Document

Long Beach, Calif., August 9, 2022 – The Beauty Health Company (NASDAQ: SKIN), home to flagship brand HydraFacial, today announced record financial results that exceeded expectations for the second quarter ended June 30, 2022. On the basis of the quarter’s exceptional performance and growing momentum, the Company also raised its 2022 net sales guidance and reaffirmed its 2022 adjusted EBITDA guidance.

“Our spectacular results this quarter reflect the growing strength of our business, the enthusiasm of our providers and consumers, and the accelerating demand for HydraFacial around the world,” said BeautyHealth President and Chief Executive Officer Andrew Stanleick. “We delivered our highest-ever quarterly net sales on record delivery system sales. We remain as confident as ever in our business and are raising our full-year net sales guidance by $10 million, up to $340 to $350 million, and reaffirming our $50 million 2022 adjusted EBITDA outlook as we continue to invest in our growth.”


	Three Months Ended June 30,				Six Months Ended June 30,
Unaudited (dollars in millions)	2022		2021		2022		2021
Delivery Systems net sales	$	64.8	$	34.9	$	106.4	$	60.6
Consumables net sales	38.8		31.6		72.5		53.4
Total net sales	$	103.5	$	66.5	$	179.0	$	114.1
Gross profit	$	71.7	$	47.3	$	123.6	$	79.0
Gross margin	69.2%		71.0%		69.1%		69.3%
Net income (loss)	$	7.9	$	(139.4)	$	40.4	$	(142.7)
Adjusted net income (loss)*	$	2.2	$	7.8	$	(6.3)	$	7.7
Adjusted EBITDA*	$	12.6	$	11.4	$	14.9	$	18.4
Adjusted EBITDA margin*	12.2%		17.1%		8.3%		16.1%
Adjusted gross profit*	$	74.8	$	49.8	$	129.6	$	84.1
Adjusted gross margin*	72.3%		74.9%		72.4%		73.8%

•Gross margin was 69.2% in Q2 2022 compared to 71.0% in Q2 2021, and adjusted gross margin was 72.3% in Q2 2022 compared to 74.9% in Q2 2021. Gross margin was impacted by the lower average selling price of delivery systems due to intentional promotions associated with Syndeo’s launch, as well as continued pricing pressure from supply chain headwinds, particularly shipping costs. These impacts were partly offset by strength in new Syndeo system placements, margin accretion from distributor acquisitions, and fixed cost leverage from higher net sales volume. The Company expects continued headwinds from global supply chain challenges and inflationary pressures to weigh on gross margin through 2022, specifically higher shipping costs, offset by fixed cost leverage from higher sales volumes coupled with pricing initiatives, and margin accretion related to the acquired distributor inventory.

•Operating loss was $3.4 million in Q2 2022 compared to an operating loss of $26.4 million in Q2 2021, primarily due to the lack of transaction costs incurred in Q2 2021 associated with the Business Combination. This was partly offset by increased sales commissions associated with higher revenue, increases in global planned marketing programs, increased personnel-related expenses, and increased recruiting & professional fees. The operating loss in Q2 2022 includes $1.1 million in litigation costs to vigorously protect the Company’s intellectual property and one-time costs of $1.9 million.

•Adjusted EBITDA is an important profitability measure that the Company uses to manage its business internally. In Q2 2022, adjusted EBITDA was $12.6 million compared to adjusted EBITDA of $11.4 million in Q2 2021. Adjusted EBITDA grew due to strong demand for Syndeo, strong system sales and marketing conversions in EMEA, and fixed cost leverage, partly offset by the impact of COVID-19 lockdowns in China, supply chain headwinds, particularly shipping costs, increases in planned marketing programs, personnel-related expenses, and sales commissions associated with higher revenue.

Cash and cash equivalents were approximately $821.0 million as of June 30, 2022 compared to approximately $901.9 million as of December 31, 2021. The Company's cash and cash equivalents include approximately $638.7 million of net proceeds raised in 2021 from the Company’s issuance of $750 million of 1.25% Convertible Senior Notes due 2026, which have been and/or will be used to fund potential future acquisitions, working capital expenditures, a capped call purchase agreement and general corporate purposes.

