Beauty Health Q3 2026 Earnings Call Transcript

Beauty Health (NASDAQ:SKIN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Beauty Health reported third quarter revenue of $69.2 million, nearing the upper end of their guidance range with a 2.1% year-over-year decline, a significant improvement from previous quarters.

The company’s gross margin improved to 68.2% on a GAAP basis, with adjusted EBITDA at $13.4 million, showing better margins and cost management.

Strategic initiatives include stabilizing the HydraFacial business, expanding consumables revenue, and introducing a U.S. rental program to lower equipment adoption barriers.

Revenue in the Americas grew by 1.4% with a 4.3% increase in consumables, whereas EMEA faced a 12% revenue decline due to challenges in delivery systems.

Future outlook includes an updated full-year 2026 guidance with expected net sales between $281 million and $287 million, and adjusted EBITDA between $48 million and $50 million.

The company is focusing on innovation with the development of the next-generation HydraFacial platform targeted for 2028 and a new complementary device expected in 2027.

Management is addressing EMEA challenges with strengthened leadership and improved field execution, while also retiring the 2026 convertible notes to maintain liquidity.

Full Transcript

OPERATOR

Please press star zero for the operator. This call is being recorded on Thursday, November 5, 2026. I would now like to turn the conference over to Norberto Aggia, Investor Relations.

Norberto Aggia (Investor Relations)

Thank you, operator, and good afternoon, everyone. Thank you for joining Beauty Health’s third quarter 2026 conference call. We released our results earlier this afternoon, which can be found on our corporate website at skinhealthsystems.com. Joining me on the call today is Beauty Health’s President and Chief Executive Officer, Pedro Malha, along with our Chief Financial Officer, Michael Monahan. Before we begin, I want 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 any forward-looking statements. For a further discussion of risks related to our business, please refer to the risk factors contained in the Company’s filings with the Securities and Exchange Commission. In addition, this call will present non-GAAP financial measures. Management uses adjusted EBITDA and other non-GAAP measures as supplemental measures to evaluate operating performance and to facilitate period-to-period comparisons. These non-GAAP measures should be considered in addition to, and not as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measure is available in the earnings press release which was furnished to the SEC as well as available on our website.

Following management’s prepared remarks, we will open the call for a question-and-answer session. With that, I would now like to turn the call over to our President and CEO, Pedro Malha. Please go ahead, Pedro.

Pedro Bruno Ferreira Malha (President and CEO)

Thank you, Norberto, and good afternoon, everybody. Let me start with a central message from this quarter. We are making progress on the things that matter the most: stabilizing the HydraFacial business and improving the economics of the company. And at the same time, we are developing new opportunities for growth. To be clear, the work isn’t done. Equipment sales remain challenging, particularly in EMEA, and utilization in our installed base is still below where it should be.

But we are making good progress against our plan, and the third quarter results provide tangible evidence that we are operating from a stronger foundation than a year ago. Our third quarter revenue was $69.2 million, towards the upper end of our $65 million to $70 million guidance range, meaning that our quarterly revenue declined 2.1% year over year, which is a meaningful improvement from the declines of 7.8% in the second quarter and 6.7% in the first quarter. And, importantly, global consumables returned to growth, up 1.2% on a year-over-year comparison, while equipment remained the primary headwind. But the rate of the overall revenue decline has moderated significantly.

At the same time, the earnings profile of the business continues to improve. On a GAAP basis, gross margin was 68.2%, operating income was approximately $5 million, and net loss was approximately $1 million. We delivered positive GAAP operating income for the second consecutive quarter, and adjusted gross margin was 71.8%, our third consecutive quarter above 70%. Adjusted EBITDA was $13.4 million. Some of our quarterly bottom-line outperformance benefited from one-time items and expense timing, but we are also seeing the benefits of better margins, tighter cost management, and a more efficient operating model.

The priority now is to sustain those improvements while returning revenue to growth. Looking across our regions, we are seeing encouraging signs in the Americas, which grew 1.4%, with consumables growing 4.3% on a year-over-year comparison. EMEA remains challenged, with revenues down approximately 12% on a year-over-year comparison, reflecting pressure in delivery systems, particularly in Germany, where execution has been below expectations. To address this, we have strengthened regional leadership, and we are taking actions to improve field execution and customer engagement.

