The Beauty Health Company (NASDAQ:SKIN) Q3 2025 Earnings Call Transcript

The Beauty Health Company (NASDAQ:SKIN) Q3 2025 Earnings Call Transcript November 6, 2025

The Beauty Health Company misses on earnings expectations. Reported EPS is $-0.09 EPS, expectations were $-0.08.

Operator: Good day, and welcome to The Beauty Health Company 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn over to Norberto Aja, Investor Relations. Please go ahead.

Norberto Aja: Thank you, operator, and good afternoon, everyone. Thank you for joining The Beauty Health Company’s conference call to review our third quarter 2025 results. We released our results earlier this afternoon, which can be found on our corporate website at beautyhealth.com. Joining me on the call today is BeautyHealth’s Chief Executive Officer, Pedro Malha, along with our Chief Financial Officer, Mike Monahan. Before we begin, I would like 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 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. With that, I would now like to turn the call over to our CEO, Pedro Malha. Please go ahead, Pedro.

Pedro Malha: Thank you, Norberto. So good afternoon, everybody, and thank you for joining us today. Before I get into our quarterly results, let me by start thanking Marla Beck for her leadership during an important transition period. BeautyHealth team did a fantastic job stabilizing the business and positioning it for the next phase of growth. This next phase is actually one of the reasons why I chose to lead BeautyHealth. We have an incredible opportunity to leverage our Hydrafacial, device platform and expand it into a category-leading ecosystem of skin health technology solutions. This is a unique company with a proven and resilient razor and blade business model, which is anchored in recurring high-margin consumables and supported by a global network of providers who believe in our technology and in the outcomes of our treatments that are delivered every day to thousands of people around the world.

BeautyHealth is also well positioned to lead the skin health category as we continue to see the market shifting towards a less invasive, increasingly personalized and more science-backed procedures and treatments. I say well positioned because if we look across the landscape, every — very few companies are capturing the recurring economics behind procedure volumes. And this is where BeautyHealth stands apart because we participate on both sides of the equation, the capital equipment and the consumables, which creates a self-reinforcing flywheel of predictable and profitable revenue. So since I joined BeautyHealth a month ago, I’ve been very impressed by the passion and the commitment of our teams around the world and by the loyalty of our customers and providers.

But as we all know, passion alone does not create shareholder value. So we need to make sure that this passion is harnessing with a clear strategy and operational excellence and a consistent top line growth and financial performance. So we are going to go and over-index our capital and attention in 4 different areas. First, our priority will be protecting and growing our Hydrafacial installed base of over 35,000 devices worldwide, because we know that for every device we place that will drive years of high-margin consumable growth. Second, we will focus on driving consumable utilization. This is the engine behind our profitability. Consumer — consumables generate strong gross margins, so increasing device to consumable efficiency and usage across the installed base needs to absolutely be a key focus area for us.

Thirdly, we must keep innovating across both devices and consumable platforms, and we will do that by bringing to market superior clinically backed products that meet our providers’ needs and deliver the desired results for our customers. And fourth, we will continue to strengthen our operational discipline around commercial execution, cost control, margin expansion, supply chain and quality. And this is an area where we already have done very good work, and we will continue to focus on. So now turning to our third quarter results. For Q3, total net sales were $70.7 million, down 10.3% year-over-year, slightly ahead of the high end of our forecast for the quarter. In our device segment, Q3 revenues were $20.8 million, a decrease of 24.6% year-over-year, primarily reflecting continued pressure on equipment sales globally and the impact of the China transition to a distributor partner.

Looking at our consumables segment. Q3 revenues were $49.8 million, a decrease of 2.6% year-over-year, primarily reflecting the change in the China business model. If we net out the China impact, consumables sales will have actually increased modestly versus last year. So as a result, our consumable mix moved from 65% of net sales in Q3 of last year to 71% this quarter. Now looking from a portfolio perspective. We continue to deliver on our new product launches. Hydralock HA and HydraFillic with Pep9 Boosters together contributed to 14% growth in the booster sales category this quarter. We also achieved significant milestone in operations. We are holding inventory below $60 million, which is the lowest in 3 years. And this is the result of the work the team has done to improve demand planning, forecasting and production quality.

