The Beauty Health Company Q1 2023 Earnings Call

Operator: Good day, and welcome to The Beauty Health Company Q1 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Eduardo Rodriguez, Senior Director of M&A and Investor Relations. Please go ahead.

Good day and welcome to the Beauty Health Company first quarter 2023 earnings Conference call.

All participants will be in a listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on a touchtone phone.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Eduardo Rodriguez Senior director of M&A and Investor Relations. Please go ahead.

Eduardo Rodriguez: Thank you, operator. Good morning, everyone. Thank you for joining The Beauty Health Company's conference call to discuss our Q1 2023 financial results, which were released this morning and can be found on our website at beautyhealth.com. We also encourage you to join the webcast available on our website, which contains a presentation that will be referenced during this call. With me today are Beauty Health's President and Chief Executive Officer, Andrew Stanleick, and Chief Financial Officer, Liyuan Woo. Before we get started, I would like to remind you of the company's safe harbor language. 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 a further discussion of risks related to our business, see our filings with the SEC. This call will present non-GAAP financial measures.

Thank you operator, and good morning, everyone. Thank you for joining the beauty health companies conference call to discuss our first quarter 2023 financial results.

Were released this morning and can be found on our website at beauty health Dot com.

I also encourage you to join the webcast available on our website, which contains a presentation that will be referenced during this call.

With me today are beauty helps president and Chief Executive Officer, Patrick Stanley and Chief Financial Officer of land.

Before we get started I would like to remind you of the company's safe Harbor language.

Management may make forward looking statements, including guidance and the underlying assumptions forward looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.

Further discussion of risks related to our business see our filings with the SEC.

This call will present non-GAAP financial measures reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website.

Eduardo Rodriguez: Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. I will now turn the call over to Andrew.

I will now turn the call over to Andrew.

Andrew Stanleick: Thank you, Eduardo. Good morning, everyone. Thank you for joining Beauty Health's Q1 2023 earnings call. Today, we'll discuss the drivers of our Q1 results and our raised outlook for fiscal 2023. To begin, I will discuss our performance and accomplishments for Q1. Later, Leon will provide more detail on our financial results. After which, we'll be happy to take your questions. As always, I want to start by thanking our Beauty Health team members, our aestheticians, and provider partners who together make up our global HydraFacial nation for their continued hard work, passion, and creativity. During Q1, our team made meaningful progress against our five-point master plan, positioning us well to capture the tremendous growth we see ahead for our business globally. All in all, we delivered a solid 14% net sales growth for Q1, continuing a quarterly trend of double-digit revenue growth.

Thank you Eduardo good morning, everyone and thank you for joining beauty Health's first quarter 2023 earnings call.

Today, we will discuss the drivers about Q1 results and our raised outlook for fiscal 2023.

Again, I will discuss our performance and accomplishments for the first quarter later Leon will provide more detail on our financial results after which we will be happy to take your questions.

As always I want to start by thanking beauty health team members, a petition and provider partners, who together make up our global hydro facial nation for their continued hard work passion and creativity.

During the first quarter, our team made meaningful progress against our five point Master plan positioning us well to capture the tremendous growth. We see ahead for our business globally.

All in all we delivered a solid 14% net sales growth for Q1, continuing a quarterly trend of double digit revenue growth.

Andrew Stanleick: Q1 was highlighted by a particularly strong March, which was our second highest net sales generating month ever, demonstrating a building momentum ahead of the Q2 international launch of our Syndeo system and reinforcing our confidence in our 2023 guidance. Q1 performance overall was anchored by 21% year-over-year consumables net sales growth, a signal of the strong underlying demand for HydraFacial treatments as consumers continue to prioritize products and treatments that make them feel good about themselves. On slide five, you see that consumables net sales in the Americas grew a staggering 34% for the quarter, demonstrating the continued strong consumer demand for HydraFacial. In EMEA, we achieved 13% growth year-over-year. Excluding Russia's $1.2 million contribution to Q1 consumables net sales in 2022, EMEA's consumable growth was 35%. In APAC, COVID-related shutdowns in China created consumable sales softness in January and February.

Well, it's a one was highlighted by a particularly strong March which was our second highest net sales generating month ever.

Demonstrating a building momentum ahead of the Q2 international launch the Boston data system and reinforcing our confidence in our 2023 guidance.

Q1 performance overall was anchored by 21% year over year consumables net sales growth a signal of the strong underlying demand behind the facial treatments as consumers continue to prioritize products and treatments that make them feel good about themselves.

On slide five you see that consumables net sales in the Americas grew a staggering 34% for the quarter demonstrating the continued strong consumer demand for hydro facial.

In EMEA, we achieved 13% growth year over year.

Excluding Russia is $1 2 million contribution to Q1 consumables in itself in 2022, EMEA as consumable growth was 35%.

In APAC Covid related shutdowns in China created consumable sales softness in January and February However March saw a rapid acceleration as the country reopens.

Andrew Stanleick: March saw a rapid acceleration as the country reopened. On the delivery system side, net sales grew 9% year-over-year. As a reminder, we saw a very robust performance in Q1 2022 with the launch of Syndeo, which creates a difficult comparison for growth in Q1 of this year when combined with the loss of the Russia business. We saw a natural degree of holdback on the delivery systems from providers outside of the US in anticipation of Syndeo's international availability in Q2 2023. Going back to China, prolonged COVID closures during the early months of the quarter weighed on device sales performance. We saw a strong resurgence as of March. March shattered the previous monthly record for delivery system sales in China by two and a half times as providers readied to meet consumer demand.

On the delivery system side net sales grew 9% year over year.

As a reminder, we saw a very robust performance in the first quarter of 2022 with the launch of <unk>, which creates a difficult comparison for growth in the first quarter of this year when combined with the loss of the Russia business.

Additionally, we saw a natural degree of hold back on the delivery systems from providers outside of the U S. In anticipation of <unk> International availability in Q2 2023.

Finally going back to China prolonged COVID-19 closures during the early months of the quarter weighed on device sales performance. However, we saw a strong resurgence as of March in fact March shattered the previous monthly record for delivery system sales in China by two and a half times as provide is ready to meet consumer demand.

Andrew Stanleick: After visiting China in April, my first time since the pandemic, I am very optimistic about the potential of returning to pre-pandemic growth rates. The investments we made in China in 2022 have served us well, and I can attest that we have a strong team and operational infrastructure in place in order to seize the large opportunity in this strategic market. Even with these factors at play, the number of new delivery systems sold globally during the quarter grew 4%, and our ASP grew 17% year-over-year. As we have previously discussed, Q1 is historically our smallest quarter of the year due to the natural seasonality of our business. Looking ahead to Q2, we are very encouraged by the return of consumer and provider demand that we see from China and the early performance of Syndeo's international launch.

After visiting China in April My first time since the pandemic I'm very optimistic about the potential of returning to pre pandemic growth rates.

The investments we made in China in 2022 has served us well and I can attest that we have a strong team and operational infrastructure in place in order to see the large opportunity in the strategic market.

Even with these factors at play the number of new delivery system. So globally during the quarter grew 4% and our Asps grew 17% year over year.

As we have previously discussed the first quarter is historically, our smallest quarter of the year due to the natural seasonality of our business.

Looking ahead to the second quarter, we are very encouraged by the return of consumer and provider demand that we see from China and the early performance of <unk> International launch.

Andrew Stanleick: This, together with the investments we made last year and favorable market trends, gives us the confidence to raise our 2023 net sales target and reconfirm our 2023 adjusted EBITDA margin guidance and long-term 2025 targets. As we typically do, I would like to walk you through the progress we have made against our five-point master plan in Q1. Strategy remains consistent and is laser-focused on delivering profitable growth while moving with speed and agility to capture the tremendous opportunity we see ahead of us. Starting with our first pillar on slide seven, in Q1, we marked the first anniversary of the US launch of Syndeo, our revolutionary connected delivery system. On 30 March, we announced Syndeo's international availability to great excitement at the AMWC trade show in Monaco.

This together with the investments we made last year and favorable market trends gives us the confidence to raise our 2023 net sales target and reconfirm, our 2023, adjusted EBITDA margin guidance and long term 2025 targets.

As we typically do I would like to walk you through the progress we have made against our five point Master plan in Q1.

Strategy remains consistent and is laser focused on delivering profitable growth, while moving with speed and agility to capture the tremendous opportunity. We see ahead of us.

Starting with our first pillar on slide seven in.

In Q1, we marked the first anniversary of the U S launch of <unk>, a revolutionary connected delivery system.

March 30, we announced 10 days international availability to great excitement at the <unk> trade show and Monica.

Andrew Stanleick: Today, Syndeo systems are live in 14 of our direct markets, with the balance to follow by the end of the year. One year on from its debut, we have placed nearly 5,000 Syndeo systems across the world. We are very pleased with its uptake to date and expect growth to continue as we execute on our international Syndeo launch and capitalize on broader sector tailwinds. In fact, the MedSpa channel, the core of our business, is expected to grow at a 14% CAGR for the next five years in the US alone, and we'll continue our Syndeo rollout with the distributor markets in 2024. In the meantime, our Elite system will continue to be sold in our distributor markets, including those Elite systems that we refurbish in connection with our Syndeo trade-up program. Second strategic pillar is a commitment to investing in our providers.

Today.

Today's systems alive in 14 of our direct markets with the balance to followed by the end of the year.

One year on from its debut we have placed nearly 5000 <unk> systems across the world.

We are very pleased with its uptake today and expect growth to continue as we execute on our international since their launch and capitalize on broader sector tailwind.

Thank the med Spa channel a core of our business is expected to grow at a 14% CAGR for the next five years in the U S alone and we will continue us in their rollout with the distributor markets in 2024.

In the meantime, our elite system will continue to be sold in our distributor markets, including those of the leads that we refurbish and connection with us and their trade up program.

Second strategic pillar is our commitment to investing in our providers.

