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].

Financial Performance - Net sales for Q3 2024 were $78.8 million, a decrease of 19.1% compared to Q3 2023, primarily due to lower delivery systems net sales[5] - Gross margin improved to 51.6% in Q3 2024 from (12.9)% in Q3 2023, driven by the absence of prior year charges and lower inventory-related costs[5] - Adjusted gross margin increased to 69.5% in Q3 2024 from 62.5% in Q3 2023, attributed to lower product costs and a favorable shift towards consumable net sales[5] - The company reported a net loss of $(18.3) million in Q3 2024, significantly improved from a net loss of $(73.8) million in Q3 2023[5] - Adjusted EBITDA for Q3 2024 was $8.1 million, down from $9.1 million in Q3 2023, reflecting lower net sales but higher gross margin[5] - Net sales for the three months ended September 30, 2024, were $78.8 million, a decrease of 19.2% compared to $97.4 million for the same period in 2023[17] - Gross profit for the three months ended September 30, 2024, was $40.6 million, with a gross margin of 51.6%, compared to a gross loss of $12.6 million in 2023[21] - The net loss for the three months ended September 30, 2024, was $(18.3) million, compared to a net loss of $(73.8) million for the same period in 2023[22] - Adjusted EBITDA for the three months ended September 30, 2024, was $8.1 million, with an adjusted EBITDA margin of 10.2%, compared to $9.1 million and 9.3% margin for the same period in 2023[22] Sales and Market Dynamics - The company revised its full-year net sales guidance to $322 million – $332 million, reflecting continued pressure on delivery systems sales[7] - Total delivery systems sold in Q3 2024 were 1,118, down from 2,140 in the prior year period, indicating a challenging macroeconomic environment[5] - Active install base increased to 34,162 as of September 30, 2024, compared to 30,074 in the same period last year[4] - The company successfully launched the Hydralock HA Booster, contributing to growth in consumables sales[2] Operational Changes - The company centralized its global manufacturing footprint in Long Beach, California, concluding its relationship with a third-party manufacturer in China[2] - Total operating expenses for the three months ended September 30, 2024, were $62.2 million, down from $69.5 million in the same period last year[17] - The company incurred manufacturing optimization costs of $7.6 million during the three months ended September 30, 2024[22] Cash Flow and Assets - Cash, cash equivalents, and restricted cash at the end of the period were $358.9 million, down from $523.0 million at the beginning of the period[19] - Total assets decreased to $699.5 million as of September 30, 2024, from $929.1 million as of December 31, 2023[19] - Total liabilities decreased to $639.8 million as of September 30, 2024, from $869.7 million as of December 31, 2023[19] - The company reported a net cash used for operating activities of $0.3 million for the nine months ended September 30, 2024, compared to $26.9 million provided in 2023[20] Expenses and Financial Adjustments - Adjusted gross profit for the three months ended September 30, 2024, was $54.7 million, with an adjusted gross margin of 69.5%[21] - The company reported a significant increase in stock-based compensation expense, totaling $7.7 million for the three months ended September 30, 2024, compared to $8.2 million for the same period in 2023[22] - Interest expense for the three months ended September 30, 2024, was $2.5 million, down from $3.4 million in the same period in 2023[22] - The company experienced a foreign currency loss of $(2.3) million for the three months ended September 30, 2024[22] - The write-off of discontinued, excess, and obsolete products amounted to $2.0 million for the three months ended September 30, 2024[22] Strategic Focus - The company is focused on expanding its product offerings and enhancing its market presence through innovative skin health solutions[24] - The Beauty Health Company emphasizes its commitment to sustainability and positive community impact as part of its business strategy[24]

The Beauty Health Company (NASDAQ:SKIN) Q1 2024 Earnings Conference Call May 9, 2024 4:30 PM ET Company Participants Norberto Aja – Investor Relations Marla Beck – Chief Executive Officer Mike Monahan – Chief Financial Officer Conference Call Participants Oliver Chen – TD Cowen Allen Gong – JPMorgan Susan Anderson – Canaccord Genuity Olivia Tong – Raymond James Joe Federico – Stifel Korinne Wolfmeyer – Piper Sandler Operator Hello, and welcome to The Beauty Health First Quarter 2024 Earnings Conference Call ...