In terms of Q3 adjusted gross margins, we landed at 68%, a decline of approximately 150 bps from Q3 of last year. And this was driven primarily by lower average selling prices as our distributor markets held a larger unit share of the overall equipment revenue year-over-year. Looking at adjusted EBITDA, that was $8.9 million, up 11% from Q3 of last year and reflects a tight control of cost and a solid operational execution. Now looking ahead, we are confident in our outlook of raising adjusted EBITDA guidance for the remainder of the year as well as the midpoint of our full year revenue guidance. And that is because we are encouraged by the momentum we are building as we enter 2026. So with that, I’ll turn the call over to Mike to walk you through our third quarter results in more detail.

Michael Monahan: Thank you, Pedro, and good afternoon, everyone. I’m pleased to share another quarter of steady execution and disciplined financial performance in which we once again exceeded our initial expectations. Our team across all functions continues to work tremendously hard to support our providers and drive shareholder value. As expected, revenue declined year-over-year, primarily due to device sale pressure. However, we delivered strong margins and profitability, reflecting the continued benefits of operational discipline and cost management. For the third quarter, net sales were $70.7 million compared to $78.8 million in the prior year, primarily reflecting lower device sales, which declined 24.6% to $20.8 million, consistent with the macroenvironment.

Overall, consumable sales declined 2.6% to $49.8 million as international gains were offset by softer U.S. trends. The decline includes lower consumable sales due to our transition from a direct seller to a distributor model in China. Excluding China, consumable sales would have increased modestly year-over-year. Price increases were partially offset by lower volume. From a regional perspective, revenue in the Americas declined by 7% to $48.3 million. APAC revenue decreased 41.5% to $6.3 million, while revenue across EMEA was relatively flat at $16.1 million. The decline in APAC reflects our planned go-to-market transition in China, where we have shifted from a direct to a distributor model. As part of this change, we prepositioned sufficient capital equipment inventory in China to meet anticipated demand through year-end, minimizing tariff exposure on devices.

Our global footprint continues to expand, which adds to the recurring consumables revenue stream. In the third quarter, we sold 875 total units worldwide at an average selling price of approximately $23,794. As of September 30, 2025, total active machines in the field increased to 35,409 units versus 34,162 units at the end of Q3 2024. GAAP gross profit increased 12.3% to $45.6 million, resulting in a GAAP gross margin of 64.6%. Adjusted gross margin came in at 68%. The GAAP margin improvement was driven primarily by lower inventory write-offs and a mix shift towards high-margin consumables revenue. Q3 2024 includes charges from our China manufacturing exit and our retail-specific Perk write-offs. We have maintained tight control over expenses this quarter as sales and marketing spending was below our plan, reflecting lower headcount and disciplined spend management.

Total operating expenses for the third quarter decreased by 16.5% to $51.9 million as we continue to manage our expenses. Selling and marketing expenses were $20.9 million compared to $27.6 million last year, a decrease of $6.7 million or 24.2% year-over-year. The decline was primarily due to lower headcount and targeted spending. R&D expenses were $1.7 million compared to $1.1 million last year, an increase of $0.6 million or 53.2% year-over-year. The increase was primarily driven by higher other professional service expenses related to early-stage future product investments. G&A expense was $29.3 million, down from $33.4 million in the prior year, a reduction of $4.2 million or 12.5% year-over-year, driven by lower headcount and bad debt recovery, partially offset by higher legal and incentive-related costs.

These results led to an operating loss of $6.2 million in Q3 2025, a significant improvement versus a loss of $21.5 million in the comparable prior year. Adjusted EBITDA was $8.9 million, up from $8.1 million in Q3 last year, with adjusted EBITDA margin improving approximately 240 basis points to 12.6%. The increase reflects continued cost control even in the face of lower top line volume. Moving to the balance sheet. We ended the quarter with $219.4 million in cash and equivalents compared to $370.1 million at year-end 2024. The change primarily reflects the completion of our convertible note exchange under which we repurchased approximately $20 million of principal and exchanged $413 million of our 2026 notes for a mix of cash and $250 million of new 7.95% secured notes due 2028.

This transaction significantly extended our debt maturity profile and enhanced our long-term financial flexibility. Cash used for refinancing activities was partially offset by cash flows from operations, reflecting a strong improvement over the breakeven position in the prior year. Inventory declined to $56.1 million, down from $69.1 million at year-end, reflecting stronger demand planning and improved supply chain efficiency. We also continue to make progress selling through our Elite fair market value devices with 131 units remaining, which we expect to sell by year-end. As previously noted, our U.S.-based manufacturing footprint is fully operational and remains a strategic advantage, enhancing product quality, increasing agility and mitigating domestic tariff exposure.

