Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

BeautyHealth Reports Record Second Quarter 2022 Financial Results


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

Second Quarter 2022 vs. Second Quarter 2021:

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

Key Operational and Business Metrics

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Unaudited (in millions)

2022

 

2021

 

2022

 

2021

Delivery Systems net sales

$

64.8

 

 

$

34.9

 

 

$

106.4

 

 

$

60.6

 

Consumables net sales

 

38.8

 

 

 

31.6

 

 

 

72.5

 

 

 

53.4

 

Total net sales

$

103.5

 

 

$

66.5

 

 

$

179.0

 

 

$

114.1

 

Gross profit

$

71.7

 

 

$

47.3

 

 

$

123.6

 

 

$

79.0

 

Gross margin

 

69.2

%

 

 

71.0

%

 

 

69.1

%

 

 

69.3

%

Net income (loss)

$

7.9

 

 

$

(139.4

)

 

$

40.4

 

 

$

(142.7

)

Adjusted net income (loss)*

$

2.2

 

 

$

7.8

 

 

$

(6.3

)

 

$

7.7

 

Adjusted EBITDA*

$

12.6

 

 

$

11.4

 

 

$

14.9

 

 

$

18.4

 

Adjusted EBITDA margin*

 

12.2

%

 

 

17.1

%

 

 

8.3

%

 

 

16.1

%

Adjusted gross profit*

$

74.8

 

 

$

49.8

 

 

$

129.6

 

 

$

84.1

 

Adjusted gross margin*

 

72.3

%

 

 

74.9

%

 

 

72.4

%

 

 

73.8

%

 

*See "Non-GAAP Financial Measures" below.

Second Quarter 2022 Summary

Balance Sheet and Cash Flow Highlights

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

Warrants and Shares Outstanding

The Company had approximately 7.0 million private placement warrants and approximately 151 million shares of Class A common stock outstanding as of June 30, 2022.

Outlook

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

For fiscal 2022, BeautyHealth also continues to expect up to $20.0 million of capital expenditures to be incurred during 2022.

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

Conference Call

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

Non-GAAP Financial Measures

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

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

Adjusted Gross Profit and Adjusted Gross Margin

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

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

The following table reconciles gross profit to adjusted gross profit for the periods presented:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

Unaudited (in thousands)

2022

 

2021

 

2022

 

2021

Net sales

$

103,536

 

 

$

66,508

 

 

$

178,951

 

 

$

114,050

 

Cost of sales

 

31,882

 

 

 

19,257

 

 

 

55,360

 

 

 

35,059

 

Gross profit

$

71,654

 

 

$

47,251

 

 

$

123,591

 

 

$

78,991

 

Gross margin

 

69.2

%

 

 

71.0

%

 

 

69.1

%

 

 

69.3

%

Adjusted to exclude the following:

 

 

 

 

 

 

 

Stock-based compensation expense included in cost of sales

$

207

 

 

$

?

 

 

$

433

 

 

$

?

 

Depreciation and amortization expense included in cost of sales

 

2,969

 

 

 

2,567

 

 

 

5,624

 

 

 

5,158

 

Adjusted gross profit

$

74,830

 

 

$

49,818

 

 

$

129,648

 

 

$

84,149

 

Adjusted gross margin

 

72.3

%

 

 

74.9

%

 

 

72.4

%

 

 

73.8

%

Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin

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

Management also believes this information will be useful for investors to facilitate comparisons of operating performance and better identify trends in the business. Management expects adjusted EBITDA margin to increase over the long-term, as the Company continues to scale its business and achieve greater operating leverage.

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

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

The following table reconciles BeautyHealth's net income (loss) to adjusted net income (loss) and adjusted EBITDA for the periods presented:

 

Three months ended June 30,

 

Six months ended June 30,

Unaudited (in thousands)

2022

 

2021

 

2022

 

2021

Net income (loss)

$

7,931

 

 

$

(139,378

)

 

$

40,438

 

 

$

(142,652

)

Adjusted to exclude the following:

 

 

 

 

 

 

 

Change in FV of warrant liability

 

(15,185

)

 

 

72,027

 

 

 

(67,237

)

 

 

72,027

 

Change in FV of earn-out shares liability

 

?

