Q2 2024 The Beauty Health Company Earnings Call

August 8, 2024

Operator: The program is about to begin. If you should need audio assistance during today's program, please press star zero. Good afternoon, and welcome to the Beauty Health Company second quarter 2020 earnings conference call. Later, you will have the opportunity to ask questions during the questions and answer session. You may register to ask a question at any time by someone who stars one on your telephone CPAC. Please note this event is being recorded, and I would like to now turn the conference over to Norberto Aja for Investor Relations. Please go ahead.

Operator: The program is about to begin. If you should need audio systems or, in today's program, please press star zero.

If you should need audio assistance during todays program fees Trust stars era.

Operator: Good afternoon and welcome to the Beauty Health Company 2nd quarter 2020 for earnings conference call. Later, you have the opportunity to ask questions during the questions and answer session. You may register to ask a question at any time by pressing the star one on your telephone CPAP.

Speaker Change: Good afternoon, and welcome to the beauty health companies second quarter 2020 for earnings Conference call.

Speaker Change: Later, you'll have the opportunity to ask questions. During the question and answer session you.

Speaker Change: You May register to ask a question at any time by pressing the star one on your telephone keypad.

Norberto Aja: Please note this event is being recorded, and I would like to now turn the conference over to Norberto Aja for investor relations. Please go ahead.

Nabretta onshore: Please note. This event is being recorded and I would like to now turn the conference over to Nabretta onshore for Investor Relations. Please go ahead.

Norberto Aja: Thank you, operator, and good afternoon, everyone. Thank you for joining the Beauty Health Company's conference call. The Discussor 2nd quarter 2024 financial results, which were released earlier this afternoon and which can be found on our corporate website at beautyhealth.com.

Norberto Aja: Thank you, operator. And good afternoon, everyone.

Nabretta onshore: Thank you operator and good luck.

Nabretta onshore: Afternoon, everyone. Thank you for joining the beauty health companies conference call.

Speaker Change: <unk> second quarter 2024 financial results, which were released earlier this afternoon, and which can be found on our corporate website at beauty health Dot com.

Norberto Aja: Thank you for joining the Beauty Health Company's conference call to discuss our second quarter 2024 financial results, which were released earlier this afternoon and which can be found on our corporate website at beautyhealth.com. Leading the call today is Beauty Health Chief Executive Officer Marla Beck, and our Chief Financial Officer Mike Monahan. Before we begin, however, I would like to remind everyone of the company's safe harbor language. Management may make forward-looking statements, including guidance and underlying assumptions.

Norberto Aja: Leading the call today is Beauty Health Chief Executive Officer Marla Beck and her Chief Financial Officer Mike Monahan. Before we begin, however, I would like to remind everyone 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 risk and uncertainties that could cause actual results to the firm materially. Listeners are cautioned not to place any reliance on any forward-looking statements. For further discussion of risks related to our business, please see the company's filings with the SEC. This call will present non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are in the earnings press release furnished to the SEC and available on our website.

Speaker Change: Leading the call today is <unk>, Chief Executive Officer, Marla Beck, and our Chief Financial Officer, Mike Monahan.

Norberto Aja: Forward-looking statements are based on expectations that involve risk and uncertainties that could cause actual results to differ materially. Listeners are cautioned not to place undue reliance on any forward-looking statement. For a further discussion of risks related to our business, please see the company's filings with the FCC. This call will present non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most comparable GAAP measures is in the earnings press release furnished to the SEC and available on our website.

Speaker Change: Before we begin however, I would like to remind everyone 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.

Speaker Change: Place undue reliance on any forward looking statements for further discussion of risks related to our business. Please see the company's filings with the SEC.

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

Norberto Aja: Following management's prepared remarks, we will open the call for a question-and-answer session.

Norberto Aja: Following management's prepared remarks, we will open the call for a question and answer session. With that said, I would now like to turn the call over to our CEO, Marla Beck. Please go ahead, Marla.

Speaker Change: Following managements prepared remarks, we will open the call for a question and answer session.

Norberto Aja: With that, I would now like to turn the call over to our CEO, Marla Beck. Please go ahead, Marla.

Speaker Change: With that I would now like to turn the call over to our CEO Marla Beck. Please go ahead Marla.

Marla Beck: Thank you, Norberto. Good afternoon, and thank you for joining us today. During my short time as CEO, we have solved our most pressing device issues, identified and begun to address the remaining business challenges, and made significant strides in realigning the cost structure and overall operations of the business. While this work will take some time, I am confident we are on the right path to return the company to long-term profitable growth. Today I will walk through a summary of our second quarter results, and then I will explain the initiatives we have already put in place to turn the business around, along with the longer-term initiatives we are executing against to fully realize the company's potential.