In APAC, revenue declined approximately 4% on a year-over-year comparison, primarily reflecting the transition in Australia and New Zealand to a distributor model. So while our performance varies across markets, we know where the pressure is, and we are taking actions to address it. Let me turn now to our three strategic priorities and the progress we are making in building a stronger, more sustainable growth business. Our first priority is strengthening the core HydraFacial franchise. We have a fantastic global brand and deep customer relationships, but we need to translate those advantages into better commercial execution. So over the past year we reorganized our commercial teams, strengthened accountability, and invested in better training, processes, and selling tools.

We are also taking a more targeted approach to customers, with a greater emphasis on HydraFacial’s clinical differentiators and the economic value it creates for providers. Additionally, we are expanding our relationships with corporate and multi-location accounts, where we see opportunities to broaden our installed base and increase treatment volumes. And during the quarter we introduced a U.S. rental program to address one of the key barriers to equipment adoption: the upfront capital investment.

It’s still early, but the objective is to make HydraFacial more accessible, bring more providers into the HydraFacial ecosystem, and support long-term relationships with them. We are also advancing our next-generation HydraFacial platform, currently targeted for 2028, with the goal of improving clinical outcomes, provider workflow, and overall treatment experience. On competition, we haven’t seen a meaningful change in intensity from what we discussed last quarter, but our strategy isn’t simply to compete on price; it’s to strengthen our differentiation, improve commercial execution, and deliver greater value to our providers.

Our second strategic priority is getting more value from the HydraFacial installed base. Throughout the years we have built a substantial global network of providers, and that represents one of our biggest competitive advantages. But placing a system is only the beginning of the customer relationship. The real opportunity lies in helping providers perform more treatments, increase utilization, and generate more recurring consumables revenue. We saw encouraging progress in the quarter, with global consumables growing 1.2% on a year-over-year comparison, and the Americas consumables returning to growth for the first time this year, supported by strong signature consumables performance plus a HydraFacial relaunch and other commercial initiatives. But consumables revenues per system remained below last year, and we believe we can do more to improve productivity across the installed base.

And that’s an important part of our innovation strategy: bringing providers clinically differentiated treatments that address real consumer needs and create more reasons for consumers to come back. So in September we introduced our treatment enhancers, the Hydroglobe Pre-Extraction Peel and the Hydrolock HA biocellulose mask. And in October we launched a new booster, Hydroclear for blemish-prone skin, which in clinical evaluation showed that a series of Hydroclear treatments produced a 38% mean reduction in total blemishes. These launches are a good example of the direction we’re taking with innovation: more targeted, clinically supported products that address specific customer needs.

Our Hydro Sculpt relaunch is another good example of how we are working to expand how providers can use their existing HydraFacial system in the scalp and in hair health. Equally important is our work in helping providers turn this innovation into greater treatment volumes, and we are doing this with education programs like HydraFacial Impact, which was built to help providers attract more customers, increase repeat visits, and improve their treatment economics.

The point isn’t simply to launch more products; it’s to make the systems already in the market more productive. And if we execute well, we can create a meaningful recurring revenue opportunity without relying entirely on new equipment placements. Our third strategic priority is to build a broader skin health business. Our ambition is not to be limited to one product or one category. We want to participate in attractive, high-growth segments of the aesthetic market and offer providers complementary treatments and give consumers more reasons to engage with our brands. SkinStylus is a good example of that strategy in play. Microneedling is an attractive and growing segment that complements HydraFacial, and SkinStylus gives us a strong platform to compete in that market, offering both microneedling and nano-channeling treatments.

SkinStylus consumables grew 39% year over year this quarter. And very recently we expanded SkinStylus into six key European markets, leveraging our existing international commercial infrastructure. We are also making good progress towards a planned introduction of another complementary device in 2027, with more details to come. But what’s important strategically is that we believe we already have the customer relationships, the commercial infrastructure, and the clinical credibility, and that we can leverage those advantages across a broader portfolio.

