The Beauty Health Company (SKIN) Q1 2026 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the SkinHealth Systems 2026 First Quarter Earnings Call. [Operator Instructions] This call is being recorded on Thursday, May 7, 2026. I would now like to turn the conference over to Norberto Aja, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss SkinHealth Systems 2026 First Quarter Results. We released our results earlier this afternoon, which can be found on our corporate website at skinhealthystems.com. Joining me on the call today is SkinHealth Systems' Chief Executive Officer, Pedro Malha, along with our Chief Financial Officer, Mike 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 expectations 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 these risks related to our business, please see the company's filings with the SEC. This call will present GAAP financial measures. A reconciliation of these GAAP nonfinancial 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. With that, I would now like to turn the call over to our CEO, Pedro Malha. Please go ahead, Pedro.

Thank you, Norberto. So as you know, 2 weeks ago, we rebranded SkinHealth to Skin Health Systems, and this was not simply a name change. It reflects a deliberate shift in how we operate as a company and that we are building a company with a clinical rigor, the commercial discipline and the operational mindset of a leading medical device company. Hydrafacial remains at the center of that strategy as one of the most recognized specialty aesthetic treatments globally. And around it, we are building a broader platform that includes skin stylist, our microneedling and nano channeling technology and the up-and-coming relaunch of our Keravive for scalp Health. So the objective is straightforward. It's to build a clinically differentiated platform that improves provider economic, strengthens utilization and drives durable recurring revenue growth. I also want to take the time to acknowledge the addition of 3 new independent directors to our Board: Kenneth Tripp; Dr. Sachin Shridharani; and Scott Beattie. Together, they bring deep experience across medtech, aesthetics and global consumer brands. And we believe we now have the right Board to support the company's next phase. So now turning to the quarter. First quarter net sales were $64.9 million, so within our guidance range, while adjusted EBITDA was $8.5 million, up 17% year-over-year and well above the high end of our guidance range. So the quarter clearly demonstrated 2 things: first, that the top line growth has not yet returned; but second, that the operational foundation of the business continues to strengthen. So let's go over first, our systems revenue. Here, device placements came below our expectations during the quarter. Several factors come into play here. On the macro side, the market has gone through rapid expansion, follow consolidation and some of the tailwinds that drove growth in prior years are not as strong today. So as a result, capital equipment demand continues to be constrained by tighter credit conditions and longer purchasing cycles. Also, competition has intensified and providers have more choices than they did 2 years ago. So all that I just mentioned are structural headwinds and not one quarter occurrences. But the macro conditions are only part of the story. We see opportunities to improve our commercial execution, and we are taking the steps to strengthen our sales discipline to sharpen the focus across the organization and to improve how we convert the opportunity in front of us. So given the strength of the Hydrafacial brand and our current market position, we believe there is meaningful room to perform better, and this is where the focus is. One relevant fact is that we continue to see the softness in device placements in Q2. So we are not expecting a near-term inflection of this trend because the commercial fixes that we are implementing, more structural sales processes, tighter pipeline management, better account prioritization and an improved commercial leadership, all will take time to fully translate into results. Therefore, we are revising our full year revenue outlook to a range of $280 million to $295 million, which represents a reduction of approximately 2.5% or roughly $7.5 million at the midpoint. This revision reflects a more cautious near-term view on capital equipment demand as well as the time required for the commercial initiatives now underway to translate into improved trends. Also, as part of our efforts, we recently made a key leadership change within the commercial organization, and I'm now taking on a more direct role in the global sales organization, particularly around how we sell and how we improve conversion across our pipeline. So as importantly, despite the revised revenue outlook, we are maintaining our adjusted EBITDA guidance range of $35 million to $45 million, which reflects the underlying margin strength, the operational discipline and the resilience of our business model. Moving on now to our consumables business. Revenues for the quarter was $46.4 million, down 6.1% year-over-year, but approximately 2/3 of this drop was related to a transition of China to a distributor model last year, which continues to impact the year-over-year comparisons. So outside of China, consumables performance was impacted primarily by the timing-related variability across certain regions, which we expect that to normalize. Moving into our installed base. Despite the placement softness, our active installed base grew this quarter to 36,400 devices, up 4% year-over-year. More encouragingly, device churn in Q1 declined 40% year-over-year, and that is meaningful, and a meaningful earnings signal that our provider retention and reactivation programs are working. To close up our quarterly financial results, on profitability, the quarter demonstrated again the strength of our operating model. Adjusted EBITDA was $8.5 million, up 17% year-over-year and well above the high end of our guidance range, while adjusted gross margin expanded to 72.2%. Importantly, this performance was achieved while continuing to invest in R&D, in provider education, in commercial capabilities and in our innovation pipeline. Now let's step back and look at the longer term. Innovation remains a central focus as we build the next phase of growth for the business. We are advancing our innovation pipeline across 3 key priorities: boosters; strategic partnerships; and the next-generation Hydrafacial platform. First, on boosters. Here, we are restructuring our booster portfolio around clearly defined clinical use cases, differentiated outcomes and tier pricing designed to improve both provider economics and utilization. Later this quarter, we will relaunch Keravive, our scalp health treatment, with updated marketing, enhanced protocols and improved integration into the Hydrafacial platform. Given the growing consumer focus on scalp health, including GLP-1-related hair loss concerns, we believe timing is favorable for us. And in the fourth quarter, we also expect to introduce a new booster backed by strong clinical data. Second, we are in the late stages of diligence, exploring strategic partnerships that will bring complementary technologies into the SkinHealth Systems portfolio. These solutions will expand treatment options for providers while at the same time, strengthens the broader Hydrafacial ecosystem. And third, we continue to advance the development of our next-generation Hydrafacial device targeting a 2028 launch. Our objective here with the next generation of Hydrafacial is to deliver a meaningful advancement in clinical outcomes and treatment experience while creating a compelling upgrading opportunity for our installed base of more than 36,000 active systems. We are also making sure we are applying the lessons learned from prior launches, particularly around quality standards, partner selections and field readiness as we continue -- and we will continue to update you on the development progress. With that, I will turn it over to Mike to walk you through the financials in more detail. Mike?