Andrew Stanleick: Our world-class training programs and experience centers are instrumental in fostering these connections. To date, we have trained more than 40,000 aestheticians globally, turning them into ardent brand evangelists. In fact, those who have gone through one of our training programs not only generate double-digit growth in consumable purchases, they are much faster to purchase a second system for their practice. These trainings teach our providers valuable skills and best practices when it comes to HydraFacial treatments and offer business building acumen to drive practice growth. This month, we launched a new business-focused curriculum, a mini beauty MBA, if you will, which targets MedSpa owners, medical directors, and physicians, further deepening our relationship with our community. These programs are taught virtually and in our experience centers across more than a dozen global cities, including New York, London, Paris, and Shanghai. The facilities act as more than just training hubs.

A world class training programs and experience centers are instrumental in fostering these connections.

To date, we have trained more than 40000 patients globally, turning them into Arden brand evangelists.

Thanks to those who have gone through one of our training programs not only generate double digit growth in consumable purchases. They are much faster to purchase a second system for their practice.

These trainings TJ will provide us valuable skills and best practices. When it comes to hydro facial treatments and offer business building acumen to drive practice growth.

This month, we launched a new business focused curriculum and many beauty NBA, if you will which targets med spa owners medical directors and physicians further deepening our relationship with our community.

These programs are taught virtually and in our experience centers across more than a dozen global cities, including New York, London, Paris and Shanghai.

The facilities anchored more than just training hubs they serve as showrooms to host influences editors and key opinion leaders in every region as I recently had the pleasure of opening our new experience center in Beijing, Our second in China After Shanghai.

Andrew Stanleick: They serve as showrooms to host influencers, editors, and key opinion leaders in every region. I recently had the pleasure of opening our new experience center in Beijing, our second in China after Shanghai. This state-of-the-art facility includes a live streaming studio for 24/7 production of localized, engaging content. With the reopening China, we are incredibly excited about the opportunity in this strategic market. We continue to build awareness for our much-loved HydraFacial brand. Primary objective of our marketing engine is to drive traffic to providers, bringing buzz and hype through their doors. You may have seen this in our birthday cake takeover last week, photos of which you can see on slide nine. We rang the Nasdaq opening bell, showed up on Times Square billboards, and seeded birthday cakes to top influencers around the world.

This state of the art facility includes a live streaming <unk> of $24 seven production of localized engaging content.

The reopening China, we are incredibly excited about the opportunity in the strategic market.

Next we continue to build awareness for our much loved hydro facial brand.

<unk> objective of our marketing engine is to drive traffic to providers, bringing buzz and hype through their doors.

You may have seen this in a birthday cake takeover last week voters of which you can see on slide nine.

<unk> the NASDAQ opening Bell showed up on times square Billboard and seeded birthday cakes to top influences around the world.

Andrew Stanleick: Together with our partners, we are creating unique, attention-grabbing moments that capture the public's imagination. Just last week, our teams collaborated with Sephora's top doors across the US to host exciting co-branded events. As a reminder, Perk by HydraFacial treatments are available at Sephoras in the US, Canada, the UK, and Southeast Asia. We carefully measure a variety of consumer engagement metrics, such as earned media value and Google Search Trends, to ensure the effectiveness of our marketing programs. As I mentioned earlier, consumer enthusiasm for our brand remains as strong as ever, with the two most recent quarters representing our top two highest consumables net sales quarters ever. You can see from the headlines generated and consumer awards earned that HydraFacial has never been hotter in the eyes of consumers.

Yes, there with our partners, we are creating unique attention grabbing moments that captured the public's imagination.

Last week, our teams collaborated with Sephora is top doors across the U S to host exciting co branded events.

As a reminder, <unk> by hydro facial treatments are available at Sephora in the U S, Canada, the UK and southeast Asia.

We carefully measure a variety of consumer engagement metrics, such as earned media value and Google search trends to ensure the effectiveness of our marketing programs.

As I mentioned earlier consumer enthusiasm for our brand remains as strong as ever with the two most recent quarters, representing our top two highest consumables net sales quarters ever.

You can see from the headlines generated and consumer awards and the hydro facial has never been hotter in the eyes of consumers as one beauty editor put it hydro facial is having a renaissance.

Andrew Stanleick: As one beauty editor put it, HydraFacial is having a renaissance. Concretely, you can see on slide 10 the results generated in earned media value, which grew 134% year-on-year, despite comping against the buzz around Syndeo's US launch in Q1 of last year. Today, HydraFacial is a leader in earned media value in aesthetics, with more than twice the combined EMV of the next five peer brands. We are reaching towards the level of conversation only seen by mainstream beauty brands, cracking the top 50 US skincare brands in March 2023, as measured by Tribe Dynamics. Our rising consumer awareness also shows through in organic Google Search Trends, which are up 13% year-on-year and 53% versus 2021. As we discussed last quarter, the planned elevated investments we made over the past two years were designed to build scalable global infrastructure.

<unk> greatly you can see on slide 10, the results generated in earned media value, which grew 134% year on year. Despite comping against the buzzer ramps in the U S launch in Q1 of last year.

Day Hydro facial is a leader in earned media value in aesthetics with more than twice the combined <unk> of the next five peer brands, we are reaching towards the level of compensation only seen by mainstream beauty brands cracking the top 50 U S. Skincare brands in March 2023, as measured by tribe dynamics.

A rising consumer awareness also shows through in organic Google search trends, which are up 13% year on year and 53% versus 2021.

As we discussed last quarter the planned elevated investments we made over the past two years, we are designed to build scalable global infrastructure.

Andrew Stanleick: One of the important elements of that investment was building our foundation in China, a critical growth market for us. With a TAM of at least two times that of the US, China is a massive untapped opportunity for Beauty Health. Recent reports estimate that China's middle and upper classes will increase by over 80 million to account for 40% of the country's total population by 2030. This is HydraFacial's prime target consumer. While the COVID lockdown persisted longer than any of us reasonably predicted, we are pleased to see a budding resurgence in China as economic activity returned in earnest starting in March. Enthusiasm for beauty and aesthetics treatments in China is rapidly growing, particularly for non-invasive and minimally invasive treatments. HydraFacial, with its gold standard positioning and relatively low cost of capital, is the perfect gateway product for providers to capitalize on this sector tailwind.

One of the important elements of that investment was building a foundation in China, a critical growth market for us with.

With a tam of at least two times that of the U S. China is a massive untapped opportunity for BD health.

Recent reports estimate that China's middle and upper classes will increase by over $80 million to account for 40% of the country's total population by 2030. This is hydro facials prime target consumer.

While the Covid lockdown persisted longer than any of us reasonably predicted we are pleased to see a budding resurgence in China as economic activity returned in earnest starting in March.

<unk> for beauty and aesthetics treatments in China is rapidly growing, particularly for non invasive or minimally invasive treatments IGF.

<unk> with its gold standard positioning and relatively low cost of capital is the perfect gateway product for providers to capitalize on this sector tailwind.

Andrew Stanleick: During my recent visit to the market with Lian, there was a palpable excitement around the launch of Syndeo and its potential to revolutionize the future of preventative skin health. In fact, nearly all our providers now report operating at full capacity, with traffic nearly back to pre-COVID levels. We look forward to sharing more on our performance in the region over coming quarters as we continue to bring HydraFacial to the opportunity-filled Chinese market. Moving on to our strategy as it relates to M&A on slide 12. Since our inception, our vision has been to build Beauty Health into a multi-brand platform through a build and buy strategy. We have a strong cash position to pursue inorganic opportunities, and we continue to be opportunistic and evaluate opportunities that provide differentiated products or services, are complementary to our platform and community, and are financially accretive.

During my recent visit to the market with Lan there was a palpable excitement around the launch of <unk> and its potential to revolutionize the future preventative skin health.

In fact, nearly all of our providers now report operating at full capacity with traffic nearly back to pre COVID-19 levels.

We look forward to sharing more on our performance in the region over coming quarters, as we continue to bring hydro facial to the opportunity filled Chinese market.

Moving on to our strategy as it relates to M&A on slide 12.

Since our inception, our vision has been to build beauty health into a multi brand platform through a build and buy strategy.

Have a strong cash position to pursue inorganic opportunities and we continue to be opportunistic and evaluate opportunities that provide differentiated products or services are complementary to our platform and community and are financially accretive.

Andrew Stanleick: A tangible example of our approach to M&A is our recent acquisition of SkinStylus, an FDA-cleared microneedling device that we discussed on our last earnings call. As an aesthetician-founded brand, SkinStylus fits seamlessly into our platform and expands our portfolio in the treatment room. I am pleased to report the integration of the business is now complete. While we continue to expect an immaterial contribution to net sales from SkinStylus in 2023, we are very excited about the potential upside in 2024 and beyond, the details of which we will share in due course. Before Liyuan begins her update, I would like to again thank our teams around the world for their strong performance. This quarter, we continued to drive double-digit top-line growth, announced the highly anticipated international launch for Syndeo, and integrated a new product into our platform.

A tangible example of our approach to M&A is our recent acquisition of skin status and FDA cleared micro needling device that we discussed on our last earnings call.

As an institution founded brand skin stylus fit seamlessly into our platform and expand our portfolio in the treatment room I am pleased to report the integration of the business is now complete.

While we continue to expect an immaterial contribution to net sales from skin pilots. In 2023, we are very excited about the potential upside in 2024 and beyond the details of which we will share in due course.

The fully and begins or update I would like to again, thank our teams around the world for their strong performance. This quarter, we continued to drive double digit topline growth announced the highly anticipated international launch for <unk> and integrated a new product into our platform.

Andrew Stanleick: Friends, we are seeing aesthetics play perfectly into our multi-brand ecosystem, supporting our strategy and validating our long-term growth runway. Continued strength of our consumables business, the growing consumer interest in our brand, and our unique third-party brand partnerships, when combined with the international expansion of our breakthrough Syndeo system and competitive mode of patented technology, fuels our ability to win in 2023 and beyond. With that, I will turn the call to Liyuan.

Trends, we are seeing aesthetics plays perfectly into our multi brand ecosystem supporting our strategy and validating our long term growth runway.

Continued strength of our consumables business the growing consumer interest in our brand and our unique third party brand partnerships when combined with the international expansion of our breakthroughs in their system and competitive moat of patented technology fuels, our ability to win in 2023 and beyond.

And with that I will turn the call to Leann. Thank.

