UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 9, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices)
(Zip Code)
(800 ) 603-4996
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
The information provided below in “Item 7.01 - Regulation FD Disclosure” of this Current Report on Form 8-K (“Current Report”) is incorporated by reference into this Item 2.02.
Item 7.01. Regulation FD Disclosure.
On August 9, 2022, The Beauty Health Company (the "Company") issued a press release (the “Earnings Press Release”) regarding the Company’s financial results for its fiscal quarter ended June 30, 2022. A copy of the Earnings Press Release is attached as Exhibit 99.1 hereto and incorporated herein by reference.
On August 9, 2022, the Company posted an investor presentation (the “Investor Presentation”) on the Company’s website, https://investors.beautyhealth.com/. A copy of the Investor Presentation is attached as Exhibit 99.2 hereto and incorporated herein by reference.
The Earnings Press Release and Investor Presentation include non-GAAP financial measures as defined in Regulation G of the Sarbanes-Oxley Act of 2002. The Earnings Press Release and Investor Presentation also include a presentation of the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), information reconciling the non-GAAP financial measures to the GAAP financial measures, and a discussion of the reasons why the Company’s management believes that presentation of the non-GAAP financial measures provides useful information to investors regarding the Company’s financial condition and results of operations. The non-GAAP financial measures presented therein should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated and presented in accordance with GAAP.
Exhibit 99.1 and Exhibit 99.2 contain forward-looking statements. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed in these forward-looking statements.
The information set forth under Item 7.01 of this Current Report, including Exhibit 99.1 and Exhibit 99.2 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including Exhibit 99.1 and Exhibit 99.2, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, unless expressly incorporated by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. | Description | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: | The Beauty Health Company | |||||||
| By: | /s/ Liyuan Woo | |||||||
| Name: | Liyuan Woo | |||||||
| Title: | Chief Financial Officer | |||||||
Exhibit 99.1
BeautyHealth Reports Record Second Quarter 2022 Financial Results
All-time high quarterly net sales of $103.5 million, up +55.7% YoY
Company raises net sales guidance and reaffirms adjusted EBITDA outlook for the year
Exceptional results driven by acceleration of HydraFacial delivery system placements globally, with segment revenue up +85.4% YoY; healthy consumer interest
Long Beach, Calif., August 9, 2022 – The Beauty Health Company (NASDAQ: SKIN), home to flagship brand HydraFacial, today announced record financial results that exceeded expectations for the second quarter ended June 30, 2022. On the basis of the quarter’s exceptional performance and growing momentum, the Company also raised its 2022 net sales guidance and reaffirmed its 2022 adjusted EBITDA guidance.
Second Quarter 2022 vs. Second Quarter 2021:
•Global performance:
◦+55.7% net sales growth to $103.5 million
◦Net income and adjusted net income of $7.9 million and $2.2 million in 2Q 2022, respectively, compared to net loss and adjusted net income of ($139.4) million and $7.8 million in 2Q 2021, respectively
◦+10.9% adjusted EBITDA growth to $12.6 million
•Net sales by region:
◦Americas: $75.4 million, +76.6% year-over-year; driven by strong demand for Syndeo
◦APAC: $10.4 million, (16.5%) year-over-year; driven by COVID lockdowns in China, partly offset by strength in Australia
◦EMEA: $17.8 million, +56.0% year-over-year; driven by high conversion in marketing activations across the region
•Successful U.S. rollout of Syndeo, HydraFacial’s next generation connected delivery system, with +108.3% sequential quarterly growth in Americas number of systems sold since the first quarter 2022 when Syndeo was launched
•Growing consumer interest with all-time highs in Google Search activity and Earned Media Value
“Our spectacular results this quarter reflect the growing strength of our business, the enthusiasm of our providers and consumers, and the accelerating demand for HydraFacial around the world,” said BeautyHealth President and Chief Executive Officer Andrew Stanleick. “We delivered our highest-ever quarterly net sales on record delivery system sales. We remain as confident as ever in our business and are raising our full-year net sales guidance by $10 million, up to $340 to $350 million, and reaffirming our $50 million 2022 adjusted EBITDA outlook as we continue to invest in our growth.”
