SKIN - Earnings call 2 2023 | The Beauty Health Company

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Operator

Good morning, and welcome to The Beauty Health Company Second Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Eduardo Rodriguez, Senior Director of M&A and Investor Relations. Please go ahead.

Eduardo Rodriguez

Thank you, operator, and good morning, everyone. found The quarter Company's were XXXX morning can joining discuss call released for at and second website our financial be you Beauty conference Health to this beautyhealth.com. Thank our on results, which and Andrew We Officer, Beauty our which Operating encourage I Chief Health's Chief be during President contains on in Mike me Officer, will website, this that and company's you call.With remind Hauser.Before the Stanleick; presentation safe person Brad accessible Financial we join like referenced language. would to Monahan; you incoming webcast Chief a the today of Officer, Executive harbor are begin, to statements, Management forward-looking including may and underlying make assumptions. guidance

differ Forward-looking on not and that cautioned that on materially. to statements place risks undue to forward-looking involve Listeners expectations based statements. reliance are could are uncertainties any results cause actual

to to our For business, these will non-GAAP a now SEC financial our measures, SEC.This on furnished Andrew. and measures to earnings see turn the release will our measures most risks discussion of call of over with the are to in call present the available further Reconciliation the the website.I comparable GAAP related filings non-GAAP

Andrew Stanleick

and organized call joining everyone, you, going to usual. is be Thank for Eduardo, a you, than thank different bit us.Today's

financial is release Hauser.We as transformational morning of this growth. Monahan a brings I'm you need growth, conclude I First, growth. through announcing strategy, learnings will confident during pipeline her will turning of then planning and of our This including Chief expertise press capabilities.To phase we'll reporting period a new She review our Officer, Mike Health. the that preview I of you outlook role, period our next key and right that pandemic. with rapid with want the innovation we this CFO. I the our expect we manage the company walk from for do Operating Liyuan through before saw to thank a enhancing actions tasking and the this and helped end, leadership some highlights QX critical results the formative our of taken Mike that to period Beauty am XXXX through Brad for through for Michael navigating

for brief wish assume role ensure to smooth of and her will grateful will advisor to X, her Liyuan are September introduction. effective transition.I on We tomorrow. contributions will as off for the now well,Mike a CFO stay Mike hand until an a

Michael Monahan

decision Thanks, meeting company over today profitable impressive be all forward happy Andrew. the with Beauty Health room Beauty Health incredible has look is largely based lot I a you growth. time. believe here to and My to business fundamentals an I'm that of opportunity I building is join relationships for to and solid ahead. growth with on

Andrew. first day is to my my working my use mentioned, our As the I I call back first days Andrew plan understand and fully now due course. planning to in look all sharing will tomorrow, forward XX immerse reporting.I myself to in to turn you with impressions controls, to business the financial

Andrew Stanleick

Mike. you, Thank

Beauty value.Now to X quarter quarter on on are as contributions ongoing around to for quarter recommitted our and want key work happy business. the you focus we have hard to team the long-term by second the There are takeaways the thanking We their board.I driving core we in world results. as second shareholder Health start the for from

this our impact engagement to growth launch company's of to Syndeo $XX.X $XX.X of consumables or where we QX of We When we trade-up sales net strength the single total product when brand continued on represent our quarter the is net In net reminder, adjusted HydraFacial. see sales sales, These takeaway delivered we XX%.The sales of strong of million, trade-ups. demand achieved and EMEA million continues growth adjusted grow. consumer sales EBITDA million growth against First, comparing last and EBITDA continued growth million excluding biggest demand. and benefited are this the year-over-year was we trade-ups, in XXXX year-over-year we where launch date XX%.As second net APAC. for up results XX% of net volumes.Third, of increased on $XX.X saw a of China, XXX% for U.S. in $XXX.X year, were as XX% anticipated, year-over-year XXX% excluding from which

owing and adjusted last continue XX.X%, growth about we this fourth China leverage a of the X.X% million margin year. market.The adjusted remain at see We expense enthusiastic takeaway, of operating to $XX.X re-acceleration potential generated to to in of of EBITDA compared

those by Syndeo offset and the based on caused operating XXXX drive reaffirm our takeaway the guidance. margin XXXX for in Liyuan gross which to gains are ability partially the largely leverage, a to the and X.X% continued were by U.S. our quarter, in adjusted moment.And sales headwinds final discuss our fiscal leverage demand However, impacts for HydraFacial, will re-acceleration launch-related long-range China, pleased net of we

of and we pushing brought recent precise Syndeo net our HydraFacial the have into share reflect out reflecting of can refining we experienced performance the are just XX% XXXX, trajectory, of on this this to foremost a face.Before with tenure of guidance margin age EBITDA that Syndeo Developed of can We we just my Since launch this the review the pandemic, by have XXXX learnings take year, and the But this by in the for into our is to a moment details company. the we this at believe of you as net doubled X. of based years. temporary and want quadrupled to with year. some with end forward.While is type this XX since XX% certainly range world have X on further, to gross have our to we to to turning expect and remarkable I speed quarter smooth we teething starts during our size sales growth any We delivery learnings. installed adjusted roughly key more imagine the you.This Slide the end nearly category margin headwinds the launched new and base system have which been improve we issues issues sales technology. would resolving not impressive, always some I like analog the road improvement digital teething high-tech growth days first areas with in

expense we to even unwavering were Syndeo the commitment You This quick the service. to may decision for devices underscores recall, intentional customer at issues. smallest best-in-class company's exchange our

