BeautyHealth Reports First Quarter 2023 Financial Results
On strong consumer demand, delivers double-digit net sales growth in line with 2023 plan
Raises fiscal 2023 net sales guidance
The quarter was underpinned by continued strong consumer demand for Hydrafacial treatments, with +21% year-over-year consumables net sales growth globally. Of note, consumables net sales grew +34% year-over-year in the
As expected, delivery system sales growth for the quarter was +9% year-over-year, as the Company lapped the Q1 2022 U.S. Syndeo launch and providers outside of the
“I am pleased with the growth we achieved in the first quarter and our strong momentum going into Q2. We see sustained consumer demand for Hydrafacial treatments across the globe and palpable excitement for the international launch of Syndeo,” said BeautyHealth President and CEO
Key Operational and Business Metrics
|
|
Three Months Ended |
||||||
|
Unaudited ($ in millions) (3) |
|
2023 |
|
|
|
2022(1) |
|
|
Delivery Systems net sales |
$ |
45.4 |
|
|
$ |
41.6 |
|
|
Consumables net sales |
|
40.9 |
|
|
|
33.8 |
|
|
Total net sales |
$ |
86.3 |
|
|
$ |
75.4 |
|
|
Gross profit |
$ |
54.1 |
|
|
$ |
50.9 |
|
|
Gross margin |
|
62.7 |
% |
|
|
67.5 |
% |
|
Net income (loss) |
$ |
(22.3 |
) |
|
$ |
31.5 |
|
|
Adjusted net (loss)(2) |
$ |
(5.5 |
) |
|
$ |
(9.5 |
) |
|
Adjusted EBITDA(2) |
$ |
(0.5 |
) |
|
$ |
1.2 |
|
|
Adjusted EBITDA margin(2) |
|
(0.6 |
)% |
|
|
1.5 |
% |
|
Adjusted gross profit(2) |
$ |
60.4 |
|
|
$ |
53.8 |
|
|
Adjusted gross margin(2) |
|
70.0 |
% |
|
|
71.3 |
% |
___________________
|
(1) |
Reflects the impact of immaterial revisions to the financial statements. |
|
(2) |
See "Non-GAAP Financial Measures" below. |
|
(3) |
Amounts may not sum due to rounding. |
Strategic Highlights
- Announced a definitive agreement to acquire SkinStylus, an FDA-cleared microneedling device, adding a complementary co-treatment to the BeautyHealth bundle and taking a step toward realizing a multi-brand platform.
-
Introduced Syndeo into select
Europe andAsia-Pacific markets, leveraging processes and software optimizations made since theMarch 2022 U.S. launch. Syndeo is now live in 14 markets globally with a total install base of 4,945 delivery systems. -
Activated
China commercial infrastructure alongside the country's reopening in March, opening an Experience Center inBeijing , the Company's second inChina behindShanghai , and galvanizing an in-region sales team to re-accelerate growth in the market. -
Expanded our best-in-class Hydrafacial booster portfolio, launching a co-created booster with prestige skincare brand Omorovicza in the
U.S. and EMEA and unveiling an exclusive global partnership with Dior Spas, with the first Dior powered by Hydrafacial experience now available at the iconic Hoteldu Cap-Eden-Roc .
Financial Highlights
-
Net sales were
$86.3 million for the first quarter of 2023, an increase of +14% compared to the prior year, in line with our 2023 plan and driven by strong demand for consumables. - Gross margin was 62.7% in Q1 2023 compared to 67.5% in Q1 2022. Adjusted gross margin was 70.0% in Q1 2023 compared to 71.3% in Q1 2022. Gross margin was impacted by charges for discontinued and obsolete products and the sale of lower margin refurbished Elite systems internationally prior to the international Syndeo launch in Q2 2023.
