Q2 2023 The Beauty Health Company Earnings Call

Speaker 1: Good morning and welcome to the beauty health company second quarter, 2023 earnings call all participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing star then zero on your telephone keypad after today's presentation, there will be an opportunity to ask questions.

Good morning, and welcome to the Beauty Health Company second quarter 2023 earnings call all participants will be in listen only mode.

You need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.

Speaker 1: To ask a question, you may press star then one on your telephone keypad. 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.

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

Speaker 2: Thank you, operator, and good morning, everyone. Thank you for joining the Beauty Health Company's conference call to discuss our second quarter 2023 financial results, which were released this morning and can be found on our website at beautyhealth.com.

Thank you operator, and good morning, everyone. Thank you for joining the beauty health companies conference call to discuss our second quarter 2023 financial results, which were released this morning and can be found on our website at beauty health Dot Com. We encourage you to join the webcast accessible on our website, which contains a presentation that will be referenced during this call.

Speaker 2: We encourage you to join the webcast accessible on our website, which contains a presentation that will be referenced during this.

Speaker 2: With me in person today are Beauty Health's President and Chief Executive Officer Andrew Stanlick, incoming Chief Financial Officer Mike Monahan, and Chief Operating Officer Brad House.

With me in person today, our beauty <unk>, President and Chief Executive Officer, Andrew Stanley incoming Chief Financial Officer, Mike Monahan, Chief operating Officer, Brad Houser.

Speaker 2: Before we begin, 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. Listeners are cautioned not to place undue reliance on any forward-looking statements. For a further discussion of risks related to our business, see our filings with the SEC.

Before we begin I would like to remind you of the Companys 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 listeners are cautioned not to place undue reliance on any forward looking statements for a further discussion of risks related.

To our business see our filings with the SEC.

Speaker 2: This call will present non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are in the earnings release furnished to the SEC and available on our website. The registered financial thought users may send a specific description to their technical modules and make their decision. Finally we can report them solely to the SEC and the SEC.

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

I will now turn the call over to Andrew.

Speaker 3: Thank you Eduardo and thank you everyone for joining us. Today's call is going to be organized a bit different than usual. First we'll review the highlights of our Q2 results before turning to some key learnings and actions taken through this period of rapid growth.

Thank you Eduardo and thank you everyone for joining us today's call is going to be organized a bit different than usual first will review the highlights of our Q2 results before turning to some key learnings and actions taken through this period of rapid growth.

Speaker 3: I will then walk you through our 2023 outlook and we will conclude with a preview of our innovation pipeline from Chief Operating Officer Brad Houser.

I will then walk you through our 2023 outlook and we will conclude with a preview of our innovation pipeline from Chief operating Officer, Brad Houser.

Speaker 3: We expect you saw the press release this morning, announcing Michael Monaghan as our new CFO .

We expect you saw the press release this morning announcing Michael Monahan as our new CFO .

Speaker 3: This is a critical role and I'm confident that MITE brings the right expertise that we need for this next phase of growth.

This is a critical role in I'm comforted that might bring the right expertise that we need for this next phase of growth.

Speaker 3: I am tasking Mike with enhancing our financial strategy, planning, and reporting capabilities.

Tasking, Mike with enhancing our financial strategy planning and reporting capabilities.

Speaker 3: To the end, I do want to thank Leanne for her leadership during a formative period for beauty health.

To that end I do want to thank Linda for her leadership during a formative period for beauty health.

Speaker 3: She helped manage the company through a period of transformational growth, including navigating through the pandemic. We are grateful for her contribution and wish her well. Mike will assume the role of FIFFO effective tomorrow. Leanne will stay on as an advisor until September 1st to ensure a smooth transition. I will now hand off to Mike for a brief introduction.

She helped manage the company through a period of transformational growth, including navigating through the pandemic. We are grateful for her contribution and wish her well Mike will assume the role of CFO effective Tomorrow, Leann will stone as an adviser until September 1st to ensure a smooth transition I will now hand off to Mike for a brief introduction.

Speaker 4: Thanks, Andrew. I'm happy to be here today and I look forward to meeting and building relationships with you all over time. My decision to join Beauty Health is based largely on the incredible growth opportunity ahead. Beauty Health is an impressive company with solid business fundamentals that I believe has a lot of room for profitable growth.

Thanks, Andrew I'm happy to be here today, and I look forward to meeting and building relationships with you all over time my decision to join beauty health is based largely on the incredible growth opportunity ahead beauty health is an impressive company with solid business fundamentals that I believe has a lot of room for profitable growth.

Speaker 4: As Andrew mentioned, my first day is tomorrow. I plan to use my first 90 days to immerse myself in the business, working to fully understand our financial controls, planning, and reporting. I look forward to sharing my impressions with you all in due course. I will now turn the call back to Andrew. Thank you.

As Andrew mentioned my first days Tomorrow I plan to use my first 90 days to immerse myself in the business working to fully understand our financial controls planning and reporting I look forward to sharing my impressions with you all in due course I will now turn the call back to Andrew.

Thank you Mike we are happy to have you on board.

Speaker 3: I want to start by thanking the beauty health team around the world for their hard work in the second quarter and ongoing contributions as we focus on driving long-term shareholder values.

I want to start by thanking the beauty health team around the world for their hard work in the second quarter and ongoing contributions as we focus on driving long term shareholder value.

Speaker 3: Now for the second quarter results. There are five key takeaways from the quarter as we recommitted to our core business.

Now for the second quarter results. There are five key takeaways from the quarter as we recommitted to our core business.

Speaker 3: First, we delivered net cells of 117.5 million and adjusted evator of 17.8 million on continued demand for hydrophacial.

First we delivered net sales of $117 5 million and adjusted EBITDA of $17 8 million on continued demand for hydro facial these.

Speaker 3: These results represent net cells' growth of 13% and adjusted ebidag growth of 22%.

These results represent net sales growth of 13% and adjusted EBIT growth of 22%.

Speaker 3: As a reminder, this quarter we are comparing against the US launch of Sindeir last year, the company's single biggest product launch to date, where we benefit from 23.3 million of trade-up demands.

As a reminder, this quarter, we are comparing against the U S launch of <unk> last year. The company's single biggest product launch to date, while we benefited from $23 3 million of trade up demand.

Speaker 3: When excluding the impact of trade-ups, our total year over year net sales growth for Q2 2023 was 32%.

When excluding the impact of trade ups, a total year over year net sales growth for Q2 2023 was 32%.

Speaker 3: The second takeaway is consumer engagement, where our brand continues to grow. We see this in strong consumables net cells, which were 51.9 million up 34% year over year on increased volume.

The second takeaway is consumer engagement, where our brand continues to grow we see this in strong consumables net cells, which were $51 9 million up 34% year over year on increased volumes.

Speaker 3: Third, as anticipated, we sought continued strength in a mere and a pack. In China, we achieved year-over-year net sales growth of 265%, or 167% when excluding trade-off.

Third as anticipated we saw continued strength in EMEA and APAC and China, we achieved year over year net sales growth of 265% or 167% when excluding trade ups.

Speaker 3: We continue to see re-acceleration in China and remain enthusiastic about the growth potential of this mark.

We continue to see Reacceleration in China and remain enthusiastic about the growth potential of this market.

Speaker 3: The force take away, we generated adjusted EBITDA of 17.8 million at a margin of 15.1%, owing to 7.1% of adjusted operating expense leverage compared to last year.

The fourth takeaway, we generated adjusted EBITDA of $17 8 million at a margin of 15.1% owing to 7.1% of adjusted operating expense leverage compared to last year.

Speaker 3: However, those leveraged gains were largely offset by 6.1% of adjusted gross margin headwinds, partially caused by Sindeo US-launch-related impacts, which Leanne will discuss in a moment.

However, those leverage gains were largely offset by $6, 1% of adjusted gross margin headwinds partially caused by sin day, a U S launch related impacts, which leann will discuss in a moment.

Speaker 3: and the final takeaway for the quarter, based on the continued demand for hydrofacial, the re-acceleration in China, and our ability to drive operating leverage, we are pleased to reaffirm our fiscal 2023 net sales and our long-range 2025 guidance. We are refining our 2023 adjusted EBITDA margin guidance to a more precise range of 18 to 19%, reflecting the temporary gross margin headwinds we face.

And the final takeaway for the quarter based on the continued demand for hydro facial the reacceleration in China, and our ability to drive operating leverage we are pleased to reaffirm our fiscal 2023 net sales and a long range 2025 guidance, we are refining our 2023.

Adjusted EBITDA margin guidance to a more precise range of 18% to 19%, reflecting the temporary gross margin headwinds we face.

Speaker 3: Before we review the details of the quarter further, turning to slide 6, I want to take a moment to reflect on our recent growth and learning.

Before we review the details of the quarter further turning to slide six I want to take a moment to reflect on our recent growth and learnings.

Speaker 3: Since 2020 we have nearly doubled the size of our install base. And by the end of this year, we expect to have roughly quadrupled net cells in just three years.

Since 2020, we have nearly doubled the size of our installed base and by the end of this year, we expect to have roughly quadrupled net cells in just three years. We believe this performance is remarkable for any company.

Speaker 3: We believe this performance is remarkable for any company. Though as you can imagine with this type of growth trajectory, the road is not always smooth and we certainly have some areas in which we can improve based on some key learnings that I would like to share with you.

So as you can imagine with this type of growth trajectory. The road is not always smooth and we certainly has some areas in which we can improve based on some key learnings that I would like to share with you.

Speaker 3: This improvement starts first and foremost with resolving our syndicateating issues by the end of this year.

This improvement starts first and foremost with resolving our cinder teething issues by the end of this year.

Speaker 3: Developed at speed during the pandemic, this high-tech delivery system launched just 28 days into my tenure, brought high to facial out of the analogue world and into the digital age, pushing the category forward.

Developed at speed during the pandemic. This high Tech delivery system launched just 28 days into my tenure brought hydro facial out of the analog world and into the digital age pushing the category forward.

Speaker 3: While Findeo net cells since launch have been impressive, we have experienced paving issues with this new technology.

Well since their net sales since launch have been impressive we have experienced teething issues with this new technology. You may recall, we were quick to exchanges and data devices at the company's expense even for the smallest issues.

Speaker 3: You may recall, we were quick to exchange some dare devices that the company's expense, even for the smallest issues.

Speaker 3: This intentional decision underscores our unwavering commitment to besting class customer service.

This intentional decision underscores our unwavering commitment to best in class customer service.