That’s how we can build a stronger company—not by moving away from what made it successful, but by building on it. So let me bring all of this together. The revenue decline has narrowed significantly. Overall, consumables have returned to growth, margins are substantially stronger, and we’re making progress on the commercial and innovation initiatives that can drive the next phase of our business. We still have work to do on equipment sales, utilization, and EMEA. But when I look at Beauty Health, I see a much bigger opportunity than the one we are capturing today.

We have a strong global brand, a substantial installed base, a more efficient operating model, and an expanding portfolio. Our job now is to turn those advantages into sustainable growth through better execution in the core business, greater productivity from our installed base, and a disciplined expansion into new categories. And that is exactly what we are focusing on delivering. And with that, I’ll turn the call over to Mike.

Michael Monahan (Chief Financial Officer)

Thank you, Pedro. We are pleased with our company’s performance this quarter. Our cross-functional teams were able to deliver on our revenue commitments and we overperformed on driving adjusted EBITDA. The team was able to do this while continuing to invest in future growth initiatives. We’re grateful for the hard work that everyone in this organization put into delivering. Thank you to the team. Total net sales in the third quarter were 69.2 million, down 2.1% compared with the prior year. This was primarily driven by a decline in delivery system units sold year over year, partially offset by an increase in consumables revenue. Specifically, at the end of Q3, global active systems grew to 37,342. We continue to grow our footprint and provider reach each quarter. Q3 delivery systems revenue was 18.8 million, down 9.9%. We placed 798 systems during the quarter compared with 875 in the prior year period, a decline of 8.8%.

Average selling price was $23,509, down 1.2% year over year. Consumables revenue was 50.4 million, up 1.2% year over year, representing approximately 73% of total revenue. On a year-over-year comparison, Americas net sales were 48.9 million, up 1.4%, with consumables up 4.3%, partially offset by continued pressure on equipment. EMEA net sales were 14.2 million, down 11.7%, with delivery systems the largest source of pressure and consumables down 6.6%.

APAC net sales were 6.1 million, down 4.2%, primarily reflecting the Australia and New Zealand distributor transition. GAAP gross margin was 68.2% compared with 64.6% in the prior year period. Adjusted gross margin was 71.8% compared with 68% in Q3 2025, an improvement of approximately 380 basis points and our third consecutive quarter above 70%. There were several drivers of the year-over-year improvement. First, the prior year period included higher costs associated with Elite trade-in systems that did not repeat. As a reminder, we sold through our fair market value Elite systems that were acquired prior to 2024.

Going forward, this inventory is no longer on our balance sheet. Second, we recorded approximately 1 million of tariff refunds during the quarter, which contributed approximately 140 basis points to adjusted gross margin. This was a one-time benefit. Third, we continued to benefit from improved inventory management, including lower excess, obsolete and scrap charges, and fourth, revenue mix benefited from a higher proportion of consumables as our consolidated consumables revenue reached 73% for the quarter.

For the fourth quarter, we expect adjusted gross margin to moderate from third quarter levels as equipment becomes a larger percentage of the mix and the tariff benefit does not repeat. GAAP operating expenses were approximately 42.2 million compared with 51.9 million in the prior year period. Adjusted operating expenses were approximately 36.3 million compared with 39.1 million. The year-over-year improvement reflects the benefit of our APAC go-to-market changes, lower professional fees and lower commissions, partially offset by increased marketing and event spending. Approximately 1.3 million of planned third quarter expense also shifted into the fourth quarter, roughly 600,000 of marketing, 600,000 of research and development, and 100,000 of G&A. As a result, we are projecting the fourth quarter run rate to be higher than the third quarter expense level. Research and development is expected to increase meaningfully in the fourth quarter as our device development programs, clinical studies and other innovation initiatives advance.

