Beauty Health (NASDAQ:SKIN), referred to as SkinHealth Systems on its earnings call, reported a narrower revenue decline and higher adjusted earnings for the third quarter of 2026, as growth in consumables helped offset weaker equipment sales.
Revenue fell 2.1% from a year earlier to $69.2 million, near the upper end of the company’s $65 million to $70 million guidance range. The decline moderated from 7.8% in the second quarter and 6.7% in the first quarter.
President and CEO Pedro Malha said the company was making progress in stabilizing its Hydrafacial business and improving profitability, while acknowledging that equipment sales and system utilization remained challenges.
“The priority now is to sustain those improvements while returning revenue to growth,” Malha said.
Consumables Growth Offsets Equipment Weakness
Consumables revenue rose 1.2% to $50.4 million, accounting for approximately 73% of total revenue. Delivery systems revenue fell 9.9% to $18.8 million. The company placed 798 systems during the quarter, down from 875 a year earlier, and ended the period with 37,342 active systems globally.
In the Americas, revenue increased 1.4% to $48.9 million, with consumables up 4.3%. Revenue in Europe, the Middle East and Africa fell 11.7% to $14.2 million, as delivery systems weighed on results. Asia-Pacific revenue declined 4.2% to $6.1 million, primarily reflecting the transition to a distributor model in Australia and New Zealand.
Malha said execution in Germany had been below expectations and that the company had strengthened regional leadership and was working to improve customer engagement. CFO Mike Monahan noted that the EMEA decline had moderated from 19% in the second quarter.
Malha attributed the improvement in U.S. consumables partly to commercial execution, stronger signature consumables and the HydraScalp relaunch. Still, he said consumables revenue per system remained below the prior-year level.
Margins Improve, With Some One-Time Benefits
GAAP gross margin rose to 68.2% from 64.6% a year earlier. Adjusted gross margin increased to 71.8% from 68%, marking the company’s third consecutive quarter above 70%.
Monahan said the improvement reflected factors including lower inventory-related charges, a greater share of consumables sales and approximately $1 million in one-time tariff refunds. The refunds contributed about 140 basis points to adjusted gross margin.
The company reported operating income of approximately $5 million, compared with a $6.2 million operating loss a year earlier. Net loss was approximately $0.9 million. Adjusted EBITDA increased to $13.4 million from $8.9 million.
Management cautioned that some of the quarterly earnings outperformance reflected one-time items and expense timing. Approximately $1.3 million of planned third-quarter expenses shifted into the fourth quarter, Monahan said.
Full-Year Earnings Outlook Raised
The company narrowed its 2026 revenue guidance to $281 million to $287 million from $280 million to $290 million. It raised its adjusted EBITDA outlook to $48 million to $50 million from $39 million to $46 million.
For the fourth quarter, management expects continued equipment pressure and lower adjusted gross margin than in the third quarter, as equipment represents a larger share of sales and the tariff benefit does not recur. Operating expenses are expected to rise sequentially, including a meaningful increase in research and development spending.
Monahan declined to provide 2027 growth or margin guidance, saying the company expected to offer more detail on its next call.
Rental Program and Product Pipeline
The company introduced a U.S. rental program during the quarter to reduce the upfront cost for qualified providers. Malha said it was too early to attribute a meaningful share of third-quarter performance to the program.
Monahan said the company sells a unit to a financing partner when a provider chooses the rental option, allowing revenue to be booked upfront. The arrangement carries a slightly lower gross margin than a direct sale because the partner receives a portion of the economics and assumes default risk.
Management is also seeking to increase treatment volumes from existing systems. Recent launches include treatment enhancers introduced in September and the HydraClear booster for blemish-prone skin, launched in October. Malha said the company was targeting a next-generation Hydrafacial platform for 2028 and planning another complementary device introduction in 2027.
SkinStylus consumables grew 39% year over year, and the company recently expanded the microneedling product into six European markets, Malha said.
Debt Repayment and Liquidity
On September 30, the company repaid the remaining $103.2 million principal on its 2026 convertible senior notes, along with approximately $645,000 in accrued interest. It ended the quarter with $112.4 million in cash and cash equivalents.
Approximately $250 million of convertible debt remains outstanding and matures in the fourth quarter of 2028. Monahan said the company expects to address that debt in 2027 and will evaluate its alternatives.
About Beauty Health (NASDAQ:SKIN)
BeautyHealth is a global health and beauty company focused on providing technology, products and services for aesthetic and skincare businesses. Its flagship brand, HydraFacial, offers a non-invasive treatment platform that combines cleansing, exfoliation, extraction and hydration, with treatments delivered through proprietary devices and consumable solutions.
The company also provides professional skincare products, treatment systems and related solutions designed for use by physicians, dermatologists, aestheticians and other licensed practitioners.
