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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
3 Months Ended
Mar. 31, 2026
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
The accompanying unaudited, interim Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) with all intercompany balances and transactions eliminated, for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited, interim Condensed Consolidated Financial Statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The unaudited, interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying footnotes included in the Company’s 2025 Form 10-K, as filed with the SEC on March 5, 2026.
Estimates and Assumptions
Estimates and Assumptions
Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, and other obligations such as product returns, allowance for promotions, and refunds; loss contingencies; the fair value of and/or potential impairment of goodwill and intangible assets for the Company’s reporting unit; useful lives of the Company’s tangible and intangible assets; estimated income tax expense and tax payments; future payment obligations under the Tax Receivable Agreement; and the net realizable value of, and demand for the Company’s inventory. Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties.
Fair Value of Financial Instruments
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements established a framework for measuring fair value and established a three-level valuation hierarchy for disclosure of fair value measurements as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. The Company’s Level 1 assets consist of its marketable securities.
Level 2—Observable quoted prices for similar assets or liabilities in active markets and observable quoted prices for identical assets or liabilities in markets that are not active.
Level 3—Unobservable inputs that are not corroborated by market data.
Cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are reflected at carrying value, which approximates fair value due to the short-term maturity. The Company’s long-term debt is recorded at its carrying value in the Condensed Consolidated Balance Sheets, which may differ from fair value. The Company’s 2024 Interest Rate Cap (as defined in “Note 5 Fair Value Measurement” to the Company’s Condensed Consolidated Financial Statements of this Quarterly Report) is recorded at its Level 2 fair value in the Condensed Consolidated Balance Sheets.
Tax Receivable Agreement
Tax Receivable Agreement
In connection with the Reorganization Transactions, the Company entered into the Tax Receivable Agreement under which the Company will be required to pay to the Pre-IPO Stockholders 85% of the federal, state or local tax cash savings that the Company actually realizes on its taxable income following the IPO, as a result of the amortization of intangible assets and capitalized transaction costs that existed as of the date of the IPO. Under the Tax Receivable Agreement, generally the Company will retain the benefit of the remaining 15% of the applicable tax savings.
The Tax Receivable Agreement liability is calculated based on current tax laws and the assumption that the Company and its subsidiaries will earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement. Updates to the Company’s blended state tax rate, allocation of U.S. versus foreign sourced income and changes in U.S. tax rules may significantly impact the established liability, and any changes to that established liability would be recorded to Other expense (income), net in the period in which the Company makes the determination regarding the applicable change.
Concurrently with the execution and delivery of the Merger Agreement, the Company entered into the Tax Receivable Agreement Waiver and Amendment, pursuant to which certain Pre-IPO Stockholders irrevocably waived their rights to receive any remaining payments under the Tax Receivable Agreement. In addition, the Tax Receivable Agreement was amended to provide for its automatic termination upon the Effective Time, subject to the payment of certain amounts to non-waiving Pre-IPO Stockholders. If the Merger Agreement is terminated in accordance with its terms, the Tax Receivable Agreement Waiver and Amendment will be null and void ab initio and all obligations under the Tax Receivable Agreement will continue in full force and effect. See further discussion in “Note 1 – Nature of Operations and Basis of Presentation – Proposed Acquisition by Henkel US Operations Corporation" to the Company’s Condensed Consolidated Financial Statements of this Quarterly Report.
If the Merger Agreement is terminated and as a result the Tax Receivable Agreement Waiver and Amendment becomes null and void, the Company expects that future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets could aggregate to $165.1 million, with payments expected to continue through 2038. Payments under the Tax Receivable Agreement, which began in the year ended December 31, 2022, are not conditioned upon the Pre-IPO Stockholders’ continued ownership of equity in the Company.
Recent Accounting Pronouncements And Recent Accounting Pronouncements Not Yet Adopted
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” which introduces a practical expedient for all entities to simplify the calculation required for applying credit losses to current accounts receivable, by assuming current conditions as of the balance sheet date do not change for the remaining life of the asset. The new guidance is effective for fiscal years beginning after December 15, 2025 and interim periods within fiscal years beginning after December 15, 2025. The Company adopted ASU 2025-05 on a prospective basis effective January 1, 2026 with no material impact on its Consolidated Financial Statements and related disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which is intended to improve the disclosures about a public business entity’s expenses by requiring disaggregated disclosure of certain income statement expense captions into specified categories in the notes to the financial statements. The new guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company expects this update to impact its disclosures in the notes to its financial statements but does not anticipate any effect on its Consolidated Results of Operations, Cash Flows or financial condition.
In September 2025, the FASB issued ASU No. 2025-06. “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” which amends the existing standard, which refers to various stages of a software development project, to align better with current software development methods. Under the new standard, entities will start capitalizing eligible costs when (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The new guidance is effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the potential impact of adopting this new guidance on its Consolidated Financial Statements and related disclosures.