SKIN - Earnings call transcript Q1 2021 | The Beauty Health Company

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Operator

Greetings and welcome to The Beauty Health Company’s call to discuss the HydraFacial Company’s First Quarter Results.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Dawn Francfort, Managing Director at ICR. Please go ahead.

Dawn Francfort

Good afternoon, everyone. on The first Company’s released quarter and be joining the to this for investors.beautyhealth.com. can Company's at HydraFacial results, found you Beauty call Health discuss afternoon Thank website our which we With me Saunders, of Woo, Executive Beauty The Chief Chief is Financial Company; Carnell, and Executive Clint Chairman Health Officer; the on call Brent Liyuan Officer.

with. forward-looking which like the company's Before including of I'm you're underlining we you sure get assumptions. make to started, remind Management all guidance and familiar I statements, harbor language, may would safe

Forward-looking statements expectations that to and risks cause involve materially. could actual are based differ on uncertainties that results

adjusted of discussion margin, adjusted and margin. will further in filings non-GAAP GAAP adjusted with Reconciliation our SEC. EBITDA non-GAAP release, measures included and are of risks comparable For website. the profit, available business, to most contain see earnings as our to furnished gross related on to SEC our measure such the financial EBITDA call This measures these the gross the adjusted

Now like of Company. Saunders, Health Brent The Beauty call Executive the I over to Chairman would to turn

Brent Saunders

thank Beauty Dawn, to was pioneered. only well for capital as and very significant also closed which from sustainable company. our an event have transaction business Thank corporate successfully growth. a first category and the deliver position became we week, The and but is strategic as This a you, company, joining in footprint beauty public for a health, this globally resources expand earnings Last and combination milestone our Health we you Company. The calls our important not

enduring in are like beauty achieving fuel guide platform significant our health health and category. accomplished of Between beauty my goal combination that and and the to this to of to management congratulations appropriately beauty health. have that of diverse extend ideal a range addition, would of possible. and expertise, appreciation In experience the made success an an the team building our I and the with with confident company premier team towards Directors we we Board our assembled growth is

the Turning now business. to

will And hear resilient a of opportunities you we quarter. by business, in first we and this ahead is As begin team as Liyuan, public plenty the believe from financial objective as to the growth to in global have very we pandemic. resources from later performance new evidenced appropriate emerge growth. unleash ensure and order right is the to has the My deploy this the company to that strategies Clint

enduring category minimum and about long-term, ahead. chapter’s Over have believe an of the in company is we create health. I the I'm beauty the opportunity significant platform growth beauty growth this excited the to health ideal next our

Clint Carnell

financial with I Thank by who you, earnings of why for are It Brent, positioned the and begin today to quarter we on performance I'll on to are will we sustainable in long-term a from our first uniquely strategies. share be will growth. you everyone. call I outlook growth then which as discuss is overview great and public our hello, first quarter some company. speaking beauty an touch discussing turn at Liyuan call and our our and to detail. highlights first After health

of consumers beauty and millions you months, over treated category. emerging few we platform of with a of past today, the shared consumer With powerful that leaders worldwide clear the health. our delivery created we vision have are category, and the creating Over we XX,XXX the brand in redefined business systems

and connecting the by We skin the health skin both the across professional are as well retail outcomes consumers skincare medical and for as in correction bridging markets, continuum enhancing gap care. skin

everyone and beauty category. the across beauty all of races as this health providing transform We for we genders, ages, are

utilized your that’s In of life. innovative outcome XX best treatment. It gratifying a an we and brand glow. flagship game-changing approach an offering is steps and minutes, cleanse, effective, to non-invasive highly immediate Our skin the an deliver treatment and an skin you three approachable and instantly in hydrate HydraFacial accessible extract is skin, simply

platform objective of a an business of building health. company enduring with We’re the beauty

continue We our powerful leverage as us as efforts. initiatives data global These HydraFacial in and well the community to our will product will infrastructure, innovation technology allow accelerate our to nation. and passionate expansion