PART I—FINANCIAL INFORMATION This section presents the unaudited financial statements, management's analysis of financial performance and liquidity, market risk disclosures, and internal control effectiveness [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited Q1 2024 financial statements reflect reduced assets and liabilities, a narrowed net loss, and increased cash usage for financing activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2024, shows a decrease in total assets and liabilities, with a slight increase in equity Balance Sheet Summary (as of March 31, 2024 vs. December 31, 2023) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $614,824 | $698,252 | | Cash, cash equivalents, and restricted cash | $444,634 | $523,025 | | Inventories | $95,721 | $91,321 | | **Total Assets** | **$844,741** | **$929,113** | | **Total Current Liabilities** | $93,568 | $115,008 | | Convertible senior notes, net | $665,486 | $738,372 | | **Total Liabilities** | **$781,446** | **$869,723** | | **Total Stockholders' Equity** | **$63,295** | **$59,390** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Q1 2024 saw a 5.7% decline in net sales, but net loss significantly narrowed due to a gain on debt repurchase Q1 2024 vs. Q1 2023 Income Statement Highlights | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $81,403 | $86,278 | -5.7% | | Gross profit | $48,361 | $54,104 | -10.6% | | Loss from operations | $(16,991) | $(17,310) | +1.8% | | Other income, net | $(16,087) | $(418) | N/A | | Net loss | $(679) | $(20,259) | +96.6% | | Diluted net loss per share | $(0.10) | $(0.15) | +33.3% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2024 cash flows show increased usage in operations and financing, while investing activities saw a sharp decrease Q1 2024 vs. Q1 2023 Cash Flow Summary | Activity | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :--- | :--- | :--- | | Net cash used for operating activities | $(16,854) | $(13,010) | | Net cash used for investing activities | $(1,802) | $(21,680) | | Net cash used for financing activities | $(58,618) | $(2,190) | | **Net change in cash** | **$(77,274)** | **$(36,880)** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail revenue decline, ongoing legal challenges, the Syndeo Program's financial impact, and debt repurchase gains Revenue Breakdown by Product and Region (Q1 2024 vs. Q1 2023) | Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **By Product** | | | | | Delivery Systems | $35,783 | $45,353 | -21.1% | | Consumables | $45,620 | $40,925 | +11.5% | | **Total Net Sales** | **$81,403** | **$86,278** | **-5.7%** | | **By Region** | | | | | Americas | $50,326 | $52,978 | -5.0% | | Asia-Pacific (APAC) | $11,972 | $13,620 | -12.1% | | EMEA | $19,105 | $19,680 | -2.9% | - In January 2024, the company repurchased **$75.0 million** of its Convertible Senior Notes for **$57.8 million**, recognizing a net gain of **$16.1 million**. Additional repurchases were made in April and May 2024[47](index=47&type=chunk)[48](index=48&type=chunk) - The company is facing a putative securities class action lawsuit, two derivative actions, and an SEC subpoena related to alleged false and misleading statements about the Syndeo devices. The company believes the claims lack merit[66](index=66&type=chunk)[69](index=69&type=chunk)[73](index=73&type=chunk) - The Syndeo Program, established to upgrade or replace older Syndeo devices, had a remaining liability of **$8.3 million** as of March 31, 2024, down from **$21.0 million** at the end of 2023[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [Management's Discussion and Analysis (MD&A)](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A details a net sales decline driven by Delivery Systems, a contracted gross margin, and the company's sufficient liquidity position [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q1 2024 results show a net sales decrease driven by Delivery Systems, a lower gross profit, and reduced selling and marketing expenses Net Sales Performance (Q1 2024 vs. Q1 2023) | Product Line | Q1 2024 (in millions) | Q1 2023 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Delivery Systems | $35.8 | $45.4 | (21.1)% | | Consumables | $45.6 | $40.9 | 11.5% | | **Total net sales** | **$81.4** | **$86.3** | **(5.7)%** | - Gross margin decreased to **59.4%** in Q1 2024 from **62.7%** in Q1 2023, impacted by higher indirect product costs and inventory related charges[106](index=106&type=chunk) - Selling and marketing expenses decreased by **13.0%** to **$33.7 million**, primarily due to lower personnel-related expenses, including sales commissions, and reduced marketing spend[107](index=107&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with a substantial cash balance and undrawn credit, sufficient for future operations and debt management - As of March 31, 2024, the company had cash, cash equivalents, and restricted cash of approximately **$444.6 million** and an undrawn **$50 million** revolving credit facility[113](index=113&type=chunk) - In January 2024, the company repurchased **$75.0 million** principal amount of its Notes for **$57.8 million**. Further repurchases totaling **$117.3 million** in principal were made in April and May 2024[122](index=122&type=chunk) - Management believes that existing capital is sufficient to satisfy working capital