 

 

 

36,525

 

 

 

?

 

 

 

36,525

 

Amortization expense

 

3,938

 

 

 

2,967

 

 

 

7,651

 

 

 

5,921

 

Stock-based compensation expense

 

6,378

 

 

 

3,508

 

 

 

13,427

 

 

 

3,542

 

Other (income) expense

 

(1,658

)

 

 

4,307

 

 

 

(721

)

 

 

4,314

 

Management fees (1)

 

?

 

 

 

82

 

 

 

?

 

 

 

209

 

Transaction related costs (2)

 

1,986

 

 

 

30,411

 

 

 

3,031

 

 

 

31,157

 

Other non-recurring and one-time fees (3)

 

1,897

 

 

 

50

 

 

 

3,852

 

 

 

137

 

Aggregate adjustment for income taxes

 

(3,097

)

 

 

(2,671

)

 

 

(6,723

)

 

 

(3,434

)

Adjusted net income (loss)

$

2,190

 

 

$

7,828

 

 

$

(6,282

)

 

$

7,746

 

Depreciation expense

 

1,852

 

 

 

728

 

 

 

3,268

 

 

 

1,418

 

Interest expense

 

3,217

 

 

 

2,060

 

 

 

6,617

 

 

 

7,759

 

Foreign currency (gain) loss, net

 

2,206

 

 

 

(24

)

 

 

1,838

 

 

 

232

 

Remaining benefit for income taxes

 

3,173

 

 

 

801

 

 

$

9,414

 

 

$

1,258

 

Adjusted EBITDA

$

12,638

 

 

$

11,393

 

 

$

14,855

 

 

$

18,413

 

Adjusted EBITDA margin

 

12.2

%

 

 

17.1

%

 

 

8.3

%

 

 

16.1

%

__________________
(1)

Represents quarterly management fees paid to the former majority shareholder of Hydrafacial based on a pre-determined formula. Following the Business Combination, these fees are no longer paid.

(2)

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

(3)

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

About the Business Combination

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

About The Beauty Health Company

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

Forward-Looking Statements

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

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

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

The Beauty Health Company

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands except share and per share amounts)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2022

 

2021

 

2022

 

2021

Net sales

$

103,536

 

 

$

66,508

 

 

$

178,951

 

 

$

114,050

 

Cost of sales

 

31,882

 

 

 

19,257

 

 

 

55,360

 

 

 

35,059

 

Gross profit

 

71,654

 

 

 

47,251

 

 

 

123,591

 

 

 

78,991

 

Operating expenses:

 

 

 

 

 

 

 

Selling and marketing

 

44,881

 

 

 

26,214

 

 

 

81,288

 

 

 

43,309

 

Research and development

 

2,601

 

 

 

2,988

 

 

 

4,831

 

 

 

4,440

 

General and administrative

 

27,585

 

 

 

44,402

 

 

 

53,846

 

 

 

55,213

 

Total operating expenses

 

75,067

 

 

 

73,604

 

 

 

139,965

 

 

 

102,962

 

Loss from operations

 

(3,413

)

 

 

(26,353

)

 

 

(16,374

)

 

 

(23,971

)

Other (income) expense:

 

 

 

 

 

 

 

Interest expense, net

 

3,217

 

 

 

2,060

 

 

 

6,617

 

 

 

7,759

 

Other (income) expense, net

 

(1,658

)

 

 

4,307

 

 

 

(721

)

 

 

4,314

 

Change in fair value of warrant liabilities

 

(15,185

)

 

 

72,027

 

 

 

(67,237

)

 

 

72,027

 

Change in fair value of earn-out shares liability

 

?

