Q3 2021 Beauty Health Co Earnings Call
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Greetings and welcome to the beauty health third quarter 2021 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded I would now like to turn this conference over to your host MS Dawn Frankfurt managing director at ICR. Thank you Ma'am you may begin your presentation.
Good afternoon, everyone. Thank you for joining the beauty help companies conference call to discuss the company's third quarter 2021 financial results, which we released this afternoon and can be found on our website at investors that beauty health Dot com.
With me on the call is Brent Saunders Executive Chairman Clinton, Cornell Chief Executive Officer, and Lee Ann will Chief Financial Officer of the BD Health Company.
Before we get started I would like to remind you of the Companys Safe Harbor language, which I'm sure you're all familiar with.
Management may make forward looking statements, including guidance and underlying assumptions.
Forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.
For further discussion of risks related to our business.
Our filings with the SEC.
This call will contain non-GAAP financial measures such as adjusted gross profit adjusted gross margin adjusted net income adjusted EBITDA and adjusted EBITDA margin.
Reconciliations of these non-GAAP measures to the most comparable GAAP measure are included in the earnings release furnished to the SEC and available on our website.
Now I would like to turn the call over to Brent Saunders Executive Chairman of the beauty Health company.
Thank you Dawn and good afternoon, everyone. Thank.
Thank you for joining us for a discussion of today's third quarter results.
As I'm sure you saw in today's press release, I will be stepping into the wall as the company's interim CEO effective January one 2022.
Part of this transition Quinn will remain CEO through year end at which point I will assume additional responsibilities as CEO until a permanent successor is named.
On behalf of the board I want to thank <unk> for his dedication and commitment to beauty health over the past five years, yes.
He has been a driving force behind the company's success.
I have again beauty health through Covid as well our business combination in may.
Under his leadership <unk> has become a solid platform for us to build upon as we work towards our next pillar growth begin to accelerate our acquisitions.
Given these objectives and the strength of beauty health claims on the board felt that this was the ideal time to begin the CEO transition we thank him for his contributions.
One question I had been working closely over the past few quarters.
Excited to step in more fully and work with the team to continue to drive growth and focus on our strategic initiatives.
This is a compelling time and I'm excited about our future.
The company has a strong foundation and I look forward to the next chapter and the significant growth opportunities. We have ahead.
I would now like to turn the call over to Clint.
Thank you Brad and good afternoon, everyone.
Digging into our performance I would like to express my gratitude for being part of building this category, creating brands over the last five years.
This has been an exciting journey and I'm pleased with what we have accomplished.
I would now like to thank our employees and providers across the globe for all of their hard work and commitment during this challenging environment.
They are vital to our success and propelled us to record performance again this quarter.
During today's call I will provide color on our third quarter performance as well as discuss our growth strategies and outlook for the remainder of the year.
I will then turn the call to Liam for a more detailed discussion of our third quarter results as well as our updated 2021 financial outlook in more detail.
We are very pleased with our results this quarter as well as the strength of our year to date performance, our sales and adjusted EBITDA continue to exceed our expectations and deliver new record results. While we continue to lead through macro challenges in select market closures related to the Delta variance search.
It speaks to the diversification of our business across channels and geographies as well as the favorable health and wellness tailwind that remains strong.
We believe are here to stay.
We are executing across all key strategic initiatives, we laid out for you last December and as of today, we grew our delivery systems to over 19000 units as we leveraged our virtual and physical branding events to increase our consumer data with their beauty health community.
We invested in international infrastructure, adding Indra and Stephane to lead to APAC and EMEA regions respectively.
To meaningfully expand our business in these markets and we are excited to add two additional products in the coming months.
Now turning to our financial results for the quarter adjusted EBITDA was $5 8 million once again, driven by strong net sales growth of almost 100% gross margin expansion and disciplined expense management, despite challenges related to the delta.
We continue to accelerate our brand building initiatives to capitalize on the enormous white space opportunity, we see ahead.
We further strengthened our financial position with the completion of our convertible senior notes offering which was upsized to account for the strong investor demand.
We raised approximately $900 million in dry powder from this offering and the warrant redemption to escalate our strategic investments and build upon the strong platform, we created beauty health.
Our brand building initiatives effectively strengthen our connection between our consumers and providers, which further expands our beauty health community.
Our vision of creating a deep consumer connection with the beauty health community is a top priority and we continue to make progress this quarter, improving our engagement with our customers by reaching them, where they live work and play.
As a result of these achievements, we are well positioned to deliver on our long term strategic goals.
We are raising our topline and EBITDA outlook for full year 2021 to reflect our confidence in this business model as well as our ability to execute against our multi lever growth trajectory.
During the quarter, we continued to make progress on our strategic growth initiatives to build brand awareness and accelerate innovation.
And expand our international presence.
Our investments behind these initiatives remain elevated in order to create a deeply connected and engaged consumer within our beauty health community.
It creates a strong community at the center of our vision and is essential to our long term success.
I will now focus on these key initiatives in detail.
First we invested in brand initiatives to drive consumer awareness and during the quarter, we accelerated our brand and investments to engage with their consumers and providers, both virtually and to a greater extent physically as we look to strengthen and build our beauty health community.
Continue to invest in hydro Fisher connect our clinical training professional development and holistic education programs designed for the <unk> <unk>.
A highly passionate and educated community of influential providers.
Our business in the retail channel improved this quarter as more locations reopened following COVID-19 related closures from March of 2020, we further expanded our presence in the retail channel with select partnerships during the quarter, including Nordstrom, while we're still early days with these partnerships and have not built meaningful revenue into our outlook for this channel we do see it as a unique pathway to.
Bring more consumers into our community.