Liyuan Woo: Thank you, Andrew, and thank you everyone for joining the call. I'd like to take a moment to echo Andrew's gratitude to our teams and partners around the world. We delivered double-digit top-line growth in Q1 against the timing of last year's US Syndeo launch. Today, I will walk you through our Q1 results, cost and balance sheet highlights, and finally, our outlook for the rest of 2023. Turning to net sales on slide 17, we delivered net sales of $86.3 million in Q1, up 14% year over year, driven by strong demand for consumables, which grew 21% year over year. The net sales result is in line with our plan as we comped against Syndeo's US launch from Q1 last year and reflects an unsurprising impact from January and February COVID-related shutdowns in China. Our delivery system segment grew by 9% year over year.

Thank you Angela and thank you everyone for joining the call I'd like to take a moment to echo Andrew's gratitude to our teams and partners around the world. We delivered double digit top line growth in the first quarter against a panel of last year's U S. MBA allowance today.

Today, I will walk you through our first quarter results cost and balance sheet highlights and finally, our outlook for the rest of 2023.

Turning to net sales on slide 17, we're delivering net sales of 86 <unk> in the first quarter up 14% year over year, driven by strong demand for consumables, which grew 21% year over year.

The net sales results in line with our plan I think count against the U S launch from Q1 last year and reflects the pricing impact from January and February the latest shutdown in China.

Our delivery system segment grew by 9% year over year three.

Liyuan Woo: There are three primary drivers behind the moderated growth. First, comping against the strong launch of Syndeo in the US last year. Second, the January and February COVID-related shutdowns in China. Third, providers outside of the US holding purchases of delivery systems in anticipation of the Syndeo international launch in Q2 2023. Addressing the first driver, Syndeo's surprise and successful launch in the US was in Q1 2022, making a year-over-year comparison difficult. On the second driver, as you recall, China broadly announced reopening at the end of last year. However, a wave of COVID infections shut down the market in January and February. Finally, in March, the market began rapidly recovering. As Andrew mentioned, in March 2023, we sold two and a half more China's previous high for systems sold in the month, giving us confidence around the opportunity in the region.

Three primary drivers behind a moderated growth.

Comping against a strong launch of <unk> in the U S last year.

So January and February according to the latest shutdowns in China and third providers outside of the U S holding purchases have delivery system in anticipation of the from their international launch in Q2 2023.

Addressing the first driver some bill surprise and successful launch in the U S. In Q1, 2022, making it year over year comparisons difficult.

The second driver as you recall, China broadly announced we're opening at the end of last year. However, a wave of Covid infection shut down the market in January and February finally in March the market began rapidly recovering as Andrew mentioned in March 2023.

We'll have more China's previous high for systems start in amount given us confidence around the opportunity in the region.

Liyuan Woo: Last, as is natural, international providers held purchases of delivery system in Q1 2023 in anticipation of Syndeo launch in Q2 2023. Importantly, Syndeo's international launch performance to date is promising, with strong traction across our launch market. As a reminder, Q1 historically contributes the smallest net sales and adjusted EBITDA to our fiscal year. We have expected and continue to expect our growth to be back-half weighted in 2023. This is consistent with our historical business model and what we contemplated in our guidance. The momentum we see to date gives us the confidence to raise our 2023 outlook to a range of $460 to 480 million in net sales and reiterate our 18% to 20% adjusted EBITDA margin target, which I will explain in further details in a moment. Turning to our regional performance on slide 17.

Last I think Natura international providers, how purchases have delivery system in Q1 2023 in anticipation of Sandy allowance in Q2 'twenty.

Importantly, <unk> International launch performance debate is promising with strong traction across our launch market.

As a reminder, the first quarter historically contribute the smallest net sales and adjusted EBITDA to our physical year.

We have expected and continue to expect our growth to be back half weighted in 2023. This is consistent with our historical business model and what we contemplated in our guidance.

The momentum we see today gives us the confidence to raise our 2020 outlook to a range of $4 $60 million to $480 million in net sales and reiterate our 18% to 20% adjusted EBITDA margin target, which I will explain in further detail in a moment.

Turning to our regional performance on Slide 17, you will see the America segment, we're strongest the 19% year over year net sales growth.

Liyuan Woo: You will see the America segment was strongest, with 19% year-over-year net sales growth. Growth in this region was driven by strong consumables net sales, which grew 34% year-over-year. A testament to the continued consumer demand for HydraFacial treatments. EMEA followed with growth of 10%, driven by pre-launch demand for refurbished Elite system and providers holding orders in anticipation of Syndeo's Q2 2023 launch. As Andrew mentioned, EMEA's performance was impacted by a lack of net sales from Russia in Q1 2022. Excluding Russia's 2022 contribution of approximately $1.5 million, EMEA's total net sales growth was 20% year-over-year. Turning to APAC. Despite the COVID shutdowns in China for the first two months of the quarter, we achieved growth of 6% year-over-year. As Andrew mentioned, we're encouraged by the recovery we have seen starting in March. Briefly touching on our KPIs on slide 18.

In this region was driven by strong consumer both net sales, which grew 34% year over year I pass the mic to the continued consumer demand for hydro facial treatments.

EMEA fallout with growth of 10% driven by prelaunch demand for refurbished elite system and provide us holding orders in anticipation of <unk> Q2, 2020 launch as Andrew mentioned EMEA performance was impacted by a lack of sales from Russia in Q1 2022, excluding <unk>.

<unk> 2022 contribution of approximately $1 5 million EMEA total net sales growth was 20% year over year.

Turning to APAC.

The Covid shutdowns in China for the first two months of the quarter we achieved.

<unk> growth of 6% year over year as Andrew mentioned, we are encouraged by the recovery we have seen starting in March.

Briefly touching on our Kpis on slide 18, we ended the first quarter with a net installed base of 27406 delivery system, an increase of 26% year over year consistent with what we discussed last quarter with our system and churn and become active again in Q1.

Liyuan Woo: We ended Q1 with a net install base of 27,406 delivery systems, an increase of 26% year-over-year. Consistent with what we discussed last quarter, we saw systems unchurn and become active again in Q1 in connection with China's recovery in March. Excluding trade-ups, we placed 1,636 new delivery systems in Q1, representing growth of 4% year-over-year, despite lapping Syndeo's US launch. Important to note, we expect trade-up volumes for Q2 2023 to materially step up from Q1 2023 as we execute our Syndeo international launch strategy and drive continued adoption globally. This would follow a similar pattern to last year's Q2, with the exception of smaller contribution for international. Our ASP for the quarter grew 17% to $25,099, primarily driven by the increased mix of Syndeo sold in Q1 2023 compared to the same period last year.

In connection with China's recovery in March.

Excluding trade ups were placed 16 36, new delivery systems in the first quarter representing growth of 4% year over year. Despite lapping some deals you asked lunch in.

According to note, we expect trade up volumes for Q2 2023 to materially step up from Q1 2023, as we execute our spin day, our international launch strategy and drive continued adoption globally.

This would follow a similar pattern to last year's Q2 with the exception of smaller contribution for international.

Our ASP for the quarter grew 17% to 25099, primarily driven by the increased mix of Sandell sold in Q1 of 2023 compared to the same period last year as a reminder, from Dell launched in the U S. In early.

Liyuan Woo: As a reminder, Syndeo launched in the US in early March 2022. As we have stated before, while full-year ASP growth will be heavily influenced by the extent of trade-up systems sold, we continue to expect a high single-digit increase in the blended ASP for the year. Turning to slide 19. I would like to take a moment to remind you why we're so excited about our strategy and the future growth of our business. The top chart shows the annual consumables revenue per delivery system in the MedSpa channel, the core of our install base. As you see, delivery system revenue productivity grows over time as providers utilize their systems more often, upsell booster treatments, and expand treatments beyond the face. We're just getting started in unlocking the embedded potential of our install base.

Early March 2022.

As we have stated before while full year ASP growth will be heavily influenced by the extent of tradeoffs system installed.

We continue to expect high single digit increase in the blended ASP for the year.

Turning to slide <unk> I would like to take a moment to remind you why we're so excited about our strategy and the future growth of our business.

The top chart shows the annual consumable revenue per delivery system in the mass channel.

The core of our install base.

As you'll see in the array system revenue productivity growth overtime as providers utilize their systems more often as a booster treatments and expand treatments beyond the fee. We're just getting started in unlocking the embedded potential installed base.

Liyuan Woo: The chart is a demonstration of the long-tailed lifetime value each one of our system placements represents, a promising source of upside for consumables net sales in the future as our install base matures. On the bottom chart, you can see how long it takes for our MedSpa install base to ramp up its productivity. As we have shared before, it takes at least four quarters before meaningful gains are seen. As we continue to rapidly expand and build our footprint amidst a massively growing category, our install base is getting younger, shifting where we fall on these curves to the left. This means using a per system utilization metrics today understates the true potential and health of our business, as we believe our install base will ultimately mature and become more productive over the long term. Moving to slide 20.

The chart is the demonstration of the long tailed lifetime value each one of our system placements represent.

Promising source of upside for consumer growth net sales in the future as our installed base matures.

On the bottom chart, you can see how long it takes for mats by installed base to ramp up productivity as we have shared before it takes at least four quarters, if a meaningful both our scheme.

As we continue to rapidly expand.

And build our footprint and Mr. Massively growing category, our installed base is getting younger shifting where we fall on these curves to the left this means using our per system utilization metrics today understate, the true potential and health of our business as we believe our installed base while auto.

Only mature and become more productive over the long term.

Moving to slide 20 for the first quarter, we reported a GAAP gross margin of 62, 7% or 70% on an adjusted basis.

Liyuan Woo: For Q1, we reported a GAAP gross margin of 62.7%, or 70% on adjusted basis. Gross margin declined year-over-year on the GAAP basis due to $3 million of inventory optimization related write-offs, which was added back to adjusted gross margin. As we all know, the supply chain environment has been volatile since the start of the pandemic, forcing us to be resourceful with components to meet growing demand. As mentioned before, this means we have been inefficiently assembling systems during the supply chain volatility. Now that the supply chain is stabilizing, we are opportunistically value engineering our materials and processes by scrapping components in favor of more efficient options. We believe this will optimize our operations in the long term, but it does come with near-term expenses as we streamline our inventory.

