BEAUTYHEALTH™ Fourth Quarter & Full Year 2024 Earnings Presentation March 12, 2025 Disclaimer This Presentation contains serbain from ward-looking statements. These stabenents may relate to, but are not linnited to expectations of financial perfumance of The Bauth "Company") , casida lecpenditures, the introduction of new products, expansion into new markets and the ability to execute certain strationes some of the forward-looking d of forward-fooling words such as "antidipate;" "exped:" "plan," "believe," ...

Financial Data and Key Metrics Changes - For the full year 2024, the company reported net revenue of $334 million and adjusted EBITDA of $12.3 million, both exceeding guidance [9] - Fourth quarter revenue was $83.5 million, representing a 13.8% year-over-year decline [26] - Gross profit for Q4 was $52.3 million, compared to $45.7 million in the prior year, with adjusted gross margin improving to 67.1% from 54.6% [32] Business Line Data and Key Metrics Changes - Consumable sales for Q4 totaled $56.7 million, an 8.7% increase year-over-year, with full year consumable sales reaching $208.9 million compared to $191.4 million in 2023 [29] - Non-Syndeo device sales represented 29% of total systems sold in Q4, up from 21% in the prior year [28] - Total units sold in Q4 were 1,087, down from 1,551 units sold in Q4 2023 [28] Market Data and Key Metrics Changes - In the Americas, Q4 revenue was down 3.9%, while APAC and EMEA saw declines of 50.5% and 8.3% respectively [30] - In APAC, China accounted for $23.9 million of the region's revenue, reflecting a 56.4% year-over-year decline [30] - The decline in China was attributed to a 70.2% drop in system sales and an 8.3% decrease in consumables revenue [31] Company Strategy and Development Direction - The company identified three transformation priorities: sales execution, operational excellence, and financial discipline [11] - A new commercial leadership team has been established to drive device and consumable sales, increasing utilization and deepening provider relationships [14] - The company is transitioning its direct business in China to a third-party distributor model to capture market potential while maintaining a capital-light approach [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing macroeconomic uncertainty and industry headwinds but expressed confidence in the company's strategic direction [23] - The company expects full year 2025 sales between $270 million to $300 million, with adjusted EBITDA of $10 million to $25 million [37] - Management emphasized the importance of driving long-term shareholder value through strong sales execution and operational efficiency [39] Other Important Information - The company reduced operating expenses by over $30 million year-over-year, demonstrating a commitment to financial discipline [10] - The Hydralock HA Booster was launched in Q3 2024, marking the most successful Hydrafacial branded booster launch to date [19] - The company ended Q4 with approximately $370 million in cash and projected capital expenditures of $10 million to $15 million for 2025 [36][38] Q&A Session Summary Question: What is the outlook for delivery systems given macroeconomic conditions? - Management noted that providers are taking longer to make purchasing decisions due to macro uncertainty and high interest rates, impacting sales [44] Question: How is consumer demand for consumables expected to trend in 2025? - Management indicated consistent growth in consumables, with macro trends favoring continued demand [48][50] Question: What improvements have been made regarding machine reliability? - Management reported significant improvements in manufacturing quality and customer service, addressing minor technical issues promptly [57] Question: What is the strategy for the distributor model in China? - Management explained that the decision to move to a distributor model was based on the need for focused investment and expertise in the Chinese market [102] Question: How will the company manage operating expenses in 2025? - Management expects to maintain discipline in operating expenses while leveraging improvements in gross margins [135] Question: What is the expected cash flow situation for 2025? - Management anticipates being cash neutral throughout the year, with a typical use of cash in the first half transitioning to a source of cash in the second half [136]