Given our performance through the first 9 months and our visibility into year-end, we are raising the low end of our full year 2025 revenue guidance to between $293 million and $300 million and increasing our adjusted EBITDA guidance to between $37 million and $39 million. For Q4, we expect net sales between $74.5 million and $81.5 million and adjusted EBITDA between $6.9 million and $8.9 million. The midpoint of this guidance reflects reduced year-over-year revenue declines and continued cost management discipline. Now I’ll turn the call back over to Pedro for final comments.

Pedro Malha: Thanks, Mike. So to close, it’s important to highlight that we are operating in a tough and still unpredictable environment where inflation remains an issue, access to financing continues to be challenging for capital equipment purchases and consumer confidence continues to be uneven, especially in the discretionary categories where BeautyHealth operates. But despite the macroeconomic backdrop, we will continue to prioritize and lean towards the levers within our control that will drive device footprint expansion and repeat consumer treatments, all with the objective to keep building the Hydrafacial global brand, accelerating our revenue growth and profitability and position BeautyHealth firmly as the leader in the global medical aesthetics market. So with that, I’ll turn the call over for questions.

Operator: [Operator Instructions] The first question comes from Oliver Chen with TD Cowen.

Q&A Session

Oliver Chen: Encouraging on the guidance. I would love your thoughts on what’s happening in Americas and also the more cautious trends you cited in Americas, and how you weigh that against the guidance you gave? Also to help us compare and contrast a little bit about Americas relative to EMEA being flat.

Pedro Malha: Sure, Oliver. So if you look at the regional dynamics of our business, it’s kind of a mixed picture, but I believe we’re trending in the right direction here. So just to look at the Americas, which, by the way, it’s our largest business, 65% of our total revenue comes from that. Overall, yes, the Americas was down 7%. Out of that, devices was down 16.3% and that’s the explanation for that. And the driver for that was the lower device placements and because of the macro pressures that are currently affecting the country. But despite being a decrease, Q3 was less than the previous 2 quarters. So you saw an average of 20% decrease in the prior 2 quarters of the year. We believe that we are seeing some stabilization here in terms of devices for the Americas.

Consumables, a little bit of a different mix. We were down about 2.7%, and that was driven by a combination of, again, consumer spending, some headwinds there, coupled with lower device placements that we had in the first half of the year. But if we look our booster sales have increased. So that’s kind of the picture of the Americas. If you want to contrast that with what’s happening in EMEA, EMEA, it’s a little bit of the same narrative. 25% of the total sales comes from that region. But overall, we were flat, and we were flat because of the mix of different performance. We have strong momentum in Germany, strong momentum in the medical channel. But again, devices were down in EMEA about 21%. And again, very similar challenges as the U.S. with the consumer confidence being generally lower than a year ago.

And with the added factor that in EMEA, we have a little bit more of a crowded space there. So the local teams are very focused on training and education, on the benefits of Hydrafacial versus other treatments. And that’s — but that’s taking an effect. If you look at the consumables on EMEA, we continue actually to perform well. This is a bright spot. It has been a bright spot for us. It’s definitely a bright spot for the quarter. We grew there double-digits, about 10%. And that was driven by very strong performance in Germany and then again, from the medical channel. Then we have a small portion of APAC, which is about 10% of our total sales, and which has been down substantially due to the China transition to a distributor market with both devices and consumables being down.

Oliver Chen: And then one broader question. As you mentioned, the 4 focus areas, which ones were going to be more near term in terms of what you’re seeing in your hypothesis and which ones may be longer term? And as you mentioned, the skin health technology ecosystem, how do you envision that? Or how would you frame that in terms of device platforms, digital diagnostics or partnerships as you think more broadly?

Pedro Malha: Yes, sure. So the way we’re kind of looking at the business, there’s a broader plan or strategy that is overarching for the whole company. And then we will definitely have a more surgical strategy for our device business and consumable business. And definitely, over time, I’ll share much more in how we’re shaping the future strategic roadmap as we go along. But my initial observation is that, our competitive advantage really relies on our core value proposition. We need to keep driving utilization. We need to keep driving device placement. And this is because we all know that for every device that we place that drives multiyear consumable revenues after that on the tail. So then our job after that is just to make sure that we are capturing the long tail of recurring customers, the consumables.