Speaker 3: while it led to incremental unplanned costs which have impacted us financially in the short term. This action has protected our relationship with our providers who are with Hydrofacial for the long term.

While it led to incremental unplanned costs, which have impacted us financially in the short term. This section has protected our relationship with our providers are with hydro facial for the long term.

Speaker 3: I am pleased to say that we have greatly reduced system exchanges. Today with the changes I initiated, we are equipped to address issues with over the air software updates or infield support.

I am pleased to say that we have greatly reduce system exchanges.

Today with the changes I initiated we're equipped to address issues with over the air software updates or infield support.

Speaker 3: and we have identified simple component upgrades to enhance the system's durability. And we have begun to replace these components in existing devices in the field.

And we have identified simple component upgrades to enhance the systems durability and we have begun to replace these components and existing devices in the field.

Speaker 3: As we grow past these teething dynamics, I am confident our newly strengthened product and software engineering teams, hounds by aesthetics industry veteran Brad Hauser, who I hired earlier this year, are well equipped to deliver on our vision for Cindeo. Our next learning comes from our

As we grow past these teething dynamics I'm confident our newly strengthened product and software engineering teams Helms by aesthetics industry veteran Brad Houser, who I hired earlier this year are well equipped to deliver on our vision for Sunday.

Our next learning comes from our forecasting process.

Speaker 3: puts simply in this phase as a young public company some of our internal professors have not kept pace with the rapid growth and expansion of our multi geography business footprint.

Put simply in this phase as a young public company some of our internal processes have not kept pace with the rapid growth and expansion of our multi geography business footprint.

Speaker 3: Under the experienced leadership of our incoming CFO , we plan to enhance our forecasting processes, including investing in unified global systems, to further improve our predictive analytics capability.

Under the experienced leadership of our incoming CFO , we plan to enhance our forecasting processes, including investing in unified global systems to further improve our predictive analytics capabilities.

Speaker 3: Additionally, value engineering projects that we expected to expand gross margin have been delayed, as we have instead dedicated resources to manage Shindos teethingish.

Additionally value engineering projects that we expect it to expand gross margin have been delayed as we have instead dedicated resources to manage 10 days teething issues.

Speaker 3: I am disappointed to say these dynamics have hampered our ability to meet our expected gross margin target for the year and we are retracting our gross margin guidance for 2023.

I am disappointed to say these dynamics have hampered our ability to meet our expected gross margin target for the year and we are attracting a gross margin guidance for 2023.

Speaker 3: We maintain a line of sight to delivering our targeted 500 basis points of gross margin expansion by the end of 2025 as both China manufacturing and the planned value engineering project bear fruit.

We maintain a line of sight to delivering our targeted 500 basis points of gross margin expansion by the end of 2025 as both China manufacturing and the planned value Engineering project bear fruit.

Speaker 3: Finally, in 2021, we converted a number of international distributor markets to direct markets, several of which were quite small in scale. To be frank, some of these smaller markets carry a high opportunity cost. Going forward, I have made a decision to refine our focus and concentrate our resources on executing in our most important direct markets as the top priority.

Finally in 2020, one we converted a number of international distributor markets to direct markets several of which were quite small in scale to be Frank some of these smaller markets carry high opportunity cost going forward I have made a decision to refine our focus and concentrate our resources on <unk>.

Executing and our most important direct markets as the top priority.

Speaker 3: I share these learnings transparently after 18 months leading this company and with a clear plan to move forward, made stronger by fortified leadership, improved systems and a commitment to the customer experience that we are known.

I share these learnings transparently after 18 months, leading this company and with a clear plan to move forward made stronger by fortified leadership improved systems and a commitment to the customer experience that we are known for.

Speaker 3: Indeed, as we bounce back from the Sender US launch issues, I have never been more excited about the future of this company.

Indeed, as we bounce back from the Tinder U S launch issues I have never been more excited about the future of this company.

Speaker 3: page 8 illustrates we have a deep competitive mode positioning us well for long term success.

As page eight illustrates we have a deep competitive moat positioning us well for long term success.

Speaker 3: We have an incredibly unique business model and a long-term high-margin recurring revenues.

We have an incredibly unique business model and our long term high margin recurring revenue stream.

Speaker 3: operate in a large and under penetrated market and possess scientific and product design.

We operate in a large and underpenetrated market and possess scientific and product competitive advantages.

Speaker 3: This is supported by a passionate community of providers and a powerful consumer brand that drives traffic to our customers.

This is supported by a passionate community of providers and a powerful consumer brand that drives traffic to our customers.

Speaker 3: Moreover, we have an exciting pipeline of innovation to propel our future growth, which Brad will take you through a bit later.

Moreover, we have an exciting pipeline of innovation to propel our future growth, which Brad will take you through a bit later.

Speaker 3: It is these strong fundamentals combined with favorable sector tailwinds that give me the confidence in the long-term outlook for beauty health. Now I will turn the call over to Leanne to discuss our Q2 financial results.

It is these strong fundamentals combined with favorable sector <unk> that give me the confidence in the long term outlook for beauty health now I will turn the call over to Leann to discuss our Q2 financial results.

Speaker 5: Thank you, Andrew, and thank you to everyone joining the call. Today, I'll walk you through our second quarter results, call some balance sheet highlights, then hand back to Andrew to walk you through our outlook for 2023, turning to Matt Sales detail on slide.

Thank you Danielle and thanks to everyone joining the call.

Our second quarter results.

From a balance sheet.

Alright.

To walk you through our outlook for 2023.

Turning to net sales.

Speaker 5: with delivered total net sales of 117.5 million in the second quarter, up 13% year over.

We delivered total net sales.

In the second quarter.

Speaker 5: This quarter were comparing again last year's US launch of Sondil, which benefited from 23.3 million of trade-ups.

This quarter, we're comparing U S launch.

Awesome deal, which benefited from 23 point.

A trade up.

Speaker 5: When excluding trade-offs, our total net sales world for the quarter was 32%.

When excluding trade up our total net sales for the quarter was 32%.

Speaker 5: In total, delivery system and that sales were 65.6 million, roughly flat versus last.

Codell delivery system.

Sales were $65.

Roughly flat versus last year, when excluding trade up.

Speaker 5: When excluding trade-ups, the delivery system has now grew 30% year over year, on volume growth of 56.

System sales grew 30% year over year volume growth of 56%.

Speaker 5: As expected, our trade-up volumes decline 64% and contributed 11.6 million to net sales. We continue to expect total trade-up net sales in 2023 to exceed the 23.3 million of trade-up demands seen in Q2 of last year.

I suspect that our trade up volumes declined 64% and contributed $11 6 million for myself.

We expect total trade up.

23.

The 28 million.

Million of trade up.

So true of last year.

Speaker 5: We ended the quarter with a global install base of 29,682. And so 2,822 delivery systems at an average selling price of 22.9,000, a slightly climbed from last year. This was true.

We ended the quarter with a global installed base of 29682, I felt 2022 delivery system.

Average selling price of 29000.

Slight decline from last year.

It was driven by a few factors.

Speaker 5: First, a makeshift in America towards older generation of referred devices, a mistitling credit for providers, and a degree of holdback from US providers, anticipating sendale enhancements to improve the user experience.

Sure sure.

So like the older generation of refurbished devices.

HIFU.

And I think we all hope at some U S provider anticipating from Dalian harmful to improve the user experience.

Speaker 5: Second, reduce elite pricing internationally, following Sunday's launch in our direct international.

Second.

Pricing internationally following Sunday was launched in our direct international market.

Speaker 5: Moving to consumables, strong growth in volume across the globe drove national growth of 34% to 51.9 million. And finally, breaking down our performance by...

Moving to consumables strong growth in volume across the globe.

Sales growth of 34% to 51 9 million and finally, breaking down our performance by region.

Speaker 5: In the Americas, we generated total mass sales of $63.6 million, a decline of 16% when compared against last.

In the America, we generated total net sales of 66 million.

Right.

When compared against last year.

Speaker 5: As expected, this was driven by C or Tritup so this quarter relative to Q2 of last.

As expected this was driven by trade up so this quarter relative to Q2 of last year Wilsonville U S launch drove a bolus of trade up.

Speaker 5: Winston Dale, US launch, drove a bolus of Trita-

Speaker 5: when excluding the impact of trade-ups. America's total mass of growth was 18.

When excluding the impact of trade up America total net sales growth with eight 4%.

Speaker 5: Notably, the APEC region returned to its pre-pandemic growth trajectory on the heels of China's recovery, delivering 25.2 million of missiles.

Notably the APAC region returned with pre pandemic growth trajectory on the heels of China's recovery delivering $25 2 million of Michelle.

Speaker 5: As a region, APAC registered 143% year over year growth, or 92% when excluding trade-ups.

As a region APAC registered 143% year over year growth or 92% when excluding trade up.

Speaker 5: In Amia, Sandeel's lungs drove a healthy 61% natural growth rate, or 37% when excluding trade-ups, to deliver total natural of 28.6%.

In EMEA.

Launch drove a healthy 61% net sales growth rate of 37% when excluding trade up to deliver total net sales of $28 6 million.

Speaker 5: The growth came from strength across systems and consumables.

The growth came from strength across systems and consumables.

Speaker 5: As Andrew already mentioned, we faced meaningful growth margin headwind this quarter. On slide 11.

As Andrew already mentioned.

With meaningful gross margin headwind this quarter on slide 11, you see that.

Speaker 5: that would deliver a gap growth margin of 57.8% this quarter compared to a 67.6% and that just a growth margin of 64.8% this quarter compared to a 71% last

We delivered GAAP gross margin of 57, 8% this quarter compared to 67, 6% last year and adjusted gross margin of $64 eight person this quarter compared with 71 person last quarter.

Speaker 5: The primary driver behind the decline in the Jess Gore's margin is that would be not anticipate the extent of delivery system next shifting towards refurbishing.

Primary driver behind this decline Jessica gross margin is that we do not anticipate the extent of delivery system mix shifting towards refurbished the sentence.

Speaker 5: Whereas refurbished systems were less than 1% of volume in the second quarter of last year, this quarter they accounted for 17% of volume. Refurbished systems carry a higher cost in inventory, creating gross margin dilution when they are so.

Whereas refurbished systems were less than 1% of volume in the second quarter of last year. This quarter, they accounted for 17% of volume.

Refurbished systems carry a higher cost inventory, creating gross margin dilution when they are so so.

Speaker 5: Importantly, each delivery system place represents a predictable and high-margin recurring cash flow in the form of future consumables revenue.

Importantly, each delivery system play represents a predictable and high margin recurring cash flow in the form of future consumables revenue.