-
Net loss was
$(22.3) million in Q1 2023 compared to net income of$31.5 million in Q1 2022. The net loss as compared to net income in the prior year was due primarily to a benefit in the prior year from the change in the fair value of our warrant liabilities. -
Adjusted EBITDA was
$(0.5) million in Q1 2023 compared to adjusted EBITDA of$1.2 million in Q1 2022, partially due to the operating expense burden caused by the January and February shutdowns inChina , the sale of lower margin refurbished Elite systems, and a degree of hold-back on delivery systems from international providers in anticipation of Syndeo's international availability in Q2 2023.
|
|
Three Months Ended |
|
|
||||
|
Unaudited ($ in millions) (1) |
2023 |
|
2022 |
|
% Change |
||
|
Net sales by region |
|
|
|
|
|
||
|
|
$ |
53.0 |
|
$ |
44.6 |
|
+19 % |
|
|
|
13.6 |
|
|
12.9 |
|
+6 % |
|
|
|
19.7 |
|
|
17.9 |
|
+10 % |
|
Total net sales |
$ |
86.3 |
|
$ |
75.4 |
|
+14 % |
___________________
|
(1) |
Amounts may not sum due to rounding. |
-
Net sales in the
Americas region increased +19% to$53.0 million in Q1 2023 compared to Q1 2022, driven by +34% growth in consumables net sales, partially offset by lapping Q1 2022 Syndeo launch-related trade-up demand. -
Net sales in the APAC region increased +6% to
$13.6 million in Q1 2023 compared to Q1 2022, driven by strength of delivery system demand in March, despite COVID-related shutdowns in January and February that drove a (22%) decrease in Q1 2023 consumables net sales. -
Net sales in the EMEA region increased +10% to
$19.7 million in Q1 2023 compared to Q1 2022, driven by strong performance across the region. ExcludingRussia's Q1 2022 contribution of$1.5 million net sales, EMEA net sales grew +20% year-over-year.
Operating Expenses
-
Selling and marketing expenses were
$38.7 million in Q1 2023 compared to$36.4 million in Q1 2022, primarily driven by increases in personnel related costs, including sales commission expense. Notably, Selling & marketing expenses as a percentage of revenue decreased 342 basis points year-over-year, partially due to the lapping of Syndeo US launch costs and increased operating leverage from higher revenue. -
General and administrative expenses were
$30.4 million in Q1 2023 compared to$26.3 million in Q1 2022, primarily due to an increase in software expenses, including certain contract termination costs, and professional services fees, including patent litigation expenses, partially offset by lower recruiting related expenses.
Balance Sheet and Cash Flow Highlights
-
Cash and cash equivalents were approximately
$532.3 million as ofMarch 31, 2023 compared to approximately$568.2 million as ofDecember 31, 2022 . Cash and cash equivalents decreased during the year primarily due to strategic acquisitions made during the first quarter of 2023. -
The Company had approximately 7.0 million private placement warrants and approximately 132.6 million shares of Class A common stock outstanding as of
March 31, 2023 . InApril 2023 , the Company completed its second$100.0 million accelerated share repurchase transaction. With the two$100.0 million accelerated share repurchase programs, the Company retired an aggregate of approximately 18.8 million shares at an average price of$10.78 per share.
Financial Guidance
|
|
Current as of Q1 2023 |
Previous |
|
Fiscal Year 2023 |
|
|
|
Net sales |
|
|
|
Adjusted gross margin(1) |
> Fiscal 2022 |
> Fiscal 2022 |
|
Adjusted EBITDA margin(1) |
18% – 20% |
18% – 20% |
|
|
|
|
|
Fiscal Year 2025 Long-Range Outlook |
|
|
|
Net sales |
|
|
|
Adjusted EBITDA margin(1) |
25% – 30% |
25% – 30% |
___________________
| (1) |
See "Non-GAAP Financial Measures" below. |
-
The Company raised its fiscal year 2023 net sales guidance to a range of
$460 to$480 million due to continued strength in consumer demand, strong Syndeo traction globally, and a re-acceleration inChina .
Financial guidance reflects the following external environment assumptions:
- Assumes no material deterioration in general market conditions or other unforeseen circumstances beyond our control.
