SKIN - Earnings call transcript Q1 2024 | The Beauty Health Company

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Operator

Hello, and welcome to the BeautyHealth First Quarter 2024 Earnings Conference Call. [Operator Instructions]

I will now turn the call over to your host, Norberto Aja, Investor Relations. Please go ahead.

Norberto Aja

Thank you, operator, and good afternoon, everyone. XXXX Conference Company's BeautyHealth to First Call. Quarter Welcome

safe a management's doing forward-looking comments will read let start your statements, with just in the to underlying minute before We including and guidance may assumptions. minute questions. take a language. and harbor Management me make so, But

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

related to with risks business, For see filings a of further company's our the the discussion SEC.

to Reconciliation SEC This the most call financial to earnings non-GAAP measures will the be to furnished and GAAP present available of press measures. these found release in on non-GAAP measures our comparable are the website.

BeautyHealth's with Beck, Officer, is Joining Chief Executive Chief Officer, me along on Monahan. Mike Marla call Financial the today

go management's I call Following With to Marla session. the remarks, turn open the to Please will Marla. prepared a CEO, over call question-and-answer for we ahead, would our like now that, Beck.

Marla Beck

Thank you, and for Norberto. you everyone, Good afternoon, joining us. thank

pleased be we first progress today results you our quarter to with to the BeautyHealth's making transformation. review and on business are are We

As discussed drive with rebuilding foundation to focus we on call, confidence the restoring for last on laying growth. continue a future and towards our

discipline. am transformation will X financial take operational by While our this we time, encouraged making excellence, progress and excellence towards I are the strategic sales priorities,

BeautyHealth. are and the focused, I'm potential and Our of driven by teams excited long-term

had results, first our to start we quarter solid to Turning a XXXX.

our was also well driven First cost by expectations, guidance with Profitability came sales. ahead quarter midpoint revenues in rationalization. healthy above of consumable continued

of work issues the to last July. progress, addressed our by on is X.X has earlier significantly. the the quality Syndeo be side of of that versions Syndeo impacted business. improved particularly done, core our system We've release encouraged more The still the device are we with While there

decades the service which or last are processing in-field technical finding issues, resolvable teams In However, bring and superior some seasoned visit. an production rapidly have levels. our in operations experience we global our are processes supply up brought technical phone who to by field quality and a customer chain of has XX our teams days, most of and to leader,

right of next We couple over the this quarters. get will

to Our one providers serve need our is customers priority their stream. devices make and have sure number to the maximize their revenue they

to committed are day. We every this

long-term results We operational our financial hero challenges remain necessary focused building for Hydrafacial. our foundation our and the significant acutely near-term improving growth on brand, while to capture addressing opportunities the

aestheticians, alike, health efficacy, traffic, and treatment increased support providers offers its and locations clinical a For offices, consumers business hospitality new well room a training development results, across Investing healthy, and Hydrafacial in for ongoing our and skin Hydrafacial as asked spas, potential strong teams. beloved by is and single is for by doctors' brand med providers results stream, scientifically retail proven recognition. as glowing revenue devices name instant for It for the time. every treatment

On excellence, discipline. X for excellence we operational our earnings key priorities last and financial strategic sales XXXX, call, introduced including

progress. our While by am early I transformation, this in encouraged

a our sales priority, is brand. brand. face our the our of sales and our team center teams unique are connection relationships the has customer the team engagement. and for between first elevating consistent providers tenured excellence, and our Hydrafacial the differentiator sales and provider successful and room our of experienced We treatment in believe our Regarding is service field personal business providers The best-in-class strong been through

grow craft In swiftly spots. also We in to resources businesses. equipment a education address XX/X and we've support including And training putting opportunities has to their giving providers the additional also and our their and the traditional to customer our allocated them. our our customers. med programs, technical U.S. and of convenient We've provider in more accessible refined addition needs Canada study expanded first, technical in branded February, highest effectively among service NPS and conducted spas capital the the support Hydrafacial of teams, the hone

recently This Hydrafacial Year treatment by Health, to at was the efficacy partner, named of the a Vendor our corporate Aesthetics is their franchisee field of recognition our world-class the Relive clinical both team. of Additionally, and system testament our conference. support

also the not the and our Our Hydrafacial only providers their to bring doors, unmatched treatment as continue to revenue consumers business. a multiplier brand of for the but recognize of to power serve through their results

and in further As both innovation. look are in current we form through ahead, confident its more Hydrafacial's potential, we than ever