During the quarter, we accelerated our marketing initiatives building on our second quarter's effective branding programs or.
A global issue campaign has been highly successful by engaging consumers and institutions on our U S Coast to coast bus tour that started on June 4th and continues through the end of September.
At each stop we treated 250 consumers with hydro facial of one site during the two day period.
Working alongside our customers and delivering a compelling experience and reaching a meaningful number of consumers in each market we visited.
We believe global notion has been highly effective at activating demand by driving community engagement with both best decisions and consumers by creating a physical hydro facial event, we drove brand awareness and consumer demand because you have to get it to get it.
As we have previously discussed two thirds of consumers, who try and hydro conditions for the first time will become repeat customers and of those two thirds approximately one third of the customers will become frequent super users, which is what building brand awareness and treat new customers. It was one of our top investment initiatives.
Over the past year, we have transitioned our business from a b to b.
B to C and back to be effectively connecting our passionate community.
Second we maintained our elevated investment level in innovation.
Creating product and technology to deepen consumer engagement into a bill beauty health community.
Improving our product offerings and enhancing our technological capabilities to build upon our beauty health community is important.
As we effectively increased our connection to our customers.
Our upcoming new product launches remain on track, including the November 11th launch of our Guangzhou at home device, which I will discuss in more detail in just a moment.
During the quarter, we launched a new booster collaboration with the epicure is targeting the neck and decorative areas and extending their treatments beyond the face.
We also continue to test our app that builds consumer awareness and serves as a direct connection to the customer and.
When taken together all of these initiatives allow us to better connect with their consumers, where they live work and play further expanding our direct to consumer capabilities and relationships.
Third we continued to expand our international infrastructure to support our strong international growth with our sales internationally up over 105%. This quarter. These markets remain a top investment priority.
During the quarter, we entered South Korea through a new distributor partnership we continue to globally increased market initiatives to expand brand awareness as well as invested in their team to build the necessary infrastructure to support this growth.
And as previously announced <unk> Becker joined US as President of EMEA in October and we are continuing to make foot tires, particularly as we build out teams in local markets.
We also made progress on our plans for headquarters in our EMEA and APAC regions, which will provide updates to during future calls.
We are very pleased with our accomplishments this quarter and year to date, especially given the still volatile environment as it relates to the delta variant and increasingly challenging worldwide macro concerns, which Leo will discuss in greater detail.
The sustainability of the momentum we are delivering despite these challenges was further supported by our almost 100% sales growth this quarter and proof of a highly resilient business model.
We are focused on creating a unique and powerful consumer brand and platform and beauty health with significant growth ahead.
As we look forward to our fourth quarter and beyond we will continue to leverage our infrastructure grower install base in order to fund our investments capitalizing on the significant opportunities in.
And the combination of being well capitalized and our broad geographic presence allows us to pursue strategic acquisitions in a disciplined manner.
Turning now to a brief overview of our guidance as a result of another strong quarter, we are raising our topline and EBITDA guidance for 2021.
We now expect net sales in the range of $245 million to $255 million up from our previous guidance range of $230 million to $240 million.
We also are increasing our EBITDA to $30 million from our prior guidance of 25 million. Despite the significant investments we are making in our business.
These upward revisions are based on our momentum and our third quarter results and we will continue to invest ahead of our growth.
We have a sense of urgency to capitalize on the category we have created.
I will now provide you with details on our upcoming investments in our three key strategic growth initiatives.
First building and expanding consumer awareness remains a priority our marketing programs drive consumer awareness, which has proven to drive consumer demand.
We are accelerating these marketing initiatives building, our team and expanding our partnerships, especially in the retail channel in order to capitalize on the significant white space ahead.
Our consumer activation programs are highly effective and we will continue to leverage these events in select markets.
Due to the success of global Ocean, which wrapped up at the end of September we are bringing the events in New York City for the second week in December to build consumer awareness and marks the one year anniversary of our business combination announcement with best for health care.
We are also excited about our black Friday, and cyber Monday promotions, which historically generated meaningful customer engagement.
On October 24th we participated in the Nordstrom's Block Party we.
We also are expanding our presence in the retail channel through our new partnerships, including Alta laser centers of Australia, John Lewis in the UK and select Marriott International resorts in spots.
We see retail as an important channel to further build our consumer awareness and diversify our operating model as we continue to monitor and test new retail partnerships longer term, we see this channel as a significant opportunity.
Second we are increasing our R&D investments and innovation initiatives in order to deepen and expand our consumer and partnership connections with our beauty health community.
Our innovation initiatives will enhance our ability to meet our consumers, where they live work and play and I'm in a number 11th we are launching a limited number of our growing go handheld devices with a broader rollout expected in 2022.
While we are testing the at home market with our initial launch we see this as a bigger opportunity over time.
Our App, which we officially launched in October allows us to engage with our consumers by providing self scan assessments and an educational component among many other features.
We remain on track to launch a hydrothermal 2.0 connected device in early 2022.
A major technology upgrade from our existing hydro facial innovation in products and technology remains an important component of our overall strategy to building our long term vision of seamlessly connecting and interacting with our customer through the beauty health community.
Third we are accelerating the rollout of our global footprint as we build on our international infrastructure directly in key strategic markets and expand distribution partnerships into new markets.
We are continuing to build our infrastructure and the team worldwide to capitalize on our significant international growth.
Consistent with our strategy, we will continue to go direct in key markets, where we see opportunities as well as established new director distributor partnerships and select new markets.
Over the next few years, we expect our international business to exceed the U S and we are building the necessary infrastructure to capitalize on this opportunity.
In conclusion, we are proud of our third quarter performance. The results. We have delivered thus far in 2021 support the power of the platform. We have created and the community connection we are building in the dynamic beauty health category.