Key Operational and Business Metrics
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Unaudited (dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Delivery Systems net sales | $ | 64.8 | $ | 34.9 | $ | 106.4 | $ | 60.6 | |||||||||||||||
| Consumables net sales | 38.8 | 31.6 | 72.5 | 53.4 | |||||||||||||||||||
Total net sales | $ | 103.5 | $ | 66.5 | $ | 179.0 | $ | 114.1 | |||||||||||||||
| Gross profit | $ | 71.7 | $ | 47.3 | $ | 123.6 | $ | 79.0 | |||||||||||||||
| Gross margin | 69.2% | 71.0% | 69.1% | 69.3% | |||||||||||||||||||
| Net income (loss) | $ | 7.9 | $ | (139.4) | $ | 40.4 | $ | (142.7) | |||||||||||||||
| Adjusted net income (loss)* | $ | 2.2 | $ | 7.8 | $ | (6.3) | $ | 7.7 | |||||||||||||||
| Adjusted EBITDA* | $ | 12.6 | $ | 11.4 | $ | 14.9 | $ | 18.4 | |||||||||||||||
| Adjusted EBITDA margin* | 12.2% | 17.1% | 8.3% | 16.1% | |||||||||||||||||||
| Adjusted gross profit* | $ | 74.8 | $ | 49.8 | $ | 129.6 | $ | 84.1 | |||||||||||||||
| Adjusted gross margin* | 72.3% | 74.9% | 72.4% | 73.8% | |||||||||||||||||||
*See "Non-GAAP Financial Measures" below.
1
Second Quarter 2022 Summary
•Net sales of $103.5 million increased +55.7% in Q2 2022 compared to $66.5 million in Q2 2021, driven by record Delivery Systems net sales.
◦Delivery Systems net sales increased to $64.8 million in Q2 2022, compared to $34.9 million in Q2 2021. The Company sold 2,738 Delivery Systems during the quarter, including 1,203 trade-ups.
◦Consumables net sales increased to $38.8 million in Q2 2022, compared to $31.6 million in Q2 2021.
◦Net sales in the Americas region increased to $75.4 million in Q2 2022 compared to $42.7 million in Q2 2021, driven by strong demand for Syndeo.
◦Net sales in the APAC region decreased to $10.4 million in Q2 2022 compared to $12.4 million in Q2 2021, driven by COVID-19 related lockdowns in China, partly offset by continued strength in Australia.
◦Net sales in the EMEA region increased to $17.8 million in Q2 2022 compared to $11.4 million in Q2 2021, driven by strong Delivery Systems net sales and high conversion of the Company’s marketing activations across the region.
•Gross margin was 69.2% in Q2 2022 compared to 71.0% in Q2 2021, and adjusted gross margin was 72.3% in Q2 2022 compared to 74.9% in Q2 2021. Gross margin was impacted by the lower average selling price of delivery systems due to intentional promotions associated with Syndeo’s launch, as well as continued pricing pressure from supply chain headwinds, particularly shipping costs. These impacts were partly offset by strength in new Syndeo system placements, margin accretion from distributor acquisitions, and fixed cost leverage from higher net sales volume. The Company expects continued headwinds from global supply chain challenges and inflationary pressures to weigh on gross margin through 2022, specifically higher shipping costs, offset by fixed cost leverage from higher sales volumes coupled with pricing initiatives, and margin accretion related to the acquired distributor inventory.
•Selling and marketing expenses were $44.9 million in Q2 2022 compared to $26.2 million in Q2 2021, primarily driven by increases in planned marketing programs, personnel-related expenses, and sales commissions associated with higher revenue.
•Operating loss was $3.4 million in Q2 2022 compared to an operating loss of $26.4 million in Q2 2021, primarily due to the lack of transaction costs incurred in Q2 2021 associated with the Business Combination. This was partly offset by increased sales commissions associated with higher revenue, increases in global planned marketing programs, increased personnel-related expenses, and increased recruiting & professional fees. The operating loss in Q2 2022 includes $1.1 million in litigation costs to vigorously protect the Company’s intellectual property and one-time costs of $1.9 million.
•Net income was $7.9 million in Q2 2022 compared to a net loss of $139.4 million in Q2 2021, and adjusted net income was $2.2 million in Q2 2022 compared to $7.8 million in Q2 2021. The fluctuation was primarily due to the change in fair value of the warrant liability.
•Adjusted EBITDA is an important profitability measure that the Company uses to manage its business internally. In Q2 2022, adjusted EBITDA was $12.6 million compared to adjusted EBITDA of $11.4 million in Q2 2021. Adjusted EBITDA grew due to strong demand for Syndeo, strong system sales and marketing conversions in EMEA, and fixed cost leverage, partly offset by the impact of COVID-19 lockdowns in China, supply chain headwinds, particularly shipping costs, increases in planned marketing programs, personnel-related expenses, and sales commissions associated with higher revenue.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were approximately $821.0 million as of June 30, 2022 compared to approximately $901.9 million as of December 31, 2021. The Company's cash and cash equivalents include approximately $638.7 million of net proceeds raised in 2021 from the Company’s issuance of $750 million of 1.25% Convertible Senior Notes due 2026, which have been and/or will be used to fund potential future acquisitions, working capital expenditures, a capped call purchase agreement and general corporate purposes.
