the close of business on the second scheduled trading day immediately before October 1, 2026. (2) The 2028 Notes mature on November 15, 2028 and are due either in cash or shares of the Company’s Class A Common Stock. The noteholders may convert their 2028 Notes at any time into shares of Class A Common Stock until the close of business on the second scheduled trading day immediately before November 15, 2028. (3) Subsequent to December 31, 2025, the Company amended the terms of 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. 96 Cash Flows The following table summarizes the activities from our statements of cash flows. Amounts may not foot due to rounding. Year Ended December 31, (Dollars in millions) 2025 2024 Cash, cash equivalents, and restricted cash at beginning of period $ 370.1 $ 523.0 Operating activities: Net loss (9.5) (29.1) Non-cash adjustments 36.6 72.6 Changes in working capital 10.4 (27.4) Net cash provided by operating activities 37.5 16.1 Net cash used for investing activities (5.2) (6.8) Net cash used for financing activities (174.9) (158.3) Net change in cash, cash equivalents, and restricted cash (142.6) (149.0) Effect of foreign currency translation 5.2 (4.0) Cash, cash equivalents, and restricted cash at end of period $ 232.7 $ 370.1 Operating Activities Net cash provided by operating activities for the year ended December 31, 2025 was $37.5 million, as compared to $16.1 million for the year ended December 31, 2024. The change in cash provided by operating activities was primarily related to changes in working capital, net loss, and non-cash adjustments. The current year net loss and non-cash adjustments include $18.1 million of net gain related to the exchange and repurchases of the 2026 Notes. The prior year net loss and non-cash adjustments include $33.4 million of net gain related to the repurchases of the 2026 Notes and the prior year changes in working capital include the impact of the costs associated with the Syndeo Program of $21.0 million. Investing Activities Net cash used for investing activities for the year ended December 31, 2025 was $5.2 million, as compared to $6.8 million for the year ended December 31, 2024. The change in cash used for investing activities was due to lower capital expenditures during the year ended December 31, 2025. Financing Activities Net cash used for financing activities for the year ended December 31, 2025 was $174.9 million, as compared to $158.3 million for the year ended December 31, 2024. The cash used for financing activities for the year ended December 31, 2025 was primarily related to the exchange and repurchases of the Company’s 2026 Notes. The cash used for financing activities for the year ended December 31, 2024 was primarily related to the 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, 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. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below. 97 Revenue Recognition Management’s Policy: In accordance with ASC 606, Revenue from Contracts with Customers, we determine the amount of revenue to be recognized through application of the following steps: •Identify the customer contract; •Identify the performance obligations in the contract; •Determine the transaction price; •Allocate the transaction price to the performance obligations in the contract; and •Recognize revenue as the performance obligations are satisfied. Subjective Estimates and Judgements: The determination of the reduction of the transaction price for noncash consideration received related to the Company’s trade-in program requires that we make certain estimates and assumptions that affect the timing and amounts of revenue recognized. We estimate the noncash consideration based on the Company’s historical experience of reselling refurbished Delivery Systems. As a result, the noncash consideration represents 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 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. Impact if Actual Results Differ from Estimates and Judgements: If changes in market conditions result in reductions in the estimated reselling price below its previous estimates, the Company would decrease its basis in the trade-in Delivery Systems in the period in which it made such a determination. During the year ended December 31, 2024, the Company recognized approximately $7 million of inventory charges related to the write-down of trade-in Delivery Systems to its net realizable value. If the actual selling price of the refurbished Delivery Systems are higher than the estimated reselling price, the difference would result in an increase in gross profit in the periods the refurbished Delivery Systems are sold. Goodwill and Intangible Assets Management’s Policy: 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. We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is recorded as the difference 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. Subjective Estimates and Judgements: We will use industry accepted valuation models to estimate the fair value for impairment testing. The fair value calculation requires significant judgments in determining the assets’ fair value. 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. If these assumptions differ materially from future results, we may record impairment charges in the future. Impact if Actual Results Differ from Estimates and Judgements: Changes in qualitative factors assessed, changes to assumptions used in the impairment test, selection and weighting of the various fair value techniques, and downturns in economic or business conditions, could have a significant adverse impact on the carrying value of goodwill and intangible assets and could result in impairment losses which could have a material impact on our financial condition and earnings. 98 Inventories Management’s Policy: 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. Subjective Estimates and Judgements: 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. Impact if Actual Results Differ from Estimates and Judgements: If the assumptions around future demand for our inventory are more optimistic than actual future results, the net realizable value calculated using these assumptions may be overstated, resulting in an overstatement of the inventory balance. Income Taxes Management’s Policy: We use the asset-and-liability method for income taxes. Under this approach, deferred tax assets and liabilities arise from differences between the financial statement carrying amounts and tax bases of assets and liabilities, as well as operating loss and tax credit carryforwards. These are measured using enacted tax rates expected to be in effect when the differences reverse. Any change in tax rates is recognized in income in the period of enactment. Subjective Estimates and Judgements: We assess the need for valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be realized. This requires significant judgment. As of December 31, 2025, due to cumulative pre-tax losses, we do not rely on projected income to support the realization of deferred tax assets. Instead, we consider the reversal of taxable temporary differences as a source of income for realizing these assets. For uncertain tax positions, we evaluate whether they meet the “more-likely-than-not” threshold for sustaining upon examination by tax authorities. Positions that do not meet this threshold are recorded as a tax expense. We reassess these positions based on changes in facts, tax law interpretations, audit outcomes, or statute expirations. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. Impact if Actual Results Differ from Estimates and Judgments: While we believe our estimates and judgments are reasonable, actual results may differ. If we are unable to realize all or part of our deferred tax assets or if a tax position is overturned by a taxing authority, we may need to adjust the valuation allowance, affecting income tax expense and potentially our earnings. Recent Accounting Pronouncements See Note 2 - Summary of Significant Accounting Policies to the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a discussion about new accounting pronouncements adopted and not yet adopted.