positioned for We are uniquely five reasons. key

in growing operate and trends. a demographic large we market favorable with First,

the industry We advantage health first we where in clearly mover the a have beauty leaders. category, are

offering Second, provider with we and satisfaction. advanced high consumer have a technologically

support our our customers and strong. approval NPS are are We the excited about ratings from high suggest customer

university of branded passionate and community HydraFacial highest our brand success powering differentiates holistic score and business worldwide. flagship company. estheticians estheticians invest highly a our products estheticians the deployer and have of aim don't through clinical we of esthetician HydraFacial providers in partnership ranked by invest We with and What consumers. providing And we education a as medtech customers, and among that partnerships we is loyal professional third, just the business that peers Our influential sell our to be with development training, partners. to XX created program largest our rather We CONNECT. world's of across is the but estheticians, among XX called

engagement. spans consumer channel HydraFacial consumer beauty that to are which in and beauty seeking points, approachable mix and medical in offices, touch plastic in invest As relationships surgery. we partner resort towards created a to spas engaged shift we enhances consumer. retail, order health as bridge fifth, we a our and have behavior the healthcare wellness. and gap and experience solutions effective and deepens community an the extremely transformational result, that We day sustainable are such a options. And and seeing traditional dermatology with between and end providers health Fourth, Nation, multiple skin deliver our in Consumers including operate diversified our

global flywheel increase and model, expand business in our efforts R&D have XX% training improve accelerate across the adjusted signature accelerate for investments altogether, and generating powerful to products. a and a clinic We gross offering approximately as treatment attractive this our margin to HydraFacial adjusted favorable and over profitable marketing, and a economics we innovative elevate create XX%. and highly a partnerships our and Taking footprint both fast provides have margins ecosystem historical spa growth owners. we EBITDA of We operate and of growing our

historically However, expect spending given as the we significant are over we EBITDA elevating we we return opportunity to next levels see after moderate to growth years investment our potential, our our levels. margins two ahead, high which the our increased adjusted to fuel

financial Turning briefly to quarter first our overview an performance. of

growth to COVID-XX, our in globally. related prior specifically resonating results demonstrate is our easier year. comps A the Our first quarter brand outsides the portion of was

However, fact we are XXXX executing that significant on levels, growth saw our a initiatives. of supporting our the we

by our strength and delivery quarter sales system a nearly expansion our in doubled, first XX% which grew sales, Our led consumable XX% in by sales.

basis XX% year expanded Our ago gross XXX adjusted a profit our gross nearly from and margin points. increased

Our to $X adjusted EBITDA significantly improved million.

we've up forward well brand our both look accelerate significant upon base innovation as infrastructure to marketing our we fund We to spend growing the awareness ahead, significantly our quarter to continue and multi-dimensional plan focused opportunities the to growing investments. As and R&D our second created, our installed leveraging beyond, growth remain our we on initiatives to new category ramp in to as build health. beauty increase

shift provided As updated is approximately of provide results guidance of previously line a and for $XXX increased are wellness. markets quarter, shifts XXXX from top result first driven by behavior $XXX on and in a in In and in health our of reopened our to to our million. pandemic-related this strong million strong gradual the such consumer closures the and which based from performance, guidance been China, behavioral reopening pleased global we This have encouraging conjunction meaningful. longer, is with for as

more points, benefits global of making consumers growing footprint health by on hyper-focused aware investing beauty the access in are our adding We our and partnerships. of

four strategic have growth We initiatives.

drive space consumer and addressing growing the ecosystem existing within in we demand by white consumables First, units significant the are markets. to our opportunity

We agile are with and omnichannel This the with creates demand consumers as to that as consumer directly strategy deploying well digital, and by consumer. fast. are personalized engagement localized activating tactics speak

consumer marketing personalization to and and drive demand messaging. We our marketing to of efforts And to wellness of and our drive consumer part we intensify brand are increase our as overall demand, strategy productivity system focused on emphasize globally. the sales will

training esthetician, stores. increase as as launch additional loyalty elevate will pop-up well build We to the

