Strategic Performance and Operational Drivers

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• Revenue declines narrowed significantly as global consumables returned to growth, signaling a stabilization of the core business despite persistent equipment headwinds.

• Management attributed the 380-basis-point adjusted gross margin expansion to improved inventory management, lower scrap charges, and a higher mix of recurring consumables revenue.

• Equipment sales remain challenged by high capital costs and longer sales cycles, particularly in EMEA where execution in Germany has fallen below management expectations.

• The company is transitioning its commercial organization from a relationship-led model to a deliberative demand generation and conversion model focused on account segmentation and value-based selling.

• Growth in the Americas was supported by the HydraScalp relaunch and new clinical boosters, which are designed to increase system utilization beyond traditional facial treatments.

• Management is leveraging SkinStylus as a platform for international expansion, with consumables in that segment growing 39% as the company diversifies into microneedling.

• The U.S. rental program was introduced to address capital investment barriers, aiming to bring more providers into the ecosystem by removing upfront cost hurdles.

Strategic Outlook and Guidance Assumptions

• Full-year guidance assumes continued pressure on equipment sales and a sequential moderation in gross margins as the product mix shifts toward delivery systems in Q4.

• R&D spending is projected to increase meaningfully in the fourth quarter to support the development of a new complementary device for 2027 and the next-gen Hydrafacial platform for 2028.

• Management expects the U.S. rental program to gradually build contribution over time as it scales, though it is currently in the early stages of evaluating lead quality and conversion.

• The company plans to evaluate all alternatives in 2027 to address the remaining $250 million in convertible debt maturing in the fourth quarter of 2028.

• Strategic focus is shifting toward ‘Hydrafacial Impact’ education programs to help providers improve treatment economics and drive repeat consumer visits.

Non-Recurring Items and Risk Factors

• Adjusted gross margin benefited from a one-time $1 million tariff refund, which contributed approximately 140 basis points to the quarter’s performance.

• Approximately $1.3 million in planned third-quarter expenses for marketing and R&D shifted into the fourth quarter, contributing to the quarterly EBITDA outperformance.

• Leadership changes and organizational redesigns were implemented in EMEA to address execution gaps and improve field engagement in underperforming markets.

• The company successfully retired $103.2 million in convertible senior notes using cash on hand, satisfying the related indenture.