Revises financial guidance on
lower-than-expected U.S. revenue and incurs restructuring charges
for device upgrades
Delivers net sales of $97.4 million driven by
double digit growth in APAC and EMEA
The Beauty Health Company (NASDAQ: SKIN), home to flagship brand
Hydrafacial, today announced financial results for the third
quarter ended September 30, 2023. For the quarter, net sales of
$97.4 million increased +10% year-over-year, on the strength of
performance in Asia-Pacific, including China, and EMEA. The quarter
was overshadowed by lower-than-expected U.S. revenue and $63.1
million in restructuring charges related to device upgrades of
early generation Syndeo devices.
As a result, the Company is revising its fiscal year 2023 net
sales guidance to a range of $385 to $400 million, its fiscal year
adjusted EBITDA margin guidance to a range of 5% to 6% and is
suspending its long-term 2025 financial outlook.
“We are focused on protecting Hydrafacial’s strong brand equity
as we address the Syndeo provider experience challenges,” said
BeautyHealth Chief Financial Officer Michael Monahan. “We are
confident that, with our strategy, we will return Hydrafacial to
the reliable standard that our customers have come to expect from
us and keep their trust—and, with this, re-accelerate Syndeo
adoption in the U.S.”
Key Operational and Business Metrics
Three Months Ended September
30,
Nine Months Ended September
30,
Unaudited ($ in millions) (2)
2023
2022(1)
2023
2022(1)
Delivery Systems net sales
$
51.0
$
49.1
$
162.0
$
155.5
Consumables net sales
46.4
39.7
139.2
112.2
Total net sales
$
97.4
$
88.8
$
301.2
$
267.7
Gross (loss) profit
$
(12.6
)
$
61.4
$
109.4
$
182.3
Gross margin
(12.9
)%
69.1
%
36.3
%
68.1
%
Adjusted gross profit(3)
$
60.9
$
66.4
$
197.0
$
193.4
Adjusted gross margin(3)
62.5
%
74.8
%
65.4
%
72.2
%
Net (loss) income
$
(73.8
)
$
(0.1
)
$
(90.7
)
$
37.7
Adjusted EBITDA(3)
$
9.1
$
16.3
$
21.0
$
28.5
Adjusted EBITDA margin(3)
9.3
%
18.4
%
7.0
%
10.7
%
Three Months Ended September
30,
Nine Months Ended September
30,
Unaudited
2023
2022
2023
2022
New delivery systems sold
1,778
1,713
5,803
4,817
Trade-up delivery systems sold
362
147
933
1,608
Total delivery systems sold
2,140
1,860
6,736
6,425
Active install base
30,074
24,473
30,074
24,473
___________________ (1) Reflects the impact of immaterial
revisions to the financial statements. (2) Amounts may not sum due
to rounding. (3) See "Non-GAAP Financial Measures" below.
Syndeo Program
- To stand behind its commitment to its customers and protect
brand reputation, Management decided that, with respect to Syndeo
devices, the Company will only market and sell Syndeo 3.0 devices
due to provider experience issues with earlier generation Syndeo
devices.
- The Company will provide, at no cost to the customer, the
option of (i) a technician upgrade to their Syndeo 1.0 or 2.0
devices to 3.0 standards in the field; or (ii) a replacement Syndeo
3.0 device for their existing device.
- The Company will also extend all Syndeo warranties by one year,
as a thank you to providers.
- The Company has designated all Syndeo 1.0 and 2.0 devices
on-hand as obsolete, resulting in an inventory write-down in cost
of sales of $18.8 million during the three months ended September
30, 2023.
- The Company incurred costs of $12.3 million associated with the
Syndeo Program and has accrued an additional $32.1 million for the
estimated cost to remediate or upgrade or exchange the remaining
Syndeo 1.0 and 2.0 devices.