This margin decline year over year on a GAAP basis due to a $3 million of inventory optimization related write offs, which was added back to adjusted gross margin as.

As we all know the supply chain environment has been volatile since the start of the pandemic, forcing us to be resourceful with component to meet growing demand as mentioned before this means we have been in efficiently assembling systems during the supply chain volatility.

Now that the supply chain and stabilizing we are opportunistically value engineering, our materials and processes by scrapping components in favor of more efficient option. We believe this will optimize our operations in the long term, but it does come with near term expenses as we streamline our inventory.

Liyuan Woo: On adjusted basis, gross margin declined by 133 basis points, primarily driven by the sale of lower margin refurbished Elite systems during the pre-Syndeo international launch period. We continue to expect year-over-year gross margin expansion for fiscal 2023 as part of a journey towards our targeted 18% to 20% EBITDA margin. Given the similar trade-up dynamics with launching Syndeo, we expect the gross margin for H1 2023 to be pressured, as it was in H1 2022, with expansion expected sequentially in H2 2023 with increased volume. Moving to the bottom right, we reported adjusted EBITDA of -$0.5 million for the quarter. As mentioned earlier, international launch costs for Syndeo were incurred this quarter. Given the Q2 2023 launch timing, the associate net sales upside is expected in Q2 and beyond.

On an adjusted basis gross margin declined by 133 basis points, primarily driven by the sale of lower margin refurbished Ub systems during the pre <unk> and Dale International launch period.

We continue to expect year over year gross margin expansion for fiscal 2023 as part of a journey towards our target of 18% to 20% EBITDA margin, even if similar tradeoff dynamics with launching and Bill we expect the gross margin for the first half of 'twenty three to be pressured as it was in the first half of 2022.

With expansion expected sequentially in the second half of 2023 with increased volume.

Moving to the bottom right, we reported adjusted EBITDA of a negative <unk> 5 million for the quarter as mentioned earlier international launch costs for <unk> were incurred this quarter, but given the Q2 2023 launch timing the associate net sales upside is expected in the second quarter and beyond.

Liyuan Woo: This, along with the OPEX burden created by the January and February shutdowns in China and the lower gross margin inherent in refurbished unit sales impacted our profitability for the quarter. Our adjusted EBITDA also included $1 million of patent litigation expense and $2.9 million of severance and restructuring expenses as we continue to optimize for profitable growth. I want to spend a few moment on slide 21 to remind you of the seasonality of our business, which bears repeating, not only as we look at Q1 performance, but also our expectations for the full year of 2023. On the left, you will see our sequential net sales growth patterns throughout the year. Q1 sequential growth rate represents a trough for the year, resulting in lower net sales compared to the preceding Q4 and the lowest quarter of the year. As we mentioned previously, this Q1 is no different.

This along with the Opex Bert and created by the January and February shutdowns in China, and a lower gross margin inherent in refurbished division itself impacted our profitability for the quarter.

Our adjusted EBITDA also included $1 million of patent litigation expense and $2 9 million of severance and restructuring expenses as we continue to optimize for profitable growth.

I want to spend a few moments on slide 21 to remind you of the seasonality of our business, which bears repeating not only as we look at Q1 performance, but also our expectations for the full year of 2023.

On the left you will see a sequential net sales growth pattern throughout the year Q1 sequential growth rate represents a trough for the year, resulting in lower net sales compared to the preceding Q4 and the lowest quarter of the year.

As we've mentioned previously this Q1 is no different.

Liyuan Woo: With China's shutdowns in January and February and international providers holding back in anticipation of Syndeo's Q2 2023 launch, amplifying the sequential seasonality. Q2 typically gains momentum sequentially due to the marketing activities conducted in Q1. As a reminder, Q2 2022 saw a one-time $23.3 million benefit from trade-up demand in connection with the US Syndeo launch. With the Syndeo international launch now in full steam, we expect Q2 2023 to experience a similar but less pronounced one-time spike in trade-up demand. Q3 continues to build on Q2's momentum with relatively moderate sequential growth excluding trade-ups. This is due to a seasonal summer slowdown that is broadly applicable across the beauty sector, particularly in EMEA. Lastly, Q4 builds off Q3 and is historically our highest dollar quarter of the year.

With China's shutdown in January and February I international providers holding back in anticipation of <unk> Q2, 2023 launch amplify the sequential seasonality.

The second quarter typically like gains momentum sequentially due to the marketing activities conducted in the first quarter.

As a reminder, the second quarter of 2020 to sell a one time $23 3 million benefit from trade up demand in connection with the U S and they will launch with.

<unk> International launch now in <unk>, We expect Q2 2003, two experienced a similar but less pronounced one time spike in trade up demand.

Q3 continues to build in Q2 with momentum with relatively moderate sequential growth. Excluding trade ups. This is due to our seasonal summer slowdown that is broadly applicable across the beauty sector, particularly in EMEA.

Lastly, the fourth quarter of <unk> Q3.

Historically, our highest dollar quarter of the year and benefits from our peak in consumer demand holiday promotion and the desire, but many of our partners to utilize remaining capex budget for the year.

Liyuan Woo: It benefits from a peak in consumer demand, holiday promotions, and the desire by many of our partners to utilize remaining CapEx budget for the year. Moving to slide 22. I wanted to reiterate how to think about the sequencing for our profitability during the year. We turn on our strategic marketing investments early in the year, which subsides as we progress throughout the year. Our biggest and most productive trade shows occurs in H1, and the leads generated from these strategic investments support our funnel and fuel the stronger sales and margin historically seen in H2 of each year. On this slide, you can see the result of this quarterly sequencing in adjusted EBITDA contribution in 2022. Similar to last year, Q1 generates a minimal amount of the full year's EBITDA.

Moving to slide 22.

Wanted to reiterate how to think about the sequencing for our profitability during the year.

We turn around our strategic marketing investments early in the year, which sub size as we progress throughout the year.

Our biggest and most productive tradeshows occur in the first half of the year and the leads generated from these strategic investments support our funnel a field of stronger sales and margin historically see in the second half of each year.

On this slide you can see the result of this quarterly sequencing in adjusted EBITDA contribution in 2022, similar to last year Q1 generate a minimal amount of the full year's EBITDA.

Liyuan Woo: Given our substantial fixed cost base, the net sales seasonality we just walked through naturally makes us a H2-weighted business for EBITDA flow-through. We extract operating leverage from the higher revenue in the H2, and our marketing spend moderates as the year progresses. We expect our 2023 quarter to EBITDA contribution to follow a roughly similar cadence as shown on this slide, with the bulk of the EBITDA generated in the H2 as is customary for our business. Important to note, and as we just discussed, Q2 2022's EBITDA contribution reflects a higher trade-up volume than we currently anticipate for Q2 2023. I will now turn to slide 23 to walk through our cost details. Selling marketing expenses for the Q1 were $38.7 million compared to $36.4 million in the same period last year.

Given our substantial fixed cost base, the net sales seasonality with just walked through naturally makes as a back half weighted business for EBITDA flow through.

Extract operating leverage from the higher revenue in the back half of the year and our marketing spend moderate as the year progresses.

We expect our 2023 quarterly EBITDA contribution to follow a roughly similar cadence as shown on this slide where the bulk of the EBITDA January in the back half of the year as is customary for our business.

Important to note.

As we just discussed Q2 2020, EBITDA contribution reflects a higher trade up volume than we currently anticipate for Q2 2023.

I will now turn to slide 23 to walk through our cost detail Sal.

Marketing expenses for the first quarter was $38 7 million compared to $36 4 million in the same period last year. The increase is primarily due to higher personnel related costs, including sales Commission expense.

Liyuan Woo: The increase is primarily due to higher personnel-related costs, including sales commission expense. Selling and marketing expenses as a percentage of revenue decreased 342 basis points year over year, partially due to the lapping of Senzao US launch costs and increased operating leverage from higher revenue. Q1 G&A expenses of $30.4 million were $4.1 million higher year over year, primarily a result of an increase in software expenses, including certain contract termination costs and professional service fees, including patent litigation expenses, partially offset by lower recruiting-related expenses. On a run rate basis, our G&A expenses continue to hover around $20 million to $22 million. Lastly, R&D costs continue to remain relatively flat. I will now move to our balance sheet highlights on slide 24. We ended Q1 with roughly $532.3 million in cash and cash equivalents.

Selling and marketing expenses as a percentage of revenue decreased 342 basis point year over year, partially due to the lapping of Sunbelt U S launch costs and increased operating leverage from higher revenue.

Fourth quarter, G&A expenses of $30 4 million or $4 1 million higher year over year, primarily a result of an increase in software expenses, including certain contract termination costs and professional service fees, including patent litigation expenses, partially offset by lower recruiting related expenses.

On a run rate basis, our G&A expenses continued to hover around 20% to $22 million.

Lastly, R&D cost continued to remain relatively flat.

I will now move to our balance sheet highlights on slide 24.

We ended the first quarter with roughly $532 $3 million in cash and cash equivalents.

Liyuan Woo: We remain well-capitalized to execute on our growth initiatives and continue to remain optimistic about M&A that accelerates the vision of our platform. As discussed during the last earnings call, we continue to make working capital investments during Q1 in anticipation of Senzao's international launch. With the launch now upon us, we expect to reduce our working capital balance going forward, primarily by working through our existing inventory. As we mentioned before, we expect to normalize to approximately one to two quarter worth of inventory on hand by the end of the year. Finally, our diluted share count at the end of Q1 stood at approximately 132.6 million. In April, we completed the second $100 million tranche of our accelerated share repurchase program. With the $200 million of total shares repurchases announced last year, we retired approximately 18.8 million shares at an average price of $10.78 per share.

We remain well capitalized to execute our growth initiatives and continue to remain optimistic about M&A that salary submission of our platform.

As discussed during our last earnings call, we continue to make working capital investments during the first quarter in anticipation of some deals international launch with the launch now upon us we expect to reduce our working capital balance going forward, primarily by working through our existing inventory as we mentioned before.

