Q3 2023 The Beauty Health Co Earnings Call

Good afternoon, and welcome to the Beauty Health Company third quarter 2023 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing to Starkey followed by zero. Please note. This event is being recorded I would like now to turn the conference over to Norberto.

Speaker 1: Good afternoon and welcome to the Beauty Health Company third quarter 2023 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by

Speaker 1: Please note, this event is being recorded. I would like now to turn the conference over to Norberto Aja, investor relations.

Our Investor Relations. Please go ahead.

Thank you operator, and good afternoon, everyone. Thank you for joining us today to discuss the beauty health companies third quarter 2023 financial results, which we released this afternoon and can be found in our website at beauty health Dot com.

Speaker 2: Thank you, operator, and good afternoon, everyone. Thank you for joining us today to discuss the beauty health companies third quarter 2023 financial results, which we released this afternoon and can be found on our website at beautyhealth.com.

Speaker 2: With me today are Beauty Health's board member and incoming interim chief executive officer, Marla Beck, and our chief financial officer, Mike Monahan. Today's call will not include a Q&A session, though management will be available afterwards for any follow-up questions you may have.

With me today are beauty health Board member and incoming interim Chief Executive Officer, Marla Beck, and our Chief Financial Officer, Mike Monahan today's call will not include a Q&A session. The management will be available afterwards for any follow up questions you may have.

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 that are based on expectations that involve risk and uncertainties that could cause actual results to defer materially. Listen or sarcasm not to place undue reliance on any forward-looking statement.

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 for looking statements that 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.

Speaker 2: For further discussion of risks related to our business, please see our filings with the SEC. This call will present non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in our earnings press release filed with the SEC today and available on our website.

For further discussion of risks related to our business.

Please see our filings with the SEC. This call will present non-GAAP financial measures a reconciliation of these non-GAAP measures to the most comparable GAAP measures can be found in our earnings press release.

Filled with the SEC today and available on our website.

With that I would now like to turn the call over Tomorrow. Please go ahead.

Speaker 2: With that, I would now like to turn the call over to Marla. Please go ahead.

Thank you Roberto and thank you everyone for joining us on the call today.

Speaker 3: Thank you, Norberto, and thank you, everyone, for joining us on the call today. Before I start, on behalf of the board, I would like to thank Andrew for his leadership and commitment to beauty health. I look forward to partnering closely with him during this transition period.

Before I start on behalf of the board I would like to thank Andrew for his leadership and commitment to beauty health I look forward to partnering closely with him during this transition period.

Speaker 3: I'm excited to join Beauty Health as the interim CEO . For those of you who do not know me, I've spent my entire career in the beauty and wellness space, notably as CEO of Blue Mercury for 22 years. I founded Blue Mercury in 1999 and built the company from zero to a strategic sale to Macy's in 2015, after which I ran Blue Mercury as a division of Macy's for six years under both Terry Lundgren and Jeff Guesnet.

I'm excited to joined Ehealth as the interim CEO for those of you who do not know me I've spent my entire career in the beauty and wellness space, notably a C E O lindmark carry for 22 years.

Blue Mercury in 1999, and built the company from zero to a strategic sale to Macy's in 2015, after which I ran blue Mercury is a division of Macy's for six years under both Terry Lundgren and Jeff can add.

Speaker 3: My focus has always been on building high-growth, profitable, enduring companies with an acute focus on the customer, high-performing teams, and operational excellence. I look forward to bringing the skill set to Beauty Health and working with the team to drive revenue, profit, and build an enduring company while delivering long-term value to our share.

My focus has always been on building high growth profitable enduring company with an acute focus on the customer high performing teams and operational excellence I look forward to bringing the skill set to beauty health and working with the team to drive revenue profit and build an enduring company while delivering long.

Term value to our shareholders.

I'm confident like experience will serve beauty health well in addressing current challenges while delivering on the many opportunities ahead of us.

Speaker 3: I'm confident my experience will serve BeautyHealth well in addressing current challenges while delivering on the many opportunities ahead of us.

Since joining the board it has become evident that hydro pesos ability to engage and attract consumers is differentiated with the and the aesthetic place where consumers are more likely to know about generic treatments like pillars are laser rather than a specific treatment brand name.

