Operator: Thanks for the questions. The next question will come from Oliver Chin with TD Cowen. Please go ahead.
Jonah: Hi, this is Jonah. I'm for Oliver. Thank you for taking our question. We'd love to get additional color just around the trend that you saw in the quarter and what's baked in in terms of the trend rate in your guide and how do you anticipate tackling the trend rate throughout the year? And another question is, you mentioned MEN and Gen Z are the newer customer sets. How are you repositioning your marketing messaging, if at all, to target those new customer sets? We'll appreciate a call there. Thank you so much.
Pedro: No problem. So, Mike, we'll take the first part of that question. I'll take the second. Sure.
Mike: Thanks for the question. Churn was a little bit higher than usual for the full year of 2025, but it improved in Q4 both year over year and sequentially from what we saw in Q3. So in the fourth quarter, it was about 1.1%. You know, when you look versus the year prior, as I said, it was a little bit higher than that. In Q3, it averaged around 1.8%. So we're moving in the right direction. The driver of the churn is mostly our smaller accounts that don't have a business development manager. assigned to them. So we began over the last few months restructuring our inside sales and customer service teams to better meet the needs of these accounts. So our focus in 2026 is we expect to potentially improve on that area. The guide, however, assumes that we'll hold churn on a year-over-year basis flat. So our hope is that there's upside to the guide that we gave in that particular line item.
Pedro: In terms of the segments that are moving in our way, as I mentioned in my initial remarks, the strategy is based on three assets. We have a great brand, a very large install base, and a razor blade model. That basically means that for every device we place, it can become an annuity from a high margin consumables that potentially can last many years. Our job here is the different customers getting to the fold and different segments of customers getting to the fold is to basically unlock the full potential of these assets. And to support this strategy, we have a market, again, that is moving in various ways our way. As I mentioned, the med spas continue to grow. There's this set of new demographics entering the category, which we are building and addressing their needs, their specific concerns in terms of skin health. We are seeing more and more consumers getting into treatments earlier in age, and they wanted to treat skin very, very much like a lifestyle routine, which is definitely positioning well hydrofacial and beauty health to take advantage of this shift. Because we are indeed moving towards much more of an outcome-driven protocol, combination therapies, and clinically validated results, which is exactly us. So all in all, as more consumers, more demographics seems to be expanding into the category, we are very well positioned to be at the forefront and to offer the exact solution that they're looking for.
Jonah: Thank you so much.
Operator: The next question will come from Susan Anderson with Canaccord Genuity. Please go ahead.
Alec Legon: Hi, good afternoon. Alec Legon for Susan. Thanks for taking our question. You hinted that you have a potential new system in the works or a focus of your innovation, I guess. Is there a timeline that you're targeting for that launch, if you're able to talk about it? And then what type of additional services would that system potentially offer? Thank you.
Pedro: Sure. So let me bring you back into our innovation strategy and the initiatives that we have to support that same strategy. So we are improving. Let me start by saying that we are improving the discipline around new product launches, period. And basically, we're not going to go and chase trends. Instead, what we are going is to invest in and launch products and technologies and solutions that materially add value to our providers. And not only that, and that they are different versus our competitors, and they provide outcomes that consumers want, and in the end, they are creative financially to our business in terms of margins. So that's kind of the framework that we are taking and using for innovation. Now, when it comes to the next-gen hydrofacial, the goal here is to build one that will give our existing customers more than 36,000 providers, a compelling reason for upgrade. And a new provider is a compelling reason to get into the hydrofacial universe. I don't want to go too much into the specific features of the next-gen hydrofacial device at this moment, but what I can tell you and what I can commit is that we will launch a device that will materially advance the value proposition and the return on investment of hydrofacial to our providers. And in terms of timeline, we are right now at the early stages of development, but the plans are to launch the next gen of hydrofacial in 2028. And for sure, we're going to keep you updated as we get closer to those timelines.
Alec Legon: Thanks, Pedro. That's pretty exciting. And then just thinking longer term about sales between consumables and new device placements, right now it's around 70% consumables, 30% new devices. Is that, I guess, the rate that we should think about it? Is there a different target that you're thinking about longer term? Thank you.