On a GAAP basis, income from operations was approximately 5 million compared with an operating loss of 6.2 million in the prior year quarter. This is our second consecutive quarter of positive GAAP operating income. Net loss was approximately 0.9 million. Adjusted EBITDA was 13.4 million, or 19.3% of revenue, compared with 8.9 million, or 12.6% in the prior year period, an increase of approximately 50%. Cash flow from operations was approximately 11.3 million in the third quarter and capital expenditure was approximately 1.1 million, resulting in free cash flow of approximately 10.2 million.

On September 30, we repaid the remaining 103.2 million principal amount of our 1.25% convertible senior notes due in 2026, together with approximately 645,000 of accrued and unpaid interest. The related indenture was satisfied and discharged. This completed the retirement of the 2026 notes and delivered on the plan we communicated earlier this year to address the maturity with cash on hand. Following the repayment, we ended the quarter with approximately 112.4 million in cash and cash equivalents.

We believe our liquidity position provides sufficient flexibility to operate and invest in the business. We have approximately 250 million in convertible debt remaining that matures in Q4 of 2028. We expect to address this in 2027 and will evaluate all alternatives thoughtfully as we move forward. Turning to our outlook, based on third quarter results and our current expectations for the balance of the year, we are updating our full year 2026 guidance. We now expect net sales of 281 million to 287 million compared with our 280 to 290 million. We now expect adjusted EBITDA of 48 million to 50 million compared with our previous guidance of 39 million to 46 million. Our fourth quarter assumptions reflect continued pressure on equipment and further work to improve EMEA revenue performance.

We expect adjusted gross margin to moderate sequentially as equipment represents a greater percentage of the mix and the one-time tariff benefit does not repeat. Finally, the guidance reflects increased operating expenses quarter over quarter. This is primarily driven by increased sales and marketing expenses due to normal seasonal commission increases tied to revenue, along with some timing of marketing expenses that are now expected to impact the fourth quarter.

Our research and development expenses are projected to increase meaningfully from the third quarter as a number of our 2027 and 2028 projects are beginning to ramp. Finally, we are projecting increased G&A expenses, primarily due to increased professional fees, more normalized bad debt expense, and some timing of legal expenses. With that, I’ll turn the call back to Pedro.

Pedro Bruno Ferreira Malha (President and CEO)

Thanks, Mike. Let me close with a few thoughts. We are not simply waiting for the equipment market to recover. We are taking action to build a stronger, more profitable business with multiple opportunities for growth. This quarter demonstrates that we are making progress. Revenue is stabilizing, consumables on the overall basis have returned to growth, and the economics of the business continue to improve. At the same time, we are investing in the things that will drive our future, strengthen our HydraFacial franchise, get more value from our installed base, and build a broader portfolio of products and treatments. Like Mike mentioned, we also retired our near-term 2026 note upon maturity as planned, while maintaining meaningful liquidity to continue investing in our business. So while there’s still work ahead, we believe we are operating from a much stronger foundation than we were at the beginning of the year.

We also believe that we have the brand, the infrastructure, the relationships and the innovation pipeline to build a substantially better and more diversified business. Our focus now is on execution, translating those advantages into consistent revenue growth, sustained profitability and long-term value for our shareholders. Operator, you can now open the line for questions.

OPERATOR

Thank you, ladies and gentlemen, we will now begin our question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. And if you’re using a speakerphone, please lift the handset first before pressing any keys. We have our first question from Olivia Tong with Raymond James.

Olivia Tong (Analyst at Raymond James)

Great, thanks. Good afternoon. Two questions for me. First, can you talk about the growth in consumables? Do you think you’ve turned the corner and we can expect continued growth from here, or was there anything particularly notable this quarter that doesn’t repeat? And then what drove the growth? Was it more treatments, more boosters, pricing, other factors there? And then secondly, can you give us a sense on the delivery on the system side, what churn looks like? It’s a bit difficult to assess now that you’ve got this leasing program in place, so would love to understand that as well. Thank you so much.

Pedro Bruno Ferreira Malha (President and CEO)

Sure, Olivia. So on the consumables, let me bring you back. Global consumables increased 1.2% in this quarter and actually the Americas consumables grew 4.2. So good numbers. These are encouraging signals. In terms of performance to support that, the Signature consumables are also performing better, and together with the HydraScalp relaunch, that basically added more treatments. So the Americas, specifically the U.S., is looking good. And this is the direct result of the execution work, the commercial work, the retraining of the sales force, the marketing, the resegmentation, remassaging, all that work is starting to pay out in the U.S. We feel also encouraged that in the quarter we launched HydraClear, a very promising booster, and also the non-medical channel is supporting that growth.