Financial Performance - Net sales for the year ended December 31, 2024, decreased by $63.7 million, or 16.0%, compared to 2023, with Delivery Systems net sales down by $81.2 million, or 39.3%[440] - Consumables net sales increased by $17.5 million, or 9.2%, for the year ended December 31, 2024, primarily due to increased placements of Delivery Systems[441] - Gross profit for the year ended December 31, 2024, was $182.3 million, representing a 17.5% increase from $155.1 million in 2023[442] - Gross margin improved from 39.0% in 2023 to 54.5% in 2024, primarily due to the absence of prior year charges associated with the Syndeo Program[443] Cost and Expenses - Cost of sales for the year ended December 31, 2024, decreased by $90.9 million, or 37.4%, compared to 2023, largely due to the absence of charges related to the Syndeo Program[443] - Total operating expenses for the year ended December 31, 2024, were $250.1 million, compared to $286.0 million in 2023, reflecting a decrease in selling and marketing expenses[439] - Selling and marketing expenses decreased by $26.2 million, or 18.1%, to $118.3 million for the year ended December 31, 2024, primarily due to lower personnel-related expenses[444] - Research and development expenses decreased by $3.8 million, or 37.7%, to $6.3 million for the year ended December 31, 2024, driven by lower personnel-related expenses[445] - General and administrative expenses decreased by $6.0 million, or 4.5%, to $125.5 million for the year ended December 31, 2024, primarily due to lower losses on the sale of assets[446] Interest and Income - Interest expense for the year ended December 31, 2024, was $10.4 million, down from $13.6 million in 2023[439] - Interest income decreased by $6.5 million, or 28.2%, to $(16.6) million for the year ended December 31, 2024, primarily due to lower average invested balances[447] - The company recognized other income, net of $33.6 million for the year ended December 31, 2024, compared to $5.2 million in 2023, including a net gain of $33.4 million related to the repurchase of the Company's Notes[450] Cash Flow and Investments - As of December 31, 2024, the company had cash, cash equivalents, and restricted cash of $370.1 million, down from $523.0 million at the beginning of the period[468] - Net cash provided by operating activities was $16.1 million for the year ended December 31, 2024, compared to $21.8 million in 2023, primarily due to higher working capital usage[469] - Capital expenditures for property and equipment and intangible assets for the year ended December 31, 2024, were $6.8 million[454] - Net cash used for investing activities decreased to $6.8 million in 2024 from $31.5 million in 2023, primarily due to prior year's asset acquisitions totaling $18.5 million[470] - Net cash used for financing activities increased significantly to $158.3 million in 2024 from $37.4 million in 2023, mainly due to the repurchase of $192.3 million in Notes at a weighted average price of 81%[471] Inventory and Trade-in Programs - The Syndeo Program resulted in an inventory write-down of $19.6 million and costs of $24.6 million during the year ended December 31, 2023[427] - The company recognized approximately $7 million in inventory charges related to the write-down of trade-in Delivery Systems to net realizable value in 2024[474] - Revenue from trade-in programs was approximately $17 million in 2023 and $9 million in 2022, with no trade-in revenue recognized in 2024[473] Future Expectations and Risks - The Company expects to transition sales in the China market to a distributor partner by Q2 2025, discontinuing its direct sales presence in China[425] - The company continues to evaluate potential acquisitions of businesses and products, which may require substantial capital resources[453] - A hypothetical 100 basis points increase in interest rates would result in an approximate $3 million increase in the fair market value of the investment portfolio as of December 31, 2024[493] - An adverse 10% change in foreign currency exchange rates would have resulted in an approximate $6 million and $8 million negative impact on income before income taxes for the years ended December 31, 2024 and 2023, respectively[495] - Inflation has the potential to increase the overall cost structure, affecting liquidity and financial condition, with expectations of further cost increases if inflation persists[498] - The company has not engaged in hedging foreign currency transactions to date, which may expose it to fluctuations in net loss due to foreign currency transaction gains or losses[496] - The company does not rely on projected income to support the realization of deferred tax assets due to cumulative pre-tax losses as of December 31, 2024[482] Remediation and Charges - As of December 31, 2023, the company accrued $21.0 million for the estimated cost of its remediation plan for Syndeo devices, which was completed by December 31, 2024[490]