For <unk>, we expect to normalize to approximately one to two quarter or some inventory on hand by the end of the year.

Finally, our diluted share count at the end of first quarter stood at approximately $132 6 million.

In April we completed the second 100 million tranche of our accelerated share repurchase program with a $200 million of total shares repurchases announced last year. We retired approximately $18 8 million shares at an average price of $10 78 per share.

Liyuan Woo: As Andrew mentioned, we continue to have strong underlying consumer demand. The global traction for Syndeo has been strong, and China has shown a rapid recovery since March. These trends are part of what give us the confidence to deliver the implied year-to-go net sales growth shown on page 25. As I mentioned earlier, we expect value engineering to create gross margin expansion and top-line strength to deliver operating leverage down the P&L, combining to reach an 18% to 20% adjusted EBITDA margin for the full year. As Andrew mentioned, we remain confident and on track to deliver our 2023 commitments. We continue to deliver double-digit year-over-year growth, fueled by our marketing efforts, driving sustained consumer demand throughout our markets and sector tailwinds. The execution of the Syndeo international launch to date has been promising, and we look forward to providing you with an update during our next earnings call.

As Andrew mentioned, we continue to have strong underlying consumer demand the global traction for some bill has been strong and China has shown a rapid recovery since March.

Trends are part of what gave us confidence to deliver the implied ear to go net sales growth shown on page 25, as I mentioned earlier, we expect value engineering to create gross margin expansion and top line strength to Delever operating leverage down the P&L combining to reach an 18% to 20% adjusted <unk>.

EBITDA margin for the full year.

As Andrew mentioned, we remain confident and on track to deliver our 2023 commitments, we continue to deliver double digit year over year growth fueled by our marketing efforts driving sustained consumer demand throughout our markets and sector tailwind.

The execution of the <unk> International launch to date has been promising and we look forward to providing you with an update during our next earnings call.

Liyuan Woo: Andrew and I will now gladly take your questions.

Andrew and I will now gladly take your questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. In the interest of time, please limit yourself to one question. At this time, we will pause momentarily to assemble our roster. The first question today comes from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

We will now begin the question and answer session.

To ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

In the interest of time, please limit yourself to one question.

At this time, we will pause momentarily to assemble our roster.

The first question today comes from Karen <unk> with Piper Sandler. Please go ahead.

Korinne Wolfmeyer: Good morning, thanks for taking the questions. I'd like to touch a bit on one, what you saw throughout the months of the quarter. You noted that there were some maybe customers that were waiting to purchase for Syndeo. Did you see those customers come back and those purchases come back now that Syndeo has been launched? As we look to, say, March, April, and even the early parts of May, can you comment on what kind of trends you've been seeing in demand, both on the delivery system side and consumable side, and particularly in China, has that strong demand you saw in March continued throughout April and May? Thank you.

Hey, good morning, and thanks for taking the questions. So I'd like to touch a bit on kind of what you saw throughout the months of the quarter.

You noted that there was some maybe customers that were waiting to purchase for us.

Did you see those customers come back and those purchases come back now that from day. One has been launched and then as we look to say March April and even the early parts of Mei can you comment on what kind of trends you've been seeing in demand both on the delivery system side, and consumable side and particularly in China, how is that going.

The strong demand you saw in March continued throughout April and May Thank you.

Andrew Stanleick: Good morning, Korinne, thank you for the question. It's spot on. Overall, we delivered a really solid Q1 in line with our plan. You're absolutely right. It was a build. We always had that normal seasonality in Q1, which we had in our plan, and if you look back on previous years, it's very consistent. We did see it build. As we've said, March was actually our second-highest month ever, which we're very happy with considering that's before the international launch of Syndeo. Of course, driven by strong really across the board, but consumable, particularly across the board, performed well. That gave us the confidence, really, of what we saw going into April globally in all markets, especially in China, where Liyuan and I have just visited to obviously raise the guidance for the year, and everything we've seen into Q2 is really positive.

Good morning, Kevin and thank you for the question it's spot on so.

Overall, we delivered a really solid Q1 in line with our plan.

Absolutely right. It was a build we always have that normal seasonality in Q1, which we had in our plan and if you look back on previous years, it's very consistent and we did see it build so as we say in March was actually our second highest month ever which is and we're very happy with considering depths before the international launch of <unk>.

<unk>.

Of course, driven by strong really across the board, but consumables, particularly across the quarter performed well so that gave us the confidence really of what we saw going into April globally in all markets, especially in China, where Leon and I just visited obviously raise the guidance for the year and everything we've seen into Q2 is really paused.

Andrew Stanleick: Of course, Syndeo's got off to a tremendous start everywhere since we launched it early in Q2.

It is.

<unk> got off to a tremendous start at worse since we launched it.

Early in Q2.

Operator: The next question comes from Margaret Kaczor with William Blair. Please go ahead.

The next question comes from Margaret Kaczor with William Blair. Please go ahead.

Margaret Kaczor: Hey, good morning, everyone. Thanks for taking the questions. I wanted to maybe go a little bit deeper on some of the commentary on March and China. I know Korinne had just asked that. Was that primarily Shanghai, or are you getting some benefit from Beijing? Is there any commentary, I guess, that you could provide on the new experience center, whether that's driving demand and even a sense of scale, I guess, relative to what you saw early days in Shanghai as an example? Thanks.

Hey, good morning, everyone. Thanks for taking the question.

I wanted to maybe get a little bit deeper.

Some of the commentary on margin in China, I know, Chris I, just asked that but was that primarily Shanghai or are you getting some benefit from Beijing and is there any commentary I guess that you could provide on the new experience center, whether that's driving demand in that sense.

Scale I guess relative to what you saw now early days in Shanghai as an example.

Andrew Stanleick: Good morning, Margaret, and thanks for joining us. Yeah, no, exactly. In terms of China, of course, January was very much we saw very impacted by COVID, February, Lunar New Year. Really from March onwards, we saw a tremendous bounce back, both with existing providers turning back on the machines, retraining staff, making orders. Of course, going into Q2, of course, the launch of Syndeo. We've seen the pickup, of course, in Shanghai, Beijing, Shenzhen, but really across the board, Margaret. I think what we're finding all over China is after a couple of years of lockdown, there's a real hunger for aesthetics, beauty, and skincare treatments. We were really, really felt very positive when we spent a week or so over there.

Yeah.

Good morning, and thanks for joining US yes, no exactly in terms of China of course January with very much. We saw very impacted by Covid February lunar new year, but really from March onwards, we saw a tremendous bounce back both with existing providers turning back on the machines retraining staff, making orders.

But then of course going into Q2 of course.

The launch that we've seen the pick up of course of course in Shanghai, Beijing, Shenzhen, but really across the board Margaret I think what we're finding all over China as of a year or a couple of years of Lockdown is a real one.

Hunger for aesthetics beauty and skincare treatments.

We have really really felt very positive for me and I spent a week in some way for that.

Andrew Stanleick: Of course, the experience centers have really helped us in rapidly training those staff who have obviously been locked down and bringing them up to speed on HydraFacial and, of course, the new Syndeo system. That's been working hard. The other great thing about the new experience center in China is that we've built a live stream studio within it so we can make content 24/7 to live stream, and you know that's a key revenue driver in China. Yeah, we're really buoyed with what we saw there.

Of course, the experience centers that really help us in rapidly training those staff.

<unk>, obviously been locked down and bringing them up to speed on hydro facial and of course, the new C&I system. So thats been working.

The other great thing about the new experience center in China is that we've built a livestream studio.

Within it so we can make content 24, 7% the live stream and you know that's a key revenue driver in China. So yes, we're very bullish on what we saw there.

Operator: The next question comes from Olivia Tong with Raymond James. Please go ahead.

The next question comes from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong: Great. Thank you. Good morning. It sounds like you had quite a strong April. Could you talk about the key drivers to that, maybe some quantification in terms of exit rate in the March quarter, and how April into May has changed relative to that exit rate in March, or compare or contrast Jan, Feb performance versus April and first half of May? My second question is around consumables, because that seemed to be lower than expected. I get that China was obviously locked down at the beginning of the quarter. Was that demand lower than you had anticipated, and was it all Asia, or was the makeup of sales in the US and Western Europe different than you had expected going into the quarter? Thanks so much.

Great. Thank you good morning.

It sounds like you had a quite quite a strong April .

So could you talk about the key drivers to that maybe some quantification in terms of exit rate in the March quarter, and how April into May has changed relative to that exit rate in March or.

Compare contrast, <unk> performance versus April and first half of May.

And then my second question is around consumables, because that that seem to be lower than expected I guess, but.

There was obviously, China was obviously locked down at the beginning of the quarter.

Was that demand.

Lower than you had anticipated and was that all Asia or some makeup of sales in the U S and western Europe different than you had expected going into the quarter. Thanks, so much.

Andrew Stanleick: Good morning, Olivia. I'll kick off and perhaps also hand over to Liyuan Woo. I think we've spoken, all of us, many times about the real natural and consistent seasonality we had in our business in Q1. It was in line with what we planned with that slower January, slower February, and then a very strong resurgence bounce back in March and into April. I think what we were really happy with overall, it was a solid quarter, is just that we often talk about, and you and I have talked about this before, the barometer of the health of our business, of course, that's strong consumables growth and achieving +21% overall for the quarter, +35% in Americas. When you think of EMEA, if you exclude the Russia business, which we lost the year before, that's another 35%, and APAC there, 22%. APAC was very back-weighted.

Good morning, Olivia I'll kick off and perhaps also a handover to gilead. So we I think we spoke and all of US many times about the.

The room next rolling consistent seasonality, we had in our business in Q1.

It was in line with what we planned with that slower January slow in February and then a very strong resurgence bounce back in March and into April I think what we're really happy with overall a solid quarter as just we often talk about and you and I have talked about this before the barometer of the health of our business of course that strong consumables.

Right.

Achieving plus 21% overall for the quarter, plus 35% and Americas. When you think of EMEA. If you exclude the Russia business, which we lost the before that's another 35%.

Pak <unk>.

22% APAC was very back weighted so you can imagine the growth, which we got in March was absolutely tremendous but of course January and February was slower and we've seen that go into Q2 and of course buoyed by the launches and Dave do you think of the international markets. Olivia We've had no new news on the <unk>.

