The Beauty Health Co. Q3 FY2024 earnings call

Sales Execution

• Strengthened commercial team with new Chief Revenue Officer and Chief Marketing Officer with medical aesthetics experience. Restructured US sales strategy to improve processes, tools, and technology. Plan to focus on core markets in 2025.

Operational Excellence

• Syndeo performance stabilized; technical return rate low. Realigned global manufacturing to US facility by year-end, exiting China partnership. Implemented good, better, best pricing strategy in US, increasing sales diversity across equipment offerings.

Innovation

• Focus on 'medtech meets beauty' with HydraLoc HA Booster launch, backed by clinical claims. Working on reducing costs, improving inventory, and leveraging patents for product pipeline.

Third quarter revenue was $78.8 million, a 19.1% year-over-year decline. Consumables sales for the quarter totaled $51.2 million, a 10.4% increase versus Q3 2023, with first 9 months of 2024 at $152.2 million. Equipment sales declined globally. Adjusted gross margin for the quarter was 69.5%, driven by lower inventory charges, higher equipment average selling prices, and a favorable mix shift to consumables. Consolidated revenue in the Americas was roughly flat, while APAC and EMEA saw declines. China accounted for $5.3 million of APAC revenue, a 68.5% year-over-year decline.

Full Year 2024

• Projected sales between $322 million to $332 million and adjusted EBITDA between negative $2 million to positive $4 million.

Q4 2024

• Midpoint revenue decline of 21% YOY, with growth in Americas offset by international declines, particularly in China due to equipment sales and consumables softness.

• Macro environment challenges for new device sales due to tightened credit, high interest rates, and economic uncertainty, especially in international markets.
• Significant decline in China market revenue and sales, impacting overall performance.

Q: Consumables sales being better was very encouraging. Which regions or aspects of consumables were better than you expected? And related to that on the guidance, on the pressure on delivery system sales, I was curious about why that may have been worse than you expected and when that may or may not stabilize.

A: Mike talks about manufacturing consolidation, guidance based on continued device sales pressure, and Marla mentions priorities on go-to-market, gross margin, and consumables innovation.

Q: With system sales down pretty significantly in China and then you're pulling your manufacturing operations. I'm trying not to read into that too much, but are you guys still committed to China going forward?

A: Marla says they're evaluating all global markets for investment and partnerships.

Q: When we think about your margin profile going forward, obviously it's been pretty lumpy with the remediation you've been undergoing and the shift to more of a portfolio strategy. But gross margin was definitely a lot better than we had been expecting this quarter even though ASPs came down because of that mix shift. So how should we think about gross margin heading forward both for Q4 and for 2025 given that the ramping of Long Beach I imagine might lead to some additional disruption in the near term?

A: Mike discusses margin pressures from overhead and inventory, and Marla mentions the study on HydraFacial in combination with laser procedures and future device innovation planning