Financial Performance - Fourth quarter net sales were $83.5 million, a decrease of 13.8% compared to Q4 2023, primarily due to lower delivery systems net sales[8] - Full year net sales for 2024 totaled $334.3 million, down 16.0% from the previous year, attributed to reduced delivery systems net sales[8] - Net sales for Q4 2024 were $83.5 million, a decrease of 13.6% from $96.8 million in Q4 2023[18] - Gross profit increased to $52.3 million in Q4 2024, up 14.4% from $45.7 million in Q4 2023, resulting in a gross margin of 62.7% compared to 47.2%[24] - Total operating expenses decreased to $59.5 million in Q4 2024, down 7.0% from $64.0 million in Q4 2023[18] - The net loss for the year ended December 31, 2024, was $29.1 million, significantly improved from a net loss of $100.1 million in 2023[23] - Adjusted EBITDA for Q4 2024 was $9.0 million, compared to $3.4 million in Q4 2023, reflecting lower operational spending and higher gross margins[8] - Adjusted EBITDA for Q4 2024 was $9.0 million, with an adjusted EBITDA margin of 10.8%, compared to $3.4 million and 3.5% in Q4 2023[26] Cash and Assets - Cash and cash equivalents were approximately $370.1 million as of December 31, 2024, down from $523.0 million a year earlier, mainly due to the repurchase of convertible senior notes[8] - Cash, cash equivalents, and restricted cash decreased to $370.1 million as of December 31, 2024, down from $523.0 million at the end of 2023[20] - Total assets decreased to $685.7 million in 2024, down from $929.1 million in 2023[20] Market and Operational Insights - The company placed 1,087 delivery systems in Q4 2024, down from 1,551 in the prior year, indicating challenges in the macroeconomic environment[8] - The active install base grew to 34,735 units in 2024, up from 31,446 in 2023, contributing to increased consumable net sales[5] - The company plans to convert its China market from a direct sales to a distributor model in 2025, as part of its strategic evaluation[5] - Research and development expenses were $1.2 million in Q4 2024, a decrease from $3.0 million in Q4 2023[18] Risks and Forward-Looking Statements - The Beauty Health Company emphasizes the importance of managing growth and executing its business plan effectively[31] - The company acknowledges potential litigation risks that may impact its operations[31] - Changes in applicable laws or regulations are identified as a significant factor that could affect the company's performance[31] - The Beauty Health Company warns that actual results may differ materially from forward-looking statements due to various risks and uncertainties[30] - The company does not undertake any obligation to update or revise forward-looking statements unless required by law[30] - The Beauty Health Company filed its Annual Report on Form 10-K for the year ended December 31, 2024, with the SEC, detailing risk factors[31] - The company highlights the potential adverse effects from economic, business, and competitive factors[31] - The forward-looking statements are not guarantees of future performance and involve known and unknown risks[30] - The company encourages caution in relying on forward-looking statements due to inherent uncertainties[30] Investor Relations - Contact information for investor relations and press inquiries is provided for further communication[32]

Core Insights - The Beauty Health Company reported fourth quarter net sales of $83.5 million, a decrease of 13.8% compared to Q4 2023, and full year net sales of $334.3 million, down 16.0% year-over-year [10][3][4] - The company achieved an adjusted EBITDA of $9 million in Q4 2024, significantly up from $3.4 million in Q4 2023, driven by increased consumable sales and reduced operating expenses [2][10] - Gross margin improved to 62.7% in Q4 2024 from 47.2% in Q4 2023, attributed to lower inventory-related charges and a favorable shift towards consumable sales [10][3] Financial Performance - For Q4 2024, delivery systems net sales were $26.8 million, down from $44.6 million in Q4 2023, while consumables net sales increased to $56.7 million from $52.2 million [3][11] - The full year gross profit was $182.3 million, up from $155.1 million in 2023, with an adjusted gross margin of 62.0% compared to 62.8% in the previous year [10][3] - The net loss for 2024 was $(29.1) million, an improvement from $(100.1) million in 2023, reflecting reduced costs associated with the Syndeo Program [10][3] Operational Metrics - The company placed 1,087 delivery systems in Q4 2024, down from 1,551 in Q4 2023, and a total of 4,907 systems for the year, compared to 8,287 in 2023 [10][3] - The active install base grew to 34,735 units by the end of 2024, up from 31,446 units in 2023, contributing to the increase in consumable sales [4][3] - The company plans to transition its China market from a direct sales model to a distributor model in 2025 [4] Guidance and Future Outlook - For Q1 2025, the company expects net sales between $61 million and $66 million, with an adjusted EBITDA loss projected between $(6) million and $(4) million [8] - Full year 2025 guidance anticipates net sales of $270 million to $300 million and adjusted EBITDA of $10 million to $25 million, reflecting ongoing challenges in delivery systems sales [8][9] - The company aims to deepen partnerships and accelerate science-backed innovations in 2025 despite macroeconomic uncertainties [2]

Core Points - The Beauty Health Company will report its fourth quarter and full year 2024 financial results on March 12, 2025, after market close [1] - An investor conference call will be held at 4:30 p.m. Eastern Time following the results announcement [1] - A live webcast of the call will be available on the company's investor relations website, with a recording accessible three hours post-call [2] Company Overview - The Beauty Health Company (NASDAQ: SKIN) is a medtech and beauty company that provides millions of skin health experiences annually [4] - The company is known for its flagship brand Hydrafacial™ and other brands like SkinStylus™ and Keravive™, focusing on various skin health solutions [4] - The company emphasizes a commitment to positively impacting communities and the planet through mindful business practices [4]

Core Insights - The Beauty Health Company (SKIN) experienced a total revenue of $78.8 million for the quarter ending September 2024, reflecting a year-over-year decline of 19.1% [4] - The company's international revenue performance is critical for assessing its financial resilience and growth prospects, especially in the context of a globally interconnected economy [2][9] International Revenue Breakdown - EMEA contributed 20.43% of total revenue, amounting to $16.1 million, which was a slight miss compared to analyst expectations of $16.16 million. This represents a decline from $19.2 million (21.19%) in the previous quarter and $21.1 million (21.66%) in the same quarter last year [5] - Asia Pacific generated $10.8 million, accounting for 13.71% of total revenue, which was significantly below the expected $14.08 million, marking a decline from $13.6 million (15.01%) in the previous quarter and $24.7 million (25.36%) in the year-ago quarter [6] Revenue Forecasts - Analysts predict total revenue of $76.58 million for the current fiscal quarter, indicating a decline of 20.9% from the prior-year quarter. Expected contributions from EMEA and Asia Pacific are $16.2 million (21.2%) and $15.82 million (20.7%), respectively [7] - For the entire year, total revenue is forecasted at $327.38 million, a reduction of 17.7% from the previous year, with EMEA expected to contribute $68.27 million (20.9%) and Asia Pacific $57.88 million (17.7%) [8] Market Observations - The company's reliance on international markets presents both opportunities and risks, making it essential to monitor international revenue trends for future forecasts [9] - Wall Street analysts are closely observing these international revenue patterns, especially given the complexities of global interdependence and geopolitical issues [10]

Financial Data and Key Metrics Changes - Third quarter revenue was $78.8 million, representing a 19.1% year-over-year decline [29] - Adjusted gross margin improved to 69.5%, driven by lower inventory-related charges and a favorable sales mix [34] - Total operating expenses decreased by 10.6% to $62.2 million, reflecting successful expense management [35] Business Line Data and Key Metrics Changes - Global equipment sales declined by 45.9%, while consumable sales increased by 10.4% to $51.2 million [30][32] - In the Americas, non-Syndeo systems accounted for 38% of units sold, up from 33% in Q2 [17] - Total units sold worldwide during the quarter was 1,118, down from 2,140 units sold in Q3 2023 [30] Market Data and Key Metrics Changes - Revenue in APAC declined by 56.1%, with China accounting for $5.3 million, a 68.5% year-over-year decline [32][33] - Consolidated revenue in the Americas was roughly flat, up 0.3%, while revenue in EMEA declined by 23.6% [32] Company Strategy and Development Direction - The company is focusing on three core areas: sales execution, operational excellence, and financial discipline [9] - Plans to consolidate operations in the US and leverage partnerships in other regions to maximize shareholder value [12] - The strategy includes a tiered pricing approach for equipment sales to increase adoption among providers [15] Management's Comments on Operating Environment and Future Outlook - The current macro environment is challenging due to tightened credit and high interest rates, particularly affecting new device sales [8] - Management remains optimistic about the growth of consumables and is focused on long-term sustainable profitability [27] - The company is projecting full-year 2024 sales between $322 million to $332 million, with a year-over-year revenue decline expected in Q4 [39] Other Important Information - The company ended its partnership with Sephora, which is not expected to significantly impact revenue [75] - A one-time charge of $7.6 million was taken for exiting the manufacturing partnership in China [36] Q&A Session Summary Question: What regions or aspects of consumables performed better than expected? - Management noted strong consumable sales in the Americas and EMEA, with an increase in sales per device [44] Question: What is the outlook for device sales and when might they stabilize? - Management indicated that device sales are under pressure due to cautious provider spending and higher interest rates, with no immediate stabilization expected [46] Question: How will the consolidation of manufacturing impact operations? - The consolidation aims to improve quality and efficiency, with most production now occurring in Long Beach [45] Question: Is the company still committed to the Chinese market? - Management is evaluating global markets to determine where to invest for growth and where partnerships may be more beneficial [54] Question: What are the underlying demand trends for Hydrafacials? - Demand remains strong, particularly in the US medical channel, with increases in consumables per device [57] Question: How does the company plan to manage gross margin moving forward? - Management expects adjusted gross margin to improve in Q4 compared to last year, but to decline sequentially from Q3 due to higher overhead expenses [61] Question: What is the expected impact of interest rates on system sales? - Interest rates are a factor in provider purchasing decisions, and management is working on financing solutions to improve credit approvals [81]

Company Performance - Beauty Health Company (SKIN) reported a quarterly loss of $0.15 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.12, and a decline from earnings of $0.05 per share a year ago, representing an earnings surprise of -25% [1] - The company posted revenues of $78.8 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 1.29%, but down from year-ago revenues of $97.4 million [2] - Over the last four quarters, Beauty Health has surpassed consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Beauty Health shares have lost approximately 43.4% since the beginning of the year, contrasting with the S&P 500's gain of 25.8% [3] - The current consensus EPS estimate for the coming quarter is -$0.06 on revenues of $90.45 million, and -$0.20 on revenues of $341.09 million for the current fiscal year [7] Industry Outlook - The Medical Services industry, to which Beauty Health belongs, is currently ranked in the bottom 45% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Beauty Health's stock performance [5]

Financial Performance - Net sales for the three months ended September 30, 2024, decreased by $18.6 million, or 19.1%, compared to the same period in 2023, totaling $78.8 million[109]. - Delivery Systems net sales fell by $23.4 million, or 45.9%, to $27.6 million, impacted by unfavorable macroeconomic conditions and a challenging year-over-year comparison due to the prior year's international launch of Syndeo[110]. - Consumables net sales increased by $4.8 million, or 10.4%, to $51.2 million, driven by increased placements of Delivery Systems[111]. - Net sales for the nine months ended September 30, 2024 decreased by $50.4 million, or 16.7%, compared to the same period in 2023, with Delivery Systems net sales decreasing by $63.4 million, or 39.1%[124]. - The company reported a net loss of $18.8 million for the nine months ended September 30, 