Thank you, Pedro. The first quarter demonstrated that the operational improvements of the past year are durable. Margins are holding, adjusted EBITDA is outperforming and the business is generating the financial flexibility to fund the investments required to drive future growth. For the first quarter, total net sales were $64.9 million, down 6.7% versus the prior year and in line with our guidance range of $63 million to $68 million. Consumables revenue was $46.4 million, down 6.1% versus the prior year. By region, Americas was down 1.6%, primarily due to the outperformance of our Q4 promotions pulling demand forward. EMEA was down 5.6%, driven by distributor order timing and APAC was down 29.9%, as Pedro described, attributable to China's distributor transition. We believe the Americas and EMEA declines are timing related, and we expect them to normalize. Delivery Systems revenue was $18.5 million, down 8.3% versus the prior year, with 746 systems placed compared to 862 in Q1 2025. Americas was down 8.5%. EMEA was down 13.6%, consistent with the broader capital equipment pressure we have discussed. APAC was up 6.8%, supported by increased device orders versus the prior year from our distributor partner, a different dynamic than consumables, where the transition impact was concentrated. Our active installed base grew to 36,400 systems globally, up 4% year-over-year. Adjusted gross margin was 72.2% versus 71.9% in the prior year, relatively flat despite lower revenue. GAAP gross margin was 68.5% compared to 69.8% in the prior year, with the decline primarily driven by higher amortization expense. GAAP operating expenses totaled $46.2 million in Q1 2026 compared to $60.6 million in the prior year. Selling and marketing was $23.2 million versus $26 million, reflecting disciplined spending, while continuing to invest in provider education and training. R&D was $1.1 million, up slightly, reflecting early-stage investment in the next-generation device and booster pipeline. G&A was $21.9 million, down significantly from $33.6 million in Q1 2025, driven by lower headcount-related costs, reduced legal fees and lower depreciation and amortization. Adjusted EBITDA was $8.5 million, representing a margin of 13.1% and an improvement of 17% versus the prior year, well above the top end of our guidance range of $3.5 million to $5.5 million. This was achieved while continuing to reinvest in R&D, sales force training and tools, provider education and marketing. Net loss for the quarter improved to $6.6 million compared to a net loss of $10.1 million in the prior year. We ended the quarter with $204.4 million in cash, cash equivalents and restricted cash. Our October 2026 debt maturity totals approximately $103 million. Based on our current cash position, our Q2 and second half cash generation trajectory, we are confident we can address this maturity. We are revising our full year revenue outlook to $280 million to $295 million from our prior range of $285 million to $305 million. The primary drivers are continued softness in capital equipment demand and commercial execution improvements that will take time to be fully reflected in revenue. We are maintaining our adjusted EBITDA guidance of $35 million to $45 million as the operational discipline and margin strength of the business continues to offset top line pressure. For Q2, we expect revenue of $72 million to $77 million and adjusted EBITDA of $11 million to $13 million. I will now turn the call back to Pedro.

