SkinHealth Systems Inc. Class A Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, everyone. Thank you for joining us today to review SkinHealth Systems' 2026 second quarter results. 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 SkinHealth Systems' 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, 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 further discussion of risks related to our business, please refer to the risk factors contained in the company's filings with the SEC. This call presents non-GAAP financial measures.

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 and available on our website. Following management's prepared remarks, we will open the call for a question and answer session. I would now like to turn the call over to our CEO, Pedro Malha. Please go ahead, Pedro. Good afternoon, everybody.

Thank you for joining us to discuss our second quarter results. Let me start with the quarter at a high level. Overall, this was a mixed quarter. Revenue came in at approximately $72 million, at a lower end of our guidance range. Equipment sales remained the biggest headwind as providers continued to take a cautious approach to capital investments. Consumables proven a bit more resilient, supported by the continued growth of our installed base, although treatment activity remained below expectations. The same time, profitability for the quarter was significantly stronger than we expected. Adjusted EBITDA came in at $17 million, well above our guidance range driven by strong gross margins and continued discipline in how we manage the business.

In summary, we are not satisfied with our top-line performance. The quarter reinforced an important point. Even in a more demanding commercial environment, we are building a stronger company with better margins, greater operating discipline, and a more resilient financial model. As importantly, nothing we saw this quarter changed our strategic direction. If anything, it reinforced it. Let me spend a few minutes now on what we are seeing in the market, because it can provide an important context for both the quarter and the strategic choices we are making. The long-term demand for skin health remains healthy. What is changing is how that demand is being distributed. Consumers have more treatment options than ever before. Providers are making more selective capital investment decisions as they evaluate a broader range of technologies.

We believe that that environment rewards companies with trusted brands, meaningful innovation, strong clinical evidence, and deep provider relationships. Those are the areas where our company is best positioned to compete and where we continue to focus our investments. As we said last quarter, market conditions are only a part of this story. Our responsibility is to execute better. That is exactly where our efforts are focused. We are strengthening our commercial capabilities, improving how we engage with customers, and becoming more effective at converting opportunities. Those are the things we can control. That is where our team is focused every day. We also continue to believe strongly in the long-term opportunity for this business. For more than 20 years, HydraFacial has built one of the most recognized and clinically validated brands in professional skin health.

Today, we serve more than 36,000 providers worldwide, have a large and growing installed base, and generate around 75% of our revenue from recurring consumables, which together build durable, competitive advantage that position us to create long-term value. Last quarter, we discussed several of the investments we're making across the business, including consumable boosters and the next generation of the HydraFacial device. Today, I want to explain how these work together to support our long-term strategy. Our strategy is built around three priorities. First, strengthening and growing the core HydraFacial franchise. Second, increasing the value of every system already in the field. Third, leveraging our platform and provider relationships to expand into attractive adjacent categories. Together, these priorities are designed to accelerate sustainable growth by expanding our install base, increasing treatment utilization, growing recurring revenue, and creating a more diversified business over time.

Let me start with the first priority, strengthening and growing our core HydraFacial franchise. A key part of strengthening the franchise is making the platform accessible to a broader range of providers. As we discussed in prior quarters, capital constraints remain one of the most significant barriers of adoption. To address that, early this month, we introduced in the U.S. a new device rental program designed to lower the upfront investment by providers and make HydraFacial accessible to more practices. We believe this will expand our addressable market and support growth of our installed base. The financial accounting for the program is similar to our existing sales program, with the revenue for the sales being booked upfront upon shipment. Also, the program was built with a third-party financing partner who takes ownership of the devices and administers the program.

Part of this strategy of strengthening and growing our core HydraFacial franchise is also the investment we are making in the next generation of HydraFacial platform. As we discussed last quarter, this remains a multi-year development program targeting a 2028 launch. Our objective here with the next generation of the HydraFacial platform is to deliver a meaningful step forward in clinical outcomes, treatment experience, and provider workflow, while also creating a compelling reason for existing customers to upgrade and for new customers to choose HydraFacial. Moving now into our second strategic priority, increasing the value of every system already in the field. Our installed base is one of our company's greatest competitive advantages. It gives us longstanding relationship with providers around the world and supports a highly recurring revenue model that few companies in our industry can match.

As we discussed last quarter, improving utilization remains one of the largest and most immediate growth opportunities that we have. Our objective here is very clear, is to help providers perform more treatment, deliver better clinical outcomes, and improve the value of every customer visit. And that is exactly what our investments in clinically validated boosters and treatment enhancements are designed to do. To support that strategy, our next clinically validated booster is expected to launch globally in the fourth quarter, with additional launches planned throughout 2027. Finally, our third strategic priority, which is to use our platform and provider relationships that we've built over the past two decades and leverage those to expand into adjacent categories where providers and consumers are increasingly investing. This strategy is intended to diversify our portfolio, create additional growth engines, and to do so by building on capabilities we already have.

The SkinStylus microneedling device is a good example of that strategy in action. It gives us participation in one of the fastest-growing categories in aesthetics and continues to perform well. And recently, we received the FDA clearance for the improvement in the appearance of periorbital wrinkles, and more importantly, it also demonstrates our ability to introduce clinically differentiated technology through the provider relationships we already established. HydraScalp is another example. The reposition and relaunch of Keravive extends our presence into the growing scalp and hair wellness category while increasing the value of HydraFacial systems already in the field. Following its June relaunch, we are encouraged by how HydraScalp continues to gain traction. Also, as we discussed on our last call, we continue to make progress on our plans to introduce a new device to the U.S. market in 2027.

This is not another HydraFacial device and reflects our broader strategy of building a platform of clinically differentiated skin health solutions that leverages the provider relationships and commercial infrastructure we spent more than two decades building. Before I turn the call over to Mike, let me leave you with two observations here. First, we are not satisfied with our current performance. Despite our current business environment remaining challenging, improving execution is our responsibility and remains our highest priority. Secondly, we believe our company has exceptional assets and a clear path to using them more effectively. The rental program and the continued advancement of our next-generation platform demonstrates that the strategy is moving from planning to execution. We know that there is still plenty of work to do, but we are in the process of building a stronger and more diversified company with multiple opportunities for long-term growth.

With that, I'll turn the call over to Mike to review the financial results in more detail.