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ARQT, Arcutis Biotherapeutics Inc.

Pharmaceuticals consumer brand UnprofitableDistress / turnaround

We are a commercial-stage biopharmaceutical company focused on developing and commercializing treatments for dermatological diseases with high unmet medical needs.

Our current portfolio is comprised of highly differentiated topical and systemic treatments with significant potential to treat immune-mediated dermatological diseases and conditions.

We launched our lead product, ZORYVE cream 0.3%, in August 2022 after obtaining our initial FDA approval for the treatment of plaque psoriasis, including psoriasis in the intertriginous areas (e.g. groin or axillae), in individuals 12 years of age or older.

Latest annual: FY2025 10-K

ARQT · Arcutis Biotherapeutics Inc.

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$376M

+91.3% YoY

Vital signs · TTM, with 5-yr average

Revenue $416M 5-yr avg $127M

Gross margin 91% 5-yr avg 88%

Operating margin 0.8% 5-yr avg −2164.0%

ROIC 1% 5-yr avg −55%

Owner-earnings margin 6% 5-yr avg −1869%

Free cash flow margin 6% 5-yr avg −1869%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

What it is: Revenue is ZORYVE foam (48%), ZORYVE cream 0.3% (32%) and ZORYVE cream 0.15% (18%).
Situation: Unprofitable. No sustained operating profit across the record; an earnings multiple has nothing to rest on. What the record does show is revenue, the gross-margin trajectory, and the burn against the cash on hand. Distress / turnaround. Thin interest coverage, or operating cash burned against real debt, across the record. The balance sheet carries this situation; the debt schedule sets the clock.
What moves the needle: Operating margin has run around −404% through the cycle on a 90% gross margin, the operating line in the red even at its best — so the lever is whether the spending below the gross line can come down enough to clear a profit: revenue growth against the cost curve, and the cash runway until it does. Stock-based pay runs about 21% of sales, a real and recurring claim on owners that the GAAP margin understates. Read this kind of business on the pipeline against the patent cliff, and pricing. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has rarely cleared the cost of capital (median −56%, above 15% in 0 of 6 years). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the rest is in the 10-K.

Every line is arithmetic on the company's filings, shown in full in the sections below.

Where the money comes from

read the 10-K →

Revenue spreads across 4 lines, the largest ZORYVE foam at 48%.

Revenue by product line, FY2025

ZORYVE foam48%$182M
ZORYVE cream 0.3%32%$121M
ZORYVE cream 0.15%18%$68M
ZORYVE cream 0.05%0%$911K

From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.

The record

Ten years of arithmetic, read across the cycle.

The record, 2020–2025

realized figures from each filing · older years to the left

2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
							Income statement
$0	$0	$4M	$60M	$197M	$376M	$416M	RevenueRevenue
—	—	80%	92%	90%	90%	91%	Gross marginGross mgn
—	—	n/m	311%	117%	73%	68%	SG&A / revenueSG&A/rev
—	—	n/m	186%	39%	20%	22%	R&D / revenueR&D/rev
($137M)	($207M)	($302M)	($241M)	($128M)	($12M)	$3M	Operating incomeOp. inc.
—	—	n/m	−404.5%	−65.3%	−3.3%	0.8%	Operating marginOp. mgn
($136M)	($206M)	($311M)	($262M)	($140M)	($16M)	($2M)	Net incomeNet inc.
							Cash flow & returns
($113M)	($175M)	($258M)	($247M)	($112M)	($6M)	$27M	Operating cash flowOp. cash
$122K	$454K	$622K	$800K	$600K	$700K	$700K	DepreciationDeprec.
$15M	$7M	$20M	($25M)	($14M)	($31M)	($13M)	Working capital & otherWC & other
$321K	$995K	$333K	$428K	$143K	$686K	$78K	CapexCapex
—	—	9.0%	0.7%	0.1%	0.2%	0.0%	Capex / revenueCapex/rev
($113M)	($175M)	($258M)	($247M)	($112M)	($6M)	$27M	Owner earningsOwner earn.
—	—	n/m	−415.2%	−57.1%	−1.7%	6.5%	Owner earnings marginOE mgn
($113M)	($176M)	($258M)	($247M)	($112M)	($6M)	$27M	Free cash flowFCF
—	—	n/m	−415.2%	−57.1%	−1.7%	6.5%	Free cash flow marginFCF mgn
-53%	-60%	-67%	-94%	-52%	-4%	1%	ROICROIC
-50%	-69%	-149%	-296%	-89%	-9%	-1%	Return on equityROE
−50%	−69%	−149%	−296%	−89%	−9%	−1%	Retained to equityRetained/eq
							Balance sheet
$65M	$96M	$54M	$88M	$71M	$43M	$35M	Cash & investmentsCash+inv
—	$0	$8M	$26M	$73M	$146M	$144M	ReceivablesReceiv.
—	$0	$8M	$13M	$15M	$23M	$37M	InventoryInvent.
$7M	$7M	$9M	$12M	$14M	$13M	$18M	Accounts payablePayables
—	($7M)	$7M	$27M	$73M	$156M	$163M	Operating working capitalOper. WC
$293M	$403M	$437M	$330M	$336M	$411M	$438M	Current assetsCur. assets
$23M	$33M	$38M	$47M	$81M	$130M	$163M	Current liabilitiesCur. liab.
13.0×	12.1×	11.6×	7.1×	4.1×	3.2×	2.7×	Current ratioCurr. ratio
$298M	$408M	$449M	$341M	$349M	$433M	$460M	Total assetsAssets
$0	$72M	$198M	$202M	$107M	$109M	$109M	Total debtDebt
($65M)	($24M)	$144M	$113M	$36M	$66M	$75M	Net debt / (cash)Net debt
—	—	-19.3×	-8.1×	-4.7×	-1.0×	0.2×	Interest coverageInt. cov.
$271M	$298M	$210M	$89M	$158M	$189M	$190M	Shareholders’ equityEquity
—	—	886.7%	65.1%	21.2%	10.7%	9.9%	Stock comp / revenueSBC/rev
							Per share
35.7M	49.4M	55.0M	69.3M	121M	127M	129K	Shares out (diluted)Shares
$0.00	$0.00	$0.07	$0.86	$1.62	$2.96	$3212.80	Revenue / shareRev/sh
$-3.80	$-4.18	$-5.66	$-3.78	$-1.16	$-0.13	$-18.37	EPS (diluted)EPS
$-3.17	$-3.54	$-4.69	$-3.57	$-0.93	$-0.05	$208.06	Owner earnings / shareOE/sh
$-3.18	$-3.55	$-4.69	$-3.57	$-0.93	$-0.05	$208.06	Free cash flow / shareFCF/sh
$0.01	$0.02	$0.01	$0.01	$0.00	$0.01	$0.60	Cap. spending / shareCapex/sh
$7.59	$6.03	$3.81	$1.28	$1.30	$1.49	$1465.99	Book value / shareBVPS

