The Beauty Health pany(SKIN) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results Overview Financial & Operational Highlights The company's Q2 2025 net sales decreased due to lower delivery system sales, but gross margin and Adjusted EBITDA improved significantly Key Financial Metrics | Financial Metric | Q2 2025 | Q2 2024 | Change | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total net sales | $78.2M | $90.6M | -13.7% | $147.8M | $172.0M | -14.1% | | Delivery Systems net sales | $22.4M | $35.2M | -36.4% | $42.6M | $71.0M | -40.0% | | Consumables net sales | $55.8M | $55.4M | +0.7% | $105.2M | $101.0M | +4.2% | | Gross profit | $49.1M | $40.9M | +20.0% | $97.7M | $89.3M | +9.4% | | Gross margin | 62.8% | 45.2% | +17.6pp | 66.1% | 51.9% | +14.2pp | | Net income (loss) | $19.7M | $0.2M | +9750% | $9.6M | $(0.5)M | N/A | | Adjusted EBITDA | $13.9M | $(5.2)M | N/A | $21.2M | $(4.8)M | N/A | Key Operational Metrics | Operational Metric | Q2 2025 | Q2 2024 | Change | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total delivery systems sold | 957 | 1,285 | -25.5% | 1,819 | 2,702 | -32.7% | | Active install base | 35,193 | 33,504 | +5.0% | 35,193 | 33,504 | +5.0% | - The overall revenue decrease was driven by fewer delivery system units placed year-over-year, which was impacted by a challenging macroeconomic environment[5] Management Commentary Management highlighted strong Q2 performance exceeding expectations, driven by consumables demand and margin expansion, leading to an increased full-year outlook - Management emphasized strong execution, disciplined cost management, and exceeding expectations, which prompted the company to raise its full-year financial guidance[1][2] - The company's recurring revenue model is showing strength, with over 35,000 active devices in the field and consumables driving more than 70% of total revenue[2] - Innovation remains a focus, highlighted by the successful launch of the HydraFillic with Pep9™ Booster[1][2] - As part of a global distribution strategy evaluation, the company transitioned its sales in the China market to a distributor partner and has discontinued direct sales in the region[5] Detailed Financial Performance Second Quarter Financial Review Q2 2025 net sales declined, but gross margin expanded significantly due to a favorable sales mix and lower inventory charges, boosting net income - Gross margin and adjusted gross margin improved primarily due to lower inventory-related charges and a favorable mix shift towards higher-margin consumable sales[10] - The increase in net income and the positive swing in Adjusted EBITDA were primarily due to lower operational spending and higher gross margins, which more than offset the impact of lower net sales[10] - The company placed 957 delivery systems in Q2 2025, a decrease from 1,285 in Q2 2024, reflecting a challenging macroeconomic environment[10] Balance Sheet and Cash Flow Highlights The company strengthened its financial position through significant debt restructuring while reporting cash and equivalents of $212.0 million - Cash, cash equivalents, and restricted cash was approximately $212.0 million as of June 30, 2025, down from $370.1 million at the end of 2024[10] - The company undertook significant debt restructuring, repurchasing ~$170 million of its 2026 Notes and exchanging ~$263 million for new 7.95% convertible senior secured notes due 2028[10] - As of June 30, 2025, the company had approximately 126.8 million shares of Class A common stock outstanding[10] Regional Performance Net sales declined across all regions in Q2 2025, led by a significant drop in APAC, though consumables sales showed resilience in the Americas and EMEA Net Sales by Region | Region | Q2 2025 Net Sales | Q2 2024 Net Sales | YoY Change | | :--- | :--- | :--- | :--- | | Americas | $52.0M | $57.7M | -9.9% | | APAC | $7.7M | $13.6M | -43.4% | | EMEA | $18.4M | $19.2M | -4.2% | - Sales of delivery systems declined year-over-year in all three regions for both the second quarter and the first six months of 2025[12] - Consumables net sales grew in the Americas and EMEA regions during Q2 2025 compared to the prior year, while APAC consumables sales declined[12] Financial Guidance Updated 2025 Outlook The company raised its full-year 2025 guidance for net sales and Adjusted EBITDA following strong first-half performance 2025 Financial Guidance | Guidance Period | Metric | Guidance Range | | :--- | :--- | :--- | | Third Quarter 2025 | Net sales | $65 – $70 million | | | Adjusted EBITDA | $2 – $4 million | | Fiscal Year 2025 | Net sales | $285 – $300 million | | | Adjusted EBITDA | $27 – $35 million | Guidance Assumptions The revised 2025 guidance assumes stable market conditions and excludes the impact of potential M&A or other unforeseen