Speaker 5: Andrew will touch on this more in a moment, but this relationship is a foundational tenant supporting our go-to-market strategy.

Andrew will touch on this more in a moment, but this relationship it's a foundational tenant supporting our go to market strategy.

Speaker 5: Additionally, we continue to carry duplicative production costs, which we expect to resolve upon the completion of our transition to China production in the second quarter of 2020.

Additionally, we continue to Perry.

Production costs, which we expect to resolve upon the completion of our transition to China production in the second quarter of 2024.

Speaker 5: For the quarter, we generated 100 basis points of adjusted E.V. margin expansion. This was due to an 8.2% year-over-year reduction in selling and marketing as a percentage of net sales for the second quarter, which was driven by lower sales.

For the quarter, we generated 100 basis points of adjusted EBITDA margin expansion. This was due to an eight 2% year over year reduction in selling and marketing as a percentage of net sales for the second quarter, which was driven by lower sales commissions due to a year over year mix shifting towards Costa.

Speaker 6: Due to year-over-year mix, shifting towards consumables, A-PAC and M-PAC.

APAC and EMEA.

Speaker 5: The benefit was partially offset by Gorge Margin's headwind already covered.

The benefit was partially offset by gross margin headwinds already covered.

Speaker 6: Next, R&D Cuff Reming Relatively Flaps, Chimding at around 2 million per quarter on adjust.

Net R&D costs remain relatively flat shouldn't be at around 2 million per quarter on adjusted basis.

Speaker 5: Lastly, a dressage in expense of 20.4 million is consistent to our run rate expectations of 20 to 22 million per quarter and is expected to remain relatively.

Lastly, adjusted G&A expense of 24 million is consistent to our run rate expectation of 20 to 22 million per quarter.

Expect it to remain relatively sick.

Speaker 5: Overall, we generate a 7.1% in adjusted operating leverage. I would now move to...

Overall, we generated seven 1% in adjusted operating leverage.

I will now move to our balance sheet highlights on slide 13.

Speaker 5: We ended the second quarter with roughly 550 million cash and cash.

Ended the second quarter, with roughly 550 million cash and cash equivalents.

Speaker 5: and increase of 17.4 million from March 2020.

Increase of $17 4 million from March 2023.

Speaker 5: Notably, we continue to trend of reducing of working capital balance, which was largely driven by reduction in inventory, as we drive towards carrying one to two quarters worth.

Notably we continue with the trend of reducing our working capital balance, which was largely driven by a reduction in inventory as we drive towards carrying one or two quarters worth on him.

Speaker 5: Finally, our Shears Outstanding at the end of the second quarter stood at approximately 132.9.

Finally, our shares outstanding at the end of the second quarter stood at approximately $32 9 million.

Speaker 5: We remain well capitalized to execute our growth initiatives and continue to remain opportunistic with our capital, Alex.

We remain well capitalized to execute on our growth initiatives and continue to remain opportunistic with our capital allocation.

Speaker 5: Before I turn back to Andrew, I would like to express my gratitude to our teams and partners globally for a wonderful free

Before I turn it back to Andrew I would like to express my gratitude to our teams and partners globally for wonderful three years.

Speaker 5: We have much to be proud of and I am excited to see Mike take beauty health through to his next phase of growth. With that, I will now turn the call back.

Much to be proud of and I am excited to see Mike take beauty health through its next phase of growth with that I will now turn the call back to Andrew for a look at our outlook for the second half and full year 2023.

Speaker 5: for a look at our outlook for the second half in the full year 2020.

Speaker 3: Thank you, Liam. On slide 15, we share our expectations for the second half of 2023. We reaffirm our 2023 guidance, driving to projected net cells of 460 to 480 million and refine our adjusted EBITDA margin target to a more precise 18-19% rate.

Thank you Leann.

On slide 15, we share our expectations for the second half of 2023, we reaffirm our 2023 guidance driving to projected net sales of $460 million to $480 million and refine our adjusted EBITDA margin target to a more precise 18% to 19% range.

Speaker 3: We acknowledge that due to pandemic impacts, a new product launch and relative units for the public company, modeling our growth has not been straightforward. As a result, we are providing incremental colour to provide clarity on our expectations for the third quarter.

We acknowledge that due to pandemic impacts our new product launch and relative newness as a public company modeling out growth has not been straightforward.

As a result, we are providing incremental color to provide clarity on our expectations for the third quarter.

Speaker 3: We expect this incremental color to be temporary and unnecessary to continue once we lap these dynamics early next year.

We expect this incremental color to be temporary and unnecessary to continue once we lap. These dynamics early next year.

Speaker 3: consistent with traditional fusionality in the medical aesthetics industry. We expect Q3 net cells to be in line to a slight step down from Q net cells figures, or a range of 110 to 120 million.

Consistent with traditional seasonality in the medical aesthetics industry. We expect Q3 net sales to be in line to a slight step down from Q2, net sales figures or a range of $110 million to $120 million.

Speaker 3: We expect Q3 adjusted EBITDA margin to step up slightly from Q2 to a range of 18 to 20%. Driven by minus sequential improvement in adjusted gross margin versus Q2.

We expect Q3, adjusted EBIT margin to step up slightly from Q2 to a range of 18% to 20% driven by minus sequential improvement in adjusted gross margin versus Q2.

Speaker 3: Increased selling and marketing leverage as marketing investments seasonally received in the back half of the year and tight cost discipline with GNS.

Increased selling and marketing leverage as marketing investments seasoning to recede in the back half of the year and tight cost discipline with G&A.

Speaker 3: Q4 is historically the largest quarter for the medical aesthetics industry and ours is no difference.

Q4 is historically the largest quarter for the medical aesthetics industry and ours is no different.

Speaker 3: rescinders, enhancements, expect to be largely completed, resurgence in China as it comps the 2022 pandemic lockdowns and continued volume growth in consumables, we remain confident in our ability to land within our guided fiscal 2023 race.

Within days in Huntsville is expect to be largely completed resurgence in China as it comes the 'twenty to 'twenty two pandemic Lockdowns and continued volume growth in consumables, we remain confident in our ability to land within our guided fiscal 2023 range.

Speaker 3: Our confidence is bolstered by the fundamentals of our business, which we spoke about earlier, and the favorable market dynamics that we anticipate will continue to drive our business.

Our confidence is bolstered by the fundamentals of our business, which we spoke about earlier and the favorable market dynamics that we anticipate will continue to drive our business.

Speaker 3: With every system we place, we unlock a long term sustaining revenue stream.

With every system, we place we unlocked a long term sustaining revenue stream.

Speaker 3: For those of you unfamiliar with our business, we are a razor, razor blade model with profitable unit economics across our razors, which are our systems, and our razor blades, which are our consumables in the forms of our serums, boosters and treatment tips.

For those of you I'm familiar with our business. We are a razor razorblade model with profitable unit economics across our raises which are our systems and our razor blades, which are our consumables in the forms of our theorems boosters and treatment tips.

Speaker 3: Today, our revenue split is roughly 50-50 between delivery systems and consumables.

Today, our revenue split is roughly 50 50 between delivery systems and consumables.

Speaker 3: with consumables typically being the recurring and predictable revenue generator.

With consumables typically being the recurring and predictable revenue generator.

Speaker 3: On slide 17 you can see why this model is so appealing.

On Slide 17, you can see why this model is so appealing.

Speaker 3: The chart on the left depicts a historical consumables net cells based on the provider's equipment purchase year.

The chart on the left depicts our historical consumables net cells based on that provide us equipment purchase here.

Speaker 3: 2022 nearly 75% of our consumables net cells came from providers who have been our customers for three years or more

In 2020 to nearly 75% of our consumables net sales came from providers, who have been our customers for three years or more.

Speaker 3: About half of the providers we first sold to 8 to 10 years ago are still active and reordering high margin consumables.

About half of that provide as we first sold to eight to 10 years ago are still active and reordering high margin consumables. This long profitable tell is virtually unheard of in the aesthetics market.

Speaker 3: This long, profitable tale is virtually unheard of in the aesthetics market.

Speaker 3: To date, we have placed more than 29,000 hydro-facial systems globally. But we know there is a large and untapped market still available to us.

To date, we have placed more than 29000 hydro facial systems globally, but.

But we know there is a large and untapped market still available to us.

Speaker 3: We are less than 5% penetrated globally in our direct markets, with our most mature market, the US, representing only mid-teens penetration.

We are less than 5% penetrated globally in our direct markets with our most mature market the U S representing only mid teens penetration.

Speaker 3: There is still so much more room to grow and any number of factors that would deliver that opportunity where they're increasing points of distribution, product lines or treatment frequency.

There is still so much more room to grow in any number of factors that would deliver that opportunity with the increasing points of distribution product lines or treatment frequency.

Speaker 3: I want us to take a closer look at one of our single biggest growth opportunities. China.

I want us to take a closer look at one of our single biggest growth opportunities China.

Speaker 3: Our business is nascent in China, a market we view with a potential of three times that of the US.

Our business is nascent in China, a market, we view with a potential of three times of that of the U S.

Speaker 3: Skin is reported as the number two health concern amongst Chinese consumers, and more than 40% of Chinese consumers expect to increase their spending on health and beauty products.

Skin is reported as the number two health concern amongst Chinese consumers in more than 40% of Chinese consumers expect to increase their spending on health and beauty products.

Speaker 3: Our gold standard positioning coupled with an accessible price point and flexibility for broader distribution than competitive devices is part of our recipe for success to capitalise on these tailwinds and drive penetration in the region.

Our gold standard positioning coupled with an accessible price point and flexibility for broader distribution than competitor devices as part of our recipe for success to capitalize on these tailwind and drive penetration in the region.

Speaker 3: With just 2,000 systems in China today and $24 million of revenue in the first half of this year we are just getting started.

With just 2000 systems in China today, and $24 million of revenue in the first half of this year. We are just getting started.

Speaker 3: As we continue to drive market penetration, perhaps the strongest lever we have available to us is the hydrophacial brand itself.

Okay.

As we continue to drive market penetration, perhaps the strongest lever we have available to us is the hydro facial brand itself.

Speaker 3: Hydrafacial is unrivaled at generating

Hydro facial is unrivaled at generating buzz.

Speaker 3: A monk star pierced set of ascetic strands, none come close in terms of our earned media value.

Amongst our peer set of aesthetics brands, none come close in terms of our earned media value.

Speaker 3: In the first half of the year alone, hydrofacial generated 9.7 million of EMV and with it, excitement and interest from consumers and providers alike.