We are a rapidly growing business capitalizing on our multiple levers of growth.
I'm now pleased to turn the call over to Liam for a more detailed discussion of our third quarter financial performance as well as provide you with our updated financial outlook for 2021. Thank you.
Thank you.
And good afternoon, everyone before I discuss outperformance this quarter I also want to thank our employees and providers worldwide for their continued dedication and effort that is underpinning our growth. This record performance. The successful completion of our convertible senior notes offering and the redemption of all.
Any worries or demonstrate the flexibility of our business model and a comprehensive operating masters in allowing us to continue to rapid growth trajectory we are executing.
I will review, our third quarter results touch on our balance sheet, and then provide detail on our updated 2021 outlook.
I will make select comparison to our third quarter of 2019 accurately it has a more meaningful comparison due to the COVID-19 related market closure in 2020.
Let me start with our third quarter results.
As Clint mentioned were very pleased with our record performance. This past quarter as we continue to build on our strategic initiatives, which drove better than expected.
Results across all metrics, despite downtime related restrictions, especially in the APAC region.
And products has global appeal as reflected in our strong geographic segment growth in this past quarter.
Net sales of $68 1 million increased almost 100% from last year's Colby impacted sales of $34 6 million and up 72% from $39 6 million in the third quarter 2019.
Significant increase was largely due to expansion in our delivery system with over 18500 <unk>.
Globally at the end of the quarter and the continued strength in our consumables as COVID-19 restrictions lifted and more of our partners. We opened strong trends in the U S and EMEA business and.
<unk> growth in the APAC region continued during the quarter, despite a worsening colby.
Now I'll share a few highlights from our three regions.
Third quarter sales in the Americas region increased to $45 million compared to $21 2 million a year ago and grew over 50% from our 2019 levels.
<unk> was driven by continued traction in the U S and solid performance in that manner.
As markets reopen and consumer demand accelerated as far as ongoing strength in our delivery system Rollouts, we continue to see select U S locations operating at reduced capacity to accommodate state and local regulation, especially in a non medical channels.
We also saw consumable orders increase for our customers reopening, which drove the acceleration from our 2019 levels as Clint mentioned earlier marketing and training Activations such as Globe Elution also positively contributed to the increase in sales given the strong performance of global solution, we're extending event.
Into Q4, and we're holding the event in New York City during the second week of December.
EMEA net sales of $12 6 million <unk> $8 1 million in the prior year and expanded over 90% from the third quarter in 2019, driven by strength in the United Kingdom, Germany, France, Russia and Middle East.
Pop up in the Middle East and the U K continue to feel growth for the region.
Our creative marketing in Spain, and France also help consumer awareness and contributed to the sales increase. In addition, we have also started to expand pop up into Germany, and expect to see further acceleration in growth.
Turning to APAC net sales up $10 5 million increased almost 100% from the prior year and over 200% from the third quarter 2018, primarily driven by growth in China, and Australia. Despite a restricted Colgate related lockdowns implemented in Australia.
In China, we're continuing to focus on our system rollout, while building sales productivity and continuing to expand our presence in both the medical and nonmedical channels, our marketing and training program in regional markets also drove growth trend in the APAC decelerated from the second quarter, primarily due to the Delta.
They made a shutdown in Japan, Australia, and part of China during the third quarter.
Overall, our growth has been demand driven across all channels, we continue to see consumers asking for hydro financial by knee, especially in a more mature market.
Even the current brand recognition and our initiatives to build awareness as well as international Global self care momentum. This in house is attractively positioned to continue to both expand this category and take share globally.
Moving to profitability, our gross margin was 67, 6% from last year, 66%.
Adjusted basis, we expanded our gross margin by 320 basis points year over year to 71, 5%.
The increase was largely driven by fixed cost leveraging on higher than expected in <unk>.
Selling prices for delivery system as wide cost savings initiatives.
This was partially offset by higher supply chain and logistic costs.
On a sequential basis, our gross margin declined 340 basis points due to supply chain challenges and increased.
Logistic costs as.
As well as temporary impact from transitioning higher carrying inventory value related to the distributor acquisition.
We will continue to focus on enhancing our margin structure. However, we expect the continued headwinds from global supply chain challenges and inflationary pressure to weigh on margins into 2022.
We currently anticipate a higher shipping costs to continue into next year, partially offset by an accretion in margins related to the acquired distributor and pricing initiatives.
During the quarter there were a few significant noncash accounting entries from the valuation of Orange and the convertible transaction, which we will address and Jack out as non-GAAP measures to focus our discussion on our core business performance.
SG&A expenses in the quarter were $49 7 million as compared to $17 6 million for the prior year.
As a percentage of sales selling and marketing increased by over a fortune 100 basis points to 44, 7% compared to 35 pricing in the third quarter of 2020, which was constrained due to COVID-19.
This increase was driven by greater sales commissions higher personnel related expenses and increased marketing spending during the quarter, we significantly ramped up our marketing spend as we strategically activating demand. We will continue to focus on optimizing our investment sales marketing and training per cube.
Clearly as we look to build upon our community engagement initiatives.
Moving on to R&D, we invested $1 9 million in the third quarter of 2021, compared with <unk> 6 million in the prior year as we accelerated our investments ahead of our launch of the Hydro station lesion at the initial test of our new home device and upcoming launch of <unk>.
Great delivery system.
As Clint has shared innovation is one of our main pillars of our strategic investments, we will continue to prioritize investments in innovation.
Our G&A expenses of $19 2 million included $3 9 million of noncash stock based compensation expenses. Excluding this item our G&A expenses were $15 3 million compared to $7 1 million in second quarter 2020, the increase in G&A expenses was driven by non payroll related.