BeautyHealth increased its fiscal 2022 guidance and now expects net sales in the range of $340.0 million to $350.0 million, up from the previous outlook of $330.0 million to $340.0 million, reflecting management's confidence in the business as the Company executes against its growth plan. The Company also reaffirmed its 2022 outlook for adjusted EBITDA of approximately $50.0 million, reflecting the continuing strategy of reinvesting in the business to fuel long-term growth. The increase assumes no material deterioration in general market conditions or other factors related to COVID-19 trends.

BeautyHealth’s achievement of the anticipated results is subject to risks and uncertainties, including those disclosed in the Company’s filings with the Securities and Exchange Commission. The outlook does not take into account the impact of any unanticipated developments in the business or changes in the operating environment, nor does it take into account any acquisitions, dispositions or financings during 2022. In addition, given the uncertainty in the environment in which BeautyHealth is operating, the Company remains cautious of the potential risk for further market closures or other restrictive measures from existing or new COVID-19 strains and the uneven global rollout and adoption of vaccines, as well as inflationary headwinds related to higher raw material, shipping and labor costs. BeautyHealth’s outlook assumes a largely reopened global market, which would be negatively impacted if closures or other restrictive measures persist or are reimplemented.

BeautyHealth will host a conference call on Tuesday, August 9, 2022, at 8:30 a.m. ET to review its second quarter financial results. The call may be accessed via live webcast through the "Events & Presentations" page under "News & Events" on our Investor Relations website at https://investors.beautyhealth.com/. A replay of the conference call will be available within approximately three hours after the conclusion of the call and can be accessed online at https://investors.beautyhealth.com/.

In addition to results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), management utilizes certain non-GAAP financial measures such as adjusted net income, adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit, and adjusted gross margin for purposes of evaluating ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP financial measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance. These non-GAAP financial measures should not be considered as an alternative to GAAP financial information or as an indication of operating performance or any other measure of performance derived in accordance with GAAP, and may not provide information that is directly comparable to that provided by other companies in its industry, as these other companies may calculate non-GAAP financial measures differently, particularly related to non-recurring, unusual items.

The Company does not provide a reconciliation of its fiscal 2022 adjusted EBITDA guidance to net income (loss), the most directly comparable forward looking GAAP financial measure, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation, which cannot be done without unreasonable efforts, including adjustments that could be made for changes in fair value of warrant liabilities, integration and acquisition-related expenses, amortization expenses, non-cash stock-based compensation, gains/losses on foreign currency, and other charges reflected in our reconciliation of historic numbers, the amount of which, based on historical experience, could be significant. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The Company's fiscal 2022 adjusted EBITDA guidance is merely an outlook and is not a guarantee of future performance. Stockholders should not rely or place an undue reliance on such forward-looking statements. See “Forward-Looking Statements” for additional information.

Management uses adjusted gross profit and adjusted gross margin to measure profitability and the ability to scale and leverage the costs of Delivery Systems and Consumables. The continued growth of Delivery Systems is expected to improve adjusted gross margin, as additional Delivery Systems sold will increase our recurring Consumables net sales, which has higher margins.

Management believes adjusted gross profit and adjusted gross margin are useful measures to the Company and its investors to assist in evaluating operating performance because they provide consistency and direct comparability with past financial performance and between fiscal periods, as the metrics eliminate the effects of amortization, depreciation, and stock-based compensation which are non-cash expenses that may fluctuate for reasons unrelated to overall continuing operating performance. Adjusted gross margin has been and will continue to be impacted by a variety of factors, including the product mix, geographic mix, direct vs. indirect mix, the average selling price on Delivery Systems, and new product launches. Management expects adjusted gross margin to fluctuate over time depending on the factors described above.