Financial Highlights
- Net sales were $97.4 million for the third quarter of 2023, an
increase of 10% compared to the prior year period, with strength in
APAC and EMEA offset by challenges in the U.S.
- Gross margin was (12.9)% in Q3 2023 compared to 69.1% in Q3
2022. Gross margin was adversely impacted by $63.1 million
associated with the Syndeo Program and higher charges related to
other discontinued, excess and obsolete product costs.
- Adjusted gross margin was 62.5% in Q3 2023 compared to 74.8% in
Q3 2022. Adjusted gross margin was adversely impacted by higher
manufacturing labor and overhead costs.
- Net loss was $(73.8) million in Q3 2023 compared to net loss of
$(0.1) million in Q3 2022. The change compared to the prior year
was primarily due to costs associated with the Syndeo Program.
- Adjusted EBITDA was $9.1 million in Q3 2023 compared to
adjusted EBITDA of $16.3 million in Q3 2022, primarily due to gross
margin pressures and higher general and administrative expenses,
partially offset by lower selling and marketing expense.
- The Company placed 2,140 delivery systems during the quarter
compared to 1,860 in the prior year period. The increase in
delivery system placements was primarily due to strength in
placements across APAC and EMEA.
Net Sales by Region
Three Months Ended September
30,
Nine Months Ended September
30,
Unaudited ($ in millions) (1)
2023
2022
2023
2022
Delivery Systems net sales
Americas
$
20.3
$
30.8
$
73.1
$
102.0
Asia-Pacific (“APAC”)
18.0
8.9
46.4
23.6
Europe, the Middle East and Africa
(“EMEA”)
12.7
9.4
42.4
29.9
Total Delivery Systems net sales
$
51.0
$
49.1
$
162.0
$
155.5
Consumables net sales
Americas
$
31.4
$
27.6
$
95.2
$
76.3
APAC
6.7
6.2
17.1
14.8
EMEA
8.3
5.9
26.9
21.1
Total Consumables net sales
$
46.4
$
39.7
$
139.2
$
112.2
Total net sales
Americas
$
51.7
$
58.4
$
168.3
$
178.3
APAC
24.7
15.1
63.5
38.4
EMEA
21.1
15.3
69.3
51.0
Total net sales
$
97.4
$
88.8
$
301.2
$
267.7
Total delivery systems sold
Americas
776
1,065
2,844
4,069
APAC
752
371
1,942
1,040
EMEA
612
424
1,950
1,316
Total delivery systems sold
2,140
1,860
6,736
6,425
Trade-up delivery systems sold
Americas
77
147
267
1,608
APAC
225
—
412
—
EMEA
60
—
254
—
Total trade-up delivery systems sold
362
147
933
1,608
___________________ (1) Amounts may not sum due to rounding.
- Net sales in the Americas region decreased (11)% to
$51.7 million in Q3 2023 compared to Q3 2022, driven by a decrease
in Delivery Systems net sales due to provider experience challenges
with Syndeo creating lower than expected demand.
- Net sales in the APAC region increased +63% to $24.7
million in Q3 2023 compared to Q3 2022, driven by strength in
China. China net sales increased +79% to $16.9 million driven
primarily by strength in delivery system net sales.
- Net sales in the EMEA region increased +37% to $21.1
million in Q3 2023 compared to Q3 2022, driven primarily by
strength across both Delivery Systems and Consumables.
Operating Expenses
- Selling and marketing expenses were $30.7 million in Q3 2023
compared to $39.8 million in Q3 2022, primarily driven by lower
marketing and advertising expense, sales commission expense, and
personnel related compensation, including lower share-based
compensation expense, partially offset by a reversal of cash
incentive accruals in the prior year.
- General and administrative expenses were $37.0 million in Q3
2023 compared to $23.8 million in Q3 2022, primarily due to higher
personnel related compensation, including severance and share-based
compensation, and the reversal of cash incentive accruals in the
prior year.