Public company costs of $1 7 million, which includes D&O insurance stocks compliance and additional audit and tax related services as well as higher personnel related expenses due to increased head count we expect such public company costs will continue at this level.
During the quarter, we accelerated our investment in building out the necessary infrastructure to support the significant growth in our international markets as well as continued to strategically invest in EMEA and APAC based Ken keep on technology.
We have gone live on our first global ERP platform, which includes CRM and ecommerce primarily with Oracle next week, we are positioned to extend our brand through global market and improved operational or geology.
This will never be pain free and we expect execution change to continue the new ERP platform advances our cloud <unk> hydro facial ecosystem and will be expanded to include new capabilities in 2020.
We expect these investments to remain elevated over the next few quarters. We will continue to invest ahead of our significant growth opportunities in order to capitalize on our long runway ahead.
In addition to GAAP measure adjusted EBITDA is an important profitability measure that we use to measure our business internally for the quarter. Adjusted EBITDA was $5 8 million versus an adjusted EBITDA of $7 6 million in 2020 the decline in our profitability is the result of increased.
And bonuses related to strong sales and acceleration in our marketing and scaling spend as well as increased headcount for future growth.
This was partially offset by higher sales and gross margin improvement.
Potential cash payments.
With nearly 900 million cash we have the dry powder to continue to invest in our business as well as pursue strategic acquisition as we accelerate our initiatives to capitalize on our significant opportunity in a rabbit involving duty health industry.
Now our share more details on our outlook for the full year.
As clinicians were racing or 2021 guidance.
For our physical 2021, we now expect net sales in the range of 245 to 255 million barring any deterioration related to COVID-19 trends and ask from our prior guidance range of $232 million to $40 million.
We remain cautiously optimistic while observing select closures related to Delta Marion in both APAC and EMEA region.
We're raising our adjusted EBITDA outlook to approximately $30 million up from our prior guidance of approximately $25 million. This upward revision largely reflects are better than expected topline shrimp. So far this year, despite our ramp up investment and increased spending on branding and global infrastructure initial.
Just that are accelerating our share gain worldwide.
We continue to anticipate capital expenditure of up to $50 million in 2021.
A revised guidance, but this year reflects our strong performance to date and solid trends that have continued into the fourth quarter.
As we look beyond 2021.
We're excited about that long term opportunity across or a multiple levels of growth as we capitalized on a significant opportunity in this category. We created however, given the uncertainty of environment, which we operate and the incredible growth were lapping in 2021 will remain cautious we continue to.
Phase potential risk for further market closures related to COVID-19, global supply chain challenges as well as inflationary headwinds related to hire raw material shipping and labor costs.
Subsequent to quarter, and we have grown our delivery system installed base to over 19000.
I would like to note that due to factors such as trading treat up very system price point, and our international distributor motto or total delivery system bigger does not direct correlate to fail.
In summary, we're very pleased with our performance. So far this year, we have confidence that are proven operating model and key strategic growth initiatives will drive long term profitable growth that will increase even greater shareholder value.
With those comments I'll turn the call back to the operator to open it up for questions. Thank you.
At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation somewhat indicate your line isn't the question queue. You May press start to move your question from the queue for participants using speaker equipment and may be necessary for you to.
Pick up your handset before pressing the star keys, one moment, while I pull for questions.
Our first question comes from the line of Oliver Chen was Cowan you May proceed with your question.
Yeah, breads and club congrats and all that you've accomplished Ah the connected device. The 2.0 connected advice sounds quite exciting how should we think about uhm, how that may be lodged throughout the year and also any any guidance in terms of your thoughts on revenues in terms of the quarterly K.
<unk>.
Also the glowing go in the home device would love to hear Uhm any initial learnings and how you're thinking about pricing and more broadly uhm, how this fits into the hide your face facial ecosystem.
And then thirdly in a modeling question just the guidance was encouraging was it the America's that drove the most upsides would love context on that as well as helping us understand some of the factors you mentioned on supply chain and inflation and in which factors you know may maybe outside of your control as we monitor those risk occur.
Ross the sector. Thank you.
Sure. Thanks, all of our appreciate that cause I'm working my question. If you look at our organic roselawn, the hydro facial system or consumable.
Really been very very solid and those products work and they feel good and you'll get an immediate results. What we're doing is taking our technology now from analog to digital and I think that's appropriate given we have over 19000 providers out there we're launching mcglone go.
Citing phone device really where you can take artificial on the road with you.
So we're doing what I think the best in the class brands do these days.
Connecting the consumers with our professional Fiesta tissues with the company to ensure that we can meet them, where they live work and play the glowing go we've had really good health on beta testing, we're super excited about it.
We don't have meaningful revenue and the model. So I would say this is testament and to build it with our community.
Project Sunday Oh, we're very excited we remain on track with that product to be in each one of next year and and his land mentioned, there's gonna be a lot of new product introductions, we expect a lot of trade in trade up activity and most importantly, we're just really really excited about going to the next.
Step in what we've committed to for the last several years and connecting.
The health community. So ultimately into the model and can I just quickly interrupt quit Oliver and just say I saw this a day a device in the office last week and it it's.
It's going to be really nice to watch in the first half of next year.
Yeah, Hey, Oliver so on your questions in terms of the guidance we ask.
<unk> mentioned, the fact that the delta there and really impacted some of the region's especially with APEC. So there is that impact that we factored in as we look forward to queue for.
In terms of the margin of supply chain, what we're really trying to say is for the third quarter are there are some temporary impact because as you can't appreciate it with all the foreign distributor they have their inventory and the balance or carrying it's higher.