So overall I think things are starting to shape up on the consumable side, specifically in our most important market, which is the U.S. In terms of the system churn, Mike, do you want to take that one?

Michael Monahan (Chief Financial Officer)

Sure, Olivia. So we had positive net churn of 59 units if you roll it forward. This was primarily driven in the Americas as we saw a lower falloff of devices and some customers repurchasing that were previously dormant. So we’re encouraged by some of the improvements that we’ve made specifically around our outreach to past dormant accounts. We’re seeing some of them come back.

Olivia Tong (Analyst at Raymond James)

Got it. Thank you.

OPERATOR

We have our next question from Sydney Wagner with Jefferies.

Sydney Wagner (Analyst at Jefferies)

Hi, thanks for taking our question. As wellness becomes a larger part of the MedSpa offering, are hair health concerns, including those associated with GLP-1 use and the side effects from that, bringing new consumers to the ecosystem? And then as we think about HydraScalp and the opportunity there, are you primarily seeing deepened engagement with existing consumers or are you seeing incremental consumers coming in through that offering? And then just on EMEA, last quarter you cited personnel gaps and distributor order timing as temporary pressures and they were expected to improve in the second half. So just curious how those issues are running now and what needs to change for that region to improve further. Thank you.

Pedro Bruno Ferreira Malha (President and CEO)

First, Sydney. So in terms of scalp health, this is a segment that is getting a lot of attention and a lot of traction independently of what’s driving. Obviously GLP-1s could be a good contributor for that renewed interest in scalp health, HydraScalp for us. And HydraScalp with Keravive is a particularly good example of the strategy that we put in place of getting more value out of our installed base. And basically the whole premise of this is that we want to extend the use of our existing HydraFacial system beyond just the facial treatments and going to the scalp, and going to hair health, which as I mentioned in the beginning is getting some good traction as a segment overall in the market and getting a lot of growing consumer interest.

Basically what is so appealing for us in terms of this treatment is that it offers and combines an in-office treatment with a home spray made out of peptides and basically creates another opportunity for providers. And we saw, and as I keep mentioning the first answer to the first question, we saw this being a good contributor to the numbers of the consumables that we have seen in the US in terms of the quarter. So now the opportunity is to expand that provider adoption of HydraScalp with Keravive and just build that recurring treatment volume on top of it.

In terms of EMEA, yes, definitely a point of pressure. It has been a point of pressure for our business for some quarters now. We have taken decisive action in terms of leadership and organization design to better address the needs and the dynamics of the EMEA market in the past quarter. I feel very encouraged and very positive with those changes and the tools and the processes that we are bringing in place. And I feel optimistic that EMEA will start providing better results in the future.

Michael Monahan (Chief Financial Officer)

The only thing I would add, Sydney, on the numbers. So we did see some improvement even though in EMEA we were down 19% year over year as you might remember in Q2, and that improved—still down—but was down 11.7% in Q3. So to Pedro’s point, even though the changes came throughout the summer, we’re starting to see some improvement there.

OPERATOR

Great, thank you. Our next question comes from Joe Federico with Stifel.

Joe Federico (Analyst at Stifel)

Hey everyone, thanks for taking the question. Maybe just to start a little high level. Delivery systems in the quarter, placements were actually pretty impressive relative to our estimate. So I know it’s now early days for the US rental program, but maybe just any early learnings you’re seeing from that program, and can you give us a bit of color on the economics of those placements from the system side? And I can have a quick follow-up. Thanks.

Pedro Bruno Ferreira Malha (President and CEO)

Yeah, Joe, I appreciate the comment. So in terms of delivery systems, yes, the numbers were—I won’t call it good—but they were less severe than they were in the last quarter. But definitely, and I can be straightforward with this, we’re still below where we need to be. What we’re seeing in the market is that capital decisions still remain a barrier. The sales cycles are longer, and the competition is there. And as I mentioned before, EMEA is the largest source of pressure that we have right now.