requirements for ongoing operations and obligations for at least the next 12 months[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risks, including interest rates, foreign currency, and inflation, were reported since the 2023 Form 10-K - There were no material changes to the company's market risks related to interest rates, foreign currency, and inflation as disclosed in the 2023 Annual Report on Form 10-K[138](index=138&type=chunk) [Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective due to a material weakness in inventory processes, with remediation efforts underway - The company's principal executive and financial officers concluded that disclosure controls and procedures were not effective as of March 31, 2024[139](index=139&type=chunk) - The ineffectiveness is due to a material weakness in internal control over financial reporting related to the company's inventory process, as described in the 2023 Form 10-K[139](index=139&type=chunk) - A remediation plan is underway, focusing on hiring experienced personnel and enhancing controls over physical inventory, obsolescence identification, and purchasing authorization[140](index=140&type=chunk) PART II—OTHER INFORMATION This section provides updates on legal proceedings, confirms no material changes to risk factors, and reports on equity security sales [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Material pending legal proceedings are detailed in Note 10 of the condensed consolidated financial statements - For a description of material pending legal proceedings, refer to Note 10, Commitments and Contingencies, in Part I, Item 1 of this report[144](index=144&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material updates or changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - As of the filing date, there have been no material updates or changes to the risk factors disclosed in the company's 2023 Annual Report on Form 10-K[145](index=145&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not issue or repurchase any unregistered equity securities during the first quarter of 2024 - The company did not issue any unregistered shares of Class A Common Stock or other equity securities during the three months ended March 31, 2024[146](index=146&type=chunk) - No purchases of the company's equity securities were made by the issuer or its affiliates during the three months ended March 31, 2024[147](index=147&type=chunk)

Exhibit 99.1 BeautyHealth Reports First Quarter 2024 Financial Results Delivers first quarter net sales of $81.4 million; year-over-year operating expense improvement of $6.1 million Repurchases $192.3 million of convertible notes through May 8th Long Beach, Calif., May 9, 2024 – The Beauty Health Company (NASDAQ: SKIN) ("BeautyHealth"), home to flagship brand Hydrafacial, today announced financial results for the first quarter ended March 31, 2024. First quarter net sales of $81.4 million decreased (5.7)% ...

Financial Data and Key Metrics Changes - Revenue for the full year 2023 was $398 million, representing an 8.8% year-over-year growth, driven by steady consumables growth in the Americas and strong international performance [53] - Adjusted EBITDA for the full year was $24.3 million, a decline of 47.2% year-over-year, compared to $46.1 million in the prior year [55] - Gross margin for the full year was 39% compared to 68% in the prior year, primarily affected by the Syndeo 3.0 program and higher charges related to discontinued products [55] Business Line Data and Key Metrics Changes - Consumable sales increased 19.9% year-over-year to $191.4 million, representing 48.1% of total revenue [54] - Equipment revenue was relatively flat for the year, up 0.2%, primarily due to lower provider adoption in the Americas [53] - In Q4 2023, consumable sales were $52.2 million, accounting for 53.9% of revenue, while system sales declined 12% year-over-year to $44.6 million [58] Market Data and Key Metrics Changes - APAC revenue grew 17.3% year-over-year to $18.7 million in Q4, with China contributing $14.2 million, showing 71.8% year-over-year growth [57] - Americas revenue declined 8.5% year-over-year in Q4, primarily due to soft device sales related to Syndeo concerns [56] - EMEA Q4 revenue grew 8.4% year-over-year to $18.8 million, driven by consumables [57] Company Strategy and Development Direction - The company is focused on three key priorities: sales excellence, operational excellence, and financial discipline [41][45] - There is a strong emphasis on improving operational capabilities and addressing quality control issues with the Syndeo 3.0 program [37][44] - The company aims to increase consumable sales per system and stabilize the business while completing the Syndeo 3.0 replacement program [79] Management's Comments on Operating Environment and Future Outlook - Management believes there is significant growth potential in the China market, indicating they are still in the early stages of market penetration [4] - The company expects to return to growth in the back half of 2024, driven by improved system sales and consumable sales per system [82] - Management acknowledges challenges in the first half of 2024 but anticipates a recovery as provider confidence in Syndeo 3.0 improves [73] Other Important Information - The company ended Q4 2023 with approximately $523 million in