They were functioning as a distributor and that's going to go away as you things from Q form before however, when it comes to supply chain. When it comes to the extra shipping costs all of that just like everybody else in the market. We continue to see pressure, that's going to impact us for going forward.
Thank you and Brent and Clint as you think about do you need help with a platform what shall we know about in terms of what's on your mind for a framework as you'd think about opportunities in your well Capitalised and you have a lot of expertise in terms of this major structural change with the consumer nation of health care.
Thanks.
Yeah, I think that's exactly right over and I think as we as we have always maintained as we think about the perfect emanate candidate or candidates.
It's it's a product or brand with a higher NPS Gordon a promoter score.
It allows us to get leverage on our call point.
Most specifically with the expectation that someone we really want to to grow with and support we have a lot of loyalty there and it's something that that would give us a lot of leverage with our existing costs and infrastructure.
And then I.
Ideally something that would add accretion to the piano.
That being said obviously.
No deal.
A perfect deal some deals are better deal some deals or not so we're pretty pretty fluent but there's a lot of opportunities. We look at a lot of different things but.
But we don't feel any pressure would want to do it in a in a in a very disciplined way, but we believe that that's a that's a true growth Webber for us in the future absolutely.
Okay.
Thanks, very much best regards.
Thanks Robert.
Our next question comes from the line of.
Well I think with Jeffries you May proceed with your question.
Thank you good afternoon, everyone and Clint it was bittersweet to see the announcement today, you will definitely be missed.
My question for you is I think in the prepared remarks, the word accelerated with used a number of times regarding marketing R&D investments to roll out of international the buyback of the distributor shape.
So can you talk a little bit about how much of the revenue upside has afforded you to accelerate the investments and the business any of that or or pull ahead from what would have been investments. In later years and then if you think about the gross that could come behind that where should be.
See the prioritization of grass do you expect international to be the single biggest scrubs driver or are there other attributes of the model we should be watching over the next couple of years. Thank you sure. Yes, thanks up mix the kind words.
The first part and then may be tended to breath for the second part if you remember when we when we merged with best for back last December.
We thought that we received celebration got hit by the Delta variant closures and I think Leon and the team has done a great job providing guidance on how we.
Managers through not just the pandemic over thriving out of it. So what we've committed to investors is that we would spend on marketing and infrastructure and adding salespeople. If we didn't have visibility to driving growth. So I think what you see in the queue three results hopefully receiving the first two quarters.
Is feathering in those investments really simply putting down more placements.
Driving the innovations of the two new products receipt and we've increasingly spent on marketing and global infrastructure to get ahead of the growth. So it's very consistent with what we laid out last December when did the pipe very consistent with I think the three quarters now that we've reported and and I think the teams and the amazing job working through with still challenging situations.
So really good tailwind really disciplined expense management, b, b, and incredibly opportunistic where possible and and hopefully that we've seen in the queue. Three results. So no pull forward on revenue just to be clear, it's really just.
Spending against those three pillars that we laid out back almost a year ago now.
And I think as you as you think about growth I mean.
One of the things I find the most exciting about that our company is there are so many levels of growth.
And for US, It's Clinton said, it's about being very thoughtful.
Ah disciplined and how to invest find those others of growth because there's so many of them.
Clearly international is a huge opportunity for us and you see that in this quarter, particularly in Asia, and that's despite flare ups and delta very in Covid closures.
New products is going to be a strong source of growth for the future and frankly M&A is completely.
Plan source of growth, but given the firepower we have in the cash we have on the balance sheet.
That could be a huge source of growth for us in the future tried to predict what which one is going to be the greatest is.
It's hard to say, because it's like asking which could you like the most.
But clearly international is that probably the most baked opportunity or the most advanced or mature opportunity for growth for us.
Thank you that's helpful and land could I ask one follow up question I think you mentioned higher pricing and delivery systems in the quarter, how 'bout stinks through some of the inflationary pressure in the power you see in your model to price into some of that in place and whether it's on the system sort of a consumable side. Thank you.
Hi, Yes, we actually share that previously as well we have a natural increasing ESP, partially because of the strong demand and really the Mick.
Correctly, we were able to pass on costs and also increasing price and we're certainly thinking that correctly go for next year as well so that that that's truly baking.
For the number of the guidance and as we think through for the future as well.
Thank you.
Our next question comes from the line of common welfare with Piper Sandler You May proceed with your question.
Hi, Thanks for taking our questions in class.
Working with you and they'll say it may be missed so first <unk> first fries can you just talk a little bit about the growth and delivery system that you saw is there any channel that stood out in the quarter I've been stronger than others and then how are you thinking about contributions from each channel going forward, especially guys you continue to grow your various.
Partnerships.
Yeah, it's great grin, thanks for the nice words.
If you think about what we've done the last three years, it's been quite a journey, but we've learned that.
To drive system places, we need to drive consumer demand. So we've kind of flipped this upside down and it really worked to go from just a pure <unk> back to be and so I think around the world as we're traveling with our distributors in our salespeople were planning to easier to sell hydro <unk> units.
Because more consumers are asking for it by name and were filling the existing ones up so people buy multiple systems. So that's really exciting I think it's a testament to where the brand starting to get a really nice.
Tipping point in terms of the channels are all growing really nicely and if there's new channels emerging as we see experience of beauty health happening I think results. The results of our relationship not just his performance incredibly strong, but with nordstroms, John Lewis and please as soon as of Australia really excited about these new and emerging business partners.
The one that's still depressed as our retail channel and I think that is really.
You did you see flare ups and as you see restrictions from government restrictions. So I think of anything that company as we emerge from the pandemic. Some of the Great News. We've had the last week, we should see all these channels growing and and really excited about it. It is important though the average hide official consumer if you remember gifts treatments and three two different location.