We need to focus on innovation, and that’s going to be a play across both devices and consumable platforms. And so the intent is to continue to launch superior, and most importantly, clinically backed products that meets our provider needs. Execution has been a very bright spot in the prior quarters. We will continue definitely tying up the execution performance, continue to drive commercial excellence around our business with better targeting and lead conversion. And as with every business, we’ll keep a close eye on capital efficiency, making sure that every dollar is invested or driving profitable revenue or in margin improvements. And then if you look more specific into what we’re planning to do for devices, again, I will definitely share more about my thinking here.

But we have to attack this problem from a multitude of angles here. First, we have to address the providers’ financing challenges. That has to be — has been definitely a gating item for us in the prior quarters. And we have to do that with smarter and more targeted pricing strategies. And secondly, as you guys remember, we rolled out the good, better, best program, which basically gives customers more flexibility in terms of price points across our portfolio of Syndeo, of Elite and Allegro. And that is definitely helping now the consumers navigate the macro better. And also on devices, we have to be reinforcing constantly the commercial discipline around targeting segmentation and conversion. And the team is doing a great job there. Different — a little bit of a different strategy that we’re going to be exploring is going to go on the consumable side, because that’s where we’re going to really lean in on the innovation.

And that’s kind of — that’s the formula that has been working for us. And we’re going to do that by launching differentiated boosters with clinical — real clinical proof there. And we’re going to continue to equip our providers with marketing tools that are relevant, that are impactful, and we’re going to continue to invest in education because that’s kind of — that’s the gating item that will move the needle. Post sales onboarding, very important. We have to continue to over-index on those, making sure that every provider knows and how to maximize the return on investment of every machine that they commit to. And consumer mind share. This is in the end, boosters, serums, they need the inbound traffic to happen. So we’ll definitely have to be invested in driving that consumer mind share.

So overall, still very high level, but this is kind of the key areas I personally and the team are very focused on.

Operator: [Operator Instructions] The next question comes from JP Wollam with ROTH Capital Partners.

John-Paul Wollam: Pedro, maybe if we could start with you. As you kind of get your hands wrapped around the business a little bit more and get a better understanding, is there anything else you can share about the sort of international strategy and sort of where you feel makes the most sense to have direct versus distributor models?

Pedro Malha: Definitely. Thanks, John. Thanks for the question. We are a global company. So if you want to grow, which is the intent, we have to address international markets as part of that formula. And so we have to obviously focus on that and have, in my view, very targeted commercial programs designed to fit the different regions’ economics that — in where our products are present. We have been historically leading into an extensive distributor network that is part of our DNA, and we will continue to do that in order to drive penetration and reach. That’s part of our — the way we go to marketing has been quite of a successful formula there. So we will definitely continue to do that. But at the same time, we need to make sure that we invest in education and training as we scale and help out the distributors increase their penetration in their respective markets.

So that’s kind of [ additional ] strategy. Not a big change over overall. It’s still a small portion of our business. We intend to explore the opportunities of growth in different markets, being those through direct channel or distributor channel. But definitely, just to respond to your question, John, definitely international has to be part of that equation for us.

John-Paul Wollam: And then just a quick follow-up. I believe you took the pricing on the consumables side in July. Can you just talk about how the reception has been to that price increase and what it says about potential pricing power in the future on the consumables side?

Pedro Malha: No, no problem, John. So the team has been very pleased how the market not only digested, but actually took that price increase, which was triggered around the summertime of this year. So ASP for — you look at consumers ASP is up, and that is the reason — because of the price — the 5% price increase that we drove. And another thing that we are seeing is that the boosters are driving that ASP also up for us. So overall, for our consumable category, ASP overall on average is up, which is a good thing.

Operator: The next question comes from Susan Anderson with Canaccord.

Susan Anderson: I’d love to hear maybe just kind of your thoughts on stabilizing the systems. I mean, it looks like they’re already stabilizing, but what initiatives do you think you need to put in place to get those to grow again?

Pedro Malha: Sure, Susan. So let me just anchor on our quarter performance. I think that’s probably best as we start discussing how we’re doing with devices. So for the quarter, devices were down. Devices represent about 30% of our total revenue. And by the way, Syndeo represents 70% of total new device placements. So a big chunk there on our new platform. They are declining indeed, and we feel that this is a direct — indirect correlation to the economic environment that we live in which translates into a tighter lending environment as well. But at the same time, we look at how we are expanding the footprint of our devices globally, and actually we look at Q3, and we sold an extra 875 units. So we continue to expand that footprint.