cash and has $70 million remaining on its share repurchase authorization [63] - Inventory decreased to approximately $91.3 million at the end of December 2023, down from $109.7 million in December 2022 [64] - The company is reallocating cost savings towards investments in systems and processes to improve inventory management and controls [68] Q&A Session Summary Question: Concerns regarding Syndeo 3.0 and growth in China - Management addressed quality control issues with Syndeo 3.0, stating they are focused on ensuring product quality upon delivery [3] - They believe they are early in the China market and see significant growth potential [4] Question: Trends in consumable sales by region - Consumable growth was strong in the Americas and EMEA but down 30% year-over-year in APAC, primarily due to distributor channel softness [7][8] Question: Equipment sales and free cash flow - Equipment sales were down approximately 35% year-over-year, with management noting challenges related to Syndeo [10] - They expect to generate flat to some adjusted free cash flow, with CapEx projections of $15 million to $20 million [13] Question: Syndeo 3.0 issues and trade-up program changes - Management confirmed ongoing quality issues with Syndeo 3.0 but noted improvements compared to earlier versions [17] - The trade-up program is being restructured to offer incentives for upgrades without taking back existing devices [19] Question: Capital allocation priorities - Management is focused on capital allocation discussions with the Board and will provide updates as changes are made [22]

Part I [Business](index=8&type=section&id=Item%201.%20Business) The Beauty Health Company offers skin health experiences via its Hydrafacial brand and a 'razor/razor blade' model, expanding globally under strict regulatory oversight - The company's brand portfolio includes Hydrafacial (hydradermabrasion), SkinStylus (microneedling), and Keravive (scalp health), with Hydrafacial as the flagship brand boasting over **30,000 delivery systems** in more than **90 countries**[23](index=23&type=chunk) - The business operates on a **"razor/razor blade" model**, where Delivery Systems (the "razor") create an installed base for recurring sales of Consumables (the "razor blades"), including single-use tips, solutions, and serums[44](index=44&type=chunk)[46](index=46&type=chunk) - The company's growth strategy focuses on five key pillars: expanding its product footprint, investing in providers (especially estheticians), nurturing direct consumer relationships, leveraging its global infrastructure, and making targeted acquisitions[37](index=37&type=chunk)[41](index=41&type=chunk) - As of December 31, 2023, the company employed approximately **881 people**, with **56% in the United States**, 21% in APAC, 18% in EMEA, and 5% in Canada & Latin America[144](index=144&type=chunk) - The company's products are subject to extensive regulation by the **FDA** in the United States and comparable authorities in foreign jurisdictions, classified as either medical devices or cosmetics under the Federal Food, Drug and Cosmetic Act (FDCA)[70](index=70&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from intense competition, reliance on Syndeo 3.0, supply chain disruptions, a history of operating losses, cybersecurity threats, and ongoing legal proceedings - The business is highly dependent on the commercial success of its Delivery Systems, particularly the **Syndeo 3.0 device**, and failure to successfully commercialize this product could materially harm financial results[171](index=171&type=chunk) - The company has a history of operating losses, reporting a loss from operations of **$130.9 million** for the year ended December 31, 2023, and expects to incur additional losses for the foreseeable future[198](index=198&type=chunk) - Operational risks include reliance on single-source suppliers for key components, third-party delivery services, and manufacturing facilities in California and China, where disruptions could negatively affect production[214](index=214&type=chunk)[215](index=215&type=chunk)[220](index=220&type=chunk) - The company is increasingly dependent on information technology and is vulnerable to service interruptions, data corruption, and cyber-attacks, which could disrupt operations and e-commerce sales[242](index=242&type=chunk) - The company is subject to legal and regulatory risks, including potential product liability claims, enforcement actions for off-label promotion, and compliance with complex data privacy laws like **GDPR** and **CCPA**[291](index=291&type=chunk)[303](index=303&type=chunk)[316](index=316&type=chunk) - The company is involved in a securities class action lawsuit filed in November 2023, alleging misleading statements regarding the performance and demand for **Syndeo 1.0 and 2.0 devices**[651](index=651&type=chunk) [Unresolved Staff Comments](index=66&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[357](index=357&type=chunk) [Cybersecurity](index=66&type=section&id=Item%201C.