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XXXX delayed guidance to expected instead of the expansion converted gross we and and we to maintain small expected our the our end we in issues.I'm distributor number gross have of projects sight that carry manage expand in our XXXX.We to some dynamics quite to be line direct fruit.Finally, scale. cost. delivering bear international we markets gross of as for smaller these high been gross are To margin which targeted margin XXXX, projects ability say manufacturing engineering meet hampered year value to disappointed our of a for teething China both retracting of margin resources Syndeo's engineering basis points to a a value target dedicated markets XXX margin have have were markets, frank, Additionally, opportunity of as planned the by several these

months the made resources have leading concentrate to on fortified clear after I share our plan forward, stronger these refine as top company by decision improved move made important executing and forward direct with Going learnings transparently and customer Indeed, moat focus XX never leadership, to our for more in a are have us our X experience priority.I this most we systems I known back deep illustrates, a U.S. bounce excited and have a that to commitment positioning the company.As for. issues, we Page as about the of long-term been from launch Syndeo this future a we competitive the success. well markets

to the of a advantages. bit We Health.Now our consumer call combined model of give discuss turn by financial innovation Moreover, customers. and sector I me these outlook passionate you large possess pipeline QX and powerful community which a for our Brad tailwinds strong a we business This an unique in and supported a revenue product our high-margin under-penetrated growth, will to and that is Beauty incredibly We and later.It over drives to with competitive to long-term results. operate exciting Liyuan the have favorable take scientific recurring is market through traffic propel long-term brand fundamentals an have that our stream. in confidence future will the providers

Liyuan Woo

thank cost year-over-year. for to balance and second hand of joining detail walk everyone then our million you $XXX.X back Andrew quarter Slide through to call.Today, sales you XX, delivered up will through net XXXX.Turning results, outlook highlights, Andrew, to our total you, on quarter, second in sheet you walk Thank I the sales to we net the and XX%

against we're net trade-ups, of total, quarter year-over-year sales of was XX% benefited our the year's When trade-up, sales of U.S. million for XX%. flat excluding on volume growth quarter growth which were system year. net system million, comparing XX%.In delivery excluding launch last delivery demand. grew total sales roughly Syndeo from $XX.X versus This trade-up $XX.X When last net

sales. As from trade-up and XX% $XX.X expected, volumes contributed our million declined net

million expect a ], trade-up $XX.X in a factors. in and We net year.We last slight selling XXXX with ended $XX.XXXX delivery by X,XXX seen an total exceed a to installed driven XX,XXX, quarter was global price sales continue decline base of the year. This at from average of trade-up sold the demand systems [ to of of QX last few

generation older of anticipating the refurbished towards Americas devices holdback the U.S. user tightening in from of shift improve mix and the providers for to enhancements degree amid the a First, credit experience. providers Syndeo

pricing in last In growth [ generated growth year. performance internationally Americas, across drove strong launch by markets.Moving reduced breaking of net million, international XX% total to XX% region. ] $XX.X finally, consumables, net our sales our direct to Second, a decline the million.And Syndeo's EV sales of globe when in following against down volume we of the $XX.X compared

recovery, expected, the net region As heels fewer When Americas' to impact to trade-up trajectory sold of drove the of XX%.Notably, total a excluding China's driven U.S. relative net trade-up its the QX returned was sales. this pre-pandemic Syndeo million on growth when trade-ups. bolus of $XX.X growth last APAC this by of launch was of delivering year sales quarter demand.

less margin growth, As XX% million. The sales registered when excluding growth a sales headwinds XX% came net that trade-ups.In when XX, or strength quarter and Slide and this systems compared XXX% XX.X% we net already total gross systems last volume anticipate we not delivery year-over-year a trade-up of this primary year, of rate mentioned, quarter this were adjusted of On to A are consumables.As driver sold is drove growth refurbished the Syndeo's systems extent meaningful cost last you we to GAAP excluding last volume. system Andrew XX% launch a margin margin quarter refurbished Refurbished $XX.X quarter than in gross delivered region, year higher the when compared XX% adjusted inventory gross Whereas decline they quarter. they X% systems. through. accounted of creating margin second for in the carry that behind of towards gross this margin or to quarter. from across EMEA, XX.X% of mix APAC dilution faced gross shifting of did XX% healthy deliver see XX.X%