	Three months ended June 30,						Six months ended June 30,
Unaudited (in thousands)	2022			2021			2022			2021
Net sales	$	103,536		$	66,508		$	178,951		$	114,050
Cost of sales	31,882			19,257			55,360			35,059
Gross profit	$	71,654		$	47,251		$	123,591		$	78,991
Gross margin	69.2		%	71.0		%	69.1		%	69.3		%
Adjusted to exclude the following:
Stock-based compensation expense included in cost of sales	$	207		$	—		$	433		$	—
Depreciation and amortization expense included in cost of sales	2,969			2,567			5,624			5,158
Adjusted gross profit	$	74,830		$	49,818		$	129,648		$	84,149
Adjusted gross margin	72.3		%	74.9		%	72.4		%	73.8		%

Adjusted net income, adjusted EBITDA, and adjusted EBITDA margin are key performance measures that management uses to assess the Company's operating performance. Because adjusted net income, adjusted EBITDA and adjusted EBITDA margin facilitate internal comparisons of our historical operating performance on a more consistent basis, management uses these measures for business planning purposes.

The Company calculates adjusted net income as net income (loss) adjusted to exclude: change in fair value of public and private placement warrants, change in fair value of earn-out shares liability, other expense, net; amortization expense; stock-based compensation expense; management fees incurred from historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); restructuring costs (including those associated with COVID-19) and the aggregate adjustment for income taxes for the tax effect of the adjustments described above.

The Company calculates adjusted EBITDA as net income (loss) adjusted to exclude: change in fair value of public and private placement warrants, change in fair value of earn-out shares liability, other expense, net; interest expense; income tax benefit (expense); depreciation and amortization expense; stock-based compensation expense; foreign currency (gain) loss; management fees incurred from historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); and restructuring costs (including those associated with COVID-19).


	Three months ended June 30,				Six months ended June 30,
Unaudited (in thousands)	2022		2021		2022		2021
Net income (loss)	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Adjusted to exclude the following:
Change in FV of warrant liability	(15,185)		72,027		(67,237)		72,027
Change in FV of earn-out shares liability	—		36,525		—		36,525
Amortization expense	3,938		2,967		7,651		5,921
Stock-based compensation expense	6,378		3,508		13,427		3,542
Other (income) expense	(1,658)		4,307		(721)		4,314
Management fees (1)	—		82		—		209
Transaction related costs (2)	1,986		30,411		3,031		31,157
Other non-recurring and one-time fees (3)	1,897		50		3,852		137
Aggregate adjustment for income taxes	(3,097)		(2,671)		(6,723)		(3,434)
Adjusted net income (loss)	$	2,190	$	7,828	$	(6,282)	$	7,746
Depreciation expense	1,852		728		3,268		1,418
Interest expense	3,217		2,060		6,617		7,759

Foreign currency (gain) loss, net	2,206		(24)		1,838		232
Remaining benefit for income taxes	3,173		801		$	9,414	$	1,258
Adjusted EBITDA	$	12,638	$	11,393	$	14,855	$	18,413
Adjusted EBITDA margin	12.2%		17.1%		8.3%		16.1%

(2)For the three months and six months ended June 30, 2022, such amounts primarily represent direct costs incurred in relation to potential acquisitions. For the three months and six months ended June 30, 2021 such amounts primarily represent direct costs incurred with the Business Combination and to prepare HydraFacial to be marketed for sale by HydraFacial’s shareholders in previous periods.

(3)For the three months ended June 30, 2022, such costs primarily represent one-time severance costs due to a Company re-organization. For the six months ended June 30, 2022 such costs include the re-organization severance, other one-time personnel costs related to executive recruiting, executive severance, a one-time loss on fixed asset write-offs and a CEO sign-on bonus.

On May 4, 2021, Vesper Healthcare Acquisition Corp. (“Vesper Healthcare”), a special purpose acquisition company, completed the previously announced business combination (the “Business Combination”) with Edge Systems LLC d/b/a The HydraFacial Company (“HydraFacial”). In connection with the Business Combination, Vesper Healthcare changed its name to The Beauty Health Company, and LCP Edge Intermediate, Inc., the indirect parent of HydraFacial, became an indirect subsidiary of BeautyHealth. For fiscal periods following the date of completion of the Business Combination, financial results are reported by The Beauty Health Company on a consolidated basis.