Balance Sheet and Cash Flow Highlights
- Cash and cash equivalents were approximately $559.4 million as
of September 30, 2023 compared to approximately $568.2 million as
of December 31, 2022. The change in cash and cash equivalents was
primarily due to strategic acquisitions made during Q1 2023 and the
net impact of current year net loss and other non-cash
adjustments.
- The Company had approximately 7.0 million private placement
warrants and approximately 132.6 million shares of Class A common
stock outstanding as of September 30, 2023. In September 2023, the
Company announced a $100.0 million share repurchase authorization,
of which $4.8 million has been deployed to repurchase 0.8 million
shares at an average price of $5.83 as of September 30, 2023.
Financial Guidance
Fiscal Year 2023
Current as of November 2023
Previous
Net sales
$385 – $400 million
$460 – $480 million
Adjusted EBITDA margin(1)
5% – 6%
18% – 19%
___________________ (1) See "Non-GAAP Financial Measures"
below.
- The Company revised its fiscal year 2023 net sales guidance due
to provider experience challenges with Syndeo creating lower than
expected demand for delivery systems in the U.S.
- The Company revised its fiscal year 2023 adjusted EBITDA margin
guidance as a result of slower than expected gross margin recovery
and reduced fixed cost operating leverage.
- The Company suspended its long-term fiscal year 2025
outlook.
Financial guidance reflects the following external environment
assumptions:
- Assumes no material deterioration in general market conditions
or other unforeseen circumstances beyond the Company's
control.
- Excludes any unannounced acquisitions, dispositions or
financings.
- Assumes a largely re-opened global market, which would be
negatively impacted if closures related to COVID-19 or other
restrictive measures are reimplemented.
- Assumes no material deterioration in foreign currency exchange
rates.
Conference Call
BeautyHealth will host a conference call on Monday, November 13,
2023, at 4:30 p.m. ET to review its third quarter 2023 financial
results. The call may be accessed via live webcast through the
Events & Presentations page on our Investor Relations website
at https://investors.beautyhealth.com. A replay of the conference
call will be available approximately three hours after the
conclusion of the call and can be accessed online at
https://investors.beautyhealth.com.
Non-GAAP Financial Measures
In addition to results determined in accordance with accounting
principles generally accepted in the United States of America
("GAAP"), management utilizes certain non-GAAP financial measures
such as adjusted gross profit and adjusted EBITDA for purposes of
evaluating ongoing operations and for internal planning and
forecasting purposes.
Management believes that these non-GAAP financial measures, when
reviewed collectively with the Company’s GAAP financial
information, provide useful supplemental information to investors
in assessing the Company's operating performance. These non-GAAP
financial measures should not be considered as an alternative to
GAAP financial information or as an indication of operating
performance or any other measure of performance derived in
accordance with GAAP, and may not provide information that is
directly comparable to that provided by other companies in its
industry, as these other companies may calculate non-GAAP financial
measures differently, particularly related to unusual items.
Adjusted gross profit is gross profit excluding the effects of
depreciation expense, amortization expense, stock-based
compensation expense and other items such as write-off of
discontinued, excess and obsolete product, Syndeo Program and
Syndeo product optimization logistics & service costs.
Adjusted EBITDA is calculated as net (loss) income excluding the
effects of expense (benefit) for income taxes; depreciation
expense; amortization expense; stock-based compensation expense;
interest expense; interest income; other (income) expense, net;
change in fair value of warrant liability; foreign currency loss
(gain), net; loss on disposal of assets; transaction related costs;
write-off of discontinued, excess and obsolete product; litigation
related costs; Syndeo Program; Syndeo product optimization
logistics & service costs; and severance, restructuring and
other.