%20Cybersecurity) The company maintains an enterprise-wide information security program to manage cybersecurity risks, overseen by the Audit Committee, with management responsible for daily assessment - The company has an enterprise-wide information security program designed to identify, protect, detect, and respond to cybersecurity risks, utilizing both internal and third-party security tools[358](index=358&type=chunk) - The Board of Directors has delegated oversight of cybersecurity risk to the Audit Committee, which oversees management's implementation of the program and receives updates on any material incidents[361](index=361&type=chunk)[362](index=362&type=chunk) - The management team responsible for cybersecurity is led by the Vice President - Software, Engineering, and IT, who serves as the Interim Chief Information and Security Officer and has over **24 years of industry experience**[363](index=363&type=chunk) [Properties](index=67&type=section&id=Item%202.%20Properties) The company leases its principal executive offices and a large facility in Long Beach, California, for distribution and manufacturing, owning no real property - The company's main facilities are leased in Long Beach, California, including a **23,000 sq. ft. executive office** and a **105,000 sq. ft. warehouse** for distribution and manufacturing[364](index=364&type=chunk)[365](index=365&type=chunk) - The company does not own any real property and believes its current leased facilities are adequate for its operational needs[366](index=366&type=chunk) [Legal Proceedings](index=67&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ongoing patent infringement litigation, a securities class action, and a related shareholder derivative action, while a trademark dispute was settled in 2023 - The company is a party to a securities class action lawsuit filed in November 2023, alleging misleading statements about the **Syndeo 1.0 and 2.0 devices**, and the company believes the claims are without merit[651](index=651&type=chunk)[653](index=653&type=chunk) - A shareholder derivative action was filed in February 2024 against former officers and current directors, based on similar allegations as the securities class action, which the company also believes lack merit[654](index=654&type=chunk)[655](index=655&type=chunk) - The company is engaged in ongoing patent infringement litigation against **Cartessa Aesthetics, LLC**, with a trial date pending for three of the four patents-in-suit[648](index=648&type=chunk)[649](index=649&type=chunk) - Litigation with **Ageless Serums LLC** was settled as part of Ageless's bankruptcy reorganization plan in 2023, with Ageless agreeing to pay **$1.4 million** and adhere to certain marketing restrictions[644](index=644&type=chunk)[645](index=645&type=chunk) [Mine Safety Disclosures](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not Applicable[368](index=368&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=68&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's Class A Common Stock trades on Nasdaq under 'SKIN', has not paid cash dividends, and repurchased **9.9 million shares** for **$27.8 million** in Q4 2023 under a **$100.0 million** program - The company's Class A Common Stock is traded on the **Nasdaq Capital Market** under the symbol **"SKIN"**[371](index=371&type=chunk) - The company has not paid any cash dividends on its Class A Common Stock to date[373](index=373&type=chunk) Issuer Purchases of Equity Securities | Period | Total Number of Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 1, 2023 - October 31, 2023 | 1,311,315 | $5.83 | | November 1, 2023 - November 30, 2023 | 6,704,261 | $2.22 | | December 1, 2023 - December 31, 2023 | 1,915,931 | $2.74 | | **Total Q4 2023** | **9,931,507** | **$2.80** | - A share repurchase program authorizing up to **$100.0 million** was approved on September 12, 2023, with approximately **$69.8 million** remaining available for repurchase under this program as of December 31, 2023[375](index=375&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2023, net sales grew **8.8% to $398.0 million**, driven by Consumables, but gross margin significantly decreased to **39.0%** due to **$65.2 million** in Syndeo Program charges, resulting in a **$130.9 million** operating loss, though liquidity remains strong with **$523.0 million** cash Consolidated Results of Operations | (Dollars in millions) | 2023 | 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | **$398.0** | **$365.9** | **$32.1** | **8.8%** | | Delivery Systems | $206.6 | $206.2 | $0.4 | 0.2% | | Consumables | $191.4 | $159.6 | $31.7 | 19.9% | | **Gross Profit** | **$155.1** | **$248.8** | **($93.7)** | **(37.7)%** | | Gross Margin | 39.0% | 68.0% | - | - | | **Loss from Operations** | **($130.9)** | **($25.8)** | **($105.1)** | **407.4%** | | **Net (Loss) Income** | **($100.1)** | **$44.2** | **($144.3)** | **N/M** | - The company initiated the **"Syndeo Program"** to upgrade or replace older Syndeo 1.0 and 2.0 devices at no cost to customers, resulting in a **$19.6 million inventory write-down** and **$45.6 million in total program charges** in 2023, significantly impacting cost of sales and gross margin[384](index=384&type=chunk)[385](index=385&type=chunk)[676](index=676&type=chunk) - A business transformation program was launched, resulting in **$7.2 million of restructuring charges** in 2023, primarily from workforce reductions, and is expected to generate approximately **$15 million in gross cost savings**[386](index=386&type=chunk) - As of December 31, 2023, the company had cash and cash equivalents of **$523.0 million** and an undrawn **$50 million