Andrew Stanleick: You can imagine the growth which we got in March was absolutely tremendous. Of course, January and February was slower. We've seen that go into Q2, and of course, buoyed by the launch of Syndeo. If you think of the international markets, Olivia, we've had no new news on the system side for over five years, and a lot has happened in that time. To go in with a big story, a big marketing push all around the big trade shows, which are always very Q1 and early Q2-weighted, there's a lot of excitement, and that's translated into revenue and consumables pickup.

Systems side for over five years and a lot of happened in that time, so to go into the Big story, a big marketing push all around the big trade shows it's always very Q1, and early Q2 weighted theres a lot of excitement and that's translated into revenue and consumables pickup.

Liyuan Woo: Yeah, Olivia, just to build on that, from a launching dynamics point of view, as you can appreciate, it's almost destroying it with maybe investing in Q1. We're launching. As part of the launch, we sold a lot of these refurbished Elite, almost as saying you can trade it up down the road. As you can appreciate, these refurbished Elite, if we did sell Syndeo versus that, you can see a potential 46 million top line and complete flow-through to the EBITDA margin as well. Of course, those revenue generation would actually take place in Q2. Again, marketing investment, a lot of the investments were made in Q1. The revenue really comes through build starting in Q2.

Yeah, I'll leave it just to build on that from a launching dynamics point of view as you can appreciate it it's helpful.

These joined it would may be investing in Q1, and we are launching as part of the lounge, we sold a lot of these refurbish elite.

I was just saying you can trade it up down the road. So as you can appreciate.

<unk> refurbish elite if if we did sell some deal versus that you can see a potential $46 million topline and complete flow through to the EBITDA margin as well of course, those revenue generation would actually take place in the second quarter. So again marketing investment a lot of investments were made in Q1.

But then the revenue really comes through a build starting in Q2 now in terms of the consumables. The only other comment I'll make is I think the turn really confused folks last time, when we met because of the fact that China was shutting down or measuring if someone haven't purchased consumables over 12 months with.

Liyuan Woo: Now, in terms of the consumables, the only other comment I'll make is I think the churn really confused folks last time when we met because of the fact that China was shutting down, and we're measuring if someone hasn't purchased consumables over 12 months, we deem them churned. The fact that China came back, that's why you're actually seeing the install base increase because those stores or locations start to opening again. I think, when you see it in the grand scheme of things, the other thing to keep in mind, we had shared with the market we only run consumable promotions for the most part twice a year, right? We do it during Black Friday, then we do again HydraFacial Birthday or Mother's Day right around May.

Deem them churn the fact that China came back that's why you're actually seeing the installed base increase because of those stores are locations start opening again, so I think when you see it in the Grand scheme of things. The other thing to keep in mind, we had shared with the market with only run consumable promotion for the most part twice a year I would do it.

During our Black Friday, now, we'd do again hydro facial birthday or mother's day right around may so as a result as you can appreciate some of the epic APAC market, especially distributors they kind of purchase based on the promotional periods.

Liyuan Woo: As a result, as you can appreciate, some of the APAC market, especially distributors, they kind of purchase based on the promotional period. That explains the down 21%, partially what Andrew had mentioned for APAC consumables as well. There's a bit of timing when it comes to the Q1 results.

Claims are down 21.

Actually with Andrew had mentioned for APAC consumables as well, so theres a bit of timing.

When it comes to the Q1 results.

Operator: The next question comes from Jonathan Block with Stifel. Please go ahead.

The next question comes from Jon Block with Stifel. Please go ahead.

Jonathan Block: Thanks, guys. Good morning. I guess I'll ask a pretty direct question. You have a lot of confidence in the business. You raise the top line, the EBITDA absolute, but you seemingly missed your 1Q23 implied figures from the late February call. I just want to sort of ask, I mean, is that fair? EBITDA was a tad negative. Gross margin was below the year ago. I think you sort of said you expected in line. These are small deviations, but I want to make sure the messaging is pretty cleaned up. What is it if that was the case? Because you called out China having a great March, so was it all attributable to the delay in capital purchases for EMEA that caused the supposed disconnect? Then just a follow-up is, the consumable growth by region, those details were very helpful.

Okay.

Thanks, guys good morning.

I guess I'll ask a pretty direct question you have a lot of confidence in the business.

You raised the top line the EBITDA absolute but you seemingly missed your <unk> 'twenty three implied figures from the late February call and I just wanted to sort of ask I mean is that fair EBITDA was a tad negative gross margin was below the year ago. I think you sort of said you expected in line. So these are small deviations, but I want to make sure that.

<unk>.

It's pretty cleaned up and what is it that was the case because you called out China, having a great March so was it all attributable to the delay in capital purchases for EMEA.

Cause as opposed to disconnect.

Just a follow up is the consumable growth by region. Those details were very helpful.

Jonathan Block: The Americas number, consumable number was very solid. Andrew, is it just attributable to the Q1 2023 Americas environment on a relative basis better than EMEA and APAC? Is it a Syndeo thing which would be encouraging because maybe we could extrapolate that to EMEA and APAC in coming quarters? Thanks, guys.

The Americas number of consumable number was very solid so Andrew was just attributable to the <unk> to 'twenty three Americas environment on a relative basis better than EMEA and APAC or is it a San Diego thing, which would be encouraging because maybe we could extrapolate that to EMEA and APAC in coming quarters. Thanks.

Andrew Stanleick: Morning, John. Thanks for your question. I mean, the key message is, John, for us, it's a really solid quarter in line with our plan. I mean, we expected that natural seasonality certainly across the Americas. I think the consumables at a plus 35 was something which we were extremely happy about. Outside of that, though, John, you're spot on. I think what we saw, and I think you and I probably spoke over last year, I think with the US last year, we were able to surprise the market with the launch of Syndeo. I think what we found outside of the US into Q1, there was a natural degree of Holdback from providers in EMEA and in APAC because they sensed Syndeo was about to launch. I guess it's human nature.

<unk>.

Good morning, John Thanks for your question I mean, the key messages jump for us, it's a really solid quarter in line with our plan I mean, we expected that natural seasonality certainly across the Americas I think the consumables that are plus 35 was something which we're extremely happy about outside of that though John .

You're spot on I think what we saw and I think you and I, probably slightly ahead of last year I think with the U S. Last year, we were able to surprise the market with the launch of seeing that I think what we found outside of the U S into Q1, there was a natural degree of.

Hold back from providers.

EMEA and APAC because they didn't that was about to launch I guess.

Andrew Stanleick: They waited for that to come, and of course, then when we did launch it, we've really had very strong sales since into Q2. That certainly explains that dynamic in any deviation you felt versus what you were expecting outside of the US for Q1, but it was in line with our plan.

Human nature, they waited for that to come and of course, then when we did launch it we've really had very.

Strong sales into Q2, but that certainly explains that.

That dynamic in any deviation you felt versus what you were expecting outside of the U S for Q1, but it was in line with our plan.

Liyuan Woo: Yeah, John, just to address your question in terms of the guidance. We were very thoughtful and purposefully sharing the seasonality when we had the conversation back in February. The fact that, given the launching time, there's anticipated potential wait and slowdown, to Andrew's point earlier. I think on the gross margin point, we were fully anticipating coming consistent to last year. When you really think about the dynamic with the gross margin, there's a bit over 100 basis point difference. Most of that is folks really choose to buy the Elite refurbished, which is what we plan to do as part of the trade-up program, especially when it comes to APAC and EMEA.

John just to address your question in terms of the guidance, we were very thoughtful and purposefully sharing the seasonality.

When we had the conversation back in February and the fact that given the launching time.

There is anticipated.

Potential weight and slowdown to Andrew's point earlier, I think on the gross margin point they were fully anticipating.

Coming consistent to last year, but when you really think about the dynamic with the gross margin. There is a bit over 100 basis point difference. Most of that is you know folks really chose to buy that you lead refurbish, which is what we plan to do as part of the trade up program, especially when it comes to APAC and EMEA and as you can appreciate.

Liyuan Woo: As you can appreciate, those trade-up Elite refurbished has very low margins because a lot of those came back from the trade-up with the US, so it's how we really book the revenue and the margin. These are very temporary impacts. If we sold both Syndeos and these refurbished Elite, then we would have actually had a slight tick-up. There's a bit of the timing that's really impacting gross margin for Q1, and that's partially why we felt pretty confident going forward. Of course, we're going to continue to push for trade-up, and we still have refurbished Elite to go. Given the volume and the ASP coming with new Syndeo systems going forward, we believe consistently we will see the sequential improvement in gross margin.

Those tradeoffs.

Elite refurbish has very very low margin because a lot of those came back from the tradeoff with the U S.

It's how we really bulked up the revenue and the margin. So these are very temporary impact if we sell a boston deals and these refurbish elite now it would have actually had a slight pickup so theres a bit of the timing that's really impacting gross margin for Q1 and thats, partially why we felt pretty.

Confidence going forward of course, we're going to continue to push for freed up and we still have refurbished it lead to go but given the volume and the ASP coming with new Sandeel systems going forward. We believe consistently we will see the sequential improvement in gross margin.

Operator: The next question comes from Oliver Chen with TD Cowen. Please go ahead.

The next question comes from Oliver Chen with TD Cowen. Please go ahead.

Oliver Chen: Hi, Andrew and Liyuan. On the guidance raise, what underpins your confidence there? Also, what's assumed in the China situation in terms of your guidance? A modeling question on your comments, Liyuan, on trade-up. How should we think about the margin impact this year relative to what you saw last year in the US for our models? You covered a lot of great detail on consumables, just what's the bottom line on near-term growth versus long-term growth that we should incorporate into our thinking and algorithms? I should enroll in your Beauty MBA. Congrats on that.

Hi, Andrew and Leann.

Guidance raise.

What underpins your confidence there and also whats assumed in the China.

Situation in terms of your guidance.

A modeling question on your comments on trade up how should we think about the margin impact this year relative to what you saw last year in the U S for our models.

And you covered a lot of great detail on consumables, just what's the bottom line.