Warrants and Shares Outstanding
The Company had approximately 7.0 million private placement warrants and approximately 151 million shares of Class A common stock outstanding as of June 30, 2022.
2
Outlook
BeautyHealth increased its fiscal 2022 guidance and now expects net sales in the range of $340.0 million to $350.0 million, up from the previous outlook of $330.0 million to $340.0 million, reflecting management's confidence in the business as the Company executes against its growth plan. The Company also reaffirmed its 2022 outlook for adjusted EBITDA of approximately $50.0 million, reflecting the continuing strategy of reinvesting in the business to fuel long-term growth. The increase assumes no material deterioration in general market conditions or other factors related to COVID-19 trends.
For fiscal 2022, BeautyHealth also continues to expect up to $20.0 million of capital expenditures to be incurred during 2022.
BeautyHealth’s achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Exchange Commission. The outlook does not take into account the impact of any unanticipated developments in the business or changes in the operating environment, nor does it take into account any acquisitions, dispositions or financings during 2022. In addition, given the uncertainty in the environment in which BeautyHealth is operating, the Company remains cautious of the potential risk for further market closures or other restrictive measures from existing or new COVID-19 strains and the uneven global rollout and adoption of vaccines, as well as inflationary headwinds related to higher raw material, shipping and labor costs. BeautyHealth’s outlook assumes a largely reopened global market, which would be negatively impacted if closures or other restrictive measures persist or are reimplemented.
Conference Call
BeautyHealth will host a conference call on Tuesday, August 9, 2022, at 8:30 a.m. ET to review its second quarter financial results. The call may be accessed via live webcast through the "Events & Presentations" page under "News & Events" on our Investor Relations website at https://investors.beautyhealth.com/. A replay of the conference call will be available within 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 net income, adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, and adjusted gross margin for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our 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 non-recurring, unusual items.
The Company does not provide a reconciliation of its fiscal 2022 adjusted EBITDA guidance to net income (loss), the most directly comparable forward looking GAAP financial measure, 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 2022 adjusted EBITDA 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.
3
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 our 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. 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 June 30, | Six months ended June 30, | ||||||||||||||||||||||
| Unaudited (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net sales | $ | 103,536 | $ | 66,508 | $ | 178,951 | $ | 114,050 | |||||||||||||||
| Cost of sales | 31,882 | 19,257 | 55,360 | 35,059 | |||||||||||||||||||
| Gross profit | $ | 71,654 | $ | 47,251 | $ | 123,591 | $ | 78,991 | |||||||||||||||
| Gross margin | 69.2 | % | 71.0 | % | 69.1 | % | 69.3 | % | |||||||||||||||
| Adjusted to exclude the following: | |||||||||||||||||||||||
| Stock-based compensation expense included in cost of sales | $ | 207 | $ | — | $ | 433 | $ | — | |||||||||||||||
| Depreciation and amortization expense included in cost of sales | 2,969 | 2,567 | 5,624 | 5,158 | |||||||||||||||||||
| Adjusted gross profit | $ | 74,830 | $ | 49,818 | $ | 129,648 | $ | 84,149 | |||||||||||||||
| Adjusted gross margin | 72.3 | % | 74.9 | % | 72.4 | % | 73.8 | % | |||||||||||||||
Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted net income, adjusted EBITDA, and adjusted EBITDA margin are key performance measures that management uses to assess the Company's operating performance. Because adjusted net income, 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 as net income (loss) adjusted to exclude: change in fair value of public and private placement warrants, change in fair value of earn-out shares liability, other expense, net; amortization expense; stock-based compensation expense; management fees incurred from historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); restructuring costs (including those associated with COVID-19) and the aggregate adjustment for income taxes for the tax effect of the adjustments described above.
4
The Company calculates adjusted EBITDA as net income (loss) adjusted to exclude: change in fair value of public and private placement warrants, change in fair value of earn-out shares liability, other expense, net; interest expense; income tax benefit (expense); depreciation and amortization expense; stock-based compensation expense; foreign currency (gain) loss; management fees incurred from historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); and restructuring costs (including those associated with COVID-19).