Marla Beck: Thank you, Norberto.

Marla Beck: Thank you Norberto and good afternoon, and thank you for joining us today.

Marla Beck: Good afternoon, and thank you for joining us today. During my short time as CEO, we have solved our most pressing device issues identified and began to address the remaining business challenges and made significant strides in realigning the cost structure and overall operations of the business. While this work will take some time, I am confident we are on the right path to return the company to long-term profitable growth. Today, I will walk through a summary of our second quarter results, and then I will explain the initiatives we have already put in place to turn the business around, along with the longer term initiatives we are executing against to fully realize the company's potential.

During my short time as CEO, we have solved our most pressing device issues identified and began to address the remaining business challenges and made significant strides in realigning the cost structure and overall operations of the business.

Marla Beck: This work will take some time I am confident we are on the right path to return the company to long term profitable growth today.

Speaker Change: Today, I will walk through a summary of our second quarter results and then I will explain the initiatives we have already put in place to turn that business around along with the longer term initiatives. We are executing against to fully realize the company's potential our plan revolves around the three core areas of focus that I outlined on our last earnings call.

Marla Beck: Our plan revolves around the three core areas of focus that I outlined on our last earnings call: sales execution, operational excellence, and financial discipline. Our second quarter results reflect a slower than expected recovery of device sales, partially due to macro economic pressures as well as internal execution. We have an incredible global sales team, and we need to supply them with additional products, tools, processes, and structure to capture the demand for our products. Hydrofacial was in a hyper growth mode for many years prior to going public. During that time, the company did not fully implement an enduring and scalable infrastructure needed to maximize market share and drive profitability for a company of this size.

Marla Beck: Our plan revolves around the three core areas of focus that I outlined on our last earnings call: sales execution, operational excellence, and financial discipline. Our second quarter results reflect a slower-than-expected recovery of device sales, partially due to macroeconomic pressures as well as internal execution. We have an incredible global sales team, and we need to supply them with additional products, tools, processes, and structure to capture the demand for our products. Hydrofacial was in a hypergrowth mode for many years prior to going public, and during that time, the company did not fully implement an enduring and scalable infrastructure needed to maximize market share and drive profitability for a company of this size. We are in the process of fixing that.

Marla Beck: Sales execution operational excellence and financial discipline.

Marla Beck: Our second quarter results reflect a slower than expected recovery of device sales, partially due to macroeconomic pressures as well as internal execution.

Marla Beck: We have an incredible global sales team and we need to supply them with additional products tools processes and structure to capture the demand for our products.

Speaker Change: Hydro facial was in a hyper growth mode for many years prior to going public during that time. The company did not fully implement an enduring and scalable infrastructure needed to maximize market share and drive profitability for a company of this size. We are in the process of fixing that.

Marla Beck: We are in the process of fixing that.

Marla Beck: To drive top line growth, we've implemented three immediate actions to support sales and improve sales execution. First, we have refocused our sales and go-to-market efforts across our entire product portfolio in the U.S., including Elite and Allegro. This will allow us to offer more accessible price points other than Sandao. This good, better, best approach affords our providers three distinct price points when it comes to their equipment purchasing options. Over 30% of devices sold in the second quarter in the United States were non-Sandao, either Elite or Allegro. With price sensitivity among many of our smaller business owners, we can expect this number to grow.

Marla Beck: To drive top-line growth, we implemented three immediate actions to support sales and improve sales execution. First, we have refocused our sales and go-to-market efforts across our entire product portfolio in the U.S., including Elite and Allegro. This will allow us to offer more accessible price points other than Sundeo. This good, better, best approach affords our providers three distinct price points when it comes to their equipment purchasing options. Over 30% of devices sold in the second quarter in the United States were non-Sendea, either Elite or Allegro.

Marla Beck: To drive topline growth, we've implemented three immediate actions to support sales and improved sales execution.

Marla Beck: With price sensitivity among many of our smaller business owners, we can expect this number to grow. Second, we have engaged an outside consulting firm to help us restructure our sales strategy, including better processes, tools, and technology to support our capital sales managers and business development managers. Examples include stronger analytics to improve our lead targeting, segmenting, and pipeline forecasting. We expect this project to be completed by the end of the third quarter and to begin to see results later this year.

Marla Beck: First we have refocused our sales and go to