- Excludes any unannounced acquisitions, dispositions or financings during 2023.
- 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
Non-GAAP Financial Measures
In addition to results determined in accordance with accounting principles generally accepted in
The Company does not provide a reconciliation of its fiscal 2023 adjusted gross margin guidance to gross margin or its adjusted EBITDA margin guidance to net income (loss), 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 gross margin and 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.
Adjusted Gross Profit and Adjusted Gross Margin
Management uses adjusted gross profit and adjusted gross margin to measure profitability and the ability to scale and leverage the costs of delivery systems and consumables. The continued growth of delivery systems is expected to improve adjusted gross margin, as additional delivery systems sold will increase the Company’s recurring consumables net sales, which has higher margins.
Management believes adjusted gross profit and adjusted gross margin are useful measures to the Company and its investors to assist in evaluating operating performance because they provide consistency and direct comparability with past financial performance and between fiscal periods, as the metrics eliminate the effects of amortization, depreciation, and stock-based compensation, which are non-cash expenses that may fluctuate for reasons unrelated to overall continuing operating performance, and other items such as the write-off of discontinued and obsolete product. Adjusted gross margin has been and will continue to be impacted by a variety of factors, including the product mix, geographic mix, direct vs. indirect mix, the average selling price on delivery systems, and new product launches. Management expects adjusted gross margin to fluctuate over time depending on the factors described above.
The following table reconciles gross profit to adjusted gross profit for the periods presented:
|
|
Three Months Ended |
||||||
|
Unaudited ($ in millions) (2) |
|
2023 |
|
|
|
2022(1) |
|
|
Net sales |
$ |
86.3 |
|
|
$ |
75.4 |
|
|
Cost of sales |
|
32.2 |
|
|
|
24.5 |
|
|
Gross profit |
$ |
54.1 |
|
|
$ |
50.9 |
|
|
Gross margin |
|
62.7 |
% |
|
|
67.5 |
% |
|
Adjusted to exclude the following: |
|
|
|
||||
|
Write-off of discontinued and obsolete product |
$ |
3.0 |
|
|
$ |
— |
|
|
Stock-based compensation included in cost of sales |
|
0.3 |
|
|
|
0.2 |
|
|
Depreciation and amortization expense included in cost of sales |
|
3.0 |
|
|
|
2.7 |
|
|
Adjusted gross profit |
$ |
60.4 |
|
|
$ |
53.8 |
|
|
Adjusted gross margin |
|
70.0 |
% |
|
|
71.3 |
% |
___________________
|
(1) |
Reflects the impact of immaterial revisions to the financial statements. |
|
(2) |
Amounts may not sum due to rounding. |
Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted net income (loss), adjusted EBITDA, and adjusted EBITDA margin are key performance measures that management uses to assess the Company's operating performance. Because adjusted net income (loss), adjusted EBITDA and adjusted EBITDA margin facilitate internal comparisons of our historical operating performance on a more consistent basis, management uses these measures for business planning purposes.
Management also believes this information will be useful for investors to facilitate comparisons of operating performance and better identify trends in the business. Management expects adjusted EBITDA margin to increase over the long-term, as the Company continues to scale its business and achieve greater operating leverage.
The Company calculates adjusted net income (loss) as net income (loss) adjusted to exclude: change in fair value of warrant liability; amortization expense; loss on disposal of assets; stock-based compensation expense; interest income; other (income) expense, net; transaction related costs; write-off of discontinued and obsolete product; severance, restructuring, and other; litigation related costs, and the aggregate adjustment for income taxes for the tax effect of the adjustments described above.
The Company calculates adjusted EBITDA as adjusted net income (loss) adjusted to exclude: depreciation expense; interest expense; foreign currency loss (gain), net; and the remaining (benefit) expense for income taxes.