this future Importantly, to expect which foundational our system and of is production duplicative delivery touch resolve continue form costs, go-to-market second represents each more this flow Andrew relationship a to in transition the quarter we tenet cash on of will production the our placed completion the predictable a in to in China consumables of upon but supporting we high-margin a revenue. carry XXXX. strategy.Additionally, recurring moment,

shifting $X commissions For quarter, APAC points EMEA. was X.X% an we and the to million on year-over-year due net sales mix EBITDA by flat which covered.Next, towards adjusted costs gross percentage in basis already benefit was due to the driven adjusted margin of trending selling margin consumables was for lower marketing as generated XXX The by a partially remain quarter, year-over-year This headwinds expansion. of and quarter per basis. around at second offset R&D reduction sales relatively

balance, our balance We sheet quarter an carrying to of reducing cash outstanding remain with shares on largely equivalents, of inventory by XXX.X USDXX of expected trend move we approximately remain million in Slide to expense continue to second Andrew, and reduction adjusted execute million million generated express initiatives, working our our to Notably, X.X% $XXX the as our is of adjusted I our back XX. highlights towards $XX.X per with We well-capitalized at the remain Overall partners drive driven increase operating at million. fixed. gratitude wonderful and end March like to cash turn USDXX of on I to second XXXX. we teams leverage.I the is and allocation.Before will it years. worth in capital to in which quarters expectation rate G&A million relatively $XX.X X now ended was million stood we would globally quarter to hand.Finally, to our on our continue Lastly, quarter consistent my X to and roughly for growth to opportunistic X run capital from

turn be excited to year to proud back a Mike will of half and for look that, second see for Andrew outlook much full Health Beauty to the am growth.With through I I next have now of We its and take phase our at call the XXXX.

Andrew Stanleick

you, a launch company margin a XXXX. refine reaffirm Thank not EBITDA million half relative been target net due of pandemic USDXXX newness sales Slide adjusted USDXXX XX% our to and for acknowledge to our to to XXXX new modeling guidance XX% expectations share that projected precise and we our range.We We second has more driving XX, our of our as Liyuan.On product the to impacts, public growth straightforward. million

expectations As to incremental a result, third for we are providing the color provide clarity on our quarter.

temporary USDXXX on we incremental industry, We net in medical figures, seasonality a of be expect are necessary down to we continue expect with traditional sales step year.Consistent be to dynamics QX the line QX to net this these USDXXX sales color lap to next in a from and range once to slight aesthetics early million.

earlier back adjusted sequential slightly We from range step improvement driven place, QX of drive every continue up and recede minor to quarter the XX% favorable in spoke to revenue we system XXXX which QX, no in confident medical it by within historically increased we selling largely pandemic cost covenants for ours half our marketing tight sustaining we by our long-term growth business.With margin EBITDA completed, volume market range.Our guided the With marketing G&A.QX is unlock resurgence China we to fundamentals XXXX in QX that anticipate be Syndeo's our dynamics comes is as to the bolstered our the lockdowns the we of the margin remain continued stream. year business, XX% expected gross and in the leverage largest about investments land enhancements to of discipline a as consumables, different. to expect adjusted in a and to and is industry will ability aesthetics seasonally with versus and fiscal

placed and razorblades consumables systems XX/XX our of those the which XX, tips.Today, is our providers our net On more. of the For so on About based XX% to historical and first consumables sales In sales years sold generator. tell and X serums, and revenue are the date, being in HydraFacial this model the there equipment with between you But chart purchase or model XXXX, year. the available with our unit consumables. our systems which on market.To we left know is in active nearly providers our still appealing. untapped aesthetics delivery came our consumables who of with our This consumables business, boosters from more for split years net consumables razor we providers our profitable forms across than are our unheard are typically we recurring ago large been X The customers us. of see unfamiliar razors, to predictable treatment revenue virtually razorblade is roughly economics can XX is have half a reordering have and depicts still why you are of to Slide long profitable XX,XXX globally. the high-margin and systems a we market

less than opportunities, market, grow any to markets direct most are representing mid-teens only in much is globally We U.S. increasing at would mature points take with closer number that our X% room frequency.I our still and penetration. opportunity factors a or to product so the single want of more one of There penetrated look us China. our lines of treatment distribution, biggest that growth deliver whether

nascent view and X expect as more consumers of that reported a amongst potential spending to is the a number Chinese in XX% with times products. than health increase is consumers we Skin their X market business and of Our the China, Chinese U.S. of of beauty concern on health

drive distribution on systems in X,XXX price success for is revenue and the just accessible China half in an the to part getting region.With started. devices of penetration year, point are of and these and and of with coupled for this positioning today we recipe competitive $XX million capitalize standard first in broader gold our tailwinds just Our flexibility