The diluted share count moved ×1.75 into 2024 — shares issued, not a split the totals corroborate — and the per-share figures carry the counts as filed.

The diluted share count moved ×1/983.53 into TTM — shares retired, not a split the totals corroborate — and the per-share figures carry the counts as filed.

Per-share growththe realized rate an owner's share compounded

	5-yr	5-yr
Capital spending / share	−9.7%/yr	−9.7%/yr
Book value / share	−27.8%/yr	−27.8%/yr

The record, charted

FY2020–2025

Each measure over its full record; the current point and the worst year marked.

Share count

127Mpeak FY2025

ROIC

−4%low FY2023

Gross margin

90%low FY2022

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

($6M)owner earningsvs.($16M)net incomelow FY2022

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business turned a $16M loss into ($6M) of owner earnings: more cash than the profit line showed, after the non-cash charges and the capital it put back in.

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	($16M)	($140M)	($262M)	($311M)	($206M)
Depreciation & amortizationnon-cash charge added back	+$700K	+$600K	+$800K	+$622K	+$454K
Stock-based compensationreal costnon-cash, but a real cost	+$40M	+$42M	+$39M	+$33M	+$24M
Working capital & othertiming of cash in and out, other non-cash items	−$31M	−$14M	−$25M	+$20M	+$7M
Cash from operations	($6M)	($112M)	($247M)	($258M)	($175M)
Maintenance capital expenditurethe spending needed just to hold position and volume	−$686K	−$143K	−$428K	−$333K	−$454K
Owner earnings	($6M)	($112M)	($247M)	($258M)	($175M)
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	—	—	—	—	−$541K
Free cash flow	($6M)	($112M)	($247M)	($258M)	($176M)
Owner-earnings marginowner earnings ÷ revenue	-2%	-57%	-415%	-7001%	—

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position . The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $40M), owner earnings is nearer ($47M).

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? -1.0×

Does not cover its interest

Operating income ($12M) ÷ interest expense $12M

What this means
A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.
How heavy is the debt, net of cash? $66M

Net debt against an operating loss

Cash $43M − debt $109M

What this means
Netting $43M of cash and short-term investments against $109M of debt leaves $66M owed, with no operating profit this year to measure it against — understand that combination before anything else about the company. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 242d

Long (60+ days)

DSO 142 + DIO 225 − DPO 125 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital -60%

Below average through the cycle

6-yr median, range -94%–-4%; -4% latest = NOPAT ($10M) ÷ invested capital $256M

Industry peers: median -82%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 6 years (it ran -4% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin -415%

Consumes cash through the cycle

4-yr median margin, range -7001%–-2%; latest ($6M) = operating cash ($6M) − maintenance capex $686K

Industry peers: median -48%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's -2% of revenue this year, a -415% median across 4 years. Treating stock comp as the real expense it is (less $40M of SBC) leaves ($47M).
Are earnings backed by cash? ($6M)

Loss, and burning cash

Net income ($16M) · cash from operations ($6M)

What this means
The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did not.