In the first half of the year alone hydro facial generated $9 7 million of ANV and with it excitement and interest from consumers and providers alike.

Speaker 3: Brand building initiatives recruit new consumers to hydro-facial and ultimately drive traffic through the doors of our provider.

Brand building initiatives recruit new consumers to hydro facial and ultimately drive traffic through the doors of our providers, while other aesthetics brands declined worldwide, Google searches the hydro facial were up 10% in Q2 as more consumers sought us out.

Speaker 3: While other aesthetic brands declined, worldwide Google searches for Hydrofacial were up 10% in Q2 as more consumers sought to sell.

Speaker 3: Our EMV and sustaining Google search volume are driven by standout brand activations like our annual Glove Illusion Tool, which was reimagined for 2023, and the recent Dior Spark Ruse, which featured a customized cinder in Dior's signature white and gold for the occasion.

ANV and sustaining Google search volume driven by standout brand Activations like annual glow evolution tool, which was re imagined for 2023 and the recent Dior spot crews, which featured a customized Sunday and deals signature Weitzen gold for the occasion.

Speaker 3: One of Hygrophacial's unique competitive advantages is our Omni Channel presence and our ability to be wherever consumers seek out beauty and aesthetics. I am pleased to share that we will expand our partnership with Sephora in APAC this fall. Taking perk by Hygrophacial to Stores in Australia and Malaysia. We are already in more than 500 Sephora stores in North America and Sephora's Singapore flag.

One of hydro facials unique competitive advantages is our omnichannel presence and our ability to be wherever consumers seek out beauty and aesthetics I am pleased to share that we will expand our partnership with Sephora in APAC. This fall, taking pegged by hydro facial to stores in Australia, and Malaysia were already in.

More than 500, Sephora stores in North America, and Sephora, Singapore flagship.

Speaker 3: Our brand-building efforts have a meaningful impact on the adoption of Hydeophacial Bifurbiders, who regularly tell us that one of the reasons they love Hydeophacial is that it is the treatment consumers asked for by name.

Our brand building efforts have a meaningful impact on the adoption of hydro facial by providers, who regularly tell us that one of the reasons. They love hydro facial is that it is the treatment consumers ask for by name.

Speaker 3: We recently conducted a fresh brand study with leading market research firm Ipswich.

We recently conducted a fresh brand study with leading market research firm Ipsos.

Speaker 3: Aided brand awareness for hydrofacial is 41% amongst consumers of the aesthetics and professional beauty category in the US. Trailing only Botox at 72% awareness and Juvederm at 46%

Aided brand awareness for hydro facial is 41% amongst consumers of the aesthetics in professional beauty category in the U S trailing only botox at 72% awareness and Juvederm up 46%.

Speaker 3: What is perhaps more interesting is Hydrofacial's conversion rate. Among those who know the brand, 60% try it. This is a higher conversion rate than Botox.

What is perhaps more interesting is hydro facials conversion rates amongst those who know the brand 60% try. It. This is a high conversion rate the botox.

Speaker 3: Once consumers are aware and have tried the treatment, they recommend Hydrafacial to their friends.

Once consumers are aware and have tried to treatment they recommend hydro facial to their friends.

Speaker 3: Our refreshed Net Promoter Score or MPS is 55, an 11-point increase over data from last year, and a best-in-class industry score. MPS, as a reminder, is a measure of how likely it is for a consumer of a brand to recommend it.

Our refresh net promoter score or NPS is 55, and 11 point increase over data from last year and a best in class industry School.

P. S. As a reminder is a measure of how likely it is for a consumer of our brand to recommended we will continue to build the hydro facial brand and complement those initiatives with product innovation and R&D.

Speaker 3: We will continue to build the Hydrofacial brand and complement those initiatives with product innovation and R&D.

Speaker 3: To tell you more about our innovation pipeline, I will now turn the call over to Beauty Health Chief Operating Officer, Brad Hauser.

To tell you more about our innovation pipeline I will now turn the call over to beauty health Chief operating Officer, Brad Houser.

Thank you Andrew it's a pleasure to be here today.

Speaker 7: I have been in the aesthetic space for many years and I'm proud to have worked with many of the industry's most successful devices and brands. I must say I have rarely been as excited about an innovation pipeline as I am about the opportunity in front of beauty health.

I have been in the aesthetic space for many years and I'm proud to have worked with many of the industry's most successful devices and brands.

I must say I have rarely been as excited about an innovation pipeline as I am about the opportunity in front of beauty health <unk>.

Speaker 7: Since joining in January , I've taken on end-to-end product oversight from innovation to production to go to markets.

Since joining in January I've taken on end to end product oversight from innovation to production to go to market.

Speaker 7: My goal has been to focus the organization on innovations that will deliver long-term, sustained, profitable growth.

My goal has been to focus the organization on innovations that will deliver long term sustained profitable growth.

Speaker 7: First, Sandale. You all know it as our next generation connected device to deliver powerful insights and efficiencies for our providers.

First Sundar you all know it is our next generation connected device to deliver powerful insights and efficiencies for our providers.

Speaker 7: What we're unlocking next is Sindeio's one-stop plug-and-play platform capability.

What we are unlocking next is scenarios, one stop plug and play platform capabilities, we envision a future where some day it becomes a revenue generating Swiss army knife, serving as the centerpiece of the treatment room.

Speaker 7: We envision a future where Sendeo becomes a revenue generating Swiss Army knife, serving as the centerpiece of the treatment room. Today we plug and play our

Today, we plug and play our Leidy shield from life's them.

Speaker 7: You can imagine in the future where we can power a dermatoscope or other skin assessment tools to give the STs an in-room diagnostic, or even a laser or oxygen.

You can imagine in the future, where we can power a dramatic scope or other skin assessment tools to give the STS and in room diagnostic or even a laser or oxygen facial handpiece with this our providers can offer complementary treatments all in one device.

Speaker 7: With this, our providers can offer complementary treatments all in one device.

Speaker 7: We intend to add a new handpiece with complementary functionality to Sendaio every 12 to 18 months.

We intend to add a new handpiece with complementary functionality tooth and nail every 12 to 18 months.

Speaker 7: And a Sendeil is the flagship device in our lineup. Our new connected Allegro serves as the entry level offer.

And <unk> is the flagship device in our lineup our new connected Allegro serves as the entry level offering.

Speaker 7: The upgraded Allegro provides the same trademark hydrofacial glow, but without many of the defining features of Sendeil.

The upgraded Allegro provides the same trademark hydro facial glow, but without many of the defining features of sin Dale.

Speaker 7: The entry-level pricing offers flexibility for us to attract even more providers, particularly newly graduated estheticians just beginning their career.

The entry level pricing offers flexibility for us to attract even more providers, particularly newly graduated a statistic just beginning their careers.

Speaker 7: Boosters are already central to the hydrophacial approach to personalization and co-created R&D with a number of strong partners.

Boosters are already central to the hydro facial approach to personalization and co created R&D with a number of strong partners.

Speaker 7: You will continue to see us launch marquee booster innovations to drive newness on a regular cadence globally. These fuel excitement and truly different

You will continue to see us launch marquee booster innovations to drive newness on a regular cadence globally.

These fuel excitement and truly differentiate our brand.

Speaker 7: We expect to launch a collection of regent specific boosters, starting with China, and addressing the skin needs and preferences of our largest growth market.

We expect to launch a collection of region specific boosters, starting with China, and addressing the skin needs and preferences of our largest growth market.

Speaker 7: Hydrafacial branded skincare is a logical extension that providers can recommend to their clients to use at home. It is a natural add-on for providers and puts Hydrafacial in consumers' homes, enhancing our brand engagement.

Hydro facial branded skincare is a logical extension that providers can recommend to their clients to use at home and as a natural add on for providers and puts hydro facial in consumers' homes enhancing our brand engagement.

Speaker 7: This next innovation is particularly exciting, as it's been in the works for some time and opens a new channel for Beauty Health. Hair Solon.

This next innovation is particularly exciting as it's been in the works for some time and opens a new channel for BD health hair salons.

Speaker 7: We intend to create a portable, CaraVe-specific device tailored to the needs of hair stylists. The device is designed for the tight quarters and the economics of a hair salon, a venue that is often the first place many consumers discuss hair loss concerns.

We intend to create a portable care of these specific device tailored to the needs of hair stylists. The devices designed for the tight quarters, Ian the economics of a hair salon a venue that is often the first place many consumers discuss hair loss concerns.

Speaker 7: We will start with a very thoughtful pilot to ensure we fully understand this new market, and we'll be excited to update you on our progress as we learn more.

We will start with a very thoughtful pilot to ensure we fully understand this new market and we'll be excited to update you on our progress as we learn more.

Speaker 7: And finally, our soonest coming innovation is a consumer loyalty app that will put hydrophacial directly in the hands of consumers.

And finally, our soon as coming innovation is a consumer loyalty app that will put hydro facial directly in the hands of consumers.

Speaker 7: The app is designed to draw consumers in and reward hydrophacial treatment frequency. With this, we aim to drive increased bookings to our providers, growing their businesses and fueling our own consumables growth.

The App is designed to draw consumers in and reward hydro facial treatment frequency.

With this we aim to drive increased bookings to our providers growing their businesses and fueling our own consumables growth.

Speaker 7: At the Admatures, it is expected to become a cornerstone of our connected ecosystem.

At the Atmos yours, it is expected to become a cornerstone of our connected ecosystem.

Speaker 7: We're excited to be collaborating with Amazon Web Services and the AWS Generative AI Innovation Center to expand the functionalities of Sendeo Cloud, our beauty health loyalty platform, and implement generative and predictive AI capabilities to better personalize the consumer's beauty wellness experience.

We're excited to be collaborating with Amazon Web services, and the AWS generative AI innovation center to expand the functionalities of pseudo cloud, our beauty health loyalty platform and implement generative and predictive AI capabilities to better personalize the consumer's beauty wellness experience.

Speaker 7: In summary, we have an exciting innovation pipeline rooted in clear consumer insights that are expected to deliver sustained long-term growth. And with that, I turn it back to Andrew.

In summary, we have an exciting innovation pipeline rooted in clear consumer insights that are expected to deliver sustained long term growth.

With that I turn it back to Andrew.

Speaker 3: Thank you, Brett. Indeed, we have never had a stronger innovation pipeline. And this will provide us with long-term, sustainable, multi-dimensional growth opportunities.

Thank you Brad Indeed, we have never had a stronger innovation pipeline and this will provide us with long term sustainable multi dimensional growth opportunities and.