We continue to broaden our reach, and that is definitely good news for us. Now we understand that the devices keep coming down and have been coming down for some quarters. But what we are encouraged to see is that those numbers are stabilizing. We are coming up — coming off rather out of easier comps more and more. Our lead pipeline is improving. Our field teams are getting more disciplined about lead conversion. So if I look at — in the future, I definitely expect this trend to continue as the financing access improves and the sales teams executing better. So I look at devices and specifically the performance of our ability to sell devices into the market to get better and better as the quarters progress and the comps get easier, and we do a better job in commercial execution.

Susan Anderson: And then I guess to add one follow-up on the consumables front. I guess, just curious your thoughts around — I guess, I think Marla was creating some products not just necessarily for treatment such as boosters, but also for use maybe during treatment or for purchase in private spa. I guess just curious on your thoughts around the consumables area and kind of where you’re going to be focused at.

Pedro Malha: Yes, absolutely. So we have decided to actually pause the skin care initiative. And that decision was a deliberate strategic decision. My opinion is that our competitive advantage lies rather on the clinical differentiation, on recurring consumables, on stronger provider partnerships. And that’s where we generate long-term value. So after reviewing the business case, we basically concluded that skin care will pull us away, will pull us away from our core business model and — which, by the way, is the business model that provides us with a very strong competitive advantage. So we have decided to instead focus our capital rather on things that are core to our business instead of — into ventures where we have no expertise or actually no right to win.

As we make that decision, we also look at the potential impacts on the revenue. And so actually, the project was pre revenue. So we will — and on top of that, we will have — it will have to require heavily investment before we could scale up. So by not pursuing the skin care initiative, we actually preserve capital, which indeed will absolutely help us in our near-term profitability profile.

Operator: The next question comes from Olivia Tong with Raymond James.

Lillian Moffett: This is Lillian on for Olivia. I’m wondering if you could talk through the trends you’re seeing in different channels? And then also any color on what you’re seeing from an end consumer standpoint and whether you’ve noticed any incremental weakness as macros remain pretty choppy?

Pedro Malha: Yes. So Olivia (sic) [ Lillian ], as you know, we divide our consumable business between the medical and the non-medical segments. So medical, just for reference, that includes your med spas, your dermatologists, your plastic surgeons. And that segment itself represents about 70% of our providers in the U.S. — this is just the U.S., with the largest segment being about 2/3 being med spas, which, by the way, is the channel that keeps the market growing overall. Well, the plastic surgeons, from what we understand, are experiencing some slowdown because basically consumers now are prioritizing less invasive care. And then you have on the other side, the non-medical segment, and that includes the day spas and the single room institutions.

And here, we are seeing a stable progression there as well. But basically, the U.S. and EMEA has the largest portion of the medical side and medical spas. But with all the challenges that they are facing in the macroeconomic realm, that is impacting their business. The bright spot here is Germany, as I think, I mentioned before and on the consumable medical channel. But overall, we still believe there is growth opportunity in both of these segments or channels, both the medical and the non-medical. And our job from now on is to make sure that we design products and have the right pricing strategy and positioning to capture the opportunity in both of these segments. Mike, do you want to chime in?

Michael Monahan: I just wanted to add about the end consumer piece. One of the things we saw during the quarter where booster attachment rates were very high. They’ve been a real bright spot in the business. And that can really highlight the impact of the innovation that we’ve been investing in over the last year. So you look at a year ago, the company launched Hydralock. And then in the second quarter, we launched HydraFillic, and they’ve had a real positive impact on the overall business. Utilization rates on our installed base, we’ve seen a little pressure, highlighting that the end consumer who’s coming in for just a normal Hydrafacial without electing kind of boosters has been under a bit of pressure. And so we really focused on the sales and training aspect of the business to make sure there’s outreach there.

We’re leaning into education to make sure our providers are equipped with the tools they need to communicate the benefits most effectively around the Hydrafacial treatment.

Operator: The next question comes from Allen Gong with JPMorgan.

K. Gong: I guess starting just with a broader strategy question. This has been a reset year for BeautyHealth. You are hopefully stabilizing. This will be a nice baseline for you to grow off going forwards. So when I think about the outlook for 2026, how should I think about how you’re going to prioritize top line growth versus profitability and diving deeper into existing accounts and focusing more on consumables versus trying to drive a reacceleration in delivery systems?

