HROW · Harrow Health, Inc.

Period Performance

Harrow Health reported a strong second quarter for fiscal 2025, with total revenue of $63.7 million, up 30.2% from $48.9 million in Q2 2024. The growth was driven entirely by the Branded segment, which surged 54.5% to $42.3 million, led by IHEEZO ($18.3M, +62%) and VEVYE ($18.6M, +332%). ImprimisRx revenue was essentially flat at $21.5 million. Gross profit rose 30.5% to $47.5 million, with gross margin improving slightly to 74.6% from 74.4%. Operating income swung to $11.4 million from $1.5 million, reflecting both revenue growth and a $2.9 million decrease in stock-based compensation. Net income was $5.0 million, or $0.14 per diluted share, compared to a net loss of $6.5 million ($0.18 loss per share) in the prior year.

Balance Sheet & Liquidity

Total assets at June 30, 2025 were $345.0 million, down from $389.0 million at December 31, 2024, primarily due to a $37.6 million reduction in accounts receivable. Cash increased to $53.0 million from $47.2 million. Total debt (current and non-current) was $222.1 million, virtually unchanged from $219.5 million at year-end, but $183.6 million was reclassified as current because the Oaktree Loan ($107.5M) and 2026 Notes ($75M) both mature within one year. Stockholders' equity decreased to $49.3 million from $69.3 million, mainly due to share repurchases for tax withholding ($12.8M) and the net loss for the period.

Cash Flow Quality

Operating cash flow for the first half of 2025 improved dramatically to $18.9 million from a use of $7.4 million in the prior year, driven by a $37.2 million reduction in accounts receivable. Capital expenditures were minimal ($0.3M), resulting in free cash flow of approximately $18.4 million. Financing cash outflows of $12.6 million related largely to payroll taxes on vesting of performance stock units. The company ended the period with $53.0 million in cash, providing some near-term liquidity but insufficient to cover upcoming debt maturities without refinancing.

MD&A / Forward View

Management attributes the revenue growth to increased unit sales of IHEEZO and VEVYE and expects these trends to continue. The ImprimisRx segment is being restructured via 'Project Beagle,' which aims to transition compounded patients to FDA-approved products and discontinue certain formulations (Klarity-C discontinued June 30, 2025). The company recently signed a development and commercialization agreement with Samsung Bioepis for BYOOVIZ and OPUVIZ, expanding its retina portfolio. BYQLOVI (clobetasol) is expected to launch in Q4 2025. The critical near-term challenge is refinancing $182.5 million in debt due within the next 12 months. Management states it is in discussions with Oaktree and other lenders and believes refinancing is probable, but there can be no assurance. If unsuccessful, the company may need to sell assets or reduce operations.

Notes & Operating Detail

• Segment Performance (Q2 2025): The Branded segment generated segment contribution of $10.8 million on $42.3 million of revenue; ImprimisRx contributed $6.4 million on $21.5 million of revenue. Corporate and unallocated R&D costs totaled $5.8 million.
• Revenue Concentration: Two customers accounted for 87% of accounts receivable at June 30, 2025. IHEEZO and VEVYE together represented 58% of total revenue in Q2 2025.
• Debt Structure: The weighted-average effective interest rate on total debt was 10.74% for the six months ended June 30, 2025. Interest expense was $12.96 million for the period.
• Stock-Based Compensation: Total SBC decreased to $5.43 million for the six months (from $8.44 million), primarily due to the full vesting of performance stock units granted in 2023.
• Legal Contingencies: A jury awarded $34.9 million in a trademark infringement case against OSRX, but due to collection uncertainty, no gain has been recognized.