The following table reconciles BeautyHealth’s net income (loss) to adjusted net income (loss) and adjusted EBITDA for the periods presented:
|
|
Three Months Ended |
||||||
|
Unaudited ($ in millions) (2) |
|
2023 |
|
|
|
2022(1) |
|
|
Net (loss) income |
$ |
(22.3 |
) |
|
$ |
31.5 |
|
|
Adjusted to exclude the following: |
|
|
|
||||
|
Change in fair value of warrant liability |
|
9.1 |
|
|
|
(52.1 |
) |
|
Amortization expense |
|
4.4 |
|
|
|
3.7 |
|
|
Loss on disposal of assets |
|
0.1 |
|
|
|
0.8 |
|
|
Stock-based compensation expense |
|
3.6 |
|
|
|
7.0 |
|
|
Interest income |
|
(4.3 |
) |
|
|
— |
|
|
Other (income) expense, net |
|
(0.4 |
) |
|
|
0.1 |
|
|
Transaction related costs (3) |
|
— |
|
|
|
1.0 |
|
|
Write-off of discontinued and obsolete product |
|
3.0 |
|
|
|
— |
|
|
Severance, restructuring and other (4) |
|
2.9 |
|
|
|
2.0 |
|
|
Litigation related costs |
|
1.0 |
|
|
|
— |
|
|
Aggregate adjustment for income taxes |
|
(2.5 |
) |
|
|
(3.6 |
) |
|
Adjusted net loss |
$ |
(5.5 |
) |
|
$ |
(9.5 |
) |
|
Depreciation expense |
|
1.8 |
|
|
|
1.4 |
|
|
Interest expense |
|
3.4 |
|
|
|
3.4 |
|
|
Foreign currency loss (gain), net |
|
0.9 |
|
|
|
(0.4 |
) |
|
Remaining (benefit) expense for income taxes |
|
(1.2 |
) |
|
|
6.2 |
|
|
Adjusted EBITDA |
$ |
(0.5 |
) |
|
$ |
1.2 |
|
|
Adjusted EBITDA margin |
|
(0.6 |
) % |
|
|
1.5 |
% |
___________________
|
(1) |
Reflects the impact of immaterial revisions to the financial statements. |
|
(2) |
Amounts may not sum due to rounding. |
|
(3) |
For the three months ended |
|
(4) |
For the three months ended |
About The
The
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
|
The Condensed Consolidated Statements of Comprehensive Income (Loss) (1) (in millions, except share and per share amounts) (Unaudited) |
||||||||
|
|
|
Three Months Ended |
||||||
|
|
|
|
2023 |
|
|
|
2022(2) |
|
|
Net sales |
|
$ |
86.3 |
|
|
$ |
75.4 |
|
|
Cost of sales |
|
|
32.2 |
|
|
|
24.5 |
|
|
Gross profit |
|
|
54.1 |
|
|
|
50.9 |
|
|
Operating expenses: |
|
|
|
|
||||
|
Selling and marketing |
|
|
38.7 |
|
|
|
36.4 |
|
|
Research and development |
|
|
2.3 |
|
|
|
2.2 |
|
|
General and administrative |
|
|
30.4 |
|
|
|
26.3 |
|
|
Total operating expenses |
|
|
71.4 |
|
|
|
64.9 |
|
|
Loss from operations |
|
|
(17.3 |
) |
|
|
(14.0 |
) |
|
Interest expense, net |
|
|
3.4 |
|
|
|
3.4 |
|
|
Interest income |
|
|
(4.3 |
) |
|
|
— |
|
|
Other (income) expense, net |
|
|
(0.4 |
) |
|
|
0.9 |
|
|
Change in fair value of warrant liabilities |
|
|
9.1 |
|
|
|
(52.1 |
) |
|
Foreign currency transaction loss (gain), net |
|
|
0.9 |
|
|
|
(0.4 |
) |
|
(Loss) income before provision for income taxes |
|
|
(25.9 |
) |
|
|
34.1 |
|
|
Income tax (benefit) expense |
|
|
(3.7 |
) |
|
|
2.6 |
|
|
Net (loss) income |
|
|
(22.3 |
) |
|
|