penetration, value. alike. of of to is aesthetics strongest continue to market the to terms the brands, $X.X Amongst at none and have alone, traffic us with drive earned doors the perhaps excitement EMV set is consumers our generating buzz. drive providers. new and media first our available generated and ultimately itself. we year consumers of close of recruit million providers As and unrivaled In half interest HydraFacial HydraFacial Brand-building lever HydraFacial our the HydraFacial we initiatives brand from in it of through the peer come

consumers While the with and searches HydraFacial's we'll in annual that other share were perk QX aesthetics was white for and us occasion.One signature, HydraFacial Dior's brands by re-imagined seek EMV beauty customized taking Google as the declined, worldwide XX% in out.Our HydraFacial sustaining standout Google wherever our recent sought to tour I which GLOWvolution be Cruise, presence volume Syndeo aesthetics. competitive unique in XXXX brand Dior Australia a featured our driven like to our expand Spa activations Sephora for fall, Malaysia. for to gold more this pleased out up APAC am are and by consumers which our in search is omnichannel of stores ability and advantages and partnership and

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recommend as last of from Our a increase initiatives HydraFacial industry brand it.We NPS build Operating brand will Net turn or now Hauser. innovation complement those and innovation To about how is product Brad over R&D. is likely of data Health's consumer I an over will Officer, with Score continue a and the for measure it our call XX, a tell XX-point year a Chief to more and Promoter best-in-class refresh to pipeline, reminder a score. you the is Beauty NPS to

Brad Hauser

been one-stop in you, for in rarely have to have Health.Since taken platform plug from treatment opportunity from I industry's revenue-generating serving pleasure been devices about Syndeo the where We Syndeo's go a and centerpiece has organization envision providers. next-generation the to it Beauty space play profitable I the Thank to the I brands. have plug-and-play many the joining sustained a we say pipeline all am Army future of our for to to and of know our worked are on innovation we deliver most My you Swiss of end-to-end focus years a goal must shield powerful Syndeo, is Andrew.It's the successful be to as our with becomes today. I've aesthetic many long-term been as insights proud as next efficiencies I'm Lightstim. excited product January, LED front market. growth.First, I an as and innovation connected unlocking deliver in production Today and rooms. What innovations Knife capabilities. to that about will device on here oversight

offers where to XX or all or our in HydraFacial the FTEs same defining future in of is a complementary our Connected The offering. upgraded Allegro months.And can provides complementary assessment Allegro an the pricing in facial even trademark for power device device. newly offer give one careers.Boosters the to of particularly their to with more number can entry-level handpiece We serves new aestheticians the oxygen as the R&D HydraFacial and we entry-level flagship without Syndeo personalization to glow functionality lineup, Syndeo features providers with the many can XX graduated a providers, laser our as Syndeo. flexibility new add are intend or even of to The treatments approach With You strong but the already every tools skin this, imagine just attract diagnostic, co-created other partners. central to handpiece. to beginning dermatoscope us in-room a

to You regular globally. newness fuel brand. continue innovations differentiate us a see on booster cadence drive and These will to excitement launch marquee truly our

We hair and launch the clients region-specific works expect consumers with that needs the natural next market.HydraFacial as at a add-on preferences many exciting to designed skin place in a in of of innovation a for portable Beauty Health, extension boosters a a The new consumers' for time needs engagement. hair of can hair particularly use device collection for economics some to starting HydraFacial This is first largest China addressing branded it's intend venue quarters logical a is discuss that a providers and often enhancing the of stylers. skincare device is and our the and concerns. tight growth is Keravive-specific their create It to hair recommend providers channel We the puts salons. salon, home. and to our opens tailored to the homes been for loss is brand

With we thoughtful our you new a our excited fully We and very on update that will soonest drive more.And a pilot and growth. loyalty app will as our progress we to designed to market reward consumables own to is is app The innovation treatment to consumers. of our hands understand start fueling increased finally bookings frequency. will HydraFacial coming, we ensure with be growing aim consumers this the providers learn and draw consumer their to in in this, businesses directly HydraFacial put

be growth.And generative is turn implement connected matures, become have sustained As center Services to deliver to Amazon predictive ad innovation capabilities of Beauty AWS loyalty to We're exciting an cloud, our the better AI of I consumer AI personalize summary, with a our platform Syndeo wellness excited expected that, rooted long-term it and beauty clear ecosystem. to functionalities cornerstone consumers' it innovation Web back pipeline the Health insights to generative that the expected collaborating to the we are in and with and Andrew. expand experience.In

Andrew Stanleick

we with questions. Beauty a Investor updates Brad. at now we're and growth Day forward look ready we HX long-term us sustainable to take stronger Indeed, Health you, pipeline Thank innovation more to multi-dimensional will in never had provide any have a opportunities this of sharing XXXX.Operator, and

Operator

you. Thank

[Operator from Oliver We question will question-and-answer the comes now TD Chen Cowen. begin session. with first Instructions]The