 

 

 

36,525

 

 

 

?

 

 

 

36,525

 

Foreign currency transaction loss (gain), net

 

2,206

 

 

 

(24

)

 

 

1,838

 

 

 

232

 

Total other (income) expense

 

(11,420

)

 

 

114,895

 

 

 

(59,503

)

 

 

120,857

 

Income (loss) before provision for income taxes

 

8,007

 

 

 

(141,248

)

 

 

43,129

 

 

 

(144,828

)

Income tax expense (benefit)

 

76

 

 

 

(1,870

)

 

 

2,691

 

 

 

(2,176

)

Net income (loss)

$

7,931

 

 

$

(139,378

)

 

$

40,438

 

 

$

(142,652

)

Comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(3,687

)

 

 

(276

)

 

 

(3,832

)

 

 

(281

)

Comprehensive income (loss)

$

4,244

 

 

$

(139,654

)

 

$

36,606

 

 

$

(142,933

)

Net income (loss) per share

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

(1.52

)

 

$

0.27

 

 

$

(2.24

)

Diluted

$

(0.05

)

 

$

(1.52

)

 

$

(0.18

)

 

$

(2.24

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

Basic

 

150,731,491

 

 

 

91,798,837

 

 

 

150,665,166

 

 

 

63,805,807

 

Diluted

 

151,719,451

 

 

 

91,798,837

 

 

 

152,274,394

 

 

 

63,805,807

 

The Beauty Health Company

Condensed Consolidated Balance Sheets

(in thousands, except for share amounts)

(Unaudited)

 

 

June 30, 2022

 

December 31, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

820,970

 

 

$

901,886

 

Accounts receivable, net of allowances for doubtful accounts of $2,482 and $2,681 at June 30, 2022 and December 31, 2021, respectively

 

79,918

 

 

 

46,824

 

Prepaid expenses and other current assets

 

20,336

 

 

 

12,322

 

Income tax receivable

 

1,008

 

 

 

4,599

 

Inventories

 

73,526

 

 

 

35,261

 

Total current assets

 

995,758

 

 

 

1,000,892

 

Property and equipment, net

 

18,041

 

 

 

16,183

 

Right-of-use assets, net

 

15,791

 

 

 

14,992

 

Intangible assets, net

 

51,202

 

 

 

56,010

 

Goodwill

 

124,033

 

 

 

123,694

 

Deferred income tax assets, net

 

312

 

 

 

330

 

Other assets

 

9,823

 

 

 

6,705

 

TOTAL ASSETS

$

1,214,960

 

 

$

1,218,806

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

36,830

 

 

$

29,049

 

Accrued payroll-related expenses

 

27,786

 

 

 

28,662

 

Other accrued expenses

 

15,385

 

 

 

14,722

 

Lease liabilities, current

 

4,547

 

 

 

3,712

 

Income tax payable

 

2,510

 

 

 

292

 

Total current liabilities

 

87,058

 

 

 

76,437

 

Lease liabilities, non-current

 

13,116

 

 

 

12,781

 

Deferred income tax liabilities, net

 

3,844

 

 

 

3,561

 

Warrant liabilities

 

26,579

 

 

 

93,816

 

Convertible senior notes, net

 

732,028

 

 

 

729,914

 

TOTAL LIABILITIES

 

862,625

 

 

 

916,509

 

Commitments (Note 13)

 

 

 

Stockholders' equity:

 

 

 

Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

16

 

 

 

16

 

Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021

 

?

 

 

 

?

 

Additional paid-in capital

 

735,682

 

 

 

722,250

 

Accumulated other comprehensive income (loss)

 

(5,089

)

 

 

(1,257

)

Accumulated deficit

 

(378,274

)

 

 

(418,712

)

Total stockholders' equity

 

352,335

 

 

 

302,297

 

LIABILITIES AND STOCKHOLDERS' EQUITY

$

1,214,960

 

 

$

1,218,806

 

 


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