Thanks, Mike. So to close, while top line performance remains below where we wanted it to be, the underlying foundation of our business remains strong. We have a growing installed base of more than 36,000 systems, a highly recurring consumables model, expanding margins and one of the leading brands in aesthetics. So our focus now is execution, improving commercial conversion, increasing utilization across the installed base and continue to invest in the innovation pipeline that we believe will support sustainable, profitable, long-term growth. We understand where the opportunities are, and we are taking decisive actions. And so we remain confident in the long-term strength and potential of our platform. With that, I will turn the call back to the operator for questions. Thank you.

[Operator Instructions] We will now take our first question, and this comes from Oliver Chen from TD Cowen.

Pedro, regarding your comments on the nature of competition and also the role you're taking more closely with the sales organization, what are you seeing there in terms of what's within your control? And also the outlook still could be pretty hazy with the interest rates as well as a pressured middle consumer. So just love your thoughts on innovation and where you think the company is with respect to what inning you're in on the devices side relative to consumables and the work you have ahead? And then, Mike, as we think about that October maturity, what are the puts and takes on working capital and CapEx to give us more comfort in terms of achieving that obligation as well as generally when we're modeling free cash flow this year, what levers might you have in terms of protecting your free cash flow if there's lack of upside or downside risk to your guidance?

Thanks, Oliver. So I'll start addressing the competition question, and then I'll touch on the innovation agenda that we're driving. And then I'll just close out talking a little bit about the commercial organizational changes that we have done. So in terms of the competition, it's true, the competition continues to increase. And this is very particularly around the lower end of the market. We are seeing some pressure from lower cost alternatives. Secondary market devices are coming in and a broader set of aesthetic treatments, right, because basically, we're all competing for the same treatment room time. The secondary market is particularly relevant in this current environment because among the smaller providers that are now facing tighter financial conditions, these providers are looking for lower upfront capital commitments. So that's relevant there. Our overall strategy is not to compete purely on price because we know for a fact that providers ultimately optimize for their patients' outcomes and they optimize for the long-term return on their treatment rooms. So we believe that, that exactly plays to the strength of our company, to the strength of Hydrafacial platform and ultimately, will come up stronger as we see the market stabilizing. In terms of innovation, definitely very, very over-indexed in our innovation agenda. Innovation needs to do 4 things for us. It needs to improve clinical outcomes. It needs to strengthen the economics of providers. It needs to obviously fit naturally into the treatment room where our devices of Hydrafacial and skin stylists already reside, and it needs to be accretive to margin. So if it does not meet those, we are not pursuing it. And as I mentioned in my opening remarks, we are putting the right capital behind the development of the next-generation Hydrafacial, and we are putting the right capital and the teams behind our next generation of boosters, which I mean we are overhauling the whole strategy. In terms of the commercial organization, I come from organizations where I had direct overview of the regions. And so with this change that we did, that gives me the possibility to have a direct hand and management of the U.S. and all international business and that will allow me, most importantly, to be directly involved with these regions, with the way we sell closer to metrics. And this is an environment that I'm very comfortable with and coming from all the experiences and positions that I had in the past. And that's the reason why the change was made. Mike, do you want to address the other questions?