The Company does not provide a reconciliation of its fiscal 2023
adjusted EBITDA margin guidance to net (loss) income, the most
directly comparable forward looking GAAP financial measures, due to
the inherent difficulty in forecasting and quantifying certain
amounts that are necessary for such reconciliation, which cannot be
done without unreasonable efforts, including adjustments that could
be made for changes in fair value of warrant liabilities,
integration and acquisition-related expenses, amortization
expenses, non-cash stock-based compensation, gains/losses on
foreign currency, and other charges reflected in our reconciliation
of historic numbers, the amount of which, based on historical
experience, could be significant. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for the financial information prepared and
presented in accordance with GAAP. The Company's fiscal 2023
adjusted EBITDA margin guidance is merely an outlook and is not a
guarantee of future performance. Stockholders should not rely or
place an undue reliance on such forward-looking statements. See
“Forward-Looking Statements” for additional information.
The Beauty Health Company Condensed
Consolidated Statements of Comprehensive Income (Loss) (1)
($ in millions, except share and per share amounts)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022(2)
2023
2022(2)
Net sales
$
97.4
$
88.8
$
301.2
$
267.7
Cost of sales
110.0
27.4
191.7
85.5
Gross (loss) profit
(12.6
)
61.4
109.4
182.3
Operating expenses:
Selling and marketing
30.7
39.8
112.5
121.1
Research and development
1.8
2.2
7.1
7.0
General and administrative
37.0
23.8
102.5
77.6
Total operating expenses
69.5
65.7
222.0
205.7
Loss from operations
(82.1
)
(4.4
)
(112.6
)
(23.4
)
Interest expense, net
3.4
3.4
10.3
10.0
Interest income
(6.8
)
(2.9
)
(16.8
)
(3.6
)
Other (income) expense, net
(4.9
)
0.4
(5.3
)
0.4
Change in fair value of warrant
liabilities
(5.9
)
(4.3
)
(8.4
)
(71.5
)
Foreign currency transaction loss (gain),
net
2.3
—
0.7
1.8
(Loss) income before provision for
income taxes
(70.3
)
(0.9
)
(93.1
)
39.6
Income tax expense (benefit)
3.5
(0.8
)
(2.4
)
1.9
Net (loss) income
(73.8
)
(0.1
)
(90.7
)
37.7
Comprehensive (loss) income, net of
tax:
Foreign currency translation
adjustments
(1.1
)
(1.6
)
(0.6
)
(5.5
)
Comprehensive (loss) income
$
(74.9
)
$
(1.7
)
$
(91.3
)
$
32.2
Net (loss) income per share
Basic
$
(0.56
)
$
—
$
(0.68
)
$
0.25
Diluted
$
(0.56
)
$
(0.03
)
$
(0.68
)
$
(0.22
)
Weighted average common shares
outstanding
Basic
132,896,626
150,788,695
132,679,547
150,706,795
Diluted
132,896,626
151,417,710
132,679,547
152,018,246
___________________ (1) Amounts may not sum due to rounding. (2)
Reflects the impact of immaterial revisions to the financial
statements.
The Beauty Health Company Condensed
Consolidated Balance Sheets (1) ($ in millions)
(Unaudited)
September 30, 2023
December 31, 2022 (2)
ASSETS
Current assets:
Cash and cash equivalents
$
559.4
$
568.2
Accounts receivable, net
66.8
76.5
Inventories
74.9
109.7
Income tax receivable
1.0
1.3
Prepaid expenses and other current
assets
35.9
27.6
Total current assets
738.0
783.3
Property and equipment, net
16.1
18.2
Right-of-use assets, net
13.3
15.6
Intangible assets, net
64.6
46.4
Goodwill
124.7
124.6
Deferred income tax assets, net
0.8
0.8
Other assets
15.5
14.2
TOTAL ASSETS
$
973.1
$
1,003.1
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
35.9
$
28.5
Accrued payroll-related expenses
20.8
21.7
Syndeo Program reserves
32.1
—
Lease liabilities, current
4.7
5.0
Income tax payable
2.0
1.4
Other accrued expenses
30.5
15.2
Total current liabilities
125.9
71.7
Lease liabilities, non-current
10.1
12.7
Deferred income tax liabilities, net
2.3
2.0
Warrant liabilities
7.1
15.5
Convertible senior notes, net
737.3
734.1
Other long-term liabilities
0.4
—
TOTAL LIABILITIES
$
883.1
$
836.0
Stockholders’ equity:
Class A Common Stock
$
—
$
—
Additional paid-in capital
564.5
550.3
Accumulated other comprehensive loss
(5.1
)
(4.5
)
Accumulated deficit
(469.5
)
(378.8
)
Total stockholders’ equity
$
90.0
$
167.1
LIABILITIES AND STOCKHOLDERS’