Second, our quickly global expanding are footprint. we

We many channels, markets, key across markets. are established building well We market upon as as look our our capabilities well direct as to our to and increase strategic sales increasing in new partnerships consumer globally office forward expanding demand distributor implementing international our incremental relationships as through support. approach footprint through a to with resources

we and brand the as and delivery a we offerings beauty category, we elevate such accelerating home launch as to relentlessly fuel created. R&D efforts on Third, our product initiatives we to will our In we extensions well and innovation health create position improve category health remain our as in Casa. XXXX, our enhancing our device We're system focused will at to as Syndeo, continue our leading look Project X.X our to accelerate beauty are transform innovation.

across We including all and to continue touch will points, also add experiences. devices innovation serums,

including of part as expansion. Murad least we As our product a brand. engagement consumer to our collaborations, at drive co-branded which Fourth, launch Dr. and will innovation, this one technology serum, with leverage such increased we new own drives serum plan quarter, to category

in allow order us This to offering improve to personalization will our growth. transform our and digital. capabilities enhance will are our Through We from innovation of our long-term will customer analysis able wherever, and be analog we growth. drive we summary, seamless data harness to future deliver experience the excited forever. to to strong data power and opportunities In for our leverage whenever, provide a to with upgrade

the category an we build enduring to health investments As we've dynamic beauty created. in platform accelerate

our our to to year and detail the business. turn you as and we outlook in will provide grow in reinvest Liyuan, financial in more Now, financial continue who call I our the with discuss will performance first for quarter over the

Liyuan Woo

and Clint you, hello everyone. Thank

model. XXXX the net outsized quarter XXXX million, will and in select our our closures, you first comparison continued strength unprecedented in our quarter, of and our like anomaly provide Before The of flexibility XX% Starting understanding period. dedication our environment, their mandate in as this quarter our select delivery this with global to remarks, of market work to with of a I XXXX, comparisons removes growth still government make I'd primarily did results increase challenging that see XX% mind, systems revenue streams. in commitment in drove team continued and increased I expansion in recurring XX,XXX driven by demonstrating despite predictable revenue hard We from globally COVID-XX sales team throughout believe our We performance this was people restrictions. market our it which and created for in the first thank COVID-XX of unique to significant related our closures impressive from comprehensive the business begin, over XX.X our a XXXX. quarter by profile. with also more my consumable impacted growth prepared will this related With our

increased accelerating XXXX. of the respectively. XXXX and to in a first XX.X second year XX% consumer significant in in strength systems from The million the wave with XX% as as demand. For and and million in in region well COVID-XX, the to million driven of that closures delivery half first QX increased location XX% important revenue or XX% sales XX% the It's and to continued the consumables XXXX. U.S. to XX% the was prior note increased compared were period up same Americas quarter, had XXXX Net in by XX.X compared XX.X we traction the

closed did hotels, Although gyms, our States, were local market locations non-medical still casinos and accommodate select O-U.S. we regulations. available, operated had state partners, many with reopened locations. in vaccines spa as reduced such to capacity the with once retail channels and

trend for the strong. While was the quarter

in record We starting million to sales the or up EMEA and COVID-XX strength million offset led for XX% Australia, compared were to that Net APAC Taiwan, performance China, by to and compared our X.X which regions orders in reopen, saw contributed UK up by consumable XX% in XXXX, partially increase to the X.X and France, also quarter. The Germany. Japan, to XX.X was restrictions driven million customer in closures to first XXXX.