On near term growth versus long term growth that we should incorporate into our thinking and algorithms.

I should enroll in your beauty NBA congrats on that.

Andrew Stanleick: Good morning, Oliver. Thanks very much for your questions. I'll kick off and allow Liyuan to follow up. No, we feel good about raising the guidance for the year. I guess two very clear factors. First of all, what we have in the plan, but just combined with the momentum, frankly, we've seen coming out of March globally. Also with the really encouraging start to Syndeo. I think when you add on the real strong acceleration from China on in March, that's what gives us the confidence to raise. I think, we've spent the last couple of years, we've spoke many times about building up that infrastructure, putting the sales team in place, the training and education centers, getting the right partners. That's all in place now, and we're reaping the rewards of that. It's a really positive moment for us.

Good morning, Oliver and thanks, very much for your questions I'll kick off and allow land to follow up but.

But we feel good about raising the guidance I guess two very clear. Thanks, It's first of all.

What we have in the plan, but just combined with the momentum frankly, we've seen coming out of March globally, and also with the really encouraging start to seeing that and then I think when you add on the real strong acceleration.

From China on in March.

That's what gives us the confidence to raise and I think we spent the last couple of years, we spoke many times about building up that infrastructure, putting yourself in place the training and education centers getting the right partners.

That's all in place now and we are.

Reaping the rewards of that so.

It's a really positive buying them for us yes.

Liyuan Woo: Yeah, just to build on that, Oliver, as you can see for Q1, we actually did positive comp when it comes to Americas new system sales, which speaks for volumes, right? The part that's missed is really trade-ups. When it comes to the fact that we were launching last year, so we sold much more trade-ups last year's Q1 because it was a fresh launch when it comes to US. As we look at the margins, again, if you really think about the dynamic with the Elite refurbished, if those, call it 200, 300 units, we didn't sell the refurbished, we actually sold full-on Syndeo, you would have saw a $4 to 6 million top line and directly flow through the bottom line.

Yes, just to build on that Oliver as you can see for Q1, we actually did positive comp when they comes to America's New system sales, which speaks volume for volumes right. The part Thats missed its really trade up when it comes to the fact that we were launching last year. So we so much more.

Tradeoffs last year's Q1, because there was a fresh launch when they come to the U S.

As we look at the margin you know again, if you really think about the dynamic with the elite refurbish if those call. It 20 to 300 units we didn't sell the refurbished we actually sold.

And Dale you would've saw a $4 million to $6 million topline directly flow through the bottom line so in that vein.

Liyuan Woo: In that vein, we are going to push pretty aggressively, as we shared before, on trade-up overall, and that's going to be around the globe, right? Because we really want everybody to be on Syndeo. Because not only that provides data to everybody, better services, better product newness, but also it really helps from a consumable management point of view. In that vein, I think we will still anticipate sequential build when it comes to gross margin percentage, because all the new units with the margin now gradually with the optimization should start to really flow through, especially also with the volume. As we increase in volume, you should start to see those leverage as well.

We are going to push pretty aggressively as we shared before on trade up overall and thats going to be around the globe right. Because we really want everybody to be Allison deal because not only that provides data to everybody better services better product newness, but also a really helps from a consumable management's point of view so in that.

Zane I think we will still anticipate sequential build when it comes to gross margin percentages, because all the new units, where the margin now gradually with the optimization should start to really flow through especially also with the volume as we increase in volume you should start to see those leverage elsewhere.

<unk>.

Operator: The next question comes from Allen Gong with J.P. Morgan. Please go ahead.

The next question comes from Allen Gong with Jpmorgan. Please go ahead.

Allen Gong: Hi. Thanks for the question. I just had a quick one on, I guess the language in your presentation. I think historically you've really talked about new systems sold in the quarter, and this is the first time I think that you've phrased it as new systems placed. Should we read into that as you're seeing maybe a bit more financing, maybe a bit more leasing? If you could double tap on that a bit. I think something that would really be helpful is this China dynamic, right? We understand that it really impacted the system build numbers in Q4, and we've seen a little bit of a reversal of that in this quarter. Is there any way to quantify that in terms of number of systems that turned back online at Q1?

Hi, Thanks for the question I just had a quick one on I guess the language in your presentation I think historically, you've really talked about.

New systems sold in the quarter and this is the first time I think that you've phrased as new systems placed.

Should we read into that as Youre seeing maybe a bit more financing maybe a bit more leasing if you could double tap on that a bit and also I think something that would really be helpful is the China dynamic right. We understand that it really impacted the system build numbers in fourth quarter, and we've seen a little bit of a reversal of that in this quarter.

But is there any way to quantify that in terms of number of systems that turned back online in first quarter, and whether or not you expect that to be a similar dynamic to really keep in mind for second quarter. Thank you very much.

Allen Gong: Whether or not you expect that to be a similar dynamic to really keep in mind for Q2. Thank you very much.

Liyuan Woo: Hey, Allen, great questions. No difference. Sorry, we probably should have just been consistent, used the word sold, but placed and sold are exactly the same. The only reason we said that is to emphasize it's really placed without trade-up. It is just new systems sold. It does not include trade-up. Just wanted to make that really clear. Obviously, the trade-up is not as pronounced compared to last year. In terms of the churn, we are constantly measuring it based on purchase patterns. The churn can change, also based on who bought consumables again. Not only we are seeing it, and I believe most of the China numbers should have reflected already, based on the fact that they did come back, in February timeframe. Also even in the US, we continue to observe as we run these consumable promotions, as we really target different tiers of customers.

Yeah, Great question, no difference sorry, with probably should have just been consistent use of ourselves, but placement. So they're exactly the same the only reason we said that is to emphasize.

Really place without trade up is just new systems. So it doesn't include trade up so just wanted to make that really clear obviously, the tradeoff is not as pronounced compared to last year in terms of the churn.

We're constantly measuring it based on purchase pattern. So the term can change also based on a whole bulk consumables again now in May we're seeing it and I believe most of the China number should have reflected already.

Based on the fact that they did come back.

In February timeframe.

Spirit timeframe, but also even in the U S. We continue to observe as we run these consumable promotions as we're really target different tiers of customer. They're also we're starting to seeing really positive signs in some of the provider starting to buy consumables again.

Liyuan Woo: We're starting to see really positive signs, some of the providers starting to buy consumables again. That will continue to improve as we become even more targeted, targeting these providers to purchase consumables.

So that will continue to improve as we become even more targeted.

<unk> providers to purchase consumables.

Operator: The next question comes from Bruce Jackson with The Benchmark Company. Please go ahead.

The next question comes from Bruce Jackson with the Benchmark Company. Please go ahead.

Bruce Jackson: Hi. Good morning. Thanks for taking my question. It's about the new guidance. Last quarter, you said that the swing factor in the guidance was China. You just took guidance up for the year. Reading between the lines, should we interpret that to mean that you're more confident about China, or are there some other geographies that are doing better than expected?

Hi, Yes, good morning, and thanks for taking my question.

About.

The new guidance last quarter, you said that the swing factor in the guidance was China and you just took guidance up for the year. So.

Reading between the lines should we interpret that to mean that.

You're more confident about China or are there some other geographies are doing better than expected.

Andrew Stanleick: Morning, good to speak to you, Bruce. I think it's twofold. I think we've had a very encouraging start internationally to Syndeo overall, on top of the continued strength in the US. You saw that, of course, in that consumable number here in the Americas. Yes, Bruce, China recovery is a key element of that. I think we've been extremely pleased what we've seen so far. From March and going into Q2, we'll follow it very closely, that's what's giving us that real confidence, along with the Syndeo launch, to raise the guidance.

Good morning, and good to speak to you Bruce.

I think it's twofold I think we had a very very encouraging start internationally too soon overall on top of the continued strength in the U S. You saw that of course in the consumable number here in the Americas, but yes, John China, China.

China recovery is a key element of that I think we've been extremely pleased what we've seen so far.

From March and going into Q Z, we'll follow it very closely but that's what's giving us real confidence along with the Sudan wants to raise the guidance.

Operator: The next question comes from Linda Bolton-Weiser with D.A. Davidson. Please go ahead.

The next question comes from Linda Bolton Weiser with D. A Davidson. Please go ahead.

Linda Bolton-Weiser: Yes, hello. One of the metrics we look at sometimes is Google Search Trends for HydraFacial, and what we've noticed lately is that the trend is still positive, like growth in searches year over year, but quite frankly, less positive than in the past. In the past, maybe it'd be up 40%, 50% year over year, and now it's more up like 5% to 10% year over year. Is there any reason that those Google Search Trends would look differently? Thanks.

Yes, Hello, one of the metrics, we look at some time is Google search trends for hydro facial and what we've noticed lately is that the trend is for positive like growth in searches and year over year, but quite frankly less positive than in the past. So in the past maybe it'd be up 40 to 50 per.

<unk> year over year, and now it's more up like 5% to 10% year over year is there any reason that those Google search trends would look differently. Thanks.

Andrew Stanleick: Morning. Thanks for your question. Twofold. For the quarter, just to clarify, Google Search organic search was up 13%, which I think when you take it back and think that's a pretty amazing result because it comped the launch of Syndeo last year in the US, and we had a huge push around that, as you're aware. To comp that number with 13% is honestly, frankly, a tremendous effort. Of course, we're happy with that. I think ongoing, the growth remains very positive. It's just one measure we look at. Of course, the bigger you go, getting those huge comps will naturally slow down. It's just mathematics. It's, of course, a key focus for us at search.

Good morning. Thanks for your question I mean, two fall festival for the costs just to clarify Google search organic search was up 13%, which I think when you take it back and think that's a pretty amazing result, because it comped the launch of <unk> last year in the U S and we had a huge push.

Around that as you are aware so to combat number with 13% is honestly frankly, a tremendous effort.

And of course.

We're happy with that I think ongoing unit growth remains very positive as just one measure we look at but of course. The big are you guys getting those huge comps will naturally slow down it's just mathematics, but it's of course, a key focus for us as such.

Operator: The next question comes from Navann Ty with BNP. Please go ahead.

The next question comes from Nevada tie with BNP. Please go ahead.