The following table reconciles BeautyHealth’s net income (loss) to adjusted net income (loss) and adjusted EBITDA for the periods presented:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| Unaudited (in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net income (loss) | $ | 7,931 | $ | (139,378) | $ | 40,438 | $ | (142,652) | |||||||||||||||
| Adjusted to exclude the following: | |||||||||||||||||||||||
| Change in FV of warrant liability | (15,185) | 72,027 | (67,237) | 72,027 | |||||||||||||||||||
| Change in FV of earn-out shares liability | — | 36,525 | — | 36,525 | |||||||||||||||||||
| Amortization expense | 3,938 | 2,967 | 7,651 | 5,921 | |||||||||||||||||||
| Stock-based compensation expense | 6,378 | 3,508 | 13,427 | 3,542 | |||||||||||||||||||
| Other (income) expense | (1,658) | 4,307 | (721) | 4,314 | |||||||||||||||||||
| Management fees (1) | — | 82 | — | 209 | |||||||||||||||||||
| Transaction related costs (2) | 1,986 | 30,411 | 3,031 | 31,157 | |||||||||||||||||||
| Other non-recurring and one-time fees (3) | 1,897 | 50 | 3,852 | 137 | |||||||||||||||||||
| Aggregate adjustment for income taxes | (3,097) | (2,671) | (6,723) | (3,434) | |||||||||||||||||||
| Adjusted net income (loss) | $ | 2,190 | $ | 7,828 | $ | (6,282) | $ | 7,746 | |||||||||||||||
| Depreciation expense | 1,852 | 728 | 3,268 | 1,418 | |||||||||||||||||||
| Interest expense | 3,217 | 2,060 | 6,617 | 7,759 | |||||||||||||||||||
| Foreign currency (gain) loss, net | 2,206 | (24) | 1,838 | 232 | |||||||||||||||||||
| Remaining benefit for income taxes | 3,173 | 801 | $ | 9,414 | $ | 1,258 | |||||||||||||||||
| Adjusted EBITDA | $ | 12,638 | $ | 11,393 | $ | 14,855 | $ | 18,413 | |||||||||||||||
| Adjusted EBITDA margin | 12.2% | 17.1% | 8.3% | 16.1% | |||||||||||||||||||
__________________
(1)Represents quarterly management fees paid to the former majority shareholder of HydraFacial based on a pre-determined formula. Following the Business Combination, these fees are no longer paid.
(2)For the three months and six months ended June 30, 2022, such amounts primarily represent direct costs incurred in relation to potential acquisitions. For the three months and six months ended June 30, 2021 such amounts primarily represent direct costs incurred with the Business Combination and to prepare HydraFacial to be marketed for sale by HydraFacial’s shareholders in previous periods.
(3)For the three months ended June 30, 2022, such costs primarily represent one-time severance costs due to a Company re-organization. For the six months ended June 30, 2022 such costs include the re-organization severance, other one-time personnel costs related to executive recruiting, executive severance, a one-time loss on fixed asset write-offs and a CEO sign-on bonus.
About the Business Combination
On May 4, 2021, Vesper Healthcare Acquisition Corp. (“Vesper Healthcare”), a special purpose acquisition company, completed the previously announced business combination (the “Business Combination”) with Edge Systems LLC d/b/a The HydraFacial Company (“HydraFacial”). In connection with the Business Combination, Vesper Healthcare changed its name to The Beauty Health Company, and LCP Edge Intermediate, Inc., the indirect parent of HydraFacial, became an indirect subsidiary of BeautyHealth. For fiscal periods following the date of completion of the Business Combination, financial results are reported by The Beauty Health Company on a consolidated basis.
5
About The Beauty Health Company
The Beauty Health Company (NASDAQ: SKIN) is a global category-creating company delivering beauty health experiences that help consumers reinvent their relationship with their skin, bodies and self-confidence. Our flagship brand, HydraFacial, created the category of hydradermabrasion by using a patented vortex-fusion delivery system to cleanse, extract, and hydrate the skin with proprietary solutions and serums. HydraFacial provides a non-invasive and approachable skincare experience. Together, with our powerful community of aestheticians, consumers and partners, we are personalizing skin care solutions for all ages, genders, skin tones, and skin types. HydraFacial is available in more than 90 countries with an install base of nearly 23,000 delivery systems providing millions of experiences to consumers each year. Find a local HydraFacial at https://hydrafacial.com/find-a-provider/. For more information, visit www.beautyhealth.com.
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. 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.
Important factors, among others, that may affect actual results or outcomes include 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; and the impact of the continuing COVID-19 pandemic on the Company’s business. 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.