2024, compared to a net loss of $90.7 million for the same period in 2023[123]. - The company reported a net loss of $18.8 million for the nine months ended September 30, 2024, compared to a net loss of $90.7 million for the same period in 2023[152]. Cost and Expenses - Cost of sales decreased by $71.8 million to $38.2 million, primarily due to the absence of charges related to the Syndeo Program in the prior year[112]. - Selling and marketing expenses decreased by $3.1 million, or 10.1%, to $27.6 million, representing 35.0% of net sales[113]. - Research and development expenses decreased by $0.7 million, or 39.7%, to $1.1 million, accounting for 1.4% of net sales[114]. - General and administrative expenses decreased by $3.5 million, or 9.6%, to $33.4 million, representing 42.4% of net sales[117]. - Gross profit for the three months ended September 30, 2024, was $40.6 million, compared to a loss of $12.6 million in the same period of 2023, resulting in a gross margin of 51.6%[112]. - Gross profit for the nine months ended September 30, 2024 increased by $20.5 million, or 18.8%, compared to the same period in 2023, with gross margin improving to 51.8% from 36.3%[126]. - Selling and marketing expenses for the nine months ended September 30, 2024 decreased by $20.7 million, or 18.4%, compared to the same period in 2023, primarily due to lower personnel-related expenses[127]. - Research and development expenses for the nine months ended September 30, 2024 decreased by $2.0 million, or 28.1%, compared to the same period in 2023, driven by lower personnel-related expenses[128]. - General and administrative expenses for the nine months ended September 30, 2024 decreased by $8.8 million, or 8.5%, compared to the same period in 2023, primarily due to lower personnel-related expenses and losses on asset sales[129]. Cash Flow and Liquidity - As of September 30, 2024, the company had cash, cash equivalents, and restricted cash of approximately $358.9 million, which supports ongoing operations and potential acquisitions[134]. - The company has sufficient liquidity to meet anticipated working capital requirements for at least the next 12 months[137]. - Net cash used for operating activities for the nine months ended September 30, 2024 was $0.3 million, compared to net cash provided of $26.9 million for the same period in 2023[153]. - Net cash used for investing activities for the nine months ended September 30, 2024 was $5.9 million, down from $29.3 million in the prior year[154]. - Net cash used for financing activities for the nine months ended September 30, 2024 was $157.6 million, compared to $6.1 million for the same period in 2023[155]. - During the nine months ended September 30, 2024, the company repurchased $192.3 million principal amount of its Notes for $156.1 million[141]. Strategic Initiatives - The Syndeo Program, which offered upgrades and replacements for existing devices, was completed as of September 30, 2024[105]. - The company continues to explore strategies to mitigate cost pressures, including potential price increases and optimizing supplier contracts[106]. - The company discontinued its trade-up program starting in 2024, which previously recognized approximately $12 million and $17 million in revenue for the nine months and year ended December 31, 2023, respectively[150]. - The company entered into an Amended and Restated Credit Agreement providing a $50.0 million revolving credit facility with a maturity date of November 14, 2027[144]. Market Conditions - The company faced macro-economic challenges that negatively impacted revenues in 2024, including potential recession and financial market instability[148]. - Interest income for the three months ended September 30, 2024 decreased by $1.9 million, or approximately 27.9%, compared to the same period in 2023, primarily due to lower average invested balances[119]. - The company recognized income of $0.4 million related to the change in the fair value of warrant liabilities for the three months ended September 30, 2024, a decrease of $5.4 million, or 91.6%, compared to the same period in 2023[120]. Other Financial Transactions - Other income, net for the nine months ended September 30, 2024 increased by $28.1 million compared to the same period in 2023, primarily due to a net gain related to the repurchase of Convertible Senior Notes[133]. - The cap price of the Capped Call Transactions is initially set at $47.94, representing a premium of 100% over the last reported sale price of the company's Class A Common Stock on September 9, 2021[142].