revolving credit facility**, which management believes is sufficient to meet working capital needs for at least the next **12 months**[410](index=410&type=chunk)[413](index=413&type=chunk) - In January 2024, the company redeemed **$75.0 million** principal amount of its Convertible Senior Notes for **$57.8 million**, a discount to the principal amount[414](index=414&type=chunk)[612](index=612&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=82&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate, foreign currency, and inflation risks, with a hypothetical **10% adverse currency change impacting income by $8 million** and persistent inflation increasing costs - The company's primary market risks are interest rate risk, foreign currency risk, and inflation risk[463](index=463&type=chunk)[466](index=466&type=chunk)[469](index=469&type=chunk) - A hypothetical **100 basis point increase** in interest rates would result in an approximate **$5 million increase** in the fair market value of the company's investment portfolio as of December 31, 2023[464](index=464&type=chunk) - The company has significant foreign currency risk, primarily from the **China Renminbi, British pound sterling, Euro, and Australian dollar**, where a hypothetical adverse **10% change** in exchange rates would have resulted in an **$8 million adverse effect** on income before taxes as of December 31, 2023[466](index=466&type=chunk) - Inflation has adversely affected the company by increasing its overall cost structure, including capital, shipping, and labor costs, and the company expects these effects to persist if inflation continues[469](index=469&type=chunk) [Financial Statements and Supplementary Data](index=84&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for FY2023, with an unqualified auditor's opinion on financials but an adverse opinion on internal controls due to a material weakness - The independent auditor, **Deloitte & Touche LLP**, issued an unqualified opinion on the financial statements but an adverse opinion on the company's internal control over financial reporting as of December 31, 2023, due to a material weakness[476](index=476&type=chunk)[691](index=691&type=chunk) - The critical audit matter identified was the **Syndeo Program Reserve**, due to the significant judgments and estimates made by management regarding customer response rates, remediation methods, and associated costs[479](index=479&type=chunk)[480](index=480&type=chunk) Consolidated Balance Sheets | (in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$929,113** | **$1,003,083** | | Cash and cash equivalents | $523,025 | $568,197 | | Inventories | $91,321 | $109,656 | | **Total Liabilities** | **$869,723** | **$836,030** | | Convertible senior notes, net | $738,372 | $734,143 | | **Total Stockholders' Equity** | **$59,390** | **$167,053** | Consolidated Statements of Cash Flows | (in thousands) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $21,750 | ($106,600) | | Net cash used for investing activities | ($31,507) | ($18,869) | | Net cash (used for) provided by financing activities | ($37,448) | ($205,242) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=129&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[682](index=682&type=chunk) [Controls and Procedures](index=129&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to a material weakness in inventory processes, stemming from insufficient accounting resources, with a remediation plan underway and an adverse auditor opinion - Management identified a material weakness in internal control over financial reporting related to the company's inventory process[683](index=683&type=chunk)[686](index=686&type=chunk) - The weakness was caused by a lack of sufficient resources with appropriate accounting knowledge and experience in inventory operations, leading to inadequate controls over physical existence, excess and obsolete reserves, and pricing arrangements[686](index=686&type=chunk)[697](index=697&type=chunk) - Due to this material weakness, management concluded that disclosure controls and procedures were not effective as of December 31, 2023[683](index=683&type=chunk) - A remediation plan is being implemented, which includes hiring additional personnel and enhancing inventory processes and systems[688](index=688&type=chunk) [Other Information](index=131&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[699](index=699&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=132&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2024 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the registrant's definitive proxy statement for the 2024 Annual Meeting of Stockholders[703](index=703&type=chunk) [Executive Compensation](index=132&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation will be provided in the company's 2024 Proxy Statement and is incorporated by reference - Information regarding executive compensation is incorporated by reference from the registrant's definitive proxy statement for the 2024 Annual Meeting of Stockholders[704](index=704&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=132&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information detailing security ownership by certain beneficial owners and management, along with equity compensation plans, will be provided in the company's 2024 Proxy