Speaker 3: and we look forward to sharing more updates at a beauty health investor day in H1 of 2024. Operator, we're now ready to...

And we look forward to sharing more updates at a beauty health Investor day, an H one of 2024.

Operator, we're now ready to take any questions.

Speaker 1: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speaker phone, 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.

Thank you we will now begin the question and answer session.

I'll ask a question you May press Star then one on your telephone keypad.

If you're using a speaker phone please pick up your handset before pressing the keys.

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

Speaker 1: Please limit yourself to one question.

Please limit yourself to one question.

Speaker 1: At this time, we will pause momentarily to assemble our rusts.

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

Speaker 1: The first question comes from Oliver 10 with TV Cowan.

The first question comes from Oliver Chen with TD Cowen.

Please go ahead.

Yeah.

Speaker 2: Hi, thank you very much. We'd love your thoughts on the teething issues and what that implies in terms of timing and how much impact I ended having across the Sendeos.

Alright. Thank you very much would love your thoughts on the teething issues and what that implies in terms of timing and how much impact that is having across the us in Dallas as well as as you thought about guidance you mentioned some of those issues caused gross margin headwind how are you.

Speaker 8: as well as you thought about guidance, you mentioned some of those issues caused gross margin headwinds. How are you able to reaffirm the margin guidance in the context of that? And a follow-up on China, just we're seeing

To reaffirm.

The margin guidance in the context of that.

And a follow up on China, just we're seeing some optimism, but some caution in China would love your reads on how thats enter playing with the traffic and what you're seeing thanks very much.

Speaker 8: Some optimism, but some caution in China would love your reads on how that's interplaying with the traffic and what you're seeing. Thanks very much.

Speaker 3: Good morning, good morning Oliver. Thanks for the questions. So I'll start with the Syndeo issue. So as you know, you know our vision for Syndeo is that it's a connected platform and that Swiss Army knife at the center of the provider's treatment room and you know and when we launched it was a real leap forward. But I think as we've talked before with any high-tech AOT product, especially those first out of the gate like the ones in the US,

Good morning, Good morning, Oliver Thanks for the questions.

So I'll start with the <unk> issue. So as you know our vision for <unk> is that it.

<unk> platform and that Swiss army knife of the central to providers treatment room, and when we launched it was a real leap forward, but I think as we've talked before with any high Tech Iot product, especially those first out of the gate, let the ones in the U S. There was an element of a switch of improvement once it in the real world.

Speaker 3: There was an element of iterative improvement once it in the real world. So in part of the TV issues were software related and part of the issue was user experience and hardware.

<unk>.

And part part of achieving issues, where software related and part of the issue was user experience in hardware and <unk>.

Speaker 3: And I think, you know, as providers put some data to work over the course of last year, particularly in the U.S., going through hundreds of...

I think and as providers puts and day to work over the course of last year, particularly in the U S going through hundreds of the treatments, we observed opportunities to improve the customer experience and overall performance and Rob that reliability. So it pushed through new software updates, which in a very specifically was related to.

Speaker 3: We observed opportunities to improve the customer experience and overall performance and provide reliability so he pushed through a new software update.

Speaker 3: which very specifically was related to sporting a rinse cycle, etc, because we were finding that some of the first generation.

Forcing a written cycle et cetera, because we are finding that some of the first generations at some residue buildup and blockage and other ones. We're simply simple component upgrades. This is mainly being a U S. Teething issue because over the course of last year, we've talked about it on previous calls we were able to.

Speaker 3: had some residue build up and blockage and other ones were simply simple component upgrades.

Speaker 3: This has mainly been a US-T-Ding issue because over the course of last year we've talked about it on previous calls. We're able to...

Speaker 3: to make those amendments ahead of the international launch. So we've been putting the customer first and obviously invested, as we've spoken before, about replacing every machine. If a customer called in with a problem, we're very fast to take the machine back and switch it out.

Make those amendments ahead of the international launch.

We've been.

Putting the customer first and obviously invested as we've spoken before about replacing everything machine.

Customer called into the problem with very fast.

The machine back and switch it out.

Speaker 3: But of course, that cost us money, which was unplanned, but we felt that we must put the customer first, they're with us for the long term, and that pays off, and they appreciate that support. So we're putting the last of the fixes in terms of Q3, and we're in the US where we're making the amendments.

But of course that cost us money, which was unplanned, but we felt that we must have the customer first they're with us for the long term and that pays off.

I appreciate that support so.

Putting the last of the.

Fixes in terms of Q3, and we're in the U S, where we're making the amendments in terms of in field support and that'll be completed by the end of Q3.

Speaker 3: in terms of in-field support, and that'll be completed by the end of Q3. In terms of your other questions, you know, on growth...

In terms of your other question on gross margin.

Speaker 3: The pressure we had in Q2 very specifically was just partially cause with what I've talked about send-day issues in the US. I think we're working with our providers. Some of them knew we're about to do these in market fixes, giving Q3, so there was a partial degree of holdback. And the other part with the high interest rates in the US, particularly, we saw a degree of, shift the lower price.

The pressure we had in Q2 very specifically was just.

Partially cause with what I talked about some issues in the U S. I think we were working with our providers. Some of them you were about to do these in market fixes. Good given Q3. So there was a partial degree of hold back on the other part with the high interest rates in the U S, particularly we saw a degree of shifts.

Speaker 3: devices like the Allegro or Reformation their devices. So that's what caused the gross margin shift that it's temporary. We Aware of it we have a fixing

The lower price devices like the allegro or refurbish and data devices. So that's what caused the gross margin shift that it's temporary.

We are aware of it we have a fix in place and we'll be back up to historic levels of gross margin by the middle of next year and we do have a line of sight to our long range targets, you'll recall last September we presented.

Speaker 3: and we'll be back because this historic level of growth margin by the middle of next year and we do have a line of sight to our long-range targets you recall our September . We presented our 500 basis points of margin accretion over the next three years from September . We have a line of sight there because the China manufacturing will flow through by the middle of next year and the value engineering products which we projects which we presented will also bear fruit. We have put those on hold because we've really dedicated our resources on addressing the same day issues in the US which was the right thing to do.

500 basis points of margin accretion over the next three years from September we have a line of sight to that because the China manufacturing will.

Flow through about the middle of next year, and the value engineering products, which projects, which represented will also bear fruit.

On the whole because we've really dedicated our resources on addressing the same day issues in the U S, which was the right thing to do so we're on track and then you'll final question on China, I mean as anticipated both EMEA and APAC came back strongly but particular Lee in China.

Speaker 3: So, I'll try to get that. And then your final question on China, I mean, has anticipated both the mere and APEC came back strongly, but particularly in China.

Speaker 3: We are very pleased with the acceleration there in Q2, and I must say it's continued into Q3. As you know, Oliver, China is less impacted by those typically, you know, July , August

Very pleased with the acceleration there in Q2 and I must say it's continued into Q3 as you know all of China is less impacted by those typically in a July August .

Speaker 3: like the periods of consumption which Europe and the US has. So China continues to go well, despite the economic headlines are reading, we follow up very closely, but the consumption of consumables and systems remains very healthy.

I'd like to periods of consumption, which Europe and the U S has so I can tell you that China's continues to go well. Despite the economic headlines are reading with vault, we follow it very closely but the consumption of consumables and systems remains very healthy.

Speaker 1: The next question comes from Corinne Wolfmauer with Piper Sandler. Please go ahead.

The next question comes from Corinne Wolf Meyer with Piper Sandler. Please go ahead.

Speaker 9: Hey, good morning, Pean. Thanks for taking the question. So I just want to touch on the guidance and really appreciate the color you gave kind of on more of like the quarterly cadence from what to expect for Q's during Q4.

Hey, good morning team. Thanks for taking the question. So I just want to touch on the guidance and really appreciate the color you gave kind of like the quarterly cadence.

For Q3, and Q4, but it does kind of weird.

Speaker 9: But it does kind of lead into a pretty strong ramp in EBITDA margin in Q4.

And then to a pretty strong ramp in EBITDA margin in Q4 can you just talk about one what gives you confidence that we'll see that big of a step up in Q4, and then Q where is that really going to come from if you're still going to see some added gross margin pressure is it really going to come from the marketing.

Speaker 9: Can you just talk about, one, what gives you confidence that we'll see that big of a step up in Q4? And then two, where is that really gonna come from? If you're still gonna see some added gross margin pressure, is it really gonna come from the marketing expense and SG&A, just kind of where are we gonna see that leverage pull through? Thank you.

Expense and SG&A, just kind of where are we going to see that that leverage quarter. Thank you.

Speaker 3: Karen, thank you for the question. And I'm glad you asked it because I think it's important that we walk through this together on the call. We maintain our conviction and our ability to hit our guidance in the back half. And we started this year, mentioning this is going to be a back half way to the year and that has not changed.

Sure and thank you for the question and I'm glad you asked it because I think it's important that we work through this together on the call we maintain our conviction and our ability to hit our guidance in the back half and we started this <expletive> mentioned this was going to be back half weighted year and that has not changed I think as China recovers, we expect continue.

Speaker 3: I think as China recovers, we expect continued growth in the region. You recall, you know, in Q3, and especially in Q4 last year, China was locked out. So we had no business. That's bounce back strongly as has a mere. And as you know, we've spoken before about the higher contribution margins for those international businesses, especially in ages of that contributes.

Great. So in the region you recall in Q3, especially in Q4 last year, China was locked down. So we had no business that has bounced back strongly as has EMEA and as you know we've spoken before about the higher contribution.

Margins for those international business, especially in Asia. So that contributes also we are still in launch phase dropping a lot of these systems globally.

Speaker 3: Also, we're still in launch phase, dropping a lot of new systems globally, and it's been back after the year. We placed a certain descent growth on new systems globally in Q2. That will continue as we roll out Sinder internationally in the second half, as we count that. Thirdly, we've got of course, exciting booster portfolio launches coming in the second half, including some local in Q4 Asian boosters, which Brad talked about in China. Moreover, we're getting, as we experienced already this quarter, degrees of operating leverage throughout the P&L, beyond the fixed cost levels you'd expect to see with our revenue growth. And additionally, as you mentioned, we expect to see receiving effects investments, you know, are marketing and advertising is very front-half weighted, because of all the trade shows in our industry where we generate the leads and that typically receives. So we have line of sites to the back-up.

In the back half of the year.

Places.

Great for new systems globally in Q2 that will continue as we rollout <unk> internationally in the second half as we felt that thirdly, we've got of course exciting boost portfolio launches coming in the second half, including some local in Q4 Asian boosters, which Brad talked about in China.