Sure. Thanks, Oliver. The midpoint of our guidance assumes we have modest free cash flow generation in the last 3 quarters of the year. Overall CapEx, I'm expecting $8 million to $10 million for the year of CapEx. We spent $1.6 million, $1.7 million in the first quarter. So as you look at kind of overall, we expect free cash flow, as I said, to be positive after we service the debt for the last 3 quarters. Working capital, I expect to not be a significant drain. Actually, we're forecasting it to be relatively flat year-over-year. It was a use of cash in Q1, but that's largely due to the timing of payables. So my expectation is that, that normalizes by the time we get to the end of the year and specifically by the time we get to the maturity.

And the next question comes from Allen Gong from JPMorgan.

Just a quick one on the guide and the cadence that you expect to see throughout the balance of the year. I think previously, we have been hoping that there would be a return to modest growth in the back half of the year off of some easing comps and also some continued stabilization. But is the right expectation now that we probably won't be getting to positive growth in the back half of the year? Or do you think that's something that you can still achieve, say, like in fourth quarter?

So Allen, let me just refresh the numbers and the change on the guide that we just communicated. So definitely, the Q2, it's not coming as expected. As I just spoke about, we revised our top line guidance to reflect the current market conditions and the execution that is underway across our business. So we are basically guiding the revenue to a range of $280 million to $295 million. But also very strongly, we are maintaining the adjusted EBITDA guidance, right, that we had before. The way we are looking at the quarter -- the current quarter, at the midpoint of the guide, the quarter is sitting at $74.5 million, which basically translates this into having a quarter that will decrease 4.7% year-over-year. And that is largely driven by, again, the lower device sales trends that we're seeing across the board, while consumables in the U.S. and the rest of the world, excluding the APAC, are expecting to be flat. In terms of how do we play it out for the remaining of the year, the expectation is that we are still seeing 2026, and that has not changed, as an execution year and as a stabilization year. And the key drivers of our performance and the way we're going to be showing up the year is by improving the device conversion and as I spoke in the beginning, by improving utilization across the installed base and also improving the booster attachment rates. So the way we are seeing the year is that in the first half of this year, we expect to see the pressure in the device placements and utilization trends to continue. But as we move through the second half, we are expecting a gradual and a sequential improvement as our commercial initiatives provide more results and start taking traction. So it's important that -- to say that if we execute well against all these initiatives, against all these priorities, we believe that the model will begin to compound, utilization will begin to improve and the recurring revenue base naturally will become more productive. That is why we believe the business is positioned to return to more consistent growth in 2027 and beyond. But based on the current trends we are seeing and the expected timing of the initiatives that are underway, although we think that growth will come in 2027, the cadence of that recovery within the year will absolutely depend on how quickly the device business stabilizes and on the timing of any impact of some of the catalysts that I just mentioned, which are the new booster launches and the strategic partnerships take into effect.

And the next question comes from Olivia Tong from Raymond James.

Pedro, what gets you to the upper end versus the lower end of your ranges on sales and EBITDA? And in your view, is the shortfall more in just devices or consumables? It sounds like it's devices, but just kind of curious how you think about sort of consumables and the demand there? And then how much of this is a function of your execution versus the volatility in terms of the external environment?

Sure. So focusing on consumers. Consumables obviously remain very core to our model. And if you exclude the impact of China and the shipment timing that we went through, the business remains actually relatively stable. The larger opportunity that we know for a fact exists is around utilization, which we still believe remains below its potential. The market -- we feel that the market is still there. The consumer remains engaged, although we have seen in the past years the spending behavior being much more selective. But we -- across the category, we're still seeing strong demand for treatments and -- but only for treatments that actually deliver visible results and a very accessible price point, which we play directly into that position. But as I mentioned in the beginning, the market continued to be impacted by tighter credit conditions, longer capital purchasing cycles, which have been indeed putting continued pressure in the device placement. And that is across the industry over the last couple of years. So the way we see it is the market is gradually maturing, which means that utilization and the productivity per treatment room has become incredibly important to drive our acceleration. And that is what we are pivoting our strategy to increase that utilization with our booster strategy, with better training of our sales force, with better value selling with our reps, because the market indeed has changed and has become somewhat more challenging.