Contacts
The One Nine Three Group
Investors: Christine Lauterwasser
Email: BeautyHealthIR@the193.com
Press: Kurt Hopfenspirger
Email: BeautyHealth@the193.com
6
The Beauty Health Company
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands except share and per share amounts)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net sales | $ | 103,536 | $ | 66,508 | $ | 178,951 | $ | 114,050 | |||||||||||||||
| Cost of sales | 31,882 | 19,257 | 55,360 | 35,059 | |||||||||||||||||||
| Gross profit | 71,654 | 47,251 | 123,591 | 78,991 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling and marketing | 44,881 | 26,214 | 81,288 | 43,309 | |||||||||||||||||||
| Research and development | 2,601 | 2,988 | 4,831 | 4,440 | |||||||||||||||||||
| General and administrative | 27,585 | 44,402 | 53,846 | 55,213 | |||||||||||||||||||
| Total operating expenses | 75,067 | 73,604 | 139,965 | 102,962 | |||||||||||||||||||
| Loss from operations | (3,413) | (26,353) | (16,374) | (23,971) | |||||||||||||||||||
| Other (income) expense: | |||||||||||||||||||||||
| Interest expense, net | 3,217 | 2,060 | 6,617 | 7,759 | |||||||||||||||||||
| Other (income) expense, net | (1,658) | 4,307 | (721) | 4,314 | |||||||||||||||||||
| Change in fair value of warrant liabilities | (15,185) | 72,027 | (67,237) | 72,027 | |||||||||||||||||||
| Change in fair value of earn-out shares liability | — | 36,525 | — | 36,525 | |||||||||||||||||||
| Foreign currency transaction loss (gain), net | 2,206 | (24) | 1,838 | 232 | |||||||||||||||||||
| Total other (income) expense | (11,420) | 114,895 | (59,503) | 120,857 | |||||||||||||||||||
| Income (loss) before provision for income taxes | 8,007 | (141,248) | 43,129 | (144,828) | |||||||||||||||||||
| Income tax expense (benefit) | 76 | (1,870) | 2,691 | (2,176) | |||||||||||||||||||
| Net income (loss) | $ | 7,931 | $ | (139,378) | $ | 40,438 | $ | (142,652) | |||||||||||||||
| Comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (3,687) | (276) | (3,832) | (281) | |||||||||||||||||||
| Comprehensive income (loss) | $ | 4,244 | $ | (139,654) | $ | 36,606 | $ | (142,933) | |||||||||||||||
| Net income (loss) per share | |||||||||||||||||||||||
| Basic | $ | 0.05 | $ | (1.52) | $ | 0.27 | $ | (2.24) | |||||||||||||||
| Diluted | $ | (0.05) | $ | (1.52) | $ | (0.18) | $ | (2.24) | |||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Basic | 150,731,491 | 91,798,837 | 150,665,166 | 63,805,807 | |||||||||||||||||||
| Diluted | 151,719,451 | 91,798,837 | 152,274,394 | 63,805,807 | |||||||||||||||||||
7
The Beauty Health Company
Condensed Consolidated Balance Sheets
(in thousands, except for share amounts)
(Unaudited)
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 820,970 | $ | 901,886 | |||||||
Accounts receivable, net of allowances for doubtful accounts of $2,482 and $2,681 at June 30, 2022 and December 31, 2021, respectively | 79,918 | 46,824 | |||||||||
| Prepaid expenses and other current assets | 20,336 | 12,322 | |||||||||
| Income tax receivable | 1,008 | 4,599 | |||||||||
| Inventories | 73,526 | 35,261 | |||||||||
| Total current assets | 995,758 | 1,000,892 | |||||||||
| Property and equipment, net | 18,041 | 16,183 | |||||||||
| Right-of-use assets, net | 15,791 | 14,992 | |||||||||
| Intangible assets, net | 51,202 | 56,010 | |||||||||
| Goodwill | 124,033 | 123,694 | |||||||||
| Deferred income tax assets, net | 312 | 330 | |||||||||
| Other assets | 9,823 | 6,705 | |||||||||
| TOTAL ASSETS | $ | 1,214,960 | $ | 1,218,806 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 36,830 | $ | 29,049 | |||||||
| Accrued payroll-related expenses | 27,786 | 28,662 | |||||||||
| Other accrued expenses | 15,385 | 14,722 | |||||||||
| Lease liabilities, current | 4,547 | 3,712 | |||||||||
| Income tax payable | 2,510 | 292 | |||||||||
| Total current liabilities | 87,058 | 76,437 | |||||||||
| Lease liabilities, non current | 13,116 | 12,781 | |||||||||
| Deferred income tax liabilities, net | 3,844 | 3,561 | |||||||||
| Warrant liabilities | 26,579 | 93,816 | |||||||||
| Convertible senior notes, net | 732,028 | 729,914 | |||||||||
| TOTAL LIABILITIES | 862,625 | 916,509 | |||||||||
| Stockholders’ equity: | |||||||||||
Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 16 | 16 | |||||||||
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021 | — | — | |||||||||
| Additional paid-in capital | 735,682 | 722,250 | |||||||||
| Accumulated other comprehensive loss | (5,089) | (1,257) | |||||||||
| Accumulated deficit | (378,274) | (418,712) | |||||||||