Pedro Malha: We’re actually going to be focusing on all of those lines. You have to bring top line revenue growth to this business. We can definitely flex our spend, and we — the team has been doing that for some time very successfully, increasing our gross margins as well and which translates in an expanded profitability and EBITDA. But if the top line is not there, we’re always going to find ourselves behind the 8 ball. So our total focus will be to drive that top line. We have a very strong business model that keeps delivering recurring revenue. The team has to be focusing on that for sure. In terms of next year in the way we are looking at — and I’m not going to provide any guidance because I think it’s a little bit premature to start talking about specifics about 2026.

We’ll actually share more detail commentary on our next call. But we feel good. We feel good about the setup. We’re coming from 2 consecutive quarters of good progress, which basically gives us a strong base heading into next year. But again, and I think it transpires throughout the call this momentum that we feel strong about will depend on several factors kicking in. And first and foremost, the market that we are participating is still under some pressure versus prior years. And I think that we’re going to be definitely continue to see some lumpiness in the near term. Overall, consumer spending, again, is still rating — limiting factor for us. And so we’re going to keep an eye on that as well. But looking at next year, if the macro conditions improve even slightly and if our device momentum improves, which will be the focus of the team, then we can expect operating leverage and further expansion on our bottom EBITDA.

So where we stand, yes, I think we have the elements that we need going into next year with a good momentum.

Operator: We move to the next question. It’s from the line of Jon Block with Steifel.

Joseph Federico: It’s Joe Federico on for Jon. So maybe to start, and Mike, this might be more for you, but just to flush through some of the updated guidance dynamics. Revenue expectations, I think, came up by $4 million at the midpoint and EBITDA came up by $7 million, so a decent clip more. Can you just maybe walk us through some of the moving parts more specifically as to why there’s so much more of a drop-through on the incremental sales? I know gross margin outperformed in the quarter. So is that just sustainable in coming quarters? Any additional color would be helpful.

Michael Monahan: Sure. A big portion of the fall-through happened in Q3, Joe, as well. So we obviously exceeded kind of the midpoint of our expectations on Q3. I think the midpoint of our original guide was around $3 million, and we obviously came in well above that. So that’s the piece. But when you look to your point around adjusted gross margins, as I think about kind of Q4, seasonally, gross margins tend to be a little bit lower quarter-over-quarter because we run the consumables promotion in the fourth quarter, the Black Friday, Cyber Monday promotions. So I would think about gross margins in the fourth quarter coming in more similar to the second quarter versus the third. And then OpEx, it tends — I would expect it to go up quarter-over-quarter, about $2 million to $3 million versus Q3, and that’s primarily due to higher commission dollars because of sales growing and marketing spending associated with that.

So the key themes — those are the financials. The key themes Pedro touched on are, we’re seeing — while devices still continue to be under pressure, it’s a lot less as we’ve moved throughout the year and really executed on the sales initiatives that we’ve had and introduced kind of the good, better, best, and we’ve also put together different pricing portfolio bundles for Syndeo that we’ve started to see some success with. So our expectation behind the guidance is that you’ll continue to see those trends improve through the fourth quarter.

Joseph Federico: Okay. Got it. That’s really helpful. And then maybe just a quick follow-up. We’re calculating that churn in the quarter was just under 2%, which is a modest improvement compared with last quarter, but it’s still pretty elevated compared to the last 7 or 8 quarters, call it. I know you had planned actions to moderate that in the back half of this year. Maybe just how are some of those progressing? Are you starting to see them moderate more in 4Q to date? Just your latest thoughts there.

Pedro Malha: Yes. So I’ll take that, Joe. Definitely, churn is definitely higher than usual, about 1.8% versus, I think, about 0.9% of last year. And look, we’re looking at this very seriously. We believe the causes could be actually multifactorial. And then our data points and the team is still running a lot of analysis here. But our data points to financial pressure being the primary factor. And driven — and this is driven by the economic challenges on the low-volume small providers that — or are closing down, simply, they’re closing their doors or they have a higher staff turnover and that comes with less consistent device utilization. And so I believe or we believe rather than these factors are the main culprits behind the increased churn that we just saw this past quarter.

Now what are we doing about it? Actually, there’s ways you can see this. You can see this as a loss or you can see this as an opportunity, and we rather are looking at this as a reactivation opportunity, and we’re taking a very proactive stand in reengaging this — particularly these low-volume providers. And we’re going to go — we are going in and offering more support and improving our training to them. And so the goal that the team has is to bring these churn numbers back to what we think are the historical levels over — and we’ll do that over the next few quarters.

Operator: That was the last question. This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.