How is the cash used?

Where do the earnings go? —

Not enough data

What this means
The filing data didn't include the inputs for this check.
Investing or harvesting? 0.98×

Maintaining

Capex $686K ÷ depreciation $700K

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 2 of 5 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Miss

Revenue ≥ $2B · $376M

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Pass

Current ratio ≥ 2× · 3.17×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Pass

Debt ≤ working capital · $109M vs $281M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Miss

A profit every year (6-yr record) · 6 loss years

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth —

Earnings +33% over the record · —

What this means
Earnings were negative early in the record, a growth rate isn't meaningful.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $-1.11/share (latest year $-0.13), the averaged base the calculator's gate runs on, and book value is $1.51/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2020–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 0 of 6

What this means
Lost money in 6 year(s), look at what happened there before trusting the average.
Return on capital ≥ 15% 0 of 6 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin −4294% → −34% (2-yr avg ends)

In the filing’s words The record and the words agree: the margin widened and the filing attributes the gain to its own pricing, not volume alone.

What this means
Through the cycle the operating margin widened — about −4294% early to −34% lately, median −404% — pricing power intact or improving.
Reinvestment, incremental ROIC returns capital

What this means
The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.
Worst year 2022 · −8183.0% op. margin

What this means
Operations went underwater in 2022, understand why before trusting the good years.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Raised, but not as a competitor

The filing raises AI among its risks, but in other terms (security, regulation, energy or the like), not as a competitor to its product.

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$438M

Cash & short-term investments$35M
Receivables$144M
Inventory$37M
Other current assets$222M

Current liabilities$163M

Debt due within a year$8M
Accounts payable$18M
Other current liabilities$137M

Current ratio2.68×all current assets ÷ what's due · Graham looked for 2×

Quick ratio2.46×stricter: inventory excluded

Cash ratio0.21×strictest: cash alone against what's due

Working capital$275Mthe cushion left after near-term bills

Debt due this year vs. cash$8M due · $35M cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Revenue, latest quarter vs. a year ago+65.1%the freshest read on whether the business is still growing

Current ratio, recent quarters8.5× → 2.7×

Deeper floors

Tangible book value$175Mequity stripped of goodwill & intangibles

Net current asset value$168MGraham's net-net: current assets less all liabilities

Debt incl. operating leases$115M$6M of it operating leases

From the company's latest filing.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2021	Todd Franklin Watanabe	$4.8M	$442k	($175M)
2022	Todd Franklin Watanabe	$4.6M	$2.4M	($258M)
2023	Todd Franklin Watanabe	$4.9M	−$1.2M	($247M)
2024	Todd Franklin Watanabe	$3.7M	$11.2M	($112M)
2025	Todd Franklin Watanabe	$7.2M	$20.4M	($6M)

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Insider ownership9.4%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
CEO pay ratio28:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio alone settles nothing; some businesses are genuinely top-heavy in scarce skill. A runaway figure is where Buffett starts asking whether the board is doing its job.
Stock-based compensation$40M
The slice of the business handed to employees in shares this year, 11% of revenue. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

What an owner would ask, FY2025

read the 10-K →

Which reported numbers are a judgment call?
Management names Revenue recognition, Income taxes as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →

The questions the record and the charts do not answer on their own; each carries the figure and the place to look.

Peers, Pharmaceuticals

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
ZLABZai Lab Limited	$457M	65%	-338.0%	-103%	-281%
INVAInnoviva Inc.	$411M	—	85.6%	44%	63%
ARDXArdelyx Inc.	$407M	87%	-138.7%	-82%	-232%
ESPREsperion Therapeutics Inc.	$403M	—	-62.8%	—	-48%
ARQTArcutis Biotherapeutics Inc.	$376M	90%	-234.9%	-56%	-236%
AVIRAtea Pharmaceuticals Inc.	$351M	—	-51.5%	-80%	-38%
MNKDMannKind Corporation	$349M	72%	-63.3%	—	-45%
CRMDCorMedix Inc.	$312M	8%	-8961.5%	-202%	-7330%
Group median	—	72%	-101.0%	-81%	-140%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Arcutis Biotherapeutics Inc. has delivered.

Today’s price $

Base Normalize · through-cycle (($122M)) Net of stock comp (−$41M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth, delivered—

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Owner earnings $27M on 125M shares outstanding, per the 10-Q cover, as of 2026-04-30; net debt $75M. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh ARQT against another business →

The owners of ARQT: the meeting and the votes →

Cite: Owner Scorecard, "Arcutis Biotherapeutics Inc. (ARQT), the owner's record," https://ownerscorecard.com/c/ARQT, data as of 2026-07-09.

Manual order: ← AROC its page in the Manual ARR →

Industry order: ← ARDX the Pharmaceuticals chapter ARVN →