<unk>. So we haven't lost those consumers, we just moved in to different places and I can't wait to help our retail partners get back on a strong footing.
Great. Thank you and then.
You've invested a time and consumer awareness from Gulf relation to area in such a media is there any way that you can quantify how these investments maybe translate into new customers or increased spend from your current customers.
I understand it so maybe early days in these.
But is there any place in the five that'd be helpful. Thank you.
Yeah, what we do know.
The data for the last several years and said look at some some hydratase laws had high single digit awareness.
When people get it two thirds of them stick and one third become super consumers. So several years ago. We started the world tour during the pandemic redesign but.
Every cool semi that's called global Lucian and what we find is whether we're in Dubai in a pop up shop in London, and a pop up shop or one of our global Lucian stops the.
The data looks the same 85% of the people that we drive to one of our physical Activations I've never had a heck of facial and upon leaving 85%. They wanted to get 100 facial and so that has worked for us incredibly well so we track.
Roy on all of these events I think increasingly the company is getting more sophisticated about the cat to LTV relationship.
But it's safe to say, we wouldn't be doubling our marketing spend particularly in these type of activation that we didn't think it was well worth it. So we're not prepared to give the secret sauce, so to speak but I think it's it's really targeted very surgical like marketing that drives physical sales drives consumer awareness and that turns into consumable sales because they are going to our placement so it seems to be.
Really great ecosystem that.
That we found is very supportive smearing the consumer with greater physicians that are well trained through Asia connecting just gave an experienced benefit the treatment.
Thank you.
Our next question comes from the line of John Block with Stifel. You May proceed with your question.
Thanks, guys. Good afternoon, maybe just to start the midpoint.
2021 guidance I believe implies a flat <unk> June and it usually we see a <unk> seasonal uplift maybe if you could just talk to that a little bit as of conservatism. Just also talk about what would take it are arguably the high end of the range versus the low end and maybe just as a tack onto that lead us some of that a function of what you've.
Witness and a pack and are some of those APAC Kobe to headwinds beginning to abate here as we work our way throughout the fourth quarter.
Hi, Joan Yes, so I think there's definitely point.
A view when it comes to APEC market cause that's the market impact us and most significantly when it comes to the third quarter, you'll probably southern youth as well what happened to Shanghai D. C. I think China Sn market and there's a lot of impact.
That trend going on the west side of the equation. We also starting to see some ESF in Australia, but there's also other countries in APEC region, having a worsening trend. So overall, we do take that into consideration. We have shared with you previously would track are open and close pretty close to a fire.
Region, So we build that into our guidance if that makes sense.
Okay, Yep, certainly doesn't big I'll follow up with you a little bit more offline, there just dependent and sort of a follow up question. The global supply chain pressures that you guys mentioned I don't think an impact 2.0, I think you called it out what age 22, but.
Does it impact on how you rolled out in other words measuring the cadence of the rollout we've done some checks and there seems to be a really high want in the field from your current installed base to possibly upgrade so just as we think about the supply chain pressures will you be able to fill all demand call it new and potential upgrades in Europe.
Speaker 1: upgrades in your opinion as early as the first half of next year. Thanks guys.
Opinion as early as the first half of next year. Thanks, guys.
Hey, Joan Yes, so as you can appreciate.
Speaker 2: Hey, Joan. Yeah, so as you can appreciate, we're pretty thoughtful in terms of making the main delivery systems. Especially, we shared with you historically, we rolled out call it 3,500, 4,000, right? So from a numbers point of view, while the supply chain remains to be constrained for all of us, we can plan ahead. So a lot of the real supply chain issue we're seeing, it's more when it comes to shipping or delays, more so than shortage, if that makes sense.
[laughter] thoughtful in terms of making the main delivery systems, especially with shared with you have historically with rollout call at 3500 4000 right.
So from a numbers point of view, while the supply chain remains to be constrained for all of US. We can plan ahead. So a lot of the real supply chain issue. We're seeing it's more when it comes to shipping delays more so than shortage if that makes sense.
Speaker 3: It's not a component issue necessarily for us. So we should be okay...................
Yeah, it's not a component issue necessarily for us so we should be okay.
Perfect. Thanks, guys.
Our next question comes from the line of meet Hassan with Goldman Sachs. You May proceed with your question.
Speaker 4: Our next question comes from the line of Amit Hassan with Goldman Sachs. You may proceed with your question.
Speaker 5: I think this is still for me. Thanks for taking the question. Maybe my first one to follow on, which I was just asking the line of questioning. You know, we're starting to see case rates increase in parts of Europe , some of the key countries that you all called out as areas of strength in this quarter. I'm just wondering if you can kind of follow on the APAC logic and talk about what you're seeing at this point from movement restrictions or otherwise in Europe that might be implied in the force you've gotten.
Hi. Thanks. This is Phil for me. Thanks for taking my question, maybe my first one to fall on what time was just asking the line of questioning.
We're starting to see case rates increase in parts of Europe. Some of the key countries that you all called out as areas of strength in this quarter I'm. Just wondering if you can kind of follow on the APAC logic and talk about what you're seeing at this point from from movement restrictions are otherwise in Europe that might be implied in the <unk> guidance.
Speaker 6: Yeah, John , this plan, as you know, I mean, we've been through the worst, hopefully the worst of the pandemic. We've managed through it. We've never let that be an excuse. We just tried to shoot straight with the market on what our visibility is, but I think there's no doubt that the macro terms of health and wellness and certainly the benefits that we have as macro tailwinds chuck away.
Yes, John discipline look as you know.