to second excellence. focus, of operational Moving area our

this my As and I most avenues underway. throughout instituting oversight last operations, has chain. completion year. and evaluation A accountability added comprehensive streamline entire its later is concentrating framework supply I our to look on been our our our our manufacturing one growth of rigor, upon promising call, mentioned everyone to and focus day updating from operational on forward

continuous In we She relevant supply across including and comprehensive impose strategic global She is chain at currently will we global appointed executive the review and who Medtronic. changes. Chain will newly advancing improvement. Chief role strategic To experienced in important position serve operations, quality to objectives Sheri Officer. expertise this deeply supply decades additional to leading a April, our made is in Lewis this brings talented recently leadership drive an chains area. Operations created a Supply end, of Sheri and of

areas third to cost balancing everything priority, and our business. tighter revenue to be of expense discipline, with of management our conscious Operationally, we this a is the our goal opportunity. do, means and Regarding in structure resources cost high-impact financial reallocation

Looking profitable We'll attractive power further to our treatments. proven tremendous pipeline. Hydrafacial the long-term clinically growth of of ahead, opportunity drive We've our opportunities brand long-term the number leveraging to consumables through seen and be compelling drive we working innovation by around see a penetration.

installed provider offering grow value. by at how offering longevity and opportunity expand device base We We segmenting increase clear to efficacy our and our results. of look our a unique the will we our further see to channels

our our segment each diamond currently, our We wet in channel opportunity offerings peel. a as such unique have and treating in medical We medical offerings way. our tip to grade see an exclusive expand

Additionally, meaningful to the underway, both Hydrafacial in historic of we treatments, clinical channels. related have all that our leverage efficacy will we stakeholder and studies of

We also drive our existing markets to in penetration opportunity increase to the see scale.

are at looking and how we We provider drive increase in investments markets our to retention. direct adoption both and our consumer

and these delivering and our of none on be entire course, end to of our providers consumers. service team's focus Of opportunities highest possible without would the support levels unwavering

on future predicated Our past this and ironclad success is commitment.

shareholders of the our our further ability What we recent gives have most team, the drive to improvements made. added partners while growth is additions me quality including and confidence our creating in in value the for

long-term and While quarters the headwinds, has discuss opportunity short term our BeautyHealth we as the more I work to you the for progress. to outlook call remain been will never over cautious promising. we remaining with look With turn coming believe in that, the forward I engaging I the Mike. to through over

Michael Monahan

will consumables. X.X% regions, the begin of I financial increase update slowdown Marla. quarter midpoint provide was in across $XX.X at of our detailed primarily substantially representing a first equipment results all in guidance a an in driven capital Revenue guidance then you, sales a our year-over-year review This on came by by above and with for financial decline. offset Thank XXXX. our million, an

respectively, a The or basis GAAP XX.X% decline for was XX.X% in and and the versus of led of indirect were XX%, noncash on year $XXX,XXX quarter an certain GAAP charges. revenue inventory-related drivers of along X.X% of behind on loss prior period with margin adjusting $XXX,XXX first versus the in X.X% a the This an a product adjusted primary XXXX. XX.X% Gross to or higher costs, expenses EBITDA addbacks. increase basis revenue versus in negative

end we across across offset all growth equipment capital Global we sales consumable in saw During as overall of regions, revenue by most equipment markets. pressure saw the lower declined XX.X% sales. our quarter,

in While products, both we strong interest credit and lead brand between to and generation continue closing. seeing tightening our longer are and lags we see

price at end XX,XXX sold XX,XXX During machines the brings units X,XXX QX $XX,XXX. in systems the the total versus This an units we of average to at selling of quarter, XXXX. field the active

of the X%, perspective, Consumables a due sales sales continuing $XX.X tightening XX.X% and customer the declined to soft credit From to primarily from driven equipment by in consumers. geographical to growing caution. appeal Hydrafacial interest and capital grew revenue Americas million, demonstrate end

accounted For new increase for China in in the quarter, $X.X million a to decline growth. China the $XX consumables there partially in is China. for by of growth decline in opportunity APAC an of region's offset revenue, a revenue XX.X% We while million, declined drop system sales, The large XX.X% year-over-year. reflects believe X.X% an

remain cautious term. we in the near However,

to with grow a stable strong, sales focused and tools are developing equipping the business. the needed We on them force

offset of consumables, Adjusting margin. revenue declined of delivered in $XX.X strength gross adjusted million, consolidated million, capital to by sales. new depreciation, profit $XX.X of stock-based $XX.X XX.X%. noncash from X.X% We XX.X% adjusted equipment as GAAP GAAP for a gross EMEA's lower coming million gross amortization, gross such margin compensation, a and charges, profit with resulting for QX