We are getting as we experienced already this quarter degrees of operating leverage throughout the P&L beyond the fixed cost leverage you'd expect to see with our revenue growth. So in addition, as you mentioned, we expect to see receding Opex investments.

Marketing and advertising is very front half weighted because of all the trade shows in our industry, where we generate the leads and that typically receipts that we have line of sight to the.

The back half and I personally went through the details of the financials for the back half of the year given the CFO transition I feel confident in our ability to use various levers to achieve our guidance.

Speaker 3: Through the details of this financial, for the back half of the year, given the CFO transition, I feel confident and our ability to use various levers to achieve our goal.

Speaker 1: The next question comes from Margaret Cazer with William Blair. Please go ahead.

The next question comes from Margaret Kayser with William Blair.

Please go ahead.

Speaker 10: Hey, good morning. Thanks for taking the questions. I'm going to take a 2nd crack at the guidance comment both on the top line and the bottom line and you touched on it a little bit. Andrew there. But maybe if we go into specifics.

Hey, good morning, Thanks for taking my questions I'm going to take a second crack at the the guidance Scott.

On the topline and the bottom line is you touched on it a little bit Andrew there, but maybe if we go into specifics so if.

Speaker 10: If we look at the historical, I guess, key for trends pre-COVID.

If we look at the historical I guess Q4 trends pre COVID-19.

Those look like to me at least that they were up kind of in the mid 20% sequentially from Q3 to Q4 more recently.

Speaker 10: you know, more recently in, you know, in COVID, I guess, impacted years. It was in the teens. The number you provided, they looks like it's closer, maybe the high 20s from Q3 and Q4. So again, is that more China? Is it something else? You know, are my numbers wrong? Maybe they are. And then as you think about a just a little bit, does that even, I guess, rely on revenues that are hitting the number that you've got? Thank you. Margaret, thank you. Great questions. Important. So a few things as we unpack that. First of all,

And Covid I guess impacting gear as it was in the teens. The number you provided today it looks like its closer maybe at a high 20% from Q3 and Q4 so.

Is that more China is it something else.

Are my numbers wrong, maybe they are at.

And then are you thinking about adjusted EBITDA does that EBITDA, yes rely on revenues.

The number that you've got thank you.

Speaker 3: Margaret, thank you. Great question is important. So a few things as we unpack that.

Great. Thank you great questions important so a few things as we unpack that first of all looking back at the historical years.

Speaker 3: First of all, looking back at the historical years you referenced, remember, recall back there, China was very nascent back then. We didn't have teams on the ground in Shanghai, Beijing, Shenzhen, which we have now, as was EMEA. Now, of course, we've made all those investments during the last...

Referenced.

Remember recall by that China was very nascent back then we didn't have teams on the ground in Shanghai, Beijing, Shenzhen, which we have now as it was EMEA now of course, we've made all those investments during the last two or three years, which are really bearing fruit.

Speaker 3: two or three years, which are really bearing fruit. So when you add on those building blocks with the expansion of our business, the Cinderella launch, the new consumables.

So when you add on those building blocks with the with the expansion of our business that <unk> launched the new consumables.

Speaker 3: That's how we bridge that. In terms of EBITDA, you are very confident in our ability to deliver the EBITDA with the momentum we have, with the leverage we're getting. We'll also see some gradual sequential improvement in Grace Margin in the back half of the year. And that's why we have confidence and line of flight to deliver the guidance provided.

How do we bridge that in terms of EBITDA you are very confident in our ability to deliver the EBITDA with the momentum we have with the leverage we're getting we'll also see some gradual sequential improvement in gross margin in the back half of the year and that's why we have confidence and line of sight to deliver the guidance provided.

Speaker 1: The next question comes from John Block with Steeple. Please go ahead.

The next question comes from Jon Block with Stifel.

Please go ahead.

Speaker 7: Thanks, guys. Maybe the first question.

Thanks, guys.

Maybe the first question.

Speaker 7: The year ago EBITDA figures have changed yet again. So I see in the PR, the 1H22 EBITDA is now 18.3 million. It was 13.8 million. So, you know, it was revised higher by 30%. The 1H22 EBITDA margin arguably benefits by about 250 BIP.

The year ago, EBITDA figures have changed yet again, so I see in the PR.

The $1 22, EBITDA is now $18 3 million.

$13 8 million revised higher by 30%.

122, EBITDA margin arguably benefits by about 250 bps in.

Speaker 7: And just from some of the footnotes, it seems like more ad backs were baked in.

And just from some of the footnotes it seems like more add backs were baked in to.

Speaker 7: to the year ago numbers so that it's apples to apples with the one age 23 add back. So I guess one, do I have that right? And then Leanne, how much does the 2023 EBITDA margin of 18 to 19% benefit from these incremental?

A year ago number so that it's apples to apples with the $1 23 add back. So I guess, one do I have that right and then how much does the 2023 EBITDA margin of 18%, 19% benefit from these incremental add backs relative to your original guidance. When you gave that whenever that was it.

Speaker 7: relative to your original guidance when you gave that whenever that was six months ago. The follow-up Andrew, you know, the 22 revenues unchanged, the gross margins are arguably lower. So some of the EBITDA is being made up, you know, within our backs. Likely sales and marketing when you look at the adjusted numbers.

Months ago.

Follow up Andrew the 'twenty two revenues unchanged gross margins are arguably lower so some of the EBITDA is being made up within opex.

Likely sales in marketing when you look at the adjusted numbers.

Speaker 7: Maybe just your comfort that you're not sacrificing, you know, call it investments in sales and marketing in 23 in order to hit the near term margin targets, which might be, you know, crippling more longer term growth trajectory of longer term growth in 24 and beyond. Thanks, guys.

Maybe just your comfort that you're not sacrificing.

Investments in sales and marketing in 'twenty three in order to hit the near term margin targets, which might be <unk>.

More longer term growth trajectory of longer term growth in 'twenty four and beyond thanks guys.

Speaker 3: John , thank you. I'll take those. I'll start with your last question and then we'll back. First of all, you're just a, you know, RIF, we have, you know, and I have personally total confidence in our guidance in the year to go. On the, you know, the way we're investing, we're learning all the time in terms of our sales and market. We've been operating in marketing for sort of that 10 to 12% of sales and that's of course increased year on year value as we've grown bigger.

John Thank you I'll take those.

Start with your last question and then work back first of all just to.

We have <unk>.

Firstly total conference.

Guidance in the year to go.

On the.

The way, we're investing we're learning all the time in terms of sales a month, we've been operating and marketing expense sort of in that 10% to 12% of sales and that's a cost increase year on year in value as we've gotten bigger.

Speaker 3: Our spend is typically front-weighted, but we've really shifted and learned about how we invest.

And.

Ill spend is typically front weighted but we've really shifted and learn about how we invest a bit from the globe pollution, which we highlighted on the call. The way we are investing in broader reach digital which both a provider to drive conversion of new systems and consumers are actually being a lot more efficient in how we invest in our marketing.

Speaker 3: Be it from the global illusion which we've highlighted on the call the way we're investing in broader reach Digital which both the provider to drive conversion of new systems and consumers There actually being a lot more efficient in how we invest in our marketing Dollars and we're seeing that and the ROI's we track so I must say we're feeling you know very confident that we're not in any way

The missing that in the Rois, we track so I must say, we're feeling very confident that we're not in any way rich.

Speaker 11: reducing our songs there. We're just getting leverage from efficient season terms of OPEX and structures which are bearing through to sort that operating leverage come through this year already in Q2. In terms of your, going back in terms of your adjustment. So yes.

Reducing.

Some of them were just getting leverage from efficiencies in terms of Opex.

And in our structures, which are bearing fruit you saw the operating leverage come through this year already in Q2 in terms of your going back in terms of your adjustments so yes.

Speaker 3: What in H2 of last year, we didn't put our bonus for our teams in the H2. We also, to be apples to apples, removed it this year because so much of our comp is either base salary or equity. Indeed, we paid equity as a bonus to our teams this year, so we're very aligned with the shareholders. So we've taken that out of H2, so it's apples for apples. So that explains that adjustment since including in the footnotes.

In page two of last year, we didn't put.

Bonus.

Teams in the H two we also to be apples to apples removed this year, because so much of a.

<unk> is our the base salary or equity indeed, we pay equity as a bonus to our teams. This year. So we're very aligned with them.

With shareholders. So we've taken that on page two so it's apples to apples so that explains that adjustment since putting in the book.

<unk>.

Thank you.

Speaker 1: The next question comes from Navantai with BMP. Please go ahead.

The next question comes from Navan tight with BNP.

Please go ahead.

Speaker 12: Hi, good morning. Thanks for taking my question. Kim, spend more time on the US trade tightening condition. So let's start struggling to find the starting time thing and did really help market the further system at all. And also interested to know about the immediate priority of my co-owner hand from his appointment tomorrow. Thanks.

Hi, good morning.

Taking my question.

From a long time ago.

My question is that Nexstar Macbeth struggling to find great authority.

Greenhouse market furbished.

And also interested to know about.

Michael Monahan from appointment Tomorrow. Thank you.

Speaker 11: Thank you, you're a little bit difficult to hear, but first of all, I'll address your first one. I think you were talking about the health of the market in general credit. I think first of all, you mentioned the medical staff.

Thank you you are a little bit difficult to hear but first of all I'll. Just your first one I think you were talking about the health of the market in general credit I mean first of all you mentioned the medical Spa the medical Spa, both in the U S and globally is very very buoyant as you know, it's over 60% of our business and the most productive.

Speaker 3: The medical spa both in the U.S. and globally is very, very buoyant. As you know, it's over 60% of our business and the most productive, and it's growing fast and continues. I think what I refer to in terms of the pressure on our gross margin related to systems

And it's growing fast and continues I think what I referred to in terms of the pressure on our gross margin related to systems actually is less so from the chain they've continued to invest and that's why even the U S. You saw that really strong growth in systems of 20% in Q2, and Thats Comping last year's 10 dialogue.

Speaker 3: actually is less so from the chains. They've continued to invest, and that's why even in the U.S. you saw that really strong growth in systems of 20% in Q2, and that's comping last year.

Speaker 11: In Darylont, with new system, new doors, increasing penetration.

With new system, new doors, increasing penetration and market share I think where we've seen the pressure as those institutions, who are just out of school. They would be just buying that first device and I think what they've been telling us with higher interest rates financing now is they're getting quite up to nearly 20 <unk>.

Speaker 11: and market share. I think where we've seen the pressure is those, you know, esticians who are just out of school, they would be the, you know, just buying their first device. And I think, you know, what they've been telling us with higher interest rates.