Oliver Chen

on of Would your timing thoughts Syndeo's? how what you As How terms those much issues and guidance, that mentioned of teething impact across having gross in well caused issues about the love you as implies headwinds. margin and some is the that thought context love read guidance able in caution on And some seeing? are to but seeing you reaffirm the the with margin interplaying the optimism of that's on that? in Would traffic some and because a we're follow-up China how China. your you're what

Andrew Stanleick

issues. I'll with Syndeo the start So

iterative that and center when and our treatment knife those gate, that products, improvement the I a any platform world. high-tech especially the once with to Swiss think room forward. But Army of launched it it, it's like before, the was know, as there is we an leap first U.S., in the in IoT at connected vision ones we've real you real the Syndeo as So, for a it's provider's element of talked was out

and to of teething improve in experience put through So to providers over of the performance I in treatments, work customer hardware. were and hundreds part, observed part issue of reliability. the as the course and opportunities the part and the we experience year, particularly related going Syndeo last think issues U.S. overall user was software And of

So calls, And had generations was buildup we some because finding cycle which first et upgrades. we pushed ahead updates, software amendments ] ones residue able mainly of are of that we've new cetera being other those ridge were is launch. related some we specifically simply very because of the over teething through talked it This component about make on the to last [ supporting a are previous U.S. issue year, international a and course the blockage. simple to

called to customer before as with us course, we've and the we obviously the switch were we must and us we customer fast in first but for But every with very it which of So replacing the was back put term cost are we've putting money invested, that first, the machine a they spoken if out, take customer unplanned. about long that problem, pays been that a off. felt machine and

they support. appreciate that You know

So on U.S. just of QX.In gross be last we're of end fixes margin, pressure support in specifically amendments of sort I QX QX questions other partially Syndeo putting very of in-field was in your the that caused we in terms terms are terms the with and the by about issues the in the talked will of U.S. completed making of the in had what the we where

working with of so rates our we And of a like degree hold refurbishing during providers, them end-market fixes the of are devices shift to QX, do Allegro the in saw a there high-interest knew other back. degree partial the was with part particularly, about lower We priced to some or these the devices. their we're U.S.

shift. the what that's So gross margin It's temporary. caused

of aware are We it.

up long-range line middle and in gross of sight We to have year margin next of and of our a do the targets. we'll be fix to levels historic place a back have by we

of recall margin years our You points September, from XXX next X the presented accretion last September. we basis over

flow have projects and because bear year of fruit. manufacturing which the presented middle next value will also sight that will a the engineering we China We line by through of the

Syndeo the the our to on U.S., put really we have thing addressing issues resources because do. in hold, the was which right those We on dedicated

both final the then, APAC question track I strongly particularly mean, So China. and anticipated, on came in China. EMEA, back but on we're there.And your as

less China the the I U.S. into as and those know, which acceleration like impacted say We July, the you is by QX continued to there Oliver. consumption are typically and Europe compared very must it's August with pleased QX, have. in

tell economic China well the can consumables healthy. I follow So of are to continues you reading, that consumption remains grow systems despite and we we closely, but the very very headlines

Operator

with comes question next Sandler. from Wolfmeyer The Piper Korinne

Korinne Wolfmeyer

together from asked the to think EBITDA just to of see And you're and is important going really you going through on that strong of come I just for gives the Can going glad Is and the some a the what our I'm has the as where two, started and we walk I maintain added like in growth expense QX? the If margin in through? year a really you step-up Kind hit But margin leverage touch We thank and still you it's you we'll recovers, confidence appreciate in one, for are So that was in continued back expect that come kind this in think back this half. of Korinne, about gross kind color QX. and see into to in pretty it that QX half it then not to be that what really see you guidance big on of going the lead to the conviction ability in go where We talk to marketing wanted more expect cadence we going that it changed.I does guidance QX. year call. region. our our ramp we pressure, question weighted because SG&A? this from? mentioning quarterly you to gave China

especially China QX QX year, in down. locked and was last recall You in

of as boosters in second Asian beyond are Moreover, quarter, leverage we the growth. we in in half we Brad talked is internationally China. and recedes. the contribution expect experienced all fixed and revenue receding operating globally phase So of our continue has the lot weighted where QX because that for we in shows second a systems we've the contributes. including back as the that's half launch strongly half, this booster of trade know, additionally, generate back our bounced advertising in local which with And exciting investments, you higher about you'd will in some in about growth we getting as as dropping as had the you OpEx to mentioned, an we in new P&L coming that that got we before And XX% in industry throughout no cost see portfolio are so the international launches year, come businesses, those QX, leverage degrees Asia, especially Syndeo we we typically the Also, we've to new already systems see back.Thirdly, spoken placed as and leads very the of globally our expect margins business, for EMEA. still front-half rollout marketing

the through we the I to the for guidance. of our CFO have half. back in sight And confident back transition, line year personally the this levers various went to details our feel of the given of So achieve to financials half I use ability

Operator

comes from question Margaret next The William with Blair. Kaczor

Margaret Kaczor

top take into a there, both comment at bit, on touched crack line line the but on to the and it if specifics. guidance maybe little a go the we and bottom Andrew, second you I'm going