EQUITY
$
973.1
$
1,003.1
___________________ (1) Amounts may not sum due to rounding.
(2) Reflects the impact of immaterial revisions to the
financial statements.
The Beauty Health Company Condensed
Consolidated Statement of Cash Flows (1) ($ in millions)
(Unaudited)
Nine Months Ended September
30,
2023
2022 (2)
Cash and cash equivalents at beginning of
period
$
568.2
$
901.9
Operating activities:
Net (loss) income
(90.7
)
37.7
Non-cash adjustments
82.2
(13.2
)
Change in operating assets and
liabilities:
Accounts receivable
6.0
(40.6
)
Inventories
3.4
(72.1
)
Prepaid expenses, other current assets,
and income tax receivable
(16.2
)
(6.7
)
Accounts payable, other accrued expenses,
and income tax payable
50.1
2.0
Other, net
(7.9
)
(8.2
)
Net cash provided by (used for) operating
activities
26.9
(101.2
)
Net cash used for investing activities
(29.3
)
(16.0
)
Net cash used for financing activities
(6.1
)
(102.8
)
Net decrease in cash and cash
equivalents
(8.5
)
(220.0
)
Effect of foreign currency translation
(0.2
)
2.3
Cash and cash equivalents at end of
period
$
559.4
$
684.2
___________________ (1) Amounts may not sum due to rounding.
(2) Reflects the impact of immaterial revisions to the
financial statements.
The following table reconciles gross (loss) profit to adjusted
gross profit for the periods presented:
Three Months Ended September
30,
Nine Months Ended September
30,
Unaudited ($ in millions) (2)
2023
2022(1)
2023(3)
2022(1)
Net sales
$
97.4
$
88.8
$
301.2
$
267.7
Gross (loss) profit
$
(12.6
)
$
61.4
$
109.4
$
182.3
Gross margin
(12.9
)%
69.1
%
36.3
%
68.1
%
Adjusted to exclude the following:
Depreciation expense
0.7
0.6
1.8
1.6
Amortization expense
2.7
2.2
9.7
6.9
Stock-based compensation expense
0.5
0.2
1.2
0.6
Write-off of discontinued, excess and
obsolete product
6.4
2.0
10.4
2.0
Syndeo Program
63.1
—
63.1
—
Syndeo product optimization logistics
& service costs
—
—
1.4
—
Adjusted gross profit
$
60.9
$
66.4
$
197.0
$
193.4
Adjusted gross margin
62.5
%
74.8
%
65.4
%
72.2
%
___________________ (1) Reflects the impact of immaterial
revisions to the financial statements. (2) Amounts may not sum
due to rounding. (3) Reflects the removal of the accrual for annual
cash incentives in prior periods for comparability purposes.