| Total stockholders’ equity | 352,335 | 302,297 | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,214,960 | $ | 1,218,806 | |||||||
8
1 Q2 2022 EARNINGS PRESENTATION AUGUST 9, 2022
2 Opening Remarks AGENDA Q2 2022 Results & Outlook Q&A
3 DI SCLAI MER This Presentation contains certain forward-looking statements. These statements may relate to, but are not limited to, expectations of future operating resul ts or financial performance of The Beauty Health Company (the "Company"), the calculation of certain key financial and operating metrics, capital expenditures, the introduction of new products, expansion into new markets and the ability to execute certain strategic initiatives. Some of the forward-looking statements can be identified by the use of forward-looking words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast” and other similar expressions. These are intended to identify forward-looking statements. All forward-looking statements are based upon management estimates and forecasts and reflect the views, assumptions, expectations, and opinions of the Company as of the date of this Presentation, and may include, without limitation, changes in general economic conditions as a result of COVID-19, all of which are subject to change. Any such estimates, assumptions, expectations, forecasts, views or opinions set forth in this Presentation constitute the Company’s judgments and should be regarded as indicative, preliminary and for illustrative purposes only. The forward-looking statements and projections contained in this Presentation are subject to a number of factors, risks and uncertainties, some of which are not currently known to us, that may cause the Company’s actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition. Although such forward-looking statements have been made in good faith and are based on assumptions we believe to be reasonable, there is no assurance that the expected results will be achieved. Many factors could adversely affect our business and financial performance. We discussed a number of material risks in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022 and other filings with the Securities and Exchange Commission. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward- looking statements. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise. Description of Non-GAAP Financial Measures In addition to results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), managem ent utilizes certain non-GAAP financial measures such as adjusted gross margin, adjusted EBITDA, and adjusted EBITDA margin for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe these non-GAAP financial measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our 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 non-recurring, unusual items. Management uses 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 our 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 and depreciation, which are non-cash expenses that may fluctuate for reasons unrelated to overall continuing operating performance. 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. Management uses adjusted EBITDA and adjusted EBITDA margin to facilitate internal comparisons of historical operating performance on a more consistent basis and 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 and achieve greater operating leverage. The Company calculates adjusted EBITDA as net income (loss) adjusted to exclude: change in fair value of public and private placement warrants, change in fair value of earn-out shares liability, other expense, net; interest expense; income tax benefit (expense); depreciation and amortization expense; stock-based compensation expense; foreign currency (gain) loss; management fees incurred from historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); and restructuring costs (including those associated with COVID-19).
4 OPENI NG REMARKS Andrew Stanleick President & Chief Executive Officer
5 Q2 RESULTS EXCEEDED EXPECTATI ONS AND DEMONSTRATED ACCELERATI NG MOMENTUM +85.4% YoY increase in Delivery Systems net sales $103.5mm net sales +55.7% growth YoY $12.6mm adjusted EBITDA +10.9% growth YoY $340 – $350mm net sales $50mm adjusted EBITDA Adjusted EBITDA margin climbing to historical levels from 2023+ Achieved Record Quarterly Net Sales Accelerating Momentum with System Placements Raising 2022 Guidance