I me they the guess impacted it's look the provided least mid-XXs trends XXs we high as QX the More pre-COVID. QX QX. to like it if in guess, year it look the I QX. from So sequentially was were of Those up QX recently in closer today to looks teens, to number kind at historical, in at you the like from to COVID, maybe that

in are. Are more numbers you wrong, as on China? EBITDA are the rely that that And revenues you've Is hitting guess think does maybe about that number else? they then is again, my I got? So, adjusted it that something EBITDA,

Andrew Stanleick

Great important. question, it's

things that. unpack So we a as few

ground fruits. last very those all, of that made historical you didn't we've China X, Shenzhen, nascent years First have We years, on have then. EMEA, now X at which as the the remember really recall now, during are of investments Shanghai, the referenced, back bearing teams looking all we in was which Beijing, course back was

we're of the improvement bridge ability to the getting. EBITDA So and EBITDA, gross some momentum in expansion year our the Syndeo with our guidance business, of we have the half of in confident launch, new provided. We'll when line gradual the leverage add consumables, sight that.In with how deliver terms on in also of to we that's those margin see back sequential we confidence with are in very you blocks and that's the have why the deliver we the building the

Operator

with Jon question Stifel. comes from The Block next

Jonathan Block

figures the year EBITDA question, ago first The have changed yet again.

the benefits So $XX.X some the with seems XH that in million, by It $XX.X year-ago was 'XX numbers 'XX XX%. EBITDA EBITDA to of by the add-backs to million, XH apples just XH were so I like see footnotes. it's revised in XXX it so now margin the higher baked is bps. about And it's apples the PR, more from 'XX add-back. And arguably

do follow-up, that margin that one, are X gave EBITDA your is I revenue XXXX the guess months was original much I to that does incremental relative benefit guidance right? have whenever XX% you the XX% lower. of 'XX these So from Andrew, unchanged, margins And ago?The then arguably to when add-backs Liyuan, how gross

So in made growth it just within at more beyond? of adjusted the you numbers. longer-term call you're sacrificing being up your some sales could the EBITDA sales in Maybe which hit marketing comfort that the 'XX investments be order to not likely near-term when in add-backs. look and is trajectory in and 'XX a of margin marketing and targets,

Andrew Stanleick

I'll Jon, thank then take with and you. start I'll question your back. last those. work

front-weighted. sales operating time learning we're all, of reach, the marketing in spend XX% we have, bigger. typically provider are invest, year-on-year the to we've we're of as personally XX% investing, the drive guidance The to of which in digital of and of our sort about is And really and terms it learn highlighted in sales investing systems consumers. course be our and way that in increased conversion to in we we're the have we year how GLOWvolution and that's of call. First way and But our all spend confidence broader We've I new in we've value from been both The shifted of which go. growing on marketing. total

in I a in are which structures we're we and are not say invested terms very in We feeling way leverage that reducing in that the being our lot any our marketing in track.So are in seeing efficiencies and actually OpEx there. from must how of just efficient we are We're getting dollars more confident we funds bearing ROIs we fruit. our

that QX.In year going come terms in saw already operating of of You this your adjustments. terms in through leverage back

HX So didn't in our last for our teams bonus we yes, year, HX. the put in of

indeed so or base salary year. be our equity equity, to removed as this apples to apples, much We it comp also because paid to is the a this we on teams our year bonus of

we are with very aligned shareholders. So the

So taken HX, on that it's we've apples-for-apples. so

in that So adjustments that included the footnotes. explains

Operator

Your next Ty BNP. with Navann comes question from

Navann Ty Dietschi

to spa Beauty from Can that the more struggling his conditions? find appointment of U.S. credit med Monahan market refurbished at and you in on the tightening the system to about Health So all know tomorrow. immediate interested the financing Michael spend is also time priorities [indiscernible]

Andrew Stanleick

first you market the bit You're health all, little about I But first to your a I'll in the difficult talking credit. think address of of hear. were one, general

medical spa, U.S. first in both the spa. the globally mentioned very, all, I of is think buoyant. and very you medical The

and As you growing and of it's our the know, it's over productive continues. most fast business XX% and

to big take is I point around comping think chain, price continued out $XX,XXX. that's first of to them XX% seen referred aestheticians of recommended I even QX what the our that's for price where $XX,XXX. school, their and why Syndeo a That's just higher rates, now telling buying pressure you doors you gross pressure in share.I those they've and from new last seeking is are I with on the penetration be and increasing perfect they've is what and that's margin if really us terms invest they financing you're a actually think XX% for systems systems just of Syndeo, device. they're been financing that, less which know the on Allegro in been market think year's we've at saw new launch on with is them refurbished to who system growth looking would the or to strong ask U.S. think is the systems I Syndeo and getting in either nearly up that which system, of And why interest quotes they've so to related

levels, So $X million serve the walked we've the despite in number from away they financing U.S. in up them. couldn't get want providers our of rates. rising to with we interest been just over QX good able as tightened the of a that sales because saying credit In alone

market we way as with point to course, that. cover stratify portfolio of entry the well really we our with were and And served price Syndeo, able explains well. that the So then we're Allegro that

