HROW · Harrow Health, Inc.

Period Performance

For the three months ended September 30, 2025, Harrow reported total revenues of $71.6 million, a 45.5% increase compared to $49.3 million in the same period last year. The branded segment drove performance, with IHEEZO revenue rising 70% to $21.9 million and VEVYE surging 336% to $22.6 million. Compounding revenue (ImprimisRx) declined slightly by 3.1% to $20.1 million, reflecting the discontinuation of Klarity-C and other formulary reductions.

Gross profit increased 44.8% to $53.9 million, while gross margin contracted modestly to 75.3% from 75.6% in the prior year. Branded gross margin remained healthy at 81.6%, while ImprimisRx gross margin dropped to 59.0% from 66.9%, driven by product mix and one-time costs.

Selling, general and administrative expenses rose 6.6% to $35.9 million, primarily from higher headcount and seasonal costs, partially offset by lower stock-based compensation. Research and development expenses increased 46% to $3.3 million, reflecting increased development activity for branded products.

Operating income swung to $14.7 million from $1.3 million in Q3 2024, a dramatic improvement. Net income was $1.0 million ($0.03 diluted EPS) compared to a net loss of $4.2 million ($0.12 loss per share) in the prior year. For the nine-month period, net loss narrowed to $11.8 million from $24.3 million, with the 2025 period including a $7.75 million loss on debt extinguishment.

Balance Sheet & Liquidity

Cash and cash equivalents stood at $74.3 million at September 30, 2025, up from $47.2 million at December 31, 2024. Total assets decreased to $363.1 million from $389.0 million, primarily due to a $38.8 million reduction in accounts receivable (to $77.6 million) as a result of strong collections. Inventories increased slightly to $12.8 million.

Total liabilities decreased to $316.4 million from $319.7 million. Current liabilities fell sharply to $65.4 million from $91.3 million, driven by a $21.2 million reduction in accounts payable and accrued expenses and a $5.4 million decrease in accrued rebates. Long-term debt, net of discount, increased to $242.9 million (from $219.5 million), reflecting the new $250 million 8.625% senior notes due 2030 issued in September 2025, replacing the Oaktree loan and the 2026 and 2027 senior notes. Stockholders' equity decreased to $46.7 million from $69.3 million, mainly due to share repurchases for tax withholding and the accumulated deficit.

Liquidity is enhanced by the new $40 million revolving credit facility with Fifth Third Bank (undrawn as of September 30, 2025). The company believes its current cash and cash flows from operations will sustain operations for at least the next 12 months.

Cash Flow Quality

For the nine months ended September 30, 2025, operating cash flow was $35.5 million, a dramatic reversal from a $4.4 million use of cash in the prior year period. The improvement was driven by a $38.2 million reduction in accounts receivable and a $12.5 million increase in net income adjusted for non-cash items (depreciation, amortization, stock-based compensation, and debt extinguishment loss).

Investing activities used $0.7 million, primarily for equipment and software purchases. Financing activities used $7.7 million, reflecting $230.9 million in debt repayments and $19.9 million in tax withholdings from equity vesting, partially offset by $244.4 million in new debt proceeds net of costs.

Free cash flow (operating cash flow less capex) for the nine months was $34.9 million, a significant improvement from negative free cash flow in the prior year. The company has no material debt maturities until 2030 and has ample liquidity to fund operations and growth initiatives.

MD&A / Forward View

Management highlighted the strong performance of branded products IHEEZO and VEVYE, which together accounted for 62% of total revenues in Q3 2025. The company is executing on several strategic initiatives:

• Harrow Access for All (HAFA): A unified patient access platform expected to simplify prescribing and improve affordability across the ophthalmic portfolio.
• Project Beagle: Transitioning compounding patients to FDA-approved alternatives; Klarity-C was discontinued in June 2025, and other formulations are under review.
• Product launches: BYQLOVI (clobetasol ophthalmic suspension) is expected to launch in Q4 2025 under the Formosa license. The Samsung Bioepis agreement for BYOOVIZ and OPUVIZ will expand the retina portfolio.
• Melt Pharmaceuticals acquisition: The company agreed to acquire the remaining 54% of Melt for $4.3 million up front plus contingent milestones tied to FDA approval and sales of MELT-300.

The company faces ongoing regulatory risks, including FDA interactions regarding its New Jersey outsourcing facility and a California Board of Pharmacy administrative action. Management believes these are not material to the consolidated results but notes potential state-level restrictions.

Notes & Operating Detail

• Segment contribution for Q3 2025: Branded contributed $19.1 million (37.0% margin) and ImprimisRx contributed $4.1 million (20.5% margin). Corporate expenses were $8.4 million.
• Loss on debt extinguishment of $7.75 million in Q3 2025 related to the prepayment of the Oaktree loan, 2026 notes, and 2027 notes.
• Stock-based compensation totaled $3.3 million in Q3 2025, down from $4.4 million in Q3 2024.
• Amortization of intangible assets was $4.2 million in Q3 2025, up from $2.6 million in Q3 2024, primarily due to acquired product rights.
• Customer concentration: Two customers accounted for 82% of accounts receivable at September 30, 2025.
• Subsequent events: In October 2025, the company issued 1,658 shares upon option exercises and 1,546 shares net of tax withholdings for RSU vestings, for immaterial amounts.