relatively of work gross optimize continue XXXX strategy. levels balance be adjusted to our as to expect chain the We margin QX with consistent supply we to for and evaluate

adjusted resulted $XX.X favorably million $XX.X noncash well of am of globe. with in a $X.X expense XX% I certain compensation more $XXX,XXX, and down and as EBITDA strategically $XX.X an reflecting approximately items commissions. to a as XXXX. This QX success loss expense. compensation Selling decline driven G&A loss net Normalizing sales X.X% have expenses by marketing million, our across was EBITDA report $XXX,XXX, we million, to continue marketing in expenses, and discrete outside to lower $XXX,XXX. was charges, down for operating the of million, as R&D spend was expense of a pleased million, $XXX,XXX services a to relates $X.X net managing up adjusted income down lower it As lower in $X.X million was primarily while year-over-year comparing and expense savings to and

$XXX.X Moving debt. the in we million to repurchased balance Through convertible We our sheet. of ended million X, quarter May cash. approximately $XXX.X with the

repurchase approximately $XX comfortable and we current evaluate continue liquidity existing with As we to -- best position, of remaining our March We have approximately we with feel have will million our our together on of XX, had Board, capital. share allocation authorization. the

inventory quarter. increase ended increase during Syndeo our replacement million needed and remain additional an Taking approximately to program at in primarily on X.X with look We $XX.X to driven quarter deliver million, our base. we second the units compared build replacement track The provider the inventory, a by December XXXX. was to regarding $XX.X

As qualify of have X,XXX globally will customers Syndeo their the but we who of for X.X we system. end yet more estimate replacement systems March, replace receive to approximately

program for of end Our the the quarter-end at million $XX million, was accrual December approximately Syndeo replacement from $X.X March XXXX. down

systems, global of of XXXX is our inclusive total accrual to warranty place Our as XXXX. issued approximately warranties cover March of during to support million providers $X extended Syndeo in our we

I and to would moment and second is the is to a typically cadence the like Revenue due This of seasonality take of in fourth X business. year. quarters reiterate revenue the factors. to highest our

purchases into their First, visibility the historically in capital often base annual capital point by quarter the provider clear year. that are in fourth as allowance has largest our spend

the highest in fourth have November. consumer and in support Hydrafacial demand promotions for and consumables with the often Second, second quarters, we spring fall, May and which our treatments,

the the Given revenue. has an on the our cadence of seasonality of size our business, impact

second million EBITDA million net sales guidance, million we $X to Regarding to expect $XXX million. in of $XX be $X the to adjusted and quarter

global quarter, from to primarily year-over-year but second for the revenue capital pressure QX expect equipment. increase near-term We be sequentially driven by down in

Additionally, we Syndeo XXXX year-over-year launch challenging given in in system period. a international sales comparable our second the for quarter, comparison the faced

For growth the are XXXX, low revenue be single to flat we full year-over-year. projecting digits to year

of and improved the reflecting million EBITDA was is in the credit guidance greater. environment This provider more and a earnings However, sales. we adjusted implies half on a to expect $XX consistent revenue of communicated what consumable confidence, favorable second call deliver return or accelerating previous with to growth our year,

with partners, goal closing, is In expectations of consumers, shareholders. and execute our providers, simpler structure the a to our while exceeding

clear. is Our plan action

X.X business, the Operator increase increase new capital will now through call our to Syndeo sales. for We to replacement I turn plan profitability. consumable will sales, Q&A. program, footprint equipment and drive complete back stabilize our the We the

Operator

TD from [Operator first Chen Instructions] the question Oliver Our comes from of line Cowen.

Oliver Chen

Marla and Mike. Hi,

stabilizing what's current in-person? how Mike, phone those the with a are you go? upside? the And resolved? field, issues line machines they by what side, mentioned timing to on surprising main business. And And the drivers was picture -- in expected revenue drove really, were what bigger having of on you are of or in not expectation this some you fixable Regarding the this the And situation versus the of problems your why question, the then

are terms Marla the the of Just like thoughts key when the on in what stabilization business, your and plan? you. overall steps stabilizing Thank Mike, say you

Marla Beck

up to issue. in customer The versions regarding look On start. future, field resolve continue service are And a to our that are team. visit have processes has to issues And to Syndeo, not of our issues core had. we operations couple just technical issues the joined will service who quarters. have to going phone. experience phone, I'm noise next this, to resolved Mike, issues. had quickly to I related address flow at make And level who for potentially addressed. then of Oliver diagnose the of member Most been the seasoned you solve a the and a remaining consistent our progress. bring report leader and full in and we we the global to provider and it's work the the send Recent team with phone. if and earlier in expect. our we to over brought we resolved recently pass person the really on the to questions We'll the over we have She over cosmetic decades team production

Michael Monahan

Sure.