Speaker 11: Financing now is, you know, they're getting quotes up to nearly 20% on financing. And that, you know, if you're looking at Sender, which is, you know,

On financing and that.

And if youre looking at <unk>, which as you know.

Speaker 3: you know, recommended price of circa $40,000, you know, that's a big, um, ask for them to take on. I think that's why they've been seeking either refurbished Shindei systems or the Allegro system, which is a perfect price point for them, around $20,000. So, you know, we've been able to serve them. In saying that, we walked away from over $4 million.

Recommended price of circa $40000.

A big.

Asked for them to take on I think that's why they've been seeking either refurbishing days systems or the Allegro system, which is a perfect price point for them around $20000. So we've been able to serve them in saying that we walked away from over $4 million.

Speaker 11: of shelves in the US alone in Q2 because it despite good credit levels, a number of our providers just couldn't get the financing. They won as tightening as tightened up with the rising interest rates. So that really explains that. And of course, we're well served with, you know, the way we stratify our portfolio with Lego is that entry price point. And then, today, we're able to, you know, cover the market well.

Sales in the U S alone in Q2, because it despite good credit levels a number of I'll provide is just couldnt get the financing. They won is tightening as Craig and it tightened up with the rising interest rates, so that really explains that.

Of course with well served with the way, we stratify our portfolio with Legg ROE is that entry price point, and then <unk> were able to.

Cover the market well.

Speaker 1: The next question comes from Olivia Tong with Raymond James.

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

Speaker 13: Great. Thanks. Good morning. I want to revisit gross margin again.

Great. Thanks, Good morning, I wanted to revisit gross margin again, because a couple of things that you said.

Speaker 10: Because a couple of things that you said, obviously selling old refurbished systems, geolagory, etc., which I imagine have lower version margins relative to some day. Was it always part of the plan to do that? And as you continue to sell old refurbished systems? And then can you talk about the gross margins that are branched between some of the legacy systems and some day old?

Obviously signing.

Old refurbished system sale language et cetera, which I imagine have.

Lower gross margins Rattler chip chip and Dale was it always part of the plan to do that and are you continuing to sell old refurbished systems and then can you talk about the gross margin differential between.

Some of the legacy systems.

Speaker 10: Because effectively what it looks like is that you may be having

Oh.

Because effectively what it looks like is that you may be having a bit of a lower AUR.

Speaker 10: bit of a lower AUR relative to your prior explication thing.

Relative to your prior expectations.

Speaker 10: And with that kind of curious how you, how the building blocks to get to gross margin back to normal by beginning the next year. Thanks.

And with that.

And I'm curious how how are you.

Oh, the building blocks to get to the gross margin back to normal.

Thank you.

Speaker 11: I'll leave it. Thanks for your question. I mean, first of all, just to confirm, Allegro is not Grace margin the creative. It's not dilute.

Hi, Lisa Thanks for your question I mean first of all just to confirm Allegro is not gross margin decretive, it's not diluted.

Speaker 11: it's in line with the margin. I think what the margin pressure we face...

It's in line with the margin I think what the.

The margin pressure, we faced has been more from the REIT.

Speaker 11: has been more from the consumers, sorry providers, first thing, the lower margin refurbished, Sinde is that's what's stragg the margin down. So Allegro is a great margin, of course, at $20,000 it's a lower price point, but perfect for that, graduating S-tition and then provider. And then obviously the Sinde for the provider wanting all the functionality which Brad talked to.

Consumers.

Sorry providers purchasing the lower margin refurbished 10 days, that's what started the margin down.

<unk> a great margin of course at $20000 lower priced platelet perfect for that graduating S. Titian and then provider.

And then obviously the <unk> that provided one thing all the functionality, which Brett talk too.

Speaker 3: And then in terms of the gross margin, we will start to see a sequential improvement of that in the second half of this year, and be back up by the middle of next year, we'll be over these short-term headwinds.

And then in terms of the gross margin, we will start to see a sequential improvement of that in the in the second half of this year and be back.

By the middle of next year will be over the short term headwinds in essence.

Speaker 3: In essence, you know, we've, I think we've talked about this before in previous calls. At this stage, we've planned on twofold. One to have a lot more manufacturing in China, but at the moment, we started that manufacturing. But as we've also been making addressing the teasing issues on the devices in the US, in essence, we've been having double costs of that US.

We talked about this before in previous calls at this stage, we had planned on twofold, one to have a local manufacturing in China, but at the moment, we've started that manufacturing, but as we've also been making addressing the teething issues on the devices in the U S. In essence, we've been having double cost of that U S production and as well as Chi.

Speaker 3: production and as well as China. So that's going to grow smart in it. And more over we have

So that's been a gross margin hit.

Moreover, we have.

Speaker 3: We also had to postpone some of the value engineering projects which we'll now address because we've really focused the team on addressing the Sinde issues in the US. We'll get over that during the end of Q3 and have line of sight back to gross margin of historical levels and more by the middle of next year.

Also had to postpone some of the value engineering projects, which will now address because we've really focused the team on addressing the issues in the U S will get that during the end of Q3 and have line of sight to gross margin of historical levels and more by the middle of next year.

Speaker 1: The next question comes from Alan Gong with J.P. Morgan. Please go ahead.

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

Speaker 4: Hi, Dean, thanks for the question. You know, I kind of want to touch up on guidance again. When I look at it, it does look a bit more, you know, forculated than I think we were originally expecting. You know, Tufu came in a little bit stronger on the top line than we were expecting. And I know there's like definitely a little bit of, you know, moving pieces to the years, given the kind of the cadence of some day.

Thanks for the question.

Kind of wanted to touch up on guidance again, when I look at it does look a bit more <unk> loaded than I think we were originally expecting execute came in a little bit stronger on the top line than we were expecting and I know there is definitely a little bit of moving pieces to the year given the kind of the cadence of some data launch. It internationally. So is there any more color you can provide just on <unk>.

Speaker 14: So is there any more colleagues can provide just on how you get confident and that really strong for your number, how you should think about systems health progress?

How do you get confident and that really strong for a few number how we should think about system sales progressing how we should think about disposable sourcing.

Speaker 11: Good morning, Ellen. Thanks for the question. Again, an important one. I think we maintain our conviction and our ability to hit our guidance. And I think we've taught.

Good morning, Alan Thanks for the question again, an important one as I said, we've maintained maintain our conviction in our ability to hit our guidance I think we've talked before about from the start of the year. We said it would be back weighted I think there's a few building blocks in there of course, China was locked down.

Speaker 11: before about we, from the start of the year we said it would be back weighted. I think there's a few building blocks in there of course, China was locked down, you know, really for us during much of Q2 and certainly Q4 of last year, you've seen how significant that is today on the call. That's of course bounce back strongly and continues to form well into Q3. And the same with, in mere in general, and both of those markets had higher contributions, margins than American business.

It really for us doing much of Q2, and certainly Q4 of last year, you've seen how significant that is today on the call. That's of course bounce back strongly and continues to perform well into Q3 and the same with <unk>.

EMEA in general and both of those markets.

Contribution margins on American business.

Speaker 11: And you know, as our business mix continues to weigh more towards international, we expect to generate degrees of office being leveraged throughout the PNL beyond the fixed cost leverage it expects to see. So there's fixed cost leverage. There's also the operating leverage which is in terms of investments. Our marketing and advertising is very front-weighted because of around the trade shows in our business.

As our business mix continues to weigh more towards international we expect to generate degrees of operating leverage throughout the P&L beyond the fixed cost leverage you would expect to see so there is a fixed cost leverage there's also the.

Operating leverage which is in terms of our investment in marketing and advertising is very front weighted because of around the trade shows in our business.

Speaker 11: And we'll get leverage there in the second half, as well as the consumables. We've also got the international markets when they launched in there. They put through some price increases on the consumables. All of that flows through in the second half in Q4, which gives us line of sight to that step up in EBITDA margin, which you see.

And we will get leverage in the second half as well as the consumables. You've also got the the international markets when they launched and day that they put through some price increases on the consumables all of that plays through in the second half in Q4, which gives us line of sight to that step up in EBIT margin, which you see.

Speaker 1: The next question comes from Linda Bolton-Wiser with the A. Davidson.

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

Please go ahead.

Speaker 9: Yes, hi, thank you. So you're commentary about the small estheticians in the US having trouble financing. It's a little bit of a different narrative about the positioning of your system because I guess we were thinking of it as position as the trade down lower and more affordable system out there among estheticians.

Yes, hi, Thank you so your commentary about the small as statistic.

I was having trouble financing, it's it's a little bit of a different narrative about the positioning of your system. Because I guess, we were thinking of it is positioned as the trade down lower more affordable system out there among us sufficient so it really changes.

Speaker 9: So it really changes the positioning and how we think about it. Maybe you could talk about, you know, for the regular bigger doctors and whatnot, who have a budget, who send it to that budget by the end of the year.

The positioning and how we think about it maybe you could talk about <unk>.

For the regular bigger doctors and whatnot.

We have a budget who send it to their budget by the end of the year.

Speaker 9: causing you to have a bigger fourth quarter. I mean, it's sort of this issue seeping into that bigger provider as well. And so you may see less demands from them, even though you've sort of positioned this as the affordable system, it seems like maybe this is a stretch.

Causing you to have a bigger fourth quarter I mean, it is sort of this issue seeping into that bigger provider as well and so you may see less demand.

From them, even though you've sort of positions us as the affordable system. It seems like maybe this is a stretch.

Speaker 9: Can you just talk about how that affects like your fourth quarter sales out?

Can you just talk about how that effects like your fourth quarter sales outlook.

Speaker 3: Linda, thanks very much for the question. I'd say with respect, I don't agree with your premise.

Linda Thanks, very much for the question.

I would say with respect I don't agree with your premise.

Speaker 3: I would say, for example, the doctors and the medical channel, and the growing medical spa channel, they consider even the syndrome to be, you know, very cheap compared to the other boxes they sell from all the other brands you're very familiar with. I think, and...

I'd say first of all the doctors and the medical channel.

And the growing medical Spa channel they consider even the <unk> to be in a very cheap compared to the other boxes. They sell from all the other brands you are very familiar with I think.

Speaker 3: that for the efficient just leaving, that's why we've always had the allegro business there, as also the refrigerant ones have seen there, which makes them accessible. We see this a short term.

Yes.

The addition, just leaving that to.

We've always had the allegro business there as also the refurbishments of Tinder, which makes them accessible.

We see this as a short term headwind.