But we are focused on making the product easier to access and the value proposition easier to sell. I do believe that devices eventually will return to growth, but we have to improve conversion. We have to bring more discipline to the channel coverage. We have to reduce the adoption friction and basically give customers and providers a compelling reason to invest. And the rental program—and I will also add to this the corporate account strategy that we have now in place—work on access today, and the next-generation platform that is slated for 2028 will be the long-term innovation driver.

So in terms of the US rental program specifically, that program was introduced during the quarter, so it’s still too early to attribute a meaningful share of Q3 performance to it. But it basically was, as I mentioned before, designed to remove the upfront capital hurdle for the qualified providers. So the process that we are going through right now is that we are evaluating the lead quality, evaluating the conversion, evaluating the provider adoption, and importantly the treatment activity after every placement.

And our expectation is that this program will build contribution over time as it scales in the US right now.

Michael Monahan (Chief Financial Officer)

Joe, I would just add on the economics to follow up on that piece. The way the rental program works is our sales team is able to identify the sale, and if the end provider opts to enter into the rental program, we sell the unit to our financing partner who then administers the program. And so for us, the revenue is booked upfront upon sale, very similarly to the way we do it when we go through our normal sale process. For the rental program, it has a slightly lower gross margin, as our financing partner captures some of the economics for administering the program and taking on the default risk.

But net-net it works in the same way as if we sell directly to the end provider.

Joe Federico (Analyst at Stifel)

Very, very helpful. I’ll keep it to one. Thanks for the color.

OPERATOR

We have our next question from Navon Thai with BNP Paribas.

Navon Thai (Analyst at BNP Paribas)

Hi, good afternoon, thank you for taking my question. I don’t know if you can comment—maybe some early thoughts on how growth and margins could trend here with different factors like the expansion of the corporate multi-account, the rental program, and any other push and pull. Thank you.

Michael Monahan (Chief Financial Officer)

Yeah, I mean we are not commenting on 2027, Naveen, right now. What we can comment in terms of overall expectations is we’re launching a number of initiatives next year. So I would expect—our plan is, and we’ll give more color when we get to our next call—that as we start to roll out these initiatives during kind of the latter part of the first half of the year, you’ll start to see the benefits not just from some of the programs that we started investing in this year, but also from some of the new devices and partnerships that Pedro had mentioned earlier that you’ll see us start to announce as we get further into 2027.

Navon Thai (Analyst at BNP Paribas)

Thank you.

OPERATOR

Our next question is from Jonah Kim with TD Cowen.

Jonah Kim (Analyst at TD Cowen)

Thank you for taking my question. The first one, just curious on what are your key sales and marketing initiatives that you’re implementing to drive better system sales going forward? Any color will be helpful there. And then just on the end consumer itself, how is the health of the consumer looking? Are you seeing any sort of delay in treatment just given where the macro backdrop is? Thank you.

Pedro Bruno Ferreira Malha (President and CEO)

Sure. Jonathan. So in terms of the changes and the work that we’re doing in terms of salesforce excellence and corporate accounts within the commercial organization, we have strengthened the leadership and invested in more consistent training. The bigger change is basically moving from a relationship-led model to a more deliberative demand generation and conversion model. And that includes better account segmentation, better value-based selling, very disciplined follow-up from the sales force down in the field, very strong oversight from management over the health and the flow of the pipeline.

All of that have been initiatives and a great focus of our commercial team and commercial leadership in the past quarter. An example of programs that we drove in the quarter—one of those was the HydraFacial Impact. Basically the concept or the thesis is that innovation only works when providers know how to sell it and know how to perform and bring customers back. So the HydraFacial Impact program is really about helping our providers build better business and improving the treatment protocols and the treatment economics. And it’s very straightforward. Basically it’s when providers are more successful with HydraFacial, they perform more treatments and utilization improves.