The next question comes from Susan Anderson from Canaccord Genuity.

I was wondering if maybe you could give some more color on the partnerships that you mentioned that you're looking at for the Hydrafacial brand? I guess, what will these look like? Are they partnerships for additional boosters or other types of partnerships?

Thanks, Susan. So there's obvious -- for obvious reasons, there's so much I can say because we are still in the phase of diligence and I would say, late exploration. But as very core to our strategy, we believe that Hydrafacial and SkinHealth Systems is indeed a platform and should be a platform of -- as an ecosystem of different solutions. So we have the team working around not only identifying feasible partners that will play well in that ecosystem. As I mentioned, we are in very late stages of that diligence. I personally, at this stage, feel encouraged by what I see. And this will become, again, together with skin stylists, another part of our portfolio that the reps can use in selling the overall solution. Again, that's so much I can say, but I feel encouraged by what I see and the time lines of the strategic partnerships that we are pursuing right now.

I can just add, Susan, they're both on the device side and the consumable side on the partnerships.

Okay. That's helpful. And then maybe just -- I wanted to ask about, I think you mentioned some timing-related variability in certain regions related to the consumables decline, I think like maybe the Americas. Maybe if you could just expand on what that was and when you expect it to normalize?

The Americas was down, Susan, the 1.6%, which was a smaller portion of the difference. It was largely due to we do a fourth quarter promotion that outperformed in the fourth quarter of 2025. So some of it was a smaller kind of pull forward. The other timing piece of it was we had a large distributor order at the end of Q4 2025. A portion of that order was consumables that came in, that pulled forward some of the revenue as well. The largest portion of the $3 million year-over-year difference on the global consumables was the move from the China -- to a China distributor. In Q1 and a large portion of Q2 last year, we still were direct in China. And so as we move through the year, that comp is going to pressure the first half of the year and should subside a bit as we move throughout 2026.

The next question comes from John Block from Stifel.

Joe Federico on for John Block. Maybe just focusing on EMEA following up on the last question. Obviously, growth was a little bit softer this quarter after kind of having been the bright spot in performance for the last handful of quarters. So with the ongoing conflict in the Middle East and subsequent rise in energy costs over there, are you seeing anything specific in the consumer in those regions? I think some of the consumables commentary you just gave speaks to it improving. But do you expect the softer performance to continue on the capital side in the near term? Just any trends would be helpful.

Yes. So I'll -- I can take that and then Mike can chime in. So in terms of the conflict is, the way we are seeing is, is not going to have a material impact. Obviously, we are monitoring the situation very actively. But so far, we're not expecting or forecasting any impact on our business. In terms of the EMEA, the split, between devices and consumables and the way they show up in the quarter, EMEA is very -- what's happening to EMEA, it's very much in line with what we have seen and are seeing much more broadly going over globally in terms of devices. We have seen still a softness in device sales, and that is true for the U.S. and for EMEA. In terms of consumables, it's a mix -- a little bit of a mixed bag. There's some timing issues there. But again, we expect those to normalize over time.

Okay. Great. Really helpful. And then maybe just as a quick follow-up. When you originally gave the 1Q guide, it was mid-March, and so I would think a good line of sight into how the quarter would shake out. And obviously, you came in within range on sales, but the EBITDA was well above. So was there anything that really deviated in the final weeks of the quarter operationally that led to that outperformance? And then maybe just one step further, with reiterating the full year guide for EBITDA, did some of those operations not continue into 2Q? Or is it just simply a function of the now lower sales outlook?

