The Beauty Health Co. Q2 FY2025 earnings call

Key Points - Q2 was strong, exceeding revenue and adjusted EBITDA guidance for the third consecutive quarter. - Launched HydraFillic with Pep9 booster, which became top-performing HydraFacial branded booster. - Expanded to over 35,000 active devices globally. - Saw significant gross margin improvement. - Completed transition to distributor model in China and restructured debt. - Consumables business over 70% of revenue remains strong, driven by razor-razor blade model. - Reduced operating expenses by nearly 18%, lowered inventory, and ended quarter with $212 million in cash. - Strategy centers on 3 pillars: commercial execution and operational rigor, innovation acceleration, and provider-centric growth. - Launched new strategic engagement program in global commercial teams. - HydraFillic with Pep9 booster and Hydralock HA booster launches successful. - Implemented wrap to treatment room strategy, including upcoming back bar product, retail skin care line, and new scalp tips and lip tip launches. - Strong provider partnerships, with over 1/3 of U.S. providers partnering for over 5 years, and double-digit growth in consumables in Europe.

In Q2, The Beauty Health Company achieved $78.2 million in revenue and $13.9 million in adjusted EBITDA. The consumables business, accounting for over 70% of revenue, remained strong. Gross margin improved, with GAAP at 62.8% and adjusted at 65.9%. Device sales were pressured by macroeconomic headwinds, but consumables revenue was driven by a favorable mix, cost control, and inventory optimization. Global active devices expanded to over 35,000.

Guidance - Increased low end of net sales full year guidance range to $285 million to $300 million and increased both top and bottom end of adjusted EBITDA guidance range to $27 million to $35 million. - For Q3, expects net sales between $65 million and $70 million and adjusted EBITDA between $2 million and $4 million. - Guidance reflects seasonally slower third quarter, strategic R&D investments in device and consumables innovation, and factors like ASP pressure, tariff impact, and product mix.

Risks - Device sales pressured due to macroeconomic headwinds. - Tariff exposure for consumables sold in China. - Higher churn in device sales in recent quarters, spread across medical and nonmedical channels. - Impact of seasonality and strategic R&D investments on financials.

Q: Congrats on the good quarter. When looking at the guide, with the third quarter guide being fairly cautious, what are you seeing in July and August and how does that factor into confidence in the guide?

A: Michael P. Monahan said it's driven by year-over-year revenue trends similar to first half, ASP pressure in back half, tariff impact in back half, and meaningful R&D investments in back half of $4 million to $5 million.

Q: On the installed base, added net but installed base grew significantly less, what drove that relative to trends?

A: Michael P. Monahan said device sales pressured by macro environment, churn higher in second quarter, and in process of developing action plan to reverse trends in back half.

Q: On EBITDA dynamics in back half of the year, step down just combination of tariff headwinds and increased R&D spend?

A: Michael P. Monahan said it's combination of tariff headwinds, increased R&D spend, and product mix pressure from factory refurbished Syndeos and Elite.

Q: On EBITDA, gross profit in line but EBITDA well ahead, any additional specific actions on OpEx?

A: Michael P. Monahan said sales and marketing a big driver of OpEx savings, G&A lower due to bad debt recovery and cost control initiatives, sales and marketing team focused on ROI, and expect sales and marketing spend in back half to be around $23 million to $24 million range.

Q: As we look forward with delivery systems, what it takes to grow positively there?

A: Marla Malcolm Beck said acutely focused on driving device sales with customer engagement program, Mike Monahan said similar pressure points on equipment across regions, Marla said excited about consumable sales future with additional launches.

Q: On marketing and demand creation as percentage of sales, outlook and framework?

A: Michael P. Monahan said selling and marketing line expected to increase due to seasonality, variable cost nature of sales component, marketing spend disciplined on leads and ROI, Marla said shifted more dollars to provider marketing.

Q: On next booster or new product launch?

A: Marla Malcolm Beck said launching backbar and hero skincare SKU in fourth quarter, booster cadence 1 to 2 a year.

Q: On refinancing of debt and impact on net interest expense?

A: Michael P. Monahan said refinanced $250 million from 2026 to 2028 at lower rate, will see more expense in interest expense.

Q: On consumables price increase, when implemented, feedback and demand elasticity?

A: Marla Malcolm Beck said implemented on July 3, no feedback issues as other price increases in medical aesthetics channel were higher, Michael P. Monahan said price increase partial offset to tariff headwinds.

Q: On higher churn versus expectations, does it continue in second half?

A: Michael P. Monahan said looking into churn, not in one particular area, reaching out to customers, optimistic to reactivate with targeted initiatives.

Q: On variability of performance between provider channels or types?

A: Marla Malcolm Beck said nice growth in nonmedical channel, especially single-room STs and med spas, good adoption in medical and med spa channel with HydraFillic booster launches.

Q: On consumables, 6% excluding Sephora, when headwind to roll off?

A: Michael P. Monahan said consumables up 5.3% excluding China, 6% in US National Accounts excluding Sephora, China in transition period.

Q: On China distributor transition, how to think about ASPs?

A: Michael P. Monahan said distributor business has different agreements, average discount, viewed as transition year, next year will see distributor model economics.

Q: On trends in med spa, plastic and derm channel in US and end consumer weakness?

A: Marla Malcolm Beck said specialty facial category strong, consumable sales reflect consistent demand, providers use HydraFacial as traffic driver, booster revenue growth shows value of higher-end treatments.

Q: On 2026 loyalty program, how structured?

A: Marla Malcolm Beck said simplifying program, adding incremental levels, relaunching to prepare for skincare and backbar, currently 93% of providers in program.