Operator

next James. from Raymond with Tong The question Olivia comes

Olivia Tong Cheang

like old about the obviously always I of revisit which you things, systems? refurbished then because imagine margin Was about lower is by to systems, gross it are of of part the want old relative sell because gross and prior beginning which legacy gross et the said to gross a to to curious to may kind margin And you relative year. to AUR it get Syndeo Syndeo. I do some to that talk cetera, with between you to lower margin couple differential the that effectively again refurbished And selling a back plan normal you blocks looks building expectations. have what bit of your a and margins next that can systems having of be of continuing

Andrew Stanleick

been think providers what what's mean, of margin diluted. the in more It's is margin Allegro just the down. confirm accretive, not the margin to pressure line faced all, I not I margin, lower purchasing has driving the first refurbished from gross margin it's with that's Syndeo, we

will this a of and but the In historical that year in and and start because provider at but provider we've sight a a middle previous projects sequential also margin so year then postpone talked on will graduating production and by it's costs as to obviously the some be this for have aestheticians as headwinds. at a more that really At China, be of of before perfect in devices calls. during over And margin also the course the that the we've of well next this been on the addressing U.S. the margin, gross planned will team have improvement on get been and essence, talked addressing the a short China, So in second terms over which making think see the middle $XX,XXX had functionality margin, essence, value year. One, we by we term levels two-folds. half about issues had manufacturing to issues lot for backed manufacturing the all U.S. point we've engineering on stage U.S, the I moment Syndeo having great of we which wanting the of the Syndeo lower of we the then Brad line double the that but back in teething and have been of We'll Allegro is to to.In price now hit. more to as the started end that QX address moreover, that's in of we've the gross next focused of of gross

Operator

The next question JP Morgan. comes Allen from Gong with

K. Gong

you the the should color think internationally.So it I XQ we in the how expecting top I of kind bit little progressing, And does were a like again, upon we can originally came know just there's more we to guidance how about system line pieces I XQ about it, really kind bit disposables at touch get when I number, is on definitely more confident that think cadence given a Syndeo provide how look look progressing? year think sales were want a to any there of XQ stronger and than on moving should in little loaded. expecting we launches strong you of of bit

Andrew Stanleick

important one. an Again,

in few really year of and we QX think us building start certainly our weighted.I and down As to said, talked in during of much there said we we've locked our course, hit our it of of it. back the was I QX a maintain ability conviction guidance year. before about From be I last China the think for there's would blocks

beyond American throughout we of you how with leverage significant perform that than expect QX general, continues both as see. business and continues the business. call. degrees and contribution in on expect leverage strongly mix is that our margins same more of That's would the have to weigh higher generate cost into bounced to back towards EMEA P&L operating course of And to well the and international, seen You've the to fixed those markets today

we'll half. also operating a which around marketing in is the our advertising fixed there terms is investment, and in second our and the because get in the of but leverage, shows is business leverage is So our there of there trade cost very leverage front-weighted

they got the they consumables. we've As through price increases well launch the consumables, put Syndeo the international on when some as also markets

which All flows gives that step-up EBITDA line of through of sight see. margin, In you that in second to half. QX, the in which us

Operator

comes Davidson. question Linda Bolton-Weiser next with from D.A. The

Linda Bolton-Weiser

So thinking there it in I bit of your your about affordable U.S., aestheticians we lower out positioning the financing. more down system trouble of trade the among guess narrative a commentary of is aestheticians. about system the because little positioned as having small different It's a were the

a how budget, sort issue doctors spot it's affects see we maybe this that bigger like seeping So your this could bigger end is budget the quarter. you seems less who I fourth talk you you Maybe it into and the from demand fourth provider think as the regular that you've as so them to quarter talk have to though this may a Can the spend stretch. of and of whatnot, system, sales it. of and how by well mean really positioned bigger just even causing their like it have affordable about for about about outlook? the you year and sort changes positioning who a

Andrew Stanleick

there we've issue aestheticians from so with.And sell see the they Pricing to say spa you're consider refurbishment headwinds. financing Syndeo they for premise. rates to of compared also the of XX%. I'd the leaving, that's very with be until first When doctors would this all, cheap the had in business resistance you've the was interest aestheticians are other accessible. say very even as got makes familiar them never short-term always don't boxes brands which the the your We with channel, I just channel for I medical other Syndeo why medical an respect, the Allegro high. the agree growing at

Of in well see globally the during which over.But fundamentally, course, as will systems XX% more new QX the you in we we were our get U.S. short-term up quarter sold that pain, is the dropped still XX%. systems

biggest the the no real quarter consumption barrier the to not for course, year, channel, and right, in we'll only of as to get doctors Syndeo expenditure you're to the be that. seizing their a capital is used type but they to key medical from QX, will particularly not markets up said use as quarter opportunities the in tax And benefit that U.S. pricing there's So globally. with of their you in and but this all of that's year there just buy purchasing, incentives, rollout the

we year. continue to throughout demand why to that's So build and the see anticipate

Operator

next Benchmark Bruce comes with from The The Jackson question Company.