31.5 |
|
|
Comprehensive (loss) income, net of tax: |
|
|
|
|
||||
|
Foreign currency translation adjustments |
|
|
0.9 |
|
|
|
(0.1 |
) |
|
Comprehensive (loss) income |
|
$ |
(21.4 |
) |
|
$ |
31.3 |
|
|
Net (loss) income per share |
|
|
|
|
||||
|
Basic |
|
$ |
(0.17 |
) |
|
$ |
0.21 |
|
|
Diluted |
|
$ |
(0.17 |
) |
|
$ |
(0.13 |
) |
|
Weighted average common shares outstanding |
|
|
|
|
||||
|
Basic |
|
|
132,420,762 |
|
|
|
150,598,105 |
|
|
Diluted |
|
|
132,420,762 |
|
|
|
152,711,698 |
|
___________________
| (1) |
Amounts may not sum due to rounding. |
| (2) |
Reflects the impact of immaterial revisions to the financial statements. |
|
The Condensed Consolidated Balance Sheets (1) (in millions, except for share amounts) (Unaudited) |
|||||||
|
|
|
|
|
||||
|
ASSETS |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
532.3 |
|
|
$ |
568.2 |
|
|
Accounts receivable, net |
|
70.8 |
|
|
|
76.5 |
|
|
Inventories |
|
122.1 |
|
|
|
109.7 |
|
|
Income tax receivable |
|
1.6 |
|
|
|
1.3 |
|
|
Prepaid expenses and other current assets |
|
21.7 |
|
|
|
26.3 |
|
|
Total current assets |
|
748.5 |
|
|
|
782.0 |
|
|
Property and equipment, net |
|
18.4 |
|
|
|
18.2 |
|
|
Right-of-use assets, net |
|
15.6 |
|
|
|
15.6 |
|
|
Intangible assets, net |
|
70.8 |
|
|
|
46.4 |
|
|
|
|
125.2 |
|
|
|
124.6 |
|
|
Deferred income tax assets, net |
|
0.8 |
|
|
|
0.8 |
|
|
Other assets |
|
15.6 |
|
|
|
14.2 |
|
|
TOTAL ASSETS |
$ |
994.9 |
|
|
$ |
1,001.8 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
34.3 |
|
|
$ |
30.3 |
|
|
Accrued payroll-related expenses |
|
18.7 |
|
|
|
21.7 |
|
|
Other accrued expenses |
|
13.1 |
|
|
|
15.2 |
|
|
Lease liabilities, current |
|
4.9 |
|
|
|
5.0 |
|
|
Income tax payable |
|
1.2 |
|
|
|
1.0 |
|
|
Total current liabilities |
|
72.3 |
|
|
|
73.1 |
|
|
Lease liabilities, non-current |
|
12.3 |
|
|
|
12.7 |
|
|
Deferred income tax liabilities, net |
|
2.9 |
|
|
|
2.0 |
|
|
Warrant liabilities |
|
24.6 |
|
|
|
15.5 |
|
|
Convertible senior notes, net |
|
735.2 |
|
|
|
734.1 |
|
|
TOTAL LIABILITIES |
$ |
847.3 |
|
|
$ |
837.4 |
|
|
|
|
|
|
||||
|
Stockholders’ equity: |
|
|
|
||||
|
Class A Common Stock |
$ |
— |
|
|
$ |
— |
|
|
Additional paid-in capital |
|
555.0 |
|
|
|
550.3 |
|
|
Accumulated other comprehensive loss |
|
(3.6 |
) |
|
|
(4.5 |
) |
|
Accumulated deficit |
|
(403.8 |
) |
|
|
(381.5 |
) |
|
Total stockholders’ equity |
$ |
147.6 |
|
|
$ |
164.3 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
994.9 |
|
|
$ |
1,001.8 |
|
___________________
| (1) |
Amounts may not sum due to rounding. |
| (2) |
Reflects the impact of immaterial revisions to the financial statements. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230510005386/en/
Investors: BeautyHealthIR@the193.com
Press: BeautyHealth@the193.com
Source: The