events - The increase in full-year guidance reflects the company's strong performance during the first half of 2025[11] - The outlook is contingent on the assumption of no further material deterioration in market conditions or other unforeseen circumstances like changes in foreign currency rates or trade restrictions[11] - The guidance excludes any potential impact from unannounced acquisitions, dispositions, or financings[11] Consolidated Financial Statements (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a significant increase in Q2 2025 net income to $19.7 million, driven by higher gross profit and lower operating expenses Q2 Statement of Comprehensive Income (Loss) Highlights | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $78.2 | $90.6 | | Gross profit | $49.1 | $40.9 | | Loss from operations | $(2.7) | $(22.1) | | Net income (loss) | $19.7 | $0.2 | | Basic EPS | $0.16 | $0.00 | Condensed Consolidated Balance Sheets Total assets and liabilities decreased as of June 30, 2025, primarily reflecting debt restructuring and a reduction in cash Balance Sheet Highlights | ($ in millions) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $306.1 | $477.1 | | TOTAL ASSETS | $507.6 | $685.7 | | Total current liabilities | $59.4 | $68.2 | | Convertible senior notes, net | $363.1 | $552.2 | | TOTAL LIABILITIES | $433.6 | $633.9 | | Total stockholders' equity | $74.0 | $51.8 | Condensed Consolidated Statement of Cash Flows The company generated positive cash from operations for the first six months of 2025, a significant improvement from the prior year Cash Flow Highlights | ($ in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used for) operating activities | $12.6 | $(10.7) | | Net cash used for investing activities | $(2.7) | $(3.8) | | Net cash used for financing activities | $(173.6) | $(157.4) | | Net change in cash | $(163.7) | $(171.9) | | Cash at end of period | $212.0 | $349.5 | Non-GAAP Financial Measures & Reconciliations Explanation of Non-GAAP Measures The company uses non-GAAP metrics like adjusted gross profit and adjusted EBITDA to provide a clearer view of core operational performance - Management uses non-GAAP financial measures such as adjusted gross profit and adjusted EBITDA for evaluating ongoing operations and for internal planning and forecasting[14] - Adjusted gross profit is defined as gross profit excluding depreciation, amortization, and share-based compensation expense[16] - Adjusted EBITDA is calculated by excluding items such as taxes, interest, D&A, share-based compensation, litigation costs, and restructuring charges from net income[17] Reconciliation of Gross Profit to Adjusted Gross Profit Adjusted gross profit for Q2 2025 was $51.5 million, yielding an adjusted gross margin of 65.9% after excluding certain non-cash expenses Gross Profit to Adjusted Gross Profit Reconciliation | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Gross profit (GAAP) | $49.1 | $40.9 | | Depreciation expense | $0.2 | $0.4 | | Amortization expense | $2.1 | $3.3 | | Share-based compensation | $0.1 | $0.1 | | Adjusted gross profit (Non-GAAP) | $51.5 | $44.8 | | Adjusted gross margin | 65.9% | 49.4% | Reconciliation of Net Income (Loss) to Adjusted EBITDA The company reported a significant turnaround to a positive Adjusted EBITDA of $13.9 million in Q2 2025 from a loss in the prior-year period Net Income (Loss) to Adjusted EBITDA Reconciliation | ($ in millions) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income (loss) (GAAP) | $19.7 | $0.2 | | Adjustments (Taxes, D&A, Interest, etc.) | $(5.8) | $(5.4) | | Adjusted EBITDA (Non-GAAP) | $13.9 | $(5.2) | | Adjusted EBITDA margin | 17.8% | (5.7)% | Other Information Conference Call Information A conference call to discuss Q2 2025 financial results was scheduled for August 7, 2025, with a webcast available online - The company will host a conference call to discuss Q2 2025 results on Thursday, August 7, 2025, at 4:30 p.m. ET[13] About The Beauty Health Company The company operates at the intersection of medical technology and beauty, with a portfolio of brands focused on skin and scalp health - The company's flagship brands are Hydrafacial™, SkinStylus™, and Keravive™, focusing on hydradermabrasion, microneedling, and scalp health, respectively[28] Forward-Looking Statements This section provides a standard safe harbor statement, advising that future projections are subject to risks and uncertainties - The press release contains forward-looking statements that are subject to risks and uncertainties and are not guarantees of future performance[29][30] - Readers are cautioned not to place undue reliance on these statements and are referred to the company's SEC filings, such as the Form 10-K, for a comprehensive list of risk factors[31]