The Beauty Health Company (NASDAQ: SKIN) is a global category-creating company delivering beauty health experiences that help consumers reinvent their relationship with their skin, bodies and self-confidence. Our flagship brand, HydraFacial, created the category of hydradermabrasion by using a patented vortex-fusion delivery system to cleanse, extract, and hydrate the skin with proprietary solutions and serums. HydraFacial provides a non-invasive and approachable skincare experience. Together, with our powerful community of aestheticians, consumers and partners, we are personalizing skin care solutions for all ages, genders, skin tones, and skin types. HydraFacial is available in more than 90 countries with an install base of nearly 23,000 delivery systems providing millions of experiences to consumers each year. Find a local HydraFacial at https://hydrafacial.com/find-a-provider/. For more information, visit www.beautyhealth.com.

Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this press release, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside The Beauty Health Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements.

Important factors, among others, that may affect actual results or outcomes include The Beauty Health Company’s ability to manage growth; The Beauty Health Company’s ability to execute its business plan; potential litigation involving The Beauty Health Company; changes in applicable laws or regulations; the possibility that The Beauty Health Company may be adversely affected by other economic, business, and/or competitive factors; and the impact of the continuing COVID-19 pandemic on the Company’s business. The Beauty Health Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	103,536	$	66,508	$	178,951	$	114,050
Cost of sales	31,882		19,257		55,360		35,059
Gross profit	71,654		47,251		123,591		78,991
Operating expenses:
Selling and marketing	44,881		26,214		81,288		43,309
Research and development	2,601		2,988		4,831		4,440
General and administrative	27,585		44,402		53,846		55,213
Total operating expenses	75,067		73,604		139,965		102,962
Loss from operations	(3,413)		(26,353)		(16,374)		(23,971)
Other (income) expense:
Interest expense, net	3,217		2,060		6,617		7,759
Other (income) expense, net	(1,658)		4,307		(721)		4,314
Change in fair value of warrant liabilities	(15,185)		72,027		(67,237)		72,027
Change in fair value of earn-out shares liability	—		36,525		—		36,525
Foreign currency transaction loss (gain), net	2,206		(24)		1,838		232
Total other (income) expense	(11,420)		114,895		(59,503)		120,857
Income (loss) before provision for income taxes	8,007		(141,248)		43,129		(144,828)
Income tax expense (benefit)	76		(1,870)		2,691		(2,176)
Net income (loss)	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(3,687)		(276)		(3,832)		(281)
Comprehensive income (loss)	$	4,244	$	(139,654)	$	36,606	$	(142,933)
Net income (loss) per share
Basic	$	0.05	$	(1.52)	$	0.27	$	(2.24)
Diluted	$	(0.05)	$	(1.52)	$	(0.18)	$	(2.24)
Weighted average common shares outstanding
Basic	150,731,491		91,798,837		150,665,166		63,805,807
Diluted	151,719,451		91,798,837		152,274,394		63,805,807



	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	820,970	$	901,886
Accounts receivable, net of allowances for doubtful accounts of $2,482 and $2,681 at June 30, 2022 and December 31, 2021, respectively	79,918		46,824
Prepaid expenses and other current assets	20,336		12,322
Income tax receivable	1,008		4,599
Inventories	73,526		35,261

Total current assets	995,758		1,000,892
Property and equipment, net	18,041		16,183
Right-of-use assets, net	15,791		14,992
Intangible assets, net	51,202		56,010
Goodwill	124,033		123,694
Deferred income tax assets, net	312		330
Other assets	9,823		6,705
TOTAL ASSETS	$	1,214,960	$	1,218,806
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	36,830	$	29,049
Accrued payroll-related expenses	27,786		28,662
Other accrued expenses	15,385		14,722
Lease liabilities, current	4,547		3,712
Income tax payable	2,510		292

Total current liabilities	87,058		76,437

Lease liabilities, non current	13,116		12,781

Deferred income tax liabilities, net	3,844		3,561
Warrant liabilities	26,579		93,816
Convertible senior notes, net	732,028		729,914
TOTAL LIABILITIES	862,625		916,509
Stockholders’ equity:
Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	16		16
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	735,682		722,250

Accumulated other comprehensive loss	(5,089)		(1,257)
Accumulated deficit	(378,274)		(418,712)
Total stockholders’ equity	352,335		302,297
LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,214,960	$	1,218,806