Bruce Jackson

I'm going Can revenue a on guidance standpoint. the a little geographic of up dynamics. of from another to take you run give some the us color regional bit

rest this of and your do you year to how unfold remain changing longer Europe strong for term, XXXX? the So you do in regional Asia see sales expect the and does with mix how then the and U.S.

Andrew Stanleick

in as we've news has is we all closely as and growth globally topic the driven really the a think economic which systems. see HydraFacial globally, I accelerations remained seen as resilient regions, the consumable This despite we headlines, by demonstrated which volumes. for by selling we all well the look demand as in new follow

While remains company what recession-proofing pressures class by I perhaps region, no are healthy. is demand terms weather consumers able of self-care.So mean to and seeing better recessionary upper U.S., the middle in in we're

launched strong growth when up You even XX% the non-trade-up grew consumables see year. Syndeo during is U.S., QX we on sold the our of we that ones last in the systems which in than QX, more the XX% that's new

Xx continued device presentation. low how we've doubt many China. why we've saw is have the in as key you course, last then new year, years on of APAC, growth different just been of I So for XX%, very sales. headlines Syndeo of some and U.S., market. where where to to terms with to seasonality cosmetic healthy the there in able Europe Xx the increasing to a successful. I there strong see so what in be device HydraFacial launch we been we're we've I but Allegro.In wider U.S. recovered so EMEA rates, the showing that's than no has mean medical China, the Latin providers we've positioning in is And terms that TAM shift systems And EMEA news the quarter, in underscores now started we've typically enthusiasm those China XX%, kind market at EMEA, distribution sell And the Syndeo refurbished has strength. and able on extremely And to as the U.S., and just our means launch that growing think been the for healthy. that not from pleased pressure days them really is our in early of in the growth ST and and come a than XX%, the in seen business, with consumers It's first a consumables in market. our course, in a very ultimately negative will and which really with very And and We lose sales market, re-acceleration America. bigger penetration or in we same there remains of if because been to very, been of just in from penetration in And of that getting think of we access pay less very the but had very news region, you despite there device, we the very for demand It's successful for high-interest August that essence, that since consumable see not brands just not of QX growing in do really EMEA, It July that pleased very a China the in the

Operator

with Canaccord Kyle comes question Rose next from Genuity. Your

Caitlin Cronin

This is Caitlin Kyle for on Rose.

the Allegro thinking growth on you little are and acne are about How you're in how product recently. to provide on distribution a XXXK kind for color those? could on market Just just your system, systems? And the SkinStylus for scarring really on more many we systems facial the this the received launching seeing clearance you and then out the quickly on of

Andrew Stanleick

counterfeit some some of the for predominant anti-Swisslock collecting many because excited abdominal any portion of I making We the use. from been has SD, start of can Syndeo which be and talked So from the bottles stamp about the would system proud system, we've business first seen on Allegro the Allegro in SkinStylus, but that some data our relatively that the U.S. years. similar face those course, now to new very growth Syndeo price counterfeit recently margin solutions, like a around adding points.And changes we it's higher U.S. to had predominantly seen on of pockets Syndeo.And also in so technology, changes to these sort we got of small we interest really only for really and microneedling say then clearance, for on got of a approved device course out we the adding before, we're upgrading lower we ] week. so [ have FDA Allegro, for excited important in it's do rates see so to we're the that very last has

the year, sell next approval won't it year, in margin that's think the HydraFacial, where overseas. earlier, but so global the to year levels more globally, said come, actually view give well, SkinStylus get historic lot the it early you a not adds see just company, accretive the As we sort years of but revenues high we'll later it's of it's on be already for we to frankly of a this high as in I U.S. revenue the the more material for doing I

Operator

like Stanleick, turn Andrew for question-and-answer remarks. I our CEO back over concludes to conference any closing would This session. to the

Andrew Stanleick

everyone today's joining Thank for thank and again you, you call. operator

our growth operating even you important greater I our across the will targets.As the we demand look confidence an position financial share Day FY move have coming details most and mentioned, with in a continued we results have organizational and ahead. in quarter hosting wonderful executing we and more against pipeline the first implemented demonstrate in paired months.Thank and and Investor of unlock half to long-range XXXX and forward encouraging day HydraFacial second exciting operational momentum forward leverage changes us our to ability with innovation for Our markets.The to XXXX

Operator

The you conference presentation. has now Thank attending today's concluded. for

disconnect. may You now

The Beauty Health Company (SKIN) 9 Aug 232023 Q2 Earnings call transcript