The following table reconciles net (loss) income to adjusted
EBITDA for the periods presented:
Three Months Ended September
30,
Nine Months Ended September
30,
Unaudited ($ in millions) (2)
2023
2022(1)
2023(3)
2022(1)
Net sales
$
97.4
$
88.8
$
301.2
$
267.7
Net (loss) income
$
(73.8
)
$
(0.1
)
$
(90.7
)
$
37.7
Adjusted to exclude the following:
Expense (benefit) for income taxes
3.5
(0.8
)
(2.4
)
1.9
Depreciation expense
2.5
2.0
7.0
5.3
Amortization expense
5.5
3.9
17.7
11.6
Stock-based compensation expense
8.2
7.4
20.3
20.9
Interest expense
3.4
3.4
10.3
10.0
Interest income
(6.8
)
(2.9
)
(16.8
)
(3.6
)
Other (income) expense, net
(4.9
)
0.4
(5.3
)
0.4
Change in fair value of warrant
liability
(5.9
)
(4.3
)
(8.4
)
(71.5
)
Foreign currency loss (gain), net
2.3
—
0.7
1.8
Loss on disposal of assets
—
3.7
0.1
4.7
Transaction related costs
—
—
0.8
3.0
Write-off of discontinued, excess and
obsolete product
6.4
2.0
10.4
2.0
Litigation related costs
—
1.0
1.5
1.0
Syndeo Program
63.1
—
63.1
—
Syndeo product optimization logistics
& service costs
—
—
1.4
—
Severance, restructuring and other
5.5
0.6
11.3
3.4
Adjusted EBITDA
$
9.1
$
16.3
$
21.0
$
28.5
Adjusted EBITDA margin
9.3
%
18.4
%
7.0
%
10.7
%
___________________ (1) Reflects the impact of immaterial
revisions to the financial statements. (2) Amounts may not sum due
to rounding. (3) Reflects the removal of the accrual for
annual cash incentives in prior periods for comparability
purposes.
About The Beauty Health Company
The Beauty Health Company (NASDAQ: SKIN) is a global
category-creating company delivering millions of skin health
experiences every year that help consumers reinvent their
relationship with their skin, bodies and self-confidence. Our
brands are pioneers: Hydrafacial™ in hydradermabrasion, SkinStylus™
in microneedling, and Keravive™ in scalp health. Together, with our
powerful community of estheticians, partners and consumers, we are
personalizing skin health for all ages, genders, skin tones, and
skin types in more than 90 countries. We are committed to being
ever more mindful in how we conduct our business to positively
impact our communities and the planet. Find a local provider at
https://hydrafacial.com/find-a-provider/, and learn more at
beautyhealth.com or LinkedIn.
Forward-Looking Statements
Certain statements made in this release are “forward looking
statements” within the meaning of the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act of 1995,
including statements regarding The Beauty Health Company’s
strategy, plans, objectives, initiatives and financial outlook.
When used in this press release, the words “estimates,”
“projected,” “expects,” “anticipates,” “forecasts,” “plans,”
“intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,”
“propose” and variations of these words or similar expressions (or
the negative versions of such words or expressions) are intended to
identify forward-looking statements.
These forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside The Beauty Health Company’s
control, that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements.
As such, readers are cautioned not to place undue reliance on any
forward-looking statements.
Important factors that may affect actual results or outcomes
include, among others: The Beauty Health Company’s ability to
manage growth; The Beauty Health Company’s ability to execute its
business plan; potential litigation involving The Beauty Health
Company; changes in applicable laws or regulations; the possibility
that The Beauty Health Company may be adversely affected by other
economic, business, and/or competitive factors; the impact of the
continuing COVID-19 pandemic on the Company’s business; and other
risks and uncertainties set forth in the sections entitled “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements”
in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022 filed with the U.S. Securities and Exchange
Commission (the “SEC”) and in the Company’s subsequent filings with
the SEC. There may be additional risks that the Company does not
presently know of or that the Company currently believes are
immaterial that could also cause actual results to differ from
those contained in the forward-looking statements. The Beauty
Health Company does not undertake any obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events, or otherwise, except as required by
law.
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version on businesswire.com: https://www.businesswire.com/news/home/20231113581193/en/
Investors: IR@beautyhealth.com Press: Press@beautyhealth.com
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