We've been through the worst hopefully the worst of the pandemic. We've managed through it we've never let that be an excuse we just tried to shoot straight with the market on our visibility is but I think.
There is no doubt that the macro terms of health and wellness and certainly the benefits that we have is a macro tailwind snuck away. So even when we see markets like Japan that shuts down in Australia shutdown, we see demand come back in because we have such a.
Speaker 6: So even when we see markets like Japan that shuts down or Australia shuts down, we see demand come back. And because we have such a, you know, omni-channel approach, geographic diversity, no concentration, you know, I'm obviously going to be handing the keys over to Brent and team here, but I feel really comfortable that we've gotten very good at managing through this.
Of.
Omnichannel approach geographic diversity no concentration.
Obviously can be handed the keys over to Brent and team here, but I feel really comfortable that we've gotten very good at managing through this so I don't think there's any reason to.
Speaker 6: So I don't think there's any reason to to overthink that or to be, you know, too optimistic about it. We're giving you good guidance based forms to be up in the marketplace.
To over think or to be.
Two.
Mystic about it we're giving you good guidance based forms the out there in the marketplace.
Speaker 5: Okay, that's fair enough. My second question was around utilization of the systems broadly. It's more of a broad question, I think, about the seasonality that you anticipate in the business going forward. But as part of the talk track today, it sounded like there were a number of factors that were kind of impediments to what would have otherwise been even stronger growth. The crude mass, just treatments divided by systems.
Okay, that's fair enough.
Second question was around utilization of the system's broadly.
It's more of a broad question I think about the seasonality that you're at that's been in the business going forward, but.
As part of the top track today. It sounded like there were a number of factors that were kind of impediments to what would have otherwise been even stronger growth.
The crude map just treatments.
[noise] treatments divided by systems.
Speaker 5: Looks like a step down sequentially. Is that something that we should be anticipating going for that kind of two queue that's recue seasonality step down and then recovery and four queue? Is that what you all see in the underlying business or are there some one times or otherwise that we should be thinking about? Thanks for the question. Yes.
It looks like a step down sequentially is that something that we should be anticipating going forward that kind of <unk> seasonality sat down and then recovery and <unk> is that what you all see an underlying business or there's some one times or otherwise that we should be thinking about thanks for the question yet.
Speaker 6: Yes, I'll handle the high level the first bit. As you're well aware, Q2 and Q4 tend to be stronger than Q1 and Q3. That has been a bit
So.
A high level of the first that is you're well aware Q2, and Q4 tend to be stronger than Q1, and Q3 that has been a bit.
Speaker 6: unusual because of the pandemic and the shutdowns and also we have a market that's growing outside the US very fast. So I wouldn't, we're also laying down a lot of new systems which take a while to mature. So, you know, when you're laying down a lot of new systems and you've got a little bit of an abnormal cycle because of the pandemic, I think it'll normalize over time and we'll be prepared to give you more granular information that time.
Unusual because of the pandemic and the shutdowns and also we have a market that's growing outside of the us very fast so.
I wouldn't we're also laying down a lot of new systems, which take awhile to mature so.
And out a lot of new systems, and you've got a little bit of an abnormal cycle because the pandemic I think it will normalize over time and will be prepared to give you more granular information at that time.
Thanks for the question.
Speaker 4: Our next question comes from the line of Kyle Rose with canna cord you may proceed with your question.
Our next question comes from the line of Kyle Rose with Canaccord. You May proceed with your question.
Speaker 7: Thank you for taking the questions and I echo all the sentiments regarding...
Great. Thank you for taking the questions and I Echo all the settlements regarding.
Quinn's departure, so congratulations on everything you have accomplished.
Speaker 7: wanted to maybe just touch a little bit more on the acceleration comments that I think was asked previously. And the one thing, when I look back to where a guy had started the year and where we're at now, you've obviously had tremendous upside on a revenue perspective. And you've reinvested the majority of that back into the business. Obviously you're raising EBITDA here a little bit. What I'm trying to understand is, how should we think about leverage from a bigger picture perspective or over the medium term? When we think about some of the investments you're making with the global ERP and the RM system, just trying to really understand how much is one time in nature versus going to be an ongoing expense line we should be thinking about. Yeah, Carl.
Wanted to maybe just touch a little bit more on the acceleration comments that I think was asked previously and the one thing when I look back to where guidance started the year and where we're at now I mean, you've obviously had tremendous upside on a revenue perspective, and you've you've reinvested the majority of that back into the business, obviously, you're raising EBITDA here.
A little bit when I'm trying to understand is how should we think about leverage from a from a bigger picture perspective or over the medium term.
When we think about some of the investments you're making with the with the global ERP in CRM system, just trying to really understand how much.
Is one time in nature versus.
Going to be.
Speaker 7: And I'm going to spend flying we should be thinking about
Going expense line, we should be thinking about.
Speaker 6: Yeah Kyle, I'll start, thanks for the kind words, I'll start with the first part and hand it over to Leigh Ann. You know, from the start of this, from the pipe to the go public, the SPAC, we really wanted to be clear to investors that this was a gross story, that there were investments that we felt would accelerate shareholder value, and that we felt like we could set up a really nice revenue predictability and expense predictability that was heavy on investment. Traditionally this company, or historically, has been very Catholic light.
I'll start and thanks for the kind, where they'll start with the first part in the land.
The start of this from the place to go public. These back we really wanted to be clear to investors that this was a gross story that their investments that we saw it would accelerate shareholder value and that we felt like we could set up a really nice revenue predictability an expense predictability. There was heavy on investment traditionally this company or historically has been very Catholic.
Right. So if you remember we agreed that.