A large portion of the EBITDA beat was driven by outperformance on gross margin and then management of the overall OpEx. So OpEx, specifically in March came in lower than we had forecasted. On the gross margin side, there were 2 drivers -- 2 of the largest drivers. The first was in the Americas, average selling price on devices was higher than we projected. And so that favored even though we had pressure on the overall number of units and came in lower than we were forecasting. The ASP offset a portion of that, which drove higher overall kind of profits on a lower number of units. The second thing is on the operational side, we project each quarter expected scrap and write-offs, and it was much, much lower than normal in Q1. So as we look going forward, we're projecting overall gross margin to come down from Q1 a bit, still stay in the high upper 60s. And it's really, the overall projection is we expect -- as we're projecting device unit sales to come back a little bit, we expect the overall ASP to come down and normalize a little bit below where it did, specifically in the Americas on Q1, and we expect overall scrap to return to normal levels.

And the next question comes from Sidney Wagner from Jefferies.

So you mentioned restructuring the booster portfolio around clearly defined clinical use cases. Can you just walk us through how does that differ from how boosters were positioned previously? And what specifically was maybe not coming through clearly around the efficacy or attended use before?

So we have done in the past quarter, 1.5 quarters, a lot of not only strategic work around our booster strategy where boosters play a very important role in consumables, overall sales, but also in driving a higher utilization, a higher interest from overall consumers getting to the door and most importantly, how it drives a higher return on investment for all providers. So boosters, we continue to see as the main driver of that to drive utilization. What we have seen is that historically, the company has had a lot of different boosters, a lot of SKUs. What we're going now is rather for simplicity and impact. So we are redoing the whole selection of boosters. But most importantly, we are selecting the boosters that bring clinical outcomes that actually will give what consumers are looking for. And that requires a different view of what boosters can do and what type of boosters we are going to be offering. Just to tell you that we have 2 planned launches this year. The first is actually next quarter when we're going to be launching the HydraScalp booster, and we're going to be using that for -- to reactivate basically an asset, which is Keravive, that never got to deserve attention or focus. And in the second, we're going to -- in -- the second booster is going to be launched in Q4 of this year, and that is definitely going to be much more clinically backed booster that is going to be supported by real clinical data. So the team is very enthusiastic about that booster. And we know for a fact, and we have those proxies in our business that we will -- when we launch a booster that delivers the outcomes that they're supposed to deliver, that drives sales. That drives provider engagement, that drives consumers into the doors, and that is a huge part of our business. So we plan to over-index on that strategy.

Okay. That's helpful. And then just one more on competition. So when you think about Hydrafacial's competitive positioning, is it more about differentiation versus similar facial devices or systems? Or are you increasingly competing for consumer spend against adjacent treatments like lasers, for instance?

I think it's both. It's not only the low end of the market that we are competing, is becoming more crowded. But we also are competing for time space of those treatment rooms as more treatments, more technologies coming in, trying to get that time from the consumer and dollar. So it's both. It's both. But we feel that we are very well positioned, actually very well resilient throughout all these challenges and throughout all these past years. Hydrafacial continues to be the gateway for other treatments. We plan to over-index in that. It's a staple in the majority of all the med spas and is a technology and is a procedure that delivers results. So although we are seeing an increased competitive pressure, we feel that is a natural pressure because the segment is still very appealing. And we plan to combat that. We plan to have the right strategy, the right sales force execution, the right messaging, the right segmentation and a well-prepared and well-trained sales force that is able to win in a little bit of a more challenging market that we're facing right now.

And the next question comes from Bruce Jackson from The Benchmark Company.

A couple of macro questions. So with the rise in oil prices, are you seeing any effect on your inputs, for example, with plastic resins or freight costs? And if we do get above inflation, how do you feel about your ability to protect the EBITDA margins?

No, we're not seeing anything specific, Bruce, on overall increases in our prices. On the capital equipment side, we have a decent amount of raw materials already in-house. We've been working through our existing inventory. So we shouldn't see an impact of that in the near term. So overall, I'm not concerned about inflation materially impacting the adjusted EBITDA guide.

Okay. And then a follow-up, if I may. With the booster that you're launching in the fourth quarter, are you providing any additional details about that at this time?

Not at this time. It's in late stages of development, and we will provide you the updates in the coming quarters as we get closer to the launch time.

Thank you. And there are no further questions that came through. This concludes our conference call for today. Thank you all for participating. You may now disconnect.