Mike: We're not in a position to give a target right now, obviously, but our hope is or our expectation is that as we move through not just this year and into next year that we return to device growth. And so we haven't been able to give kind of a specifics outside of being able to, you know, focus on growing both of those categories kind of into the future. So later in the year, into next year, we'll continue to provide updates on where we think that can be.
Operator: Thanks, Mike. I'll turn it back. The next question will come from John Block with Stiefel. Please go ahead.
Joe Federico: Hey, everyone. Joe Federico on for John Block. Maybe just to dig a little bit deeper into the consumables performance in the quarter, EMEA has been pretty strong in terms of consumable sales over the past three or so quarters, and in the back half of the year off of more difficult comps as well. Can you just give us some color on what's driving that? Is it just a healthier end market? Or is there any sales execution drivers that can be replicated in some of the other regions? Any thoughts would be helpful.
Pedro: Sure, Joe. So overall, at the highest level in terms of the full quarter performance, so on consumables, we grew low single digits compared to actually negative subsequent growth in Q3. For the full year, we grow as well low single digits. But booster sales grew much more. And that's an important point, high single digits. So if you want to break out that by region, the U.S. and looking at the larger provider groups and dermatology practice, both of these guys are growing. While small independent providers are we see that they are still under pressure. Now, you touch a good point, which was EMEA. And within EMEA, specifically, Germany is performing exceptionally well. The only pressure that we saw in the quarter when it comes to consumer performance was actually coming from China and as a direct result of the China transition. Now, If you add this to what is the underlying trends driving this consumer demand, what I can tell you is the core demand is still there. Consumers seem to continue to prioritize our treatments as part of their skin health routine and also because of our price position versus other aesthetic treatments. Actually, the average spend per treatment in the U.S. in consumables is up 10% year over year. And that is driven by our premium boosters and the strategy of the booster. Mike?
Mike: If I could just add one thing additionally to that. EMEA was a little bit different than the other regions last year because they launched five new boosters throughout the year. And some of them got regulatory approval later. So these were boosters that were launched earlier in the Americas. And so the booster growth that we saw there really kind of demonstrates the power of innovation kind of in this business. And when you can launch new innovative products that can actually drive demand. And within EMEA, we saw that not just in the direct markets, but also in the distributor channel where we saw, you know, really good consumable and specifically booster growth.
Joe Federico: Okay, that's really helpful, Culler. Thank you. And then maybe just a follow-up on guidance. The 1Q26 revenue guidance at the midpoint implies kind of a more outsized sequential decline than we've seen over the past handful of years. And so the past couple of quarters, actual performance has come in pretty solidly ahead of guidance and expectations. Should we assume you know, any more conservatism to the guidance philosophy going forward? Or is there like a specific, a specific reason to point to for, you know, more pronounced decline in one Q quarter over quarter?
Mike: The Q1 midpoint does assume a decline in the mid single digits. It's primarily due to softness in the APAC region and equipment softness in the Americas. That's, that's reason number one. The second point is on the consumables revenue. for Q1. We're projecting that to be lower year over year on a consolidated basis for a couple of reasons. First, distributor orders that came in in Q4, there's some timing a lot of times that happens with the distributor channel. They came in strong at the end of the quarter, so we're factoring in a bit of a decline in Q1 just due to timing. And also, overall, as Pedro mentioned, we're seeing lower signature treatments due to kind of macro pressures, even though consumers who are coming in to get treatments, they're, they're electing more boosters than they have in the past, which is driving up the overall treatment. But we factored in that lower consumable revenue and treatments into the first quarter. So I would, I would suggest the way we guide is to, you know, towards kind of the midpoint. So we don't really factor in deliberately conservatism. That's kind of where we're seeing in the, what we're seeing in the business. But we're obviously always striving to do as best we can. And if we can outperform, we will certainly do so.
Operator: Great. Thank you for taking the questions. The next question will come from Bruce Jackson with the Benchmark Company. Please go ahead.
Bruce Jackson: Hi. Thanks for taking my question. Looking at the strength in consumables this quarter, was there anything going on in terms of – average selling price increases or additional upselling? Can you provide any color on that? And then given the importance of the boosters, what is the anticipated launch cadence for 2026?