Another work that we’ve been doing, and a lot of organizational changes as well, is around corporate accounts. And here we are taking just a more targeted approach to this type of customers because basically they can provide scale. They can provide scale in placements; they provide scale in provider coverage and recurrent treatments when implemented well. So there’s a lot of work being done in that organization and we are very optimistic about the outcomes of that work.

Michael Monahan (Chief Financial Officer)

The only thing I would add to that is we’re seeing some encouraging signs in the Americas on overall revenue per system that we saw in Q3, where we still have some pressure, but we’ve seen that decline to less than 1%. So while we’re a B2B business, it doesn’t tell us exactly what’s happening at the end consumer. That gives us some insight that we’re seeing some health in terms of utilization, as Pedro mentioned, for the demand for our consumables, which is encouraging.

Pedro Bruno Ferreira Malha (President and CEO)

I will just end by addressing the question around the market and the consumer sentiment in terms of dynamics. So consumers are still interested in outcomes, that’s still clear in the market. But as we keep mentioning in the prior calls, their dollars are spread across more treatments and providers. And that is why we as an organization have to work harder to be the preferred treatment and help providers monetize it better. And this is why utilization, differentiation, and consumer experience matter in our business.

Also, the cost of capital is delaying equipment decisions, and that is why the response from us has to be better provider economics, more flexible access—like we kept discussing here, the rental program—and treatments need to drive repeat visits. That’s why we are so focused on having our booster and treatment enhancers and extenders strategy.

Jonah Kim (Analyst at TD Cowen)

Thank you for the color.

OPERATOR

Our next question is from Bruce Jackson with StoneX.

Bruce Jackson (Analyst at StoneX)

Hi, thanks for taking the questions. On new products, you said you’re going to be increasing R&D here. Is it going to be going up sequentially and year over year? And you mentioned the new platform that you’re working on. Is there anything else in the new product development that you’re working on?

Pedro Bruno Ferreira Malha (President and CEO)

So in terms of the new devices, the program continues to progress towards the planned 2027 launch. Again, this is not a HydraFacial device. We are not going to give product specifics or economics today or commit to a launch—the commitment is 2027. But the strategic logic here is to add another complementary treatment category through an infrastructure that we already have. And again, we will provide more details when the product and the commercial plans are ready.

In terms of the next-gen HydraFacial, this is a very important long-term initiative for us and that is targeted for 2028. But it’s not part of the foundation of our near-term recovery plan because that is 2028. But we are designing and we’re investing in a machine that will improve clinical outcomes, improve workflow, improve treatment experience, and it will create reasons for both the existing and the prospective providers to invest in a new device.

We are not disclosing any product features this fall, and we will release more information as we see fit.

Bruce Jackson (Analyst at StoneX)

Okay, and then a quick follow-up. Just in terms of the product portfolio vitality, do you have a rough idea of the percentage of the mix that the new products contribute to the sales? And is this something that could be expected to help accelerate revenue at some point in the future?

Pedro Bruno Ferreira Malha (President and CEO)

So in terms of the strategy, absolutely. Basically all these product launches are there to create more occasions to use the same system and serve in more ways the customers. The booster addresses specific skin concerns. The enhancer or the extender can personalize or broaden an existing treatment protocol. All of this supports premium treatments. All of this strategy supports repeat visits and higher consumables per treatment. That is the strategy.

We are not going to give standalone revenue forecasts per product SKU, but the way to assess the success is how this is contributing to the recurring revenue over time. New consumables require providers to adopt the protocols and consumables to incorporate them into the treatment routines that they have in these practices. And if you look at SkinStylus, that is already generating growth and we’re using SkinStylus to expand internationally. So the other products are very early. We just launched them in their commercialization, so I wouldn’t expect everything to show up all at once in one quarter. But the benefits of all these launches and the cadence of all these launches should build over time progressively as we see adoption in the markets increase.

I think the most important part of all of this is that we are working as a company to build several complementary growth drivers rather than just solely be focused on the recovery of equipment sales. That is the key work that we focus on.

OPERATOR

There are no further questions. Ladies and gentlemen, this concludes today’s conference call. We thank you for your participation. You may now disconnect. Goodbye.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.