6 GLOBAL STRENGTH DROVE RECORD NET SALES Accelerating Syndeo rollout ▪ +76.6% YoY net sales growth ▪ Driven by strong demand for Syndeo A M E R IC A S Driving penetration in existing and new channels ▪ +56.0% YoY net sales growth ▪ Driven by high conversion in marketing activations across the region E M E A Strength in region outside of China ▪ (16.5%) YoY net sales decline ▪ Driven by COVID lockdowns in China, partly offset by strength in Australia A P A C
7 Place systems Invest in providers Drive brand awareness Build global infrastructure SI GNIFICANT PROGRESS ON OUR 5-POI NT MASTER PLAN M&A 21 43 5
8 2,265 Total Syndeo systems placed +108.3% sequential growth1 1 Q2 2022 Americas delivery systems sold vs Q1 2022 Americas delivery systems sold Love the app integration for consumers and how it tracks their treatments. —Provider, Colorado Springs, CO Easier to use with the no-touch system and provides more of a personal experience for our clients. —Provider, Fresno, CA It's sleek, it’s a sexy design. It's quiet, so it makes the treatment room that much more relaxing for your client while giving that clinical grade treatment. I highly recommend it. Don’t walk. Run. —Provider, Long Beach, CA ‘‘ ‘‘ ‘‘ 1 SUCCESSF ULLY EXECUTI NG OUR SYNDEO ROLLOUT ’ ’ ’ ’ ’ ’
9 1 ACCELERATI NG TOWARD PLANNED 2023 GLOBAL ROLL -OUT Q1 2022 Q2 2022 Q3 2022 Q4 2022 2023+ Phase I Targeted, promotion-led trade-up program to reward loyal provider base Phase II Focused effort to place new units and grow in sizable underpenetrated US market Phase III Continue expansion and launch internationally
10 2 UNI T I NG #GUNKI EJUNKI ES AT EST I PALOOZA
11 I NV ESTI NG I N OUR PROV I DERS V I A ACTI V ATI ONS AND TRADE SHOWS2
12 Jan-19 Jul-19 Jan-20 Jul-20 Dec-20 Jun-21 Dec-21 Jun-22 Interest over time 2Q22 average Record Google Search activity 2Q22 average +30% vs 2Q21 Highest-ever quarterly earned media value ($mm) $1.4 $2.0 $1.9 $1.3 $1.8 $1.2 $1.3 $1.9 $2.3 $1.9 $2.0 $1.5 $2.5 $2.8 2Q22 +52% vs 2Q21 Source: Google, Tribe Dynamics GENERATI NG RECORD CONSUMER I NTEREST WI TH F OCUS ON SUPER CONSUMERS3
13 ✓ Full implementation and integration of international ERP by the end of 2022 ✓ Global network optimization underway ✓ Key hires; experience center and global presence optimization in process I NV ESTI NG I N GLOBAL I NF RASTRUCTURE4
14 Differentiated product or service / high Net Promoter Score Complementary to our existing platform and community, leveraging the trusted aesthetician Financially attractive profile via compelling revenue growth, recurring revenue characteristics, and / or profitability Acquisition criteria Playbook ACCELERATI NG THE BEAUTYHEALTH PLATF ORM THROUGH M&A5 Identify gaps in bundle Acquire digestible asset Integrate and realize synergies Wellness Beauty Medical Aesthetics
15 SECOND QUARTER RESULTS & 2022 OUTLOOK Liyuan Woo Chief Financial Officer
16 Q2 2022 FI NANCI AL HI GHLI GHTS Net sales by region ($mm)Net sales by segment ($mm) 34.9 41.5 23.3 31.6 38.8 $66.5 $103.5 2Q21 2Q22 Delivery Systems Consumables +85.4% (incl. trade- ups) +22.8% +55.7% 42.7 75.4 12.4 10.4 11.4 17.8 $66.5 $103.5 2Q21 2Q22 Americas APAC EMEA +76.6% (16.5%) +55.7% Trade- ups $23,543 Delivery System ASP 22,929 2Q22 Install Base 2,738 Delivery Systems Sold 1,535 excl. trade-ups +56.0% +21.5% (excl. trade- ups) Note: Totals and percentages may not recalculate due to rounding
17 71.0% 69.2% 74.9% 72.3% 2Q21 2Q22 2Q21 2Q22 Q2 2022 FI NANCI AL HI GHLI GHTS (CONT’D) Gross margin and adjusted gross margin1 Net income (loss) and adjusted net income (loss) ($mm)1 Adjusted EBITDA ($mm)1 1 Non-GAAP measure; please refer to the appendix for a reconciliation to the appropriate GAAP measure GAAP gross margin Adjusted gross margin1 $11.4 $12.6 17.1% 12.2% 2Q21 2Q22 % margin ($139.4) $7.9 $7.8 $2.2 2Q21 2Q22 2Q21 2Q22 Net income (loss) Adjusted net income (loss)1
18 2Q22 COST DETAI L % Net Sales ($mm) 2Q22 1Q22 2Q21 ∆ 1Q22 / ∆ 2Q21 2Q22 1Q22 2Q21 ∆ 1Q22 / ∆ 2Q21 Commentary Gross Profit $71.7 $51.9 $47.3 $19.7 / $24.4 69.2% 68.9% 71.0% 0.3% / (1.8%) Higher supply chain and logist ics costs and t rade-up impact from Syndeo, part ly offset by margin accret ion from distributor acquisit ions and fixed cost leverage Selling & Marketing 44.9 36.4 26.2 8.5 / 18.7 43.3% 48.3% 39.4% (5.0%) / 3.9% Higher sales commissions, global marketing activations and personnel-related expenses (2Q21); Syndeo launch costs incurred in 1Q22 G&A 27.6 26.3 44.4 1.3 / (16.8) 26.6% 34.8% 66.8% (8.2%) / (40.1%) Decrease in transaction costs (business combination occurred 2Q21), part ly offset by stock-based compensation, personnel-related expenses, recruit ing & professional fees, and legal fees R&D 2.6 2.2 3.0 0.4 / (0.4) 2.5% 3.0% 4.5% (0.5%) / (2.0%) Wind-down of Syndeo- related R&D; part ly offset by consult ing costs with data and software hires