Navann Ty: Hi. Thanks for taking my questions. Do you feel more confident about the low end of the 18% to 20% with the rebound in China in March, April, and early May, versus the gross margin impact in H1? My second question, have you seen any signs of macro headwinds on HydraFacial in the US and Europe at all? Maybe if I can add a third one, have you submitted the 510(k) application for the SkinStylus facial indication? Should we expect more information during the next quarter? Thank you.

Hi, Thanks for taking my questions.

Do you feel more confident about the low end of the 18, 20% with the rebound in China in March April and early may versus the gross margin.

Impacting the first half.

And then my second question have you seen any signs of macro headwinds on hydro official in the U S.

In Europe .

And maybe if I can add a third one.

Have you submitted a five 10-K application for the skin status facial indication.

And should we expect more information during the next quarter.

Andrew Stanleick: Morning, thanks for your brilliant questions. First of all, I'll kick off and then hand over to Liyuan. First of all, if I tackle the question in relation to the economic environment, I think we often say that consumables are a barometer for the health of our business. Whilst no business is recession-proof or immune, I must say Beauty Health and HydraFacial, we play in those categories which are more resistant, skincare, aesthetics. I think what we're seeing when I speak to providers when I'm traveling all around the world is there's a real disconnect between what we're reading in the newspaper headlines and online with actually what providers are telling us. Many of our providers are fully booked months in advance. In fact, their biggest challenge is actually sometimes finding people to deliver the service. It's very robust.

Thank you.

Good morning, and thanks.

Brendan questions. So first of all I'll kick off and then hand over to <unk>.

First of all if I tackle.

The question in relation to the economic environment.

I think we often say that.

Consumables was a barometer for the health of our business and whilst no business is recession proof or remove immune I must say beauty health and hygiene face we plan those categories, which are more resistant skincare.

And despite I think what we're seeing when I speak to provide his mind traveling all around the world is there is a real disconnect between what we are reading in the newspaper headlines and online we've actually will provide in that setting us.

Many of our providers are fully booked months in advance since like the biggest challenge is actually sometimes finding people to deliver the services. It's very robust we saw that throughout Q1 and certainly into Q2. So that's why it gives us the confidence to raise the revenue in terms of your question on.

Andrew Stanleick: We saw that throughout Q1 and certainly into Q2. That's why it gives us the confidence to raise the revenue. In terms of your question on the margin, we commit absolutely to the 18 to 20. I think what we'd want to do is come out of Q2, and then look at giving further clarity on any raised guidance for EBITDA for the rest of the year. At the moment, we're absolutely committed to that range, 18 to 20.

The margin, we commit absolutely to the 18 to 20 I think what was wanted to do is come out of Q2, and then look at giving further clarity on any raised guidance for EBITDA for the rest of the year, but at the moment, we're absolutely committed to that range of <unk> 20.

Liyuan Woo: Yep. Just to build on that point, if you think about the reason why we feel confident about the EBITDA flow through, I would say couple fold. One, on the gross margin, we have been not only setting up the production site in China for the local production, but also continue to value engineer and manage our inventory flow through. We build in the trade-up assumptions already as we provided the guidance previously. The more upside we can see with the growth of China, which actually have the highest ASP, highest gross margin percentage, combined with anticipated further sales of the Syndeo product, while we're value engineering that give us a lot of confidence on that sequential improvement for gross margin. Separately, as you can see, we actually invested pretty heavily in selling and marketing in Q1.

Yes, and just to build on that point.

If you think about the reason why we feel confident about the EBITDA flow through I would say couple of fold one on the gross margin we have been not only setting up the production sites in China.

For the local production, but also continue to value engineer and manage our inventory flow through so.

Build in the trade up assumptions already as we provided the guidance previously so the more upside that we can see where the growth of China, which actually had the highest ASP highest gross margin percentage combined with.

Anticipated further sales all of a sudden deal product while without value engineering that that gives us a lot of confidence on that sequential improvement for gross margin separately as you can see we actually invested pretty heavily in selling and marketing in Q1. The fact that we have 300 basis point plus.

Liyuan Woo: The fact that we have 300 basis points plus of leverage kind of speaks to volume. As the sales number goes up even further, you're going to continue to see that truly flow through to the bottom line. One thing I want to emphasize on the G&A is the fact that Q1 is usually the heaviest when it comes to professional service fees, because we expense professional service fees as they incur. As you can imagine, all the SOX testing, the heavy audit fees, all of that hit Q1. That's another reason. Suffice to say, you should really see leverage coming through quarter-over-quarter.

Uh huh.

Yes.

Average kind of speaks to volume as the sales number goes up even further you're going to continue to see that truly flow through to the bottom line. One thing I want to emphasize on the G&A is the fact that Q1 is usually the heaviest when it comes to professional service fees because were expense professional service fees as the yield curve.

You can imagine all the sox testing the heavy audit fees all of that kind of hit Q1. So that's another reason so suffice to say you should really see leverage coming through quarter over quarter and to address. Your final question you raised on skin Stylus acquisition, which we of course complete in Q1.

Andrew Stanleick: To address your final question you raised on SkinStylus, that's an acquisition which we, of course, complete in Q1. We're extremely excited about that. At the moment, as you know, it's FDA cleared for abdominal scarring, and we're in the process of securing approval for other indications, and we'll, of course, keep you posted as that's progressing during the next quarters.

So I'm excited about that.

At the moment as you know its FDA cleared for abdominal scarring and we're in the process of securing approval for other indications and we're of course keep you posted as thats progressing during the next quarters.

Operator: The next question comes from Ashley Helgans with Jefferies. Please go ahead.

The next question comes from Ashley Hogan with Jefferies. Please go ahead.

[Analyst] (Jefferies): Hi, this is Sydney on for Ashley. Just wanted to ask if you've seen or heard about any pullback in treatment add-ons or boosters, kind of given the macro, or if you have any expectations for those levels going forward?

Hi, This is sidney on for Ashley just wanted to ask if you've seen or heard about any pullback and treatment add ons or boosters kind of given the macro or if you have any expectations kind of for those levels going forward.

Andrew Stanleick: No, that's a great question. Thank you. In fact, quite the opposite. Our consumables strength in Q1 was, of course, driven by consumption. I think what we've been finding is the attachment rate on our boosters as we really double down on our storytelling, add new exciting products, be it J.Lo, Dr. BABOR, and Murad. Of course, we announced the Dior partnership last quarter. The attachment rates have been increasing, and it's becoming a key element of our business as it grows, offering that kind of unique level of personalization and customization, which really no other aesthetics or beauty procedure can do other than HydraFacial. That's been a strong driver behind the consumables growth.

Now that's a great question. Thank you in fact quite the opposite.

Consumables strength in Q1 was of course, driven by consumption, but I think what we've been finding is the attachment rate on a boost as we really doubled down on our storytelling as exciting.

<unk> Doctor before Moorad of course, we announced the deal partnership last quarter. The attachment rates are increasing and it's becoming a key element of our business as it grows offering that kind of unique level of personalization and customization, which really no other aesthetics or beauty procedure can do other than hydro <unk>.

That's been a strong driver behind the consumables growth.

Operator: The next question comes from Kyle Rose with Canaccord. Please go ahead.

The next question comes from Kyle Rose with Canaccord. Please go ahead.

Kyle Rose: Great. Thank you for taking the question. I just wanted to ask a dovetail on the previous question there on utilization. Maybe just any trends you're seeing from a utilization perspective in the Syndeo versus the non-Syndeo accounts, and then similarly, US, OUS, when we think about actual treatments provided or body areas treated, whether it's Keravive or treatments outside the face. Just overall, if you could break down some of the utilization trends, that would be very helpful.

Great. Thank you for taking the question I just wanted to kind of ask.

It could dovetail on the previous question. There is on utilization, maybe just any trends youre seeing from a utilization perspective.

In this in Deyoe versus the non <unk>.

And then similarly U S O U S. When we think about actual treatments provided ore body areas treated whether it's <unk> or.

Treatments outside the basis overall, if you could breakdown.

Some of the utilization trends that'd be very helpful.

Liyuan Woo: Hi, Kyle. Absolutely. To echo Andrew's sentiment, we didn't really push for boosters as hard prior to Andrew's joining. I think with both of the booster push, which really finish off the treatment, provide that personalization, but also extending to the body, we actually see that trend picking up around the globe. Especially when we were visiting in China, just the excitement and anticipation that we see, folks are craving for that non-invasive, personalized treatment. We're seeing a lot of upside. When you look at the data, Kyle, I would say it's a 50/50 split in terms of number of treatment increasing versus ASP and these different pricing that we added to the fold. We're just getting started. Really looking forward to see we continue to make improvement in that regard.

Hey, Kyle absolutely so to agile Angeles intently right, we didnt really push for blisters, that's hard prior to Angeles, joining I think with both of the booster push which really finish off the treatment provided that personalization, but also extending to the body, we actually see that trend picking up around the globe.

Especially when we were visiting in China, just the excitement and anticipation that we see.

Folks are craving for that non invasive personalized treatment. So we're seeing a lot of upside and when you look at the data Kyle I would say, it's a 50 50 split in terms of number of treatment increasing versus ASP and.

Different pricing that we added to the fault. We're just getting started so really looking forward to see we continue to make improvements in that regard.

Operator: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.

Andrew Stanleick: Thank you, operator, thank you all for joining us on today's call. In closing, we are pleased with the progress of Q1 and are positive about the momentum we see for Q2 and beyond. There is a sustained enthusiasm for HydraFacial treatments across the globe. Together with the rapid rebound we are seeing in China, excitement for Syndeo's international availability, and sector tailwinds that are very much in our favor, we are confident in our outlook for 2023 and beyond. Once again, thank you for joining today's call, and have a great day ahead.

Thank you operator, and thank you all for joining us on today's call in closing we are pleased with the progress of Q1 and are positive about the momentum we see for Q2 and beyond there is a sustained enthusiasm for hydro facial treatments across the globe together with the rapid rebound we are seeing in China excitement to Sunday.

Some national availability and sector tailwind. So that's very much in our favor we are confident in our outlook for 2023 and beyond once again. Thank you for joining today's call and have a great day ahead.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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