Statement and is incorporated by reference - Information regarding security ownership and equity compensation plans is incorporated by reference from the registrant's definitive proxy statement for the 2024 Annual Meeting of Stockholders[705](index=705&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=132&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related party transactions and director independence will be provided in the company's 2024 Proxy Statement and is incorporated by reference - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the registrant's definitive proxy statement for the 2024 Annual Meeting of Stockholders[706](index=706&type=chunk) [Principal Accountant Fees and Services](index=132&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information detailing fees paid to and services provided by the principal accountant will be provided in the company's 2024 Proxy Statement and is incorporated by reference - Information regarding principal accountant fees and services is incorporated by reference from the registrant's definitive proxy statement for the 2024 Annual Meeting of Stockholders[707](index=707&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=133&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section indexes financial statements in Item 8 and lists exhibits, noting that all financial statement schedules are omitted as not applicable or already included - The financial statements are indexed and located in **Item 8** of the Annual Report[710](index=710&type=chunk) - All financial statement schedules have been omitted because the information is not required, not applicable, or is included in the financial statements or notes[711](index=711&type=chunk) [Form 10–K Summary](index=136&type=section&id=Item%2016.%20Form%2010%E2%80%93K%20Summary) The company reports no summary for this item - None[725](index=725&type=chunk)

Exhibit 99.1 "To close 2023, we delivered fourth quarter financial results consistent with the expectations we outlined on our last earnings call," said BeautyHealth Chief Executive Officer Marla Beck. "While the results reflect a necessary operational reset, the underlying strength of our business remains—a clinically proven treatment, passionate provider community, unique partner portfolio, beloved consumer brand, and growing addressable market. I am confident in the still-untapped global opportunity for ...

[PART I—FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements reflect a significant net loss and reduced equity due to substantial charges from the Syndeo Program Condensed Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | $973,074 | $1,003,083 | | **Total Liabilities** | $883,117 | $836,030 | | **Total Stockholders' Equity** | $89,957 | $167,053 | Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (Unaudited) | (in thousands) | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | **Net Sales** | $97,413 | $301,170 | | **Gross (Loss) Profit** | $(12,553) | $109,427 | | **Loss from Operations** | $(82,101) | $(112,557) | | **Net (Loss) Income** | $(73,818) | $(90,713) | | **Net (Loss) Income per Share (Basic)** | $(0.56) | $(0.68) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Net cash provided by (used for) operating activities** | $26,920 | $(101,207) | | **Net cash used for investing activities** | $(29,339) | $(16,045) | | **Net cash used for financing activities** | $(6,091) | $(102,763) | | **Cash and cash equivalents, end of period** | $559,444 | $684,208 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail the Syndeo Program's financial impact, a new Business Transformation Program, revenue trends, and a new share repurchase authorization Net Sales by Product Line (in thousands) | Product Line | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Delivery Systems | $161,986 | $155,524 | | Consumables | $139,184 | $112,219 | | **Total net sales** | **$301,170** | **$267,743** | Net Sales by Geographic Region (in thousands) | Geographic Region | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Americas | $168,325 | $178,330 | | Asia-Pacific (APAC) | $63,525 | $38,397 | | Europe, the Middle East and Africa (EMEA) | $69,320 | $51,016 | | **Total net sales** | **$301,170** | **$267,743** | - The company recorded an **$18.8 million** inventory write-off for obsolete Syndeo 1.0 and 2.0 devices and an additional **$11.9 million** for other discontinued or excess inventory during the first nine months of 2023[29](index=29&type=chunk) - In Q3 2023, the company established the Syndeo Program to upgrade or replace faulty devices, resulting in **$44.3 million** in program charges with a remaining reserve of **$32.1 million** as of September 30, 2023[79](index=79&type=chunk)[81](index=81&type=chunk) - A business transformation restructuring program was announced in September 2023 with expected costs of **$9 million to $11 million** and completion by March 31, 2024[82](index=82&type=chunk)[83](index=83&type=chunk) - On September 12, 2023, the Board of Directors authorized a new share repurchase program for up to **$100.0 million** of the Company's Class A Common Stock[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses sales growth drivers, the significant gross loss from the Syndeo Program, and a new cost-saving transformation initiative [Syndeo Program and Business