19 2Q22 BALANCE SHEET HI GHLI GHTS Cash and Cash Equivalents ▪ Approximately $821.0 million cash and cash equivalents on balance sheet1 Warrants ▪ Approximately 7.0 million Private Warrants outstanding Convertible Debt ▪ $750.0 million 1.25% convertible notes due 2026 ▪ Use of proceeds: capped call transaction, potential future acquisitions, working capital expenditures, and general corporate purposes ▪ Conversion price of $31.76; capped call agreement provides dilution protection up to $47.94 Revolving Credit Facility ▪ $50.0 million Senior Secured Credit Facility remains undrawn; current undrawn commitment fee of 25 bps ▪ Allows flexibility for future M&A; ex-US operations unencumbered; convertible debt excluded from covenants Shares Outstanding ▪ Approximately 150.9 million current shares outstanding2 1 Includes net proceeds of approximately $638.7 million convertible debt issued in September 2021, which have been and / or wil l be used to fund potential future acquisitions, working capital expenditures, a capped call purchase agreement, and general corporate purposes 2 As of 08/05/22
20 2022 OUTLOOK: CONFI DENCE I N OUR ABI LI TY TO EXECUTE Strong track record of net sales outperformance ($mm) $44.1 $49.2 $58.0 $71.1 $68.1 $83.9 $47.5 $66.5 $68.1 $77.9 $75.4 $103.5 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Consensus Estimate Actual Adjusted EBITDA outlook ($mm)1 Source: FactSet complied consensus Note: Percentages may not recalculate due to rounding 1 Non-GAAP measure; please refer to the appendix for a reconciliation to the appropriate GAAP measure +7.8% +35.2% +17.5% +9.5% +10.7% +23.4% $32.7 $50.0 2021 Actual 2022 Outlook Net sales outlook ($mm) $166.6 $119.1 $260.1 $320 – $330 $330 – $340 $340 – $350 2019 Actual 2020 Actual 2021 Actual 2022 Outlook (Feb) 2022 Outlook (May) 2022 Outlook (Aug)
21 Andrew Stanleick President and Chief Executive Officer Liyuan Woo Chief Financial Officer Q&A
22 APPENDI X
23 RECONCI LIATI ON OF NON-GAAP FI NANCI AL MEASURES 1 Represents quarterly management fees paid to the majority shareholder of HydraFacial based on a pre- determined formula. Following the Business Combination, these fees are no longer paid 2 For the three months ended June 30, 2022, such amounts primarily represent direct costs incurred in relation to potential acquisitions. For the three months ended June 30, 2021 and year ended December 31, 2021, such amounts primarily represent direct costs incurred with the Business Combination, including $21.0 million paid to the former owner of HydraFacial, and to prepare HydraFacial to be marketed for sale by HydraFacial’s shareholders in previous periods 3 For the three months ended June 30, 2022, such costs primarily represent one-time sev erance costs due to a Company re-organization; For the year ended December 31, 2021, such costs primarily represent one- time retention awards related to the distributor acquisitions and executive recruiting and severance fees Reconciliation of gross margin to adjusted gross margin Reconciliation of net income (loss) to adjusted net income (loss) and adjusted EBITDA Three months ended June 30, Year ended Unaudited ($mm) 2022 2021 Dec-21 N et sales $103.5 $66.5 $260.1 N et income (loss) $7.9 ($139.4) ($375.1) Adjusted to exclude the following: Change in FV of warrant liability (15.2) 72.0 277.3 Change in FV of earn-out shares liability – 36.5 47.1 Amortization expense 3.9 3.0 13.3 Stock-based compensation expense 6.4 3.5 12.4 Other expense (1.7) 4.3 4.5 Management fees1 – 0.1 0.2 Transaction related costs2 2.0 30.4 34.9 Other non-recurring and one-time fees3 1.9 0.1 4.0 Aggregate adjustment for income taxes (3.1) (2.7) (14.1) Adjusted net income (loss) $2.2 $7.8 $4.5 Depreciation expense 1.9 0.7 4.5 Interest expense 3.2 2.1 11.8 Foreign currency (gain) loss, net 2.2 (0.0) 0.1 Remaining benefit for income taxes 3.2 0.8 11.8 Adjusted EBITDA $12.6 $11.4 $32.7 Adjusted EBITDA margin 12.2% 17.1% 12.6% Three months ended June 30, Unaudited ($mm) 2022 2021 N et sales $103.5 $66.5 Cost of sales 31.9 19.3 Gross profit (GAAP) $71.7 $47.3 Gross margin (GAAP) 69.2% 71.0% Adjusted to exclude the following: Stock-based compensation expense included in cost of sales 0.2 – Depreciation and amortization expense included in cost of sales 3.0 2.6 Adjusted gross profit $74.8 $49.8 Adjusted gross margin 72.3% 74.9%
24 WE ARE A DISRUPTOR… DEMONSTRATING EXCITING GROWTH... USING A PROFITABLE & SCALABLE BUSINESS MODEL... IN A MARKET WITH HUGE GLOBAL OPPORTUNITY.