The were regions. the really revenue, and on it. across first had of the deliver around us. consumables second that the spot to consolidated drivers was Oliver, question main quarter, In growth was XX% a on for nearly a consumables we you basis, able We bright asked,

rest question the on sales, is to to in throughout we expect capital your equipment expect our year that focusing X driving new the the of in of third trend along overall sales. the business, As provided, And time. in along around And terms see the we spending we continue guidance really to those the terms Americas, gross see specifically further we in stabilizing that we improvement of consumable also as look further year. majority where get we're with throughout the margin factors, of

Operator

line Helgans from question the from next of comes Our Ashley Jefferies.

Sydney Wagner

Can Thank health you. are that of perception This guys about It the just you sounds is there, kind of what of done from that feedback you're share you but providers those and like Ashley. bit stands? hearing, lot for a wondering of Sydney where recovery on like work more you in you where have feel a relationships?

Marla Beck

teams to that our provider making. even the continuing is as see Yes. with I have Hydrafacial The invest aesthetic driving a significantly teams than before. they've We for as and confident every with been our been touring week. is providers treatment The from Syndeo confidence in up accounts with gateway services. more talking other our in and corporate we're they're progress their that

Operator

Gong Our from next the of question from Allen comes JPMorgan. line

K. Gong

both of I'll kind of just my ask upfront. questions

million for environment your the confidence hit and about year flat macro some you kind half a a to $XXX -- the to capital, that expect Are tightening put about into and given month that think mentioned single May? that the I gives of we're the trajectory bit being that that on see so the to you low uncertainties better I or You to your the only quite number? the credit a quarter, year. target improvement And into said far million And $XX back the as of of digits, your then starting think second you of of around when year. then so over course full quarter, challenge remediation, up what but you any can ongoing in but that to guide, get also your sales does for are you

Michael Monahan

those both questions. take I'll Mike. is This Sure.

credit, for the financing they of for alternatives tightening our to actively so the access have providers we're in to capital, looking May. changes sure significant different we're make seeing On not

make we to on support sure we However, we year. expect them going to are some forward, working them that with the and can throughout make that progress

fourth revenue of couple and internationally cadence, percentage a revenue with you the device the and QX the last of of revenue on we we'll XXXX. along and from higher Historically, strong The has revenue historically. the Syndeo challenges to largest to return guidance according a of if have that year's second we've modeled That year, basis think back years. in impacted than normal of some tends it last the at and cadence, in look XXXX XXXX XXXX, it be this in in years, had as we percentage to in that business question quarter. so cadence very last of in to the the U.S. prior the the to On expect been on launch be than the to the business a for normal our guidance this the quarter more basis couple start we we

Operator

of comes question from next from Anderson Canaccord Susan Genuity. the line Our

Susan Anderson

I On maybe and thought have fixed, the are spending higher were I also, versus if going issues by on the providers if of another the med And you or a until Thanks. that? off just spas off? competitor much pullback from curious Syndeo thoughts you in was around -- they system how caused was in then at interest general I sales, something just issues curious from or were just like the purchasing weakness mean versus any the pullback general rates maybe to concerns holding holding was

Michael Monahan

definitely some a between think overall higher of it's an the to interest on able pause, longer a bit and close. our having we little them, of being impact it's I having seeing taking and generate rates combination leads both. are providers We're the

of But challenges equipment that impact we've really think We that that's to of near at the our and pipeline, we the term. And on as a the will our we're starting believe had say seen at we've we're of we between don't opportunity in of you significant specifics the thing I combination believe that, know deliver year, the really we see the when kind past. We guidance -- strong. don't the I over about one lessen. the is is kind of some competitors. rates as look look for what encouraged very think we rest can really interest

Operator

James. comes of the line question Raymond Tong Olivia next from Our from

Olivia Tong Cheang

wanted guide little QX I a the to into more. bit dig

lower then even did a how we you helped improve QX sales peel Whereas was mentioned seasonality. you the when of view? the year-to-date you've the shows Perhaps sequential lift Could in bit the creating implies it QX little from back tell QX launch it a onion on that is you. Syndeo And last international expectations? you This look us a comp. a QX. QX X-year that at talked more, stack. of Can smaller talk the in year? a a that layers You your about embedded much little of usual takeaways on that and tougher contribution are what's trade just influence had any Thank your bit QX versus