Transformation](index=23&type=section&id=Syndeo%20Program%20and%20Business%20Transformation) The company launched a program to replace faulty Syndeo devices and initiated a transformation plan to reduce operating costs - Due to performance interruptions with Syndeo 1.0 and 2.0, management decided to exclusively market Syndeo 3.0 devices and provide free upgrades for existing customers[96](index=96&type=chunk)[98](index=98&type=chunk) - The company recorded an **$18.8 million** inventory write-off for obsolete Syndeo builds and accrued an additional **$32.1 million** for the estimated cost to remediate remaining devices[99](index=99&type=chunk) - A business transformation program is underway, with Phase 1 expected to cost **$9-$11 million** and realize over **$20 million** in annualized savings, and Phase 2 to realize over **$15 million** in annualized savings[101](index=101&type=chunk)[103](index=103&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 net sales grew 9.7% YoY, but Syndeo Program charges of $63.1 million led to a significant gross loss and negative gross margin Q3 2023 vs Q3 2022 Net Sales (in millions) | Category | Q3 2023 | Q3 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Delivery Systems | $51.0 | $49.1 | 4.0% | | Consumables | $46.4 | $39.7 | 16.8% | | **Total net sales** | **$97.4** | **$88.8** | **9.7%** | Q3 2023 vs Q3 2022 Profitability (in millions) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Cost of Sales | $110.0 | $27.4 | | Gross (Loss) Profit | $(12.6) | $61.4 | | Gross Margin | (12.9)% | 69.1% | - The increase in Q3 cost of sales was primarily driven by **$63.1 million** in inventory write-downs and charges associated with the Syndeo Program, plus **$7.5 million** in other inventory charges[109](index=109&type=chunk) - For the nine months ended Sep 30, 2023, total net sales increased **12.5% YoY** to **$301.2 million**, driven by a **24.0%** increase in Consumables sales[120](index=120&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with sufficient capital to fund operations and the Syndeo Program for the next twelve months - As of September 30, 2023, the company had cash and cash equivalents of **$559.4 million** and an undrawn **$50.0 million** revolving credit facility[128](index=128&type=chunk) - Management believes current liquidity is sufficient to satisfy working capital requirements, including the costs of the Syndeo Program, for at least the next twelve months[132](index=132&type=chunk) Cash Flow Summary (in millions) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $26.9 | $(101.2) | | Net cash used for investing activities | $(29.3) | $(16.0) | | Net cash used for financing activities | $(6.1) | $(102.8) | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its primary market risks related to interest rates, foreign currency, and inflation - There were no material changes to the company's market risks related to interest rates, foreign currency, and inflation since the last Annual Report on Form 10-K[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were **effective** as of September 30, 2023[158](index=158&type=chunk) - There were **no changes** in internal control over financial reporting during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[160](index=160&type=chunk) [PART II—OTHER INFORMATION](index=36&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The report refers to Note 10 of the financial statements for details on material pending legal proceedings - For details on material legal proceedings, the report directs readers to Note 10 of the financial statements[163](index=163&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors emphasize dependency on the Syndeo 3.0 device, risks of product failures, and exposure to uninsured cash balances - A key risk factor is the business's dependence on the successful commercialization of **Syndeo 3.0 devices**, as failure could materially harm financial results[167](index=167&type=chunk) - The company acknowledges risks associated with product failures and undetected errors, which could lead to negative publicity, loss of market acceptance, and additional costs[166](index=166&type=chunk) - The company notes the risk of maintaining cash at financial institutions in balances that **exceed FDIC-insured limits**, which could result in losses if a banking institution fails[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company initiated a new $100 million share repurchase program and bought back $4.8 million worth of shares in the third quarter Share Repurchases in Q3 2023 | Period | Total Shares Repurchased | Average Price Paid per Share | Approx. Dollar Value Remaining | | :--- | :--- | :--- | :--- | | Sep 1 - Sep 30, 2023 | 419,242 | $5.66 | $97,625,260 | - A new share repurchase program was approved on September 12, 2023, authorizing up to **$100.0 million** in repurchases; during Q3, the company repurchased approximately **0.8 million shares for $4.8 million**[71](index=71&type=chunk)[170](index=170&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) The company provided information on the Syndeo Program in this report in lieu of a separate Form 8-K filing - Information regarding the Syndeo Program is included in this Form 10-Q in lieu of a Form 8-K filing under Item 2.06 Material Impairments[175](index=175&type=chunk)[176](index=176&type=chunk)