The Beauty Health Co, renowned for its flagship brand Hydrafacial, revealed its financial results for the third quarter( (Q3) ending September 30, 2023, with a sobering report marked by a dip in US revenue and significant restructuring charges. The aftermath saw a dramatic decline in The Beauty Health Co’s stock value, plunging from $3.90 to $1.57 following the release of the Q3 results.
At the time of this publication, Beauty Health Co stock (SKIN) has witnessed a decline.
Beauty Health Co
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Beauty Health co Q3 2023 Financial Results
The net sales for the third quarter of 2023 stood at $97.4 million, reflecting a 10% increase compared to the same period in the previous year. Despite the overall growth, the company faced challenges in the U.S., while regions like Asia-Pacific (APAC) and Europe, Middle East, and Africa (EMEA) showed resilience.
However, the gross margin took a hit, plummeting to (12.9)% in Q3 2023 from 69.1% in Q3 2022. This decline was attributed to a whopping $63.1 million associated with the Syndeo Program and additional charges linked to discontinued, excess, and obsolete product costs. Adjusted gross margin fared slightly better, at 62.5% in Q3 2023 compared to 74.8% in the previous year, although it, too, faced challenges due to higher manufacturing labor and overhead costs.
The bottom line revealed a net loss of $(73.8) million in Q3 2023, a stark contrast to the net loss of $(0.1) million in Q3 2022. The surge in losses was primarily attributed to costs associated with the Syndeo Program. Adjusted EBITDA also experienced a downturn, standing at $9.1 million in Q3 2023 compared to $16.3 million in Q3 2022, mainly due to gross margin pressures and increased general and administrative expenses, partially offset by reduced selling and marketing expense.
During the quarter, the company successfully deployed 2,140 delivery systems, an increase from 1,860 in the previous year. This growth was fueled by robust placements in APAC and EMEA.
Breaking down the net sales by region, the Americas reported a decrease of (11)% to $51.7 million in Q3 2023, primarily due to challenges with Syndeo affecting demand. On the positive side, the APAC region experienced a significant boost, with a 63% increase to $24.7 million, driven by strong performance in China, where net sales surged by 79% to $16.9 million. Meanwhile, the EMEA region recorded a 37% increase to $21.1 million, propelled by strength in both Delivery Systems and Consumables.
As of September 30, 2023, the company’s cash and cash equivalents stood at approximately $559.4 million, reflecting a slight decrease from $568.2 million at the end of December 31, 2022. The change was primarily attributed to strategic acquisitions made in Q1 2023 and the net impact of the current year’s net loss and other non-cash adjustments.
The company also provided insights into its capital structure, with approximately 7.0 million private placement warrants and about 132.6 million shares of Class A common stock outstanding as of September 30, 2023. Notably, in September 2023, the company initiated a $100.0 million share repurchase authorization, deploying $4.8 million to repurchase 0.8 million shares at an average price of $5.83 as of the same date.
Looking ahead, The Beauty Health Co revised its fiscal year 2023 net sales and adjusted EBITDA margin guidance, citing challenges in the U.S. market related to the Syndeo Program. Consequently, the company suspended its long-term fiscal year 2025 outlook.