Speaker 11: Pricing resistance from estheticians was never an issue until interest rates were so high. When you've got financing at 20 percent, of course, that is the short-term pain which we'll get over. But fundamentally, you see, we still dropped 30 percent more systems used globally in Q1. Even in the U.S. as well, our systems sold during the quarter were up 2 percent.

Pricing resistance.

<unk> was never an issue until interest rates are so high when you've got financing at 20% of course that is the short term payments you'll get over the fundamentally you see we still dropped.

30% more systems new globally in Q1.

Even in the U S as well our systems sold during the quarter were up.

Speaker 11: 25%. So, you know, it's there's no real barrier to pricing.

25%.

There's no real barrier to pricing.

Speaker 11: and of course will benefit as she's setting to four, particularly from doctors in the medical channel. Not only is that the biggest chord of consumption for the year was your right as they used to use up there.

Of course, we will benefit as you said in Q4, particularly from doctors and the medical channel not only is that the biggest quarter of consumption for the year was youre right as they used to use up that cash.

Speaker 11: capital expenditure quota to get their tax incentives, that's a key time to purchasing, not just in the US, but globally. And with the rollout of FinDev and all the markets this year, there will be seizing opportunity to buy that. So that's why we see and anticipate demand to continue to build throughout the year.

Capital expenses quota to.

To get their tax incentives that the key signs of purchasing not just in the U S, but globally and with the rollout and that in all the markets. This year that will be seizing the opportunity to buy that so thats why we see and anticipate demand to continue to build throughout the year.

Speaker 1: 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.

Speaker 11: Hi, good morning, and thank you for taking my question. I'm going to take another run at the revenue guidance from a geographic standpoint. Can you give us a little bit of color on some of the regional dynamics? So how do you expect the U.S. to unfold for the rest of this year? And is Asia and, are Asia and Europe gonna remain strong? And then longer term, how do you see the regional mix changing with your sales in 2024?

Hi, Good morning, and thank you for taking my question I'm going to take another run at the revenue guidance from a geographic standpoint.

Can you give us a little bit of <unk>.

Color on some of the regional dynamics.

How do you expect the U S. During the quarter for the rest of this year.

As Asia, and our Asia and European remains strong and then longer term how do you see the regional mix changing with your sales in 2024.

Speaker 3: Good morning, Bruce, and thanks for the question. This is a topic which I'll follow really closely, and I think...

Good morning, Bruce and thanks for the question.

This is a topic, which drove followed pretty closely and I think.

Speaker 11: As we look globally, despite the economic news headlines, globally we see demand for hydrofacials remain resilient, as demonstrated by the accelerations in the consumable growth driven by volumes, which we've seen in all regions, as well as selling new systems, and while no...

As we look globally, despite the economic news headlines globally, we see demand.

<unk> remained resilient.

Demonstrated by.

The accelerations in the consumable growth driven by volumes, which we've seen in all regions as well as selling new systems.

While no company is recession proof.

Speaker 3: companies recession-proofing, you know, our upper middle class consumers are better able to weather recessionary pressures and for ourselves, you know, self-determination.

Middle class consumers are better able to weather recessionary pressures and process self care as in.

Speaker 3: So in terms of what we're seeing by a region, I mean in the US,

In terms of what we're seeing by region I mean in the U S.

No.

Demand remains healthy you see that in the growth of the consumables at 29% during Q2.

Our strong Q1.

Systems, New systems, we sold in a.

It grew 25% that's in the non traded at once in the U S, which is even more than when we launched <unk> last year. So in essence, we've been increasing our penetration we see.

Speaker 3: on the non-trade-up ones in the US, which is even more than when we launched Indeo last year. So in essence, we've been increasing our penetration, and we see a very healthy market in the US. It's just where we've seen incentives on the device sales, not on the consumable sales. There's just some pressure on that ST because of the high interest rates, but that's why we've been able to not really lose business, we've been able to sell them refurbished Indeos or the Allegros. In terms of, if we shift now to APAC, where we had a very strong quarter, of course, really the news there is the re-acceleration in China.

A very healthy market in the U S is just where we've seen incentives on the device sales not only the consumable sales is just some pressure on the on that.

<unk> because of the high interest rate. So that's why we've been able to not lose business, we've been able to sell them refurbished in days for the <unk> in terms of.

Speaker 3: sell them with published in days for the Allegra.

Speaker 3: In terms of, you know, if we shift now to, you know, APEC.

Shifting now to APAC, where we had a very strong quarter of course really the news there is that reacceleration in China. Despite the negative news headlines from China demand for hydro facial remains very healthy we see less seasonality in China than what you typically do kind of in July and August in Europe , or the U S. St.

Speaker 3: where we had a very strong quarter, of course, really the news there is the re-acceleration in China. And despite the negative news...

Speaker 11: headlines from China demand for hydro facial remains very healthy. We see less seasonality in China than what you typically do in July and August in Europe or the US.

Speaker 11: Same for Latin America. And the Sundar launch has been successful and I think really underscores the enthusiasm in that market. I mean, ultimately.

For Latin America, and the <unk> launch has been successful and I think really underscores the enthusiasm in that market I mean ultimately.

Speaker 3: In years to come, you know, China will no doubt be our first market, the tan bearers.

In years to come China will no doubt.

First market. The Tam there is two three times bigger than that of the U S. And I think we're just getting started with very very low penetration as you saw in the in the presentation and of course, our positioning there as it cosmetics device northern medical device, which is very different to a payer brands in the regions that we have just that.

Speaker 11: to three times bigger than that of the U.S. And I think we're just getting started there with very, very low penetration, as you saw in the presentation. And of course, our positioning there as a cosmetic device, not a medical device, which is very different to our peer brands in the region, means that we have just a wider distribution and access to so many more providers and consumers in that key market. And then for EMEA, we've been extremely pleased with how EMEA has recovered since last year. Very successful launch of Syndo in its early days in EMEA, but new systems growth in Q2 growing 64%, consumer falls growing 28, 29%.

Wider distribution and access to semiannual providers and consumers in that key market and then for EMEA. We've been extremely pleased with how EMEA was recovered since last year.

Very successful launch of Tinder and it's.

Early days in EMEA.

<unk> systems growth in Q2, growing 64% consumer bulls growing 28% to 29% so.

Speaker 3: So, very pleased with the growth of that emir and sharing continued strength.

Pleased with the growth of that.

I'm showing continued strength.

Speaker 1: The next question comes from Kyle Rose with Canacor Genuity. Please go ahead.

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

Speaker 15: Hi everyone, this is Kaitlyn on for Kyle Rose. Just on the Allegro system, could you provide a little more color on the distribution and how many systems are out in the market and the growth you're really seeing on those? And then just quickly on SkinStylus, you received the 510K for the clearance for facial acne scarring recently. How are you thinking about launching this product on onto your systems? Thank you.

Hi, everyone. This is Caitlin answer Kyle rose.

On the Allegro system could you provide a little more color on kind of the distribution and you know how many systems are out in the market and the growth Youre really seeing on those and then just quickly on skin stylists, who received the 500 10-K for the claims for facial acne scarring recently, how are you thinking about launching this.

Product on onto your systems. Thank you.

Speaker 3: Thank you for the question. So the Allegro system has been around for many years. I would say it's a relatively small portion of our business, but has seen some growth recently, predominantly in the U.S.

Thank you for the question so the <unk> system.

Our system has been around for many years I would say, it's a relatively small portion of our business that has seen some.

Some growth recently predominantly in the U S from that bus SD, we've talked about predominately because of the high interest rates and of course, we're very proud to be upgrading that making some important changes, adding some technology. So we can start collecting data like we do on Sunday and also adding the antitrust law counterfeit bottles that we haven't seen that.

Speaker 11: from that first SD we've talked about, predominantly because of the high interest rates, and of course we're very proud to be upgrading that, making some important changes, adding some technology so we can start collecting data like we do on Sendai. And also, adding the anti-twist lock counterfeit bottles like we have on Sendai to really stamp out any of the sort of counterfeit solutions which we had seen in pocket.

So really step out any of the sort of counterfeit solutions, which we had seen in pockets in the U S. Before so very excited to see those changes on our lead growth. It's got a similar margin to synergize, the lower price points and then for skin Stylus of course, we're really excited for the new clearance, we got from the FDA last week.

Speaker 3: in the U.S. before. So, you know, very excited to see those changes on Allegro. It's got a similar margin to Sindeo, just a lower price point.

Speaker 3: And then for skin stylists, of course, we're really excited for the new clearance we got from the FDA last week. You know, we're now the only microneedling device approved for face.

We're now the only micro needling device approved for face and abdominal use as I said earlier.

Speaker 11: and abdominal use. As I said earlier, the revenue this year, frankly, won't be material for the company, but it's already doing well. It's high margin, more accretive actually than the historic high levels of hydrofacial. So it adds a lot. I think later in the year, early next year, we'll give you more of a view on where we see the Skin Stylists go.

The revenue this year frankly won't be material to the company.

But.

Ready doing well, it's higher margin more accretive actually then.

That's sort of the historic high levels of Heidrick ratio. So it adds a lot I think later in the year early next year, we'll give you more of a view on where we see the skin stylus.

Speaker 11: global revenues for the years to come not just in the US but globally as we get approval to sell it over.

Global revenues for the years to come not just in the U S, but globally as we get approval to sell it overseas.

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Andrew Standlick, CEO for Nick Losing or Mark.

This concludes our question and answer session I would like to turn the conference back over to Andrew <unk> CEO for any closing remarks.

Speaker 11: Thank you, operator, and thank you against everyone for joining today's call. Our second quarter results demonstrate continued demand for hydro-facial and encouraging momentum across our most important great marks.

Thank you operator, and thank you again to everyone for joining today's call. Our second quarter results demonstrate the continued demand for hydro facial and encouraging momentum across our most important growth market the organizational and operational changes we have implemented paired with our ability to unlock operating leverage.

Speaker 11: The organization and operational changes we have implemented paired with our ability to unlock operating leverage at an exciting innovation pipeline. Position us to move forward with leading greater confidence in executing against our FY 2023 and long range financial targets. As I mentioned, we look forward to hosting Invest today in the first half of 2024 and we will share more details in the coming months. Thank you and have a wonderful day ahead.

<unk> innovation pipeline position us to move forward with even greater confidence in executing against our FY 2023, and long range financial targets as I mentioned, we look forward to hosting Investor day in the first half of 2024, and we will share more details in the coming months. Thank you and have a wonderful day.

Speaker 1: 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.

Yeah.

Speaker 16: ?? ?? ?? ??

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