Michael Monahan

at our X that was Again, largely to seeing comping an equipment of we'll our side. EMEA, capital pressure we're we and able in The close things Sure. EMEA. strong was in terms had second APAC impact a on little it When that the longer close modeled are bit be We to is you pipeline. way in bit in that softness Americas, In look on year-over-year we're impacted of and the a that total the was second guide, overall putting expectation a had really so little internationally. the quarter. obviously what's sales this sales the in basis of quarter -- little which take still the Americas, and quarter. a down quarter. really $XXX consolidated They year, the equipment APAC did largely bit be We Last year really general -- bit revenue substantially pipeline the because capital we'll the to little that's grew the launch million a year, modeled guide. revenue on impacting in of and strong, a second in overall see the grew equipment in later the

Operator

comes next question of William Our Kaczor Blair. Margaret line from from the

Macauley Kilbane

with Margaret. just catch-up if I'm those some you wondering some an the as the made for out. of ordering quarter? you on those they APAC you quarter, distributors. normalized, patterns Or update Syndeo have change disruptions, get any Macauley Last course? if mentioned those normalized, international some of there did is over especially how have can we This on associated And specifically to in last called the maybe were this was as compared improvements any quarters quarter see just ordering

Marla Beck

portion large impacted that the first for of distributor quarter, in see starting specifically normalize saw quarter in we of the QX, kind the I terms on think APAC. that that anything side to timing in timing. We're consumables first business overall the so of the in wasn't there significant a was of

Operator

Stifel. line Our next the Block question comes from Jon of from

Joseph Federico

of some on year moving Full Mike, basically margin Joe us on for first on that out Can a implies it detail EBITDA an half parts ramp of for up kind I perspective. the second EBITDA guidance the XX%. like but previous around margin? just Federico more maybe back so sales, was The consumable the give start, is kind year questions on half sales, the that I'll EBITDA helpful. Thanks. the one other lot It guess of the the shakes is try on any This any Jon. the from around of XQ following there to would guidance implies half that on sounds of accelerating you color X%. be on

Michael Monahan

we'll be to saw manage able expectation the able And revenue, and continue OpEx. that of our QX. we expect to throughout were actively grow operating managing do to is We're the to expenses do lot the and you year. as in improve potentially that A we

drops manage you our if able we're a operating margin, is or to on gross that the slightly see the you -- improve bit you'll And that so grow revenues little driving EBITDA. hold potentially as and expenses, really EBITDA, expectation what's the to down as adjusted

Operator

from the Korinne comes from Piper line Our [Operator Sandler. question Instructions] of next Wolfmeyer

Korinne Wolfmeyer

demand from positive commentary some does some on a it the other was on consumer weaker. pressures? some like like throughout accelerate you're Thanks. end it remainder had with peers -- the the I'd some looks all consumables confidence you there's gives overall being in in What to might then I aesthetics. marketing look coming year hearing also consumables, is know of spend weaker these -- the you that We're the like also ask able about be bit down. of but utilization to utilization. And

Marla Beck

Thank is nearly the which grew the grown. to and base question. quarter really has spot our corporate marketing adding A accounts. you on for utilization. XX% Consumables our our bright Hydrafacial first in significantly year-over-year, installed They're expanding focusing and is

expand see we pretty 'XX Additionally, we innovation 'XX. long-term a for as and opportunity our pipeline

The other to We the we support, providers. and support have in doing support driving thing on to we be activations in providers training can efficient in we opportunity to marketing utilization. And do is, need them this. highly our to focus will invest think and certain additional

resource time we a As from a deeply perspective dig investing of attention and allocation our the into supporting half providers and really we'll and be the back year, perspective.

Operator

remarks. questions All are the right. in would now Marla for over call to queue. the I closing of our Beck turn Those to back all like

Marla Beck

Thank joining you us today. all for

by the team right Our for drive about our trust success. excited their execute progress am equity, and confident being employees the to you. brand and presence BeautyHealth of given deep of providers market, and significant compelling I thank addressable of Thank their want driven hard and provider work our for community. partnerships future dedication, partners and for incredibly our and collaboration. continued is I passionate and their loyalty, BeautyHealth our the team our to

Operator

today's attending. you call. concludes This for Thank

The Beauty Health Company (SKIN) 9 May 242024 Q1 Earnings call transcript