Speaker 3: Since joining the board, it has become evident that hydrofacial's ability to engage and attract consumers is differentiated within the aesthetic place, where consumers are more likely to know about generic treatments like fillers or laser, rather than a specific treatment brand etc.

Speaker 3: Regularly, providers report that their decision to buy a device is in part because their clients ask for a hydrofacial treatment by name. This represents a significant competitive advantage for beauty health.

Regularly providers report that their decision to buy a device is in part because our clients ask for our hydro facial treatment by name.

This represents a significant competitive advantage for BD health.

My focus is to protect hydro facials incredible brand equity and to address provider experienced challenges with some Dale hydro facials newest generation delivery system well.

Speaker 3: My focus is to protect HydraFacial's incredible brand equity and to address provider experience challenges with Sendeo, HydraFacial's newest generation delivery.

Speaker 3: While we can all acknowledge that many mistakes were made with regard to Sendeo, we always put our customers first. As a result, we are taking some tough actions this quarter to do the right thing.

Well, we can all acknowledge that many mistakes were made with regards to some dale.

We always put our customers first as a result, we are taking some tough actions this quarter to do the right thing.

Once we work through these we can again go back to empowering the team to continue to drive our revenue and capitalize on our substantial growth opportunities.

Speaker 3: Once we work through these, we can again go back to empowering the team to continue to drive our revenue and capitalize on our substantial growth opportunity.

Speaker 3: I'm a believer in beauty health's current strategy to capitalize on the blue sky potential in front of us and welcome the opportunity to execute on our vision.

Believer in beauty health current strategy to capitalize on a blue sky potential in front of us and we welcome the opportunity to execute on our vision.

With that I will turn the call over to Mike to discuss the quarter's performance.

Speaker 3: With that, I will turn the call over to Mike to discuss the quarter's performance.

Thank you Marla and thank you everyone for joining us today I also want to thank Andrew for his service, even though we have only worked together for a short time I came to know him as a passionate and dedicated leader and wish him the best in the future.

Speaker 4: Thank you Marla, and thank you everyone for joining us today. I also want to thank Andrew for his service. Even though we have only worked together for a short time, I came to know him as a passionate and dedicated leader and wish him the best.

Today, we released a significant amount of information so I'd like to state a few things upfront.

Speaker 4: Today we released a significant amount of information, so I'd like to state a few things up front.

Speaker 4: First, our recent financial performance is not acceptable. The board and management are committed to delivering future value for our shareholders and have taken steps to position the company for long-term future success.

First our recent financial performance is not acceptable the board and management are committed to delivering future value for our shareholders and have taken steps to position the company for long term future success.

Speaker 4: Second, we did not take the decision to impair our earlier generation delivery systems lightly. Our long-standing provider relationships play a critical role in our continued success. Nearly half of the devices we sold in the past 9 to 11 years are still active.

Second we did not take the decision to impair our earlier generation delivery system slightly our longstanding provider relationships play a critical role in our continued success nearly half of the devices. We sold in the past nine to 11 years are still active.

Speaker 4: Providing reliable products and services is always our primary goal, and the decisions we made this quarter protect our customers and the hydrofacial brand.

Providing reliable products and services is always our primary goal and the decisions. We made this quarter protect our customers and the hydro facial brand.

Third our recent performance is largely a result of provider experience issues with <unk> in the U S.

Speaker 4: Third, our recent performance is largely a result of provider experience issues with Sendejo in the US.

Speaker 4: We have taken the learnings to avoid any similar issues in the future. We want to be very clear that the impact applies only to providers who use Zendaya 1.0 or 2.0 delivery systems.

We have taken the learnings to avoid any similar issues in the future we want to be very clear that the impact applies only to providers, who use and day of one point or two point out delivery systems. There was no impact on the safety or efficacy of the hydro facial treatment.

Speaker 4: There was no impact on the safety or efficacy of the hydrofacial treatment.

Speaker 4: We believe our latest generation, Sendeo 3.0, provides the best experience for our providers. Fourth, we believe the fundamentals of our business and future opportunity remain strong. The issues we face are executional in nature, not strategic.

We believe our latest generation Sunday, a 3.0 provides the best experience for our providers.

Fourth.

We believe the fundamentals of our business and future opportunity remains strong the issues. We face are execution all in nature not strategic.