Pedro: So, Bruce, so in terms of the boosters themselves, roughly they're about a fifth of the treatments. A fifth of the treatments use a booster. And what we are seeing is that that ratio keeps improving. For Q4, the booster revenue was up 7% year-on-year. And this happened, and it was driven by the clinical proven hydrophilic and hydrologic boosters launched in the medical channel. Because the providers and the consumers actually saw the results, and that was a major engine of growth for the boosters. In terms of, and this speaks exactly to the strategy that we are putting forward, which is we are going to be over-indexing in launching clinical differentiated boosters with a very disciplined cadence. And also, we're going to be equipping providers with impactful marketing, good, strong marketing tools, and keep investing in education. And also, we're going to AMP the post-sales onboarding, making sure that every provider knows how to maximize their return on investment. And finally, we're going to invest our marketing into driving consumer mindshare and investing in the brand. So that's kind of the backdrop of the Q4 performance. It's mainly heavy on the way the boosters are taking share out of the main treatments. But in terms of 2026, yes, we just spoke that Q1 will be pressure a little bit modestly with a modest decline versus prior year. But as Mike just said, that is largely driven by the APEC region and majority with the change in China. But as the year progresses, in terms of consumables, we expect to see modest growth in the Americas to happen.
Operator: Okay, got it. Thank you very much. The next question will come from JP Wallum with Roth Capital Partners. Please go ahead. Great. I appreciate you guys taking my questions.
JP Wallum: If we could maybe start on the consumables side. So I think 4Q would have been kind of the first promo or busy season for consumables following the price increase. So just curious if you can talk about, you know, reception to the pricing increase and kind of what that means for whether price might be a lever going forward. And just as a follow-up there, like, When you think about consumable utilization between your best partners and your worst, what's separating them?
Operator: What does that difference look like?
Mike: I can speak to a couple of those questions. The first on the price increase, we did the price increase on consumables actually at the beginning of Q3. So the third quarter was the first quarter where you saw the impact. I think the follow-up to that question was we really didn't see – we did a 5% increase, and we really didn't have a lot of complaints or pushback on that. So, so far, that's been very successful for us. Going forward, the sales and marketing team continue to evaluate the overall pricing strategy, so we don't have any plans, you know, at this point to make any changes, but we'll keep you posted if anything changes there.
Pedro: In terms of, I'll just chime in, in terms of what we see being the reasons why boosters get higher attachment rates in certain specific segments of customers versus others, and what we have seen and what actually our data shows is is that a provider who understands how to prescribe a booster uses roughly three times more as many boosters as the one that doesn't. And that is exactly why we are investing in marketing and investing in education to these providers.
JP Wallum: Understood. And maybe, Mike, for you as a follow-up, you know, as we think about kind of OpEx and you've done such a great job kind of managing expenses there, you know, understanding the need to invest from here, but just curious as you think about kind of some offsets to the investment, you know, where are you in terms of maybe kind of centralizing some, some international, um, you know, double costs of whether that's accounting finance, anything of that nature, like, are there still offsets that you see in terms of the OPEX line for, for the upcoming investments?
Mike: Yes. In terms of shared service centers, we are creating them. That's been a process that's been ongoing over the last year and will continue. So we're continuing to see really two things. We're making investments in the back end system infrastructure that enables us to manage the global business effectively through shared service centers, which is helping us with costs. We expect that to all be finalized more so by the end of this year. We made a lot of progress in some of the global entities the past year, and we have a few more to do this year, and we'll continue to do that. Our guide this year assumes that there is, you know, GNA as a whole is stable to slightly up. And then there's the additional reinvestment back into R&D. I think over the long term, there is opportunity to continue to gain efficiencies in this business. But most importantly, I think when you look at the overall optics, there's a huge opportunity as we return to growth to get leverage out of that fixed cost infrastructure going forward. And that's really as we continue to get more focused on system innovation processes. We've done a lot of work there. We're really positioning the company in our view to start to have a lot more of that gross profit drop down to adjusted EBITDA when we return to growth.
Operator: Really helpful. Thanks and best of luck going forward. And this will conclude our question and answer session as well as our conference call for today. Thank you for attending today's presentation. You may now disconnect.