Speaker 6: So if you remember, we agreed that we, we, we, we, signal investors, we wanted to double the marketing spend and consumer work and the strides revenue. We wanted to get the new products out because those have been stopped as we went into the pandemic. So we have two new exciting products coming. And then we wanted to build out the international infrastructure. And then we said we, we focus on M&A. So I think, you know,
Signals vessels, we wanted the double the marketing spent in consumer awareness drives revenue, we wanted to get the new product cell.
Because those have been stopped as women in the Pandemics it with two new exciting products coming and then we wanted to build out the internationally infrastructure and then we'd said we focus on M&A. So.
I think.
Speaker 6: What Leigh Ann and I have committed to is that for the next 18 months to really think about this being a growth story, historically under private equity management we ran this at 25 to 30% EBITDA. There's no reason this company couldn't be run to really produce cash flows in that same level in the future. But this is a growth story out of the blocks and hopefully we've delivered upon our commitments and now we focus on the growth story.
What we animal I have committed to is that for the next 18 months to really think about this kind of growth story historically into private equity management, we rented the 25% to 30% EBITDA. There's no reason this company couldnt be run to really produce cash flows in that same level in the future. But this is a growth story out of the blocks and hopefully we've delivered upon our commitment.
And.
And now we focus.
Speaker 6: on that fourth pillar. So that's the meantime. I don't know if we have to want to add. Yeah, hey Kyle. So to add to that, I think we'd mention that briefly prior, if you really think about this current year, R&D has been a pretty big focus and we had mentioned we were buying speed, right? Because we're also wanting to speed up the process, accelerate it, and then we can start to test and learn some of the new product lines.
On that porch pillars. So that's the only answer you want to add in the <expletive>.
To add to that I think that nation that briefly prior if you really think about this trend year R&D has been a pretty big focus and we had mentioned we were buying speed right cause. We also wanted to speed up the process accelerated and then we can start to test them. There are some of the new product lines. I think Clinton is Oasis also shared usually awareness.
Speaker 2: I think Clint has always shared usually where at a three to five year cycle when it's a really significant, you know, long job or product, but then we're going to be active. So if you really think about this year, a big chunk of the R&D investment, you don't necessarily see the revenue until the following year. By the same token, you know, marketing that will continue as we see how we get a return investment.
325 year cycle. When he is a really significant lounge have a product, but then we're going to be active. So if you really think about this year at a big chunk of the R&D investment you don't necessarily see the revenue in queue of the following year by the same token marketing that will continue actually see how we get a return on investment.
Speaker 2: For international, as you mentioned earlier, it's a cloud solution, there's some investment into these ERP and other space and people we're investing heavy this year, which would really benefit the year after and go forward. We will anticipate the continual investment, go forward for the next couple of quarters, then we should be at a pretty good position to really leverage for the future.
The international as you mentioned earlier, it's a cloud solution. There are some investment into these ERP and other.
Space and people were investing heavy this year, which would really benefit.
The year after and go forward Willa anticipate the continuing investment.
Go for for the next couple of quarters now we should be at a pretty good position to really leverage.
For the future.
Thank you that that's very helpful.
Speaker 7: Thank you, that's very helpful. And then, we spent some time already talking about Sendeo and Glow and Go, but I wanted to touch on, if we could go back to Cara Veeb and Epicutus, I'm not sure if I'm pronouncing that right, but when I think about that, you're moving beyond the face into the scalp and now you're moving into the declatage and the neck. Trying to understand what uptake has been of both of those products and just how you expect to see utilization trend from a longer term perspective when we think about moving beyond just the face into some of those other areas.
And then we.
We spent the time already talking about.
<unk> in glowing go but I wanted to touch on just if we could go back to care of Eve and epic executed from I'm not sure if I'm pronouncing that right, but when I think about that you are moving beyond the face into the scalp and now you're moving into the Declan Taj in the neck trying to understand.
What uptake has been of of of both of those products and and just how you expect to see utilization trend from a longer term perspective, when we think about.
Moving beyond just the face and into the some of the some of those other areas.
Yes, Thanks call I'll start with the first part of it.
Speaker 6: Yeah, thanks, Kyle. I'll start with the first part of me. You know, I think three steps, 30 minutes, that's in your life. Hydrofatal has become really increasingly synonymous with kind of only the healthy skin category. You know, we cleanse, extract the hydrate, and I think the team's done a really nice job. I'm increasing consumer awareness about this being the first place to go. And I think beauty helped us.
Think three steps 30 minutes desk in your life Hydro <unk> become really increasingly synonymous with kind of owning the healthy skin.
Category, we cleanse extract rehydrate and I think it seems that a really nice job.
Increasing consumer awareness about this in the first place to go and I think beauty health is a natural extension of trying to increase that influence if you look at the data.
Speaker 6: a natural extension of trying to increase that influence. If you look at the data, and I know you know this healthy scalp is as big a market, Caribbean is a highly differentiated product. It works just like our skin health products, the medicine and the product, it makes everything else better, and healthy scalp is key to healthy new hair growth.
This.
Healthy skelf as as big of a market Caribees is a highly differentiated products. It works just like our skin health products of medicine and product that makes everything else better and healthy scalp is key to a healthy new hair growth. So I think that seems really excited about it.
Speaker 6: So I think the team's really excited about it. And I would consider Caribbean just the first product and a portfolio product for LBS. Epicutus is new. I think, you know, as we look to improve the system, improve the ingredients, launch new products, you know, skin is your largest organ, it's all over your body. And it's a really nice natural.
And I would consider caribou just the first product in a portfolio products royalty scale <unk> is new I think.
We look to to improve the system improve the ingredients launched new products.
Skin is your largest Oregon, it's all of your body and so it's a really nice.