impacted of are in For earlier that of in by as the severely already experienced such APAC, world. during closures Since XXXX of mind the first COVID-XX we the million XXXX. rest quarter many opening been trend X.X for the APAC the compared than and keep quarter the region first late countries in improving and were XXXX, quarter in market. net has second X.X APAC XXXX for million sales of was sequentially X.X the XXXX million to

driven well quarter by and to XX.X expansion XXXX. net XXXX of XXXX, was by XX.X% quarter XXXX compares first first quarter cost region the gross impacted administrative EMEA quarter the XX.X QX of closures for to as the EMEA savings first X.X This XX.X adversely COVID-XX XX.X in gross in a million million profit XXX Gross were sales. in of million XX.X in leverage adjusted general in XXXX. in or million in million the to compared XX.X from QX XXXX net in this On X.X basis was initiatives sales XXXX. compared million the or as a QX X.X XXXX rate primarily during prior was XXXX. as sales, of other a in million quarter was XX.X% or Adjusted point the million was the XX.X% compared first million net Gross QX XX.X% cost fixed hand, expenses to profit margin Selling sales in for margin to higher compared year. was a

and reopen, totaled in the the operating XX.X last sales offset operating million decreased XX.X% to related to personnel points percentage XX.X of were compared COVID-XX to decision expenses. million year. million this of marketing sales partially were the of for quarter, marketing lifted year, period X,XXX the commissions and income in an select by markets quarter a As loss same sales decrease operating due delay to compared spent XX.X% to prior million compared Total the restrictions to by leverage first until a expenses programs to lower X.X XXXX, and X.X for in increased SG&A was basis to quarter related

In an business important measure our profitability EBITDA addition these GAAP to measures, adjusted to use we is manage that internally.

improvement, marketing by loss million million. versus to For a X The the margin well delay partially adjusted of XXXX’s result commission as offset and was sales. spend, EBITDA gross the select sales quarter adjusted in higher and strong as a EBITDA of improvement is our related X.X increased profitability bonus in

cash XX to quarter Total the in for to million our the last Turning million of in the cash first compared pandemic. million quarter end balance and at X.X by XXX.X compared the debt year. the equity totaled million XXX.X to owner the million was The XX.X during equivalents driven by debt sheet, last a was the increase first year. quarter of the private additional quarter provided

combination business X. May Healthcare, we As repaid outstanding all on part of our Vesper with debt

Now I'll share our outlook for the full year.

sales guidance net of approximately expect prior up we million. our XXX mentioned, Clint million As XXX of from

adjusted to generated leaving we outlook XX We’re our at the EBITDA as into million back intend sales invest the business. additional

of XXXX. up We expenditures anticipate in also to XX capital million

sales Our so XXXX. in highly upward net far revision reflects our guidance encouraging performance

includes continued first the trends quarter. the forecast in have that quarter solid and second results into Our strong

remain the the the we given closures strains COVID-XX risk in, uncertainty in cautious market rollout However, the new even of of we're and for environment operating for global the further potential vaccines.

have earnings provide call we global closing half market, negatively I'll largely which plan re-implemented second reopened provide to once persisted, second the are remarks. hope during to color those or comments our back outlook in factors we call. which for turn closures to with With if you impacted into be Clint Our greater guidance quarter would the our global over some we openings, market Clint? visibility more

Clint Carnell

Thank you, Liyuan.

Our shows performance the excellent team's in quarter execution. first

and experiences highly continue and focused the growth remained on provided to on creating results from uncertain exceptional in in strong deliver are guidance November a investments during environment. customer our We We we innovation. seeing

as reopen, health interest As the wellness by and for are in our our continues we to markets accelerate. demand encouraged services consumer

to strategy strong our focused community, continuing for look you are on your our time on building Thank And long-term Operator? for to today's and we Looking future value. growth creating you forward call. progress. and ahead, joining update shareholder executing our we

Operator

gentlemen, teleconference. and concludes today's Ladies this

Thank a You your have your at wonderful may lines this day. disconnect time. you for participation and

The Beauty Health Company (SKIN) 13 May 212021 Q1 Earnings call transcript