Speaker 4: On the system side, it's important to highlight that our products are excessively priced relative to other medical devices, lowering the barrier to entry for providers.

On the systems side. It is important to highlight that our products are accessibly priced relative to other medical devices lowering the barrier to entry for providers.

In addition, the economics of hydro facial to the provider are extremely compelling with an average system payback period of under six months.

Our business is a razor razor blade model with our consumables segment, representing a growing predictable long term and high margin recurring revenue stream.

Speaker 4: Our business is a razor razor blade model with our consumable segment representing a growing predictable long-term and high-margin recurring revenue

Speaker 4: Even with the Cendao disruption, overall consumable sales grew 17% year over year.

Even with the Sunday of disruption overall consumable sales grew 17% year over year.

Speaker 4: As we continue to grow our delivery system install base and put the syndeo issues behind us, we expect to see further acceleration in our consumables business.

As we continue to grow our delivery system install base and put this in day of issues behind US we expect to see further acceleration in our consumables business.

We have a tremendous runway to grow domestically and overseas despite challenges with U S delivery system sales this quarter, China continued its high growth at plus 79% or plus 98% year to date and continues to have strong average selling prices positioning the Asia Pacific.

Speaker 4: We have a tremendous runway to grow domestically and over...

Region for continued long term profitability.

Speaker 4: In the upcoming quarters, our goal is to execute with a simpler structure to meet the high expectations of our providers, customers, and shareholders.

In the upcoming quarters, our goal is to execute with a simpler structure to meet the high expectations of our providers customers and shareholders.

Speaker 4: The first step in this process will be delivering on both phases of our committed strategic transformation program.

The first step in this process will be delivering on both phases of our committed strategic transformation program.

Speaker 4: Fifth, our balance sheet and liquidity remain strong, and we are positioned to make it stronger with the strategic transformation program we are under.

Fifth our balance sheet and liquidity remains strong and we are positioned to make it stronger with the strategic transformation program we are undertaking.

Speaker 4: We ended the third quarter with $559 million of cash and have access to an undrawn $50 million credit facility.

We ended the third quarter with $559 million of cash and have access to an undrawn $50 million credit facility.

As a member of the management team I can assure you there is a strong commitment from the board and the management team to deliver the best provider in customer experience and to create value for our shareholders.

Speaker 4: As a member of the management team, I can assure you there is a strong commitment from the board and the management team to deliver the best provider and customer experience and to create value for our shareholders.

Speaker 4: With the remaining time, I will address the SENDEO program, our third quarter results, our financial guidance, and the status of our strategic transformation program. Starting with the SENDEO program. For more information, visit SENDEO.com

With the remaining time I will address this in Dio program, our third quarter results, our financial guidance and the status of our strategic transformation program.

Starting with the <unk> program.

Speaker 4: As we highlighted in the press release earlier this afternoon, we incurred a $63.1 million restructuring charge this quarter due to SENDEO provider experience issue.

As we highlighted in the press release earlier. This afternoon, we incurred a $63 1 million dollar restructuring charge this quarter due to some deyoe provider experience issues.

Speaker 4: As a result of these challenges, there was a slowdown in US system placements that led to lower than expected overall net sales growth.

As a result of these challenges there was a slowdown in U S system placements that led to lower than expected overall net sales growth.

To provide some background since day 1.0 launched in the U S. In March of 2020 to.

Speaker 4: To provide some background, SENDEO 1.0 launched in the US in March of 2022.

Speaker 4: The launch was met with excitement and swift provider adoption.

The launch was met with excitement and swift provider adoption.

Speaker 4: However, after some time in the field, some providers experience frequent treatment interruptions and issues such as distractive noises and difficult bottle inserts.

However, after some time in the field some providers experienced frequent treatment interruptions and issues, such as distractive noises and difficult bottle insertion.

Speaker 4: Most importantly, there was an issue with low flow and clogs in the system.

Most importantly, there was an issue with low flow and clogs in the system.

Speaker 4: Simply put, CINDEA 1.0 did not meet the high standards of user experience that HydroFacial has been known for over its 26-year history.

Simply put <unk>, one point out did not meet the high standards that the user experience that hydro facial has been known for over its 26 year history.

Throughout 2022, and the first half of 2023 the company made several enhancements to some day I owe to address and remediate these issues releasing Sunday O 2.0 into the field.

Speaker 4: Throughout 2022 and the first half of 2023, the company made several enhancements to SINDEO to address and remediate these issues, releasing SINDEO 2.0 into the field. Despite these efforts, many of the issues...

Despite these efforts many of the issues continue to persist.

Speaker 4: After rigorous testing and development, including simulating over 10 years of heavy in-office use, we believe we have addressed the CINDEO issues with our current CINDEO 3.0 standard implemented in July of this year.

After rigorous testing and development, including stimulating over 10 years of heavy end use in office use we believe we have addressed the <unk> issues with our current Sunday with three point out a standard implemented in July of this year.

Speaker 4: We are very pleased with the real world performance over the four months and day of 3.0 has been in the field.

We are very pleased with the real world performance over the four months in day, a three point out has been in the field.

Speaker 4: Additionally, SINDEO 3.0 devices coming off the production line and existing SINDEOs in the field.

Additionally, <unk> three <unk> devices coming off the production line in existing Sunday OS in the field.

Speaker 4: that have been enhanced to the 3.0 standard have a return rate in line with hydrofacial's low historical benchmark.

That had been enhanced to the three point out standard have a return rate in line with hydro facials low historical benchmark.

To stand behind our commitment to our customers and protect the company's brand reputation, we decided that with respect to San Diego devices, We will only market and sell Sunday of three point al.

Speaker 4: To stand behind our commitment to our customers and protect the company's brand reputation, we decided that, with respect to Sendeo devices, we will only market and sell Sendeo 3.0.

With this decision we designated the approximately 4300 Sunday of one point and two point no devices and inventory as obsolete, resulting in an impairment charge of $18 8 million.

Speaker 4: With this decision, we designated the approximately 4,300 Sendea 1.0 and 2.0 devices in inventory as obsolete, resulting in an impairment charge of $18.8 million.

Additionally, during the quarter, we incurred $12 3 million in costs associated with enhancing or replacing approximately 2850 Sunday of one point out and to point out devices in the field.

Speaker 4: Additionally, during the quarter we incurred $12.3 million in costs associated with enhancing or replacing approximately 2,850 SINDEA 1.0 and 2.0 devices in the field.

Lastly, we accrued incremental costs of approximately $32 1 million to enhance or replace the roughly 4500, <unk> one point out and to point out devices, yet to be addressed in the field.

Speaker 4: Lastly, we accrued incremental costs of approximately $32.1 million to enhance or replace the roughly 4,500 Sundeo 1.0 and 2.0 devices yet to be addressed in the future.

This decision was made after concluding it was too costly to diagnose repair and resell returns and day of one point or two point out devices in inventory.

Speaker 4: This decision was made after concluding it was too costly to diagnose, repair, and resell return Sendeo 1.0 or 2.0 devices in Invisi-

Speaker 4: In addition, by replacing the systems or enhancing currently

In addition by replacing the systems are enhancing currently.

Speaker 4: Functioning systems in the field. We are ensuring provider satisfaction and safeguarding our brand

Functioning systems in the field, we are ensuring provider satisfaction and safeguarding our brand equity.

Speaker 4: We will also extend all Cendao warranties by one year to further support our providers.

We will also extend all Sunday of warranties by one year to further support our providers.

We do not believe the extended warranty we will have a material impact on our financial statements.

Speaker 4: We do not believe the extended warranty will have a material impact on our financial...

Despite these challenges we want to reiterate that the business model remains fundamentally sound and the impact has been contained to a portion of our providers without spreading to the end consumer.

Speaker 4: Despite these challenges, we want to reiterate that the business model remains fundamentally sound and the impact has been contained to a portion of our providers without spreading to the end consumer.

Speaker 4: In addition, the strength and reputation of the hydrofacial brand and our long-term opportunity remain intact.

In addition, the strength and reputation of the hydro facial brand and our long term opportunity remains intact.

We base. This assessment on two key data points first our recently conducted provided survey showing our net promoter score or NPS remains best in class in the aesthetic device category.

Speaker 4: First, our recently conducted provided survey showing our net promoter score, or NPS, remains best in class in the aesthetic device category. As a reminder, NPS is a measure of how likely it is for a user of a brand to recommend.

As a reminder, NPS as a measure of how likely it is for a user of our brand to recommend it.

Speaker 4: Second, our passionate community of hydrofacialists around the world, or what we refer to as the hydrofacial nation, powers our 30,000 active delivery systems globally. Our footprint within the medical aesthetics industry is unparalleled.

Second our passionate community of hydro facial as surround the world or what we referred to as the hydro facial nation powers, our 30000 active delivery systems globally, our footprint within the medical aesthetics industry is unparalleled.

Yeah.

Next we'll move on to Q3 results.

Speaker 4: Net sales for the third quarter grew by 10% to $97.4 million. This came in well below the company's expectations, with underperformance in U.S. delivery systems partially offsetting strong performances in APAC and EMEA.

Net sales for the third quarter grew by 10% to $97 $4 million. This came in well below the company's expectations with underperformance in U S delivery systems, partially offsetting strong performances in APAC and EMEA.

From a geographic perspective, Americas declined 11% year over year due to this and Deyoe challenges, we just discussed.

Speaker 4: From a geographic perspective, America's declined 11% year over year due to the SINDEO challenges we just discussed.

APAC revenue grew 63% year over year to $24 7 million.

Speaker 4: APAC revenue grew 63% year over year to $24.7 million.

Speaker 4: China accounted for 16.9 million and plus 79% year over year growth driven by strong delivery system placements reflecting our success in penetrating the market and the significant potential to grow our nascent presence there.

China accounted for $16 9 million and plus 79% year over year growth driven by strong delivery system placements, reflecting our success in penetrating the market and the significant potential to grow our nascent presence there.

EMEA grew 37% year over year to $21 1 million with the strength coming from system placements and consumables net sales specifically in the UK and Germany.

Speaker 4: EMEA grew 37% year-over-year to 21.1 million with the strength coming from system placements and consumables net sales specifically in the UK and Germany.

Speaker 4: Year to date, nearly 45% of our net sales came from markets outside of the US.

Year to date, nearly 45% of our net sales came from markets outside of the U S.

Moving onto net sales by product type or consumables business, which accounted for approximately 48% of our net sales in the quarter saw a 17% year over year increase to $46 $4 million. This further demonstrates our challenges are largely around delivery systems and more importantly that.

Speaker 4: Moving on to net sales by product type. Our consumables business, which accounted for approximately 48% of our net sales in the quarter, saw a 17% year-over-year increase to $46.4 million.

Speaker 4: This further demonstrates our challenges are largely around delivery systems and more importantly, that the consumer continues to see high value in hydrofacial treatments.

The consumer continues to see high value in hydro facial treatments.

On the systems side, we saw 4% year over year growth to $51 million, which was weighed down by performance in the U S.

Speaker 4: On the system side, we saw 4% year-over-year growth to 51 million, which was weighed down by performance in the US.

Speaker 4: Notably, delivery systems net sales in APAC and EMEA were plus 102 percent and plus 35 percent respectively. We reached 50% expanding sales sinceSOE.

Notably delivery systems net sales in APAC, and EMEA were plus 102% and plus 35% respectively.

Speaker 4: During the quarter, we sold 2,140 systems at an average selling price of $23,900 down year over year, primarily due to an unfavorable mixed shift towards distributor revenue.

During the quarter, we sold 2140 systems at an average selling price of $23 9000 down year over year, primarily due to an unfavorable mix shift towards distributor revenue.

Of the 2140 systems 362 were trade ups.

Speaker 4: Of the 2,140 systems, 362 were trade-ups.

Speaker 4: During the quarter, we reached a global install base of 30,074 systems.

During the quarter, we reached a global installed base of 30074 systems.

We had a consolidated GAAP gross loss of $12 6 million, resulting in a GAAP gross margin of negative 12, 9%.

Speaker 4: We had a consolidated gap gross loss of 12.6 million resulting in a gap gross margin of negative 12.9 percent.

This was primarily driven by the Sunday O program charges of approximately $63 1 million. Additionally.

Speaker 4: This was primarily driven by the CENDEO program charges of approximately 63.1 million.

Speaker 4: Additionally, this quarter we incurred discrete charges of $6.4 million related to discontinued, excess, and obsolete inventory.

Additionally, this quarter, we incurred discrete charges of $6 4 million related to discontinued excess and obsolete inventory.

Normalizing for these charges depreciation amortization and stock based compensation adjusted gross profit was $60 9 million for a 62, 5% adjusted gross margin.

Speaker 4: Normalizing for these charges, depreciation, amortization, and stock based compensation, adjusted gross profit was $60.9 million for a 62.5% adjusted gross margin.

The adjusted gross margin was impacted by higher manufacturing labor costs, and overhead, which we expect will subside as we continue to move portions of our manufacturing to China and sell through higher priced inventory purchased in 2022.

Speaker 4: The adjusted gross margin was impacted by higher manufacturing labor costs and overhead, which we expect will subside as we continue to move portions of our manufacturing to China and sell through higher-priced inventory purchased in 2022.

Selling and marketing expense was $30 7 million or down approximately 23% year over year, primarily due to strategically pulling back marketing spend given the issues regarding some dale.

Speaker 4: Selling and marketing expense was 30.7 million or down approximately 23% year over year, primarily due to strategically pulling back marketing spend given the issues regarding s McKenzie, foundation announcement, tear out, contributions and marketing suggests what

Speaker 4: The decline was further driven by lower compensation and sales commission expense.

The decline was further driven by lower compensation and sales commission expense, partially offset by a reversal of cash incentive accruals in the prior year.

Speaker 4: partially offset by a reversal of cash incentive accruals in the prior year.

Speaker 4: Going forward, while remaining disciplined, we plan to prioritize marketing initiatives to strengthen provider confidence and drive further awareness of our brand.

Going forward, while remaining disciplined we plan to prioritize marketing initiatives to strengthen provider confidence and drive further awareness of our brand.

Speaker 4: Our data suggests HydraFacial's consumer brand has never been stronger and our provider penetration is still low.

Our data suggests hydro facials consumer brand has never been stronger and our provider penetration is still low.

R&D expense was $1 8 million for the quarter relatively flat with historical trends.

Speaker 4: R&D expense was 1.8 million for the quarter, relatively flat with historical trends.

Speaker 4: GNA expense was 37 million or plus 55% year over year, primarily driven by higher compensation, severance, share-based compensation, and software expenses.

G&A expense was $37 million or plus 55% year over year, primarily driven by higher compensation severance share based compensation and software expenses the reversal of cash incentive accruals in the prior year was also a driver.

Speaker 4: The reversal of cash incentive accruals in the prior year was also a driver.

Altogether. This resulted in a net loss of $73 8 million normalizing for discrete charges. Our adjusted EBITDA was $9 1 million, primarily due to gross margin pressures.

Speaker 4: Altogether, this resulted in a net loss of $73.8 million.

Speaker 4: Normalizing for discrete charges are adjusted EBITDA with 9.1 million, primarily due to gross margin pressures.

Speaker 4: This compares to a net loss of 0.1 million and adjusted EBITDA of 16.3 million when excluding any adjustments for discretionary cash incentives.

This compares to a net loss of $1 1 million and adjusted EBITDA of $16 3 million when excluding any adjustments for discretionary cash incentives.

Moving to the balance sheet.

Speaker 4: We ended the quarter with approximately $559 million of cash on hand.

We ended the quarter with approximately $559 million of cash on hand the.

The cash balance reflects the repurchase of <unk> 8 million shares at an average price of $5 83 per share during the quarter.

Speaker 4: The cash balance reflects the repurchase of 0.8 million shares at an average price of $5.83 per share during the quarter.

Speaker 4: As of quarter end, we had approximately 95 million remaining in our existing share repurchase authorization.

As of quarter end, we had approximately $95 million remaining in our existing share repurchase authorization.

Speaker 4: As of September 30th, we had approximately 132.6 million shares outstanding.

As of September 30th we had approximately $132 6 million shares outstanding.

We feel comfortable with our current liquidity position and together with our board will continue to evaluate capital allocation, including liability management.

Speaker 4: We feel comfortable with our current liquidity position and together with our board will continue to evaluate capital allocation including liability management.

Our inventory stood at approximately $74 9 million at the end of September a decrease compared to $109 7 million at December 31 last year, primarily as a result of the impairment charges taken during the third quarter.

Speaker 4: Our inventory stood at approximately 74.9 million at the end of September , a decrease compared to 109.7 million at December 31st last year, primarily as a result of the impairment charges taken during the third quarter.

Speaker 4: As of the end of the third quarter, we had approximately 1,300 trade-up elites in our inventory marked at fair market value. As we sell through these systems, there will be minimal gross profit given the trade-up accounting treatment and rules. We are estimating approximately 10% of this inventory will sell through in Q4 of 2023.

As of the end of the third quarter, we had approximately 1300 trade up of leads and our inventory marked at fair market value as we sell through these systems there will be minimal gross profit given the trade up accounting treatment and rules. We are estimating approximately 10% of this inventory will sell through in Q4 of 2023.

Speaker 4: Given the third quarter results, we are revising our previously stated fiscal 2023 guidance.

Given the third quarter results, we are revising our previously stated fiscal 2023 guidance. We now expect fiscal 2023 net sales in the range of $385 million to $400 million and adjusted EBITDA margin of 5% to 6% respectively.

Speaker 4: We now expect fiscal 2023 net sales in the range of $385 to $400 million, an adjusted EBITDA margin of 5% to 6% respectively.

This reserve represents approximately 7% net sales growth at the midpoint on a year over year basis.

Speaker 4: This represents approximately 7% net sales growth at the midpoint on a year-over-year pace,

Speaker 4: Our updated 2023 outlook reflects the work that remains to be done to re-accelerate Sundeo adoption in the U.S.

Our updated 2023 outlook reflects the work that remains to be done to Reaccelerate <unk> adoption in the U S.

Speaker 4: While we are optimistic in our ability to execute against this goal, this will take time.

While we are optimistic in our ability to execute against this goal this will take time.

As a result, we are suspending our long term 2025 financial outlook.

Speaker 4: As a result, we are suspending our long-term 2025 financial outlook.

Lastly, I want to update you on our strategic transformation program, we announced in September.

Speaker 4: Lastly, I want to update you on our strategic transformation program we announced in September .

This initiative is expected to have a significant impact on our financial profile and we remain on track to deliver over $20 million in annualized cost savings primarily through G&A efficiencies during Q1 2024.

Speaker 4: This initiative is expected to have a significant impact on our financial profile, and we remain on track to deliver over $20 million in annualized cost savings, primarily through G&A efficiencies, during Q1 2024.

Speaker 4: We expect to incur approximately $9 to $11 million of cost to achieve for these Phase 1 annual savings.

We expect to incur approximately $9 million to $11 million of cost to achieve for these phase one annual savings.

Speaker 4: The costs to achieve are primarily related to severance and consulting expenses.

The costs to achieve are primarily related to severance and consulting expenses.

In parallel we have begun work on phase two of the project, which is focused on optimizing our manufacturing and supply chain footprint and continued optimization of our organizational structure.

Speaker 4: In parallel, we have begun work on phase two of the project, which is focused on optimizing our manufacturing and supply chain footprint and continued optimization of our organizational structure.

Speaker 4: We expect phase two will deliver over 15 million in annualized cost savings during Q2 2024.

We expect phase II will deliver over $15 million in annualized cost savings during Q2 2024.

Speaker 4: We expect to provide more detail in the new year around the savings and any related costs to achieve.

We expect to provide more detail in the new year around the savings and any related cost to achieve.

In closing, while we are disappointed in our results and recognize that there is work ahead, we are committed and confident in our ability to reaccelerate and <unk> adoption in the U S and to further our execution across our international businesses.

Speaker 4: In closing, while we are disappointed in our results and recognize that there is work ahead, we are committed and confident in our ability to reaccelerate Zendayo adoption in the U.S. and to further our execution across our international business.

Speaker 4: Importantly, our long-term strategy and our business fundamentals remain intact.

Importantly, our long term strategy and our business fundamentals remain intact.

We look forward to speaking with all of you and sharing our progress as we continue to execute against our strategy.

Speaker 4: We look forward to speaking with all of you and sharing our progress as we continue to execute against our strategy.

While we will not be hosting Q&A on this call. If you have any questions. Please reach out to our Investor relations team at IR at beauty health Dot com.

Speaker 4: While we will not be hosting Q&A on this call, if you have any questions, please reach out to our Investor Relations team at ir at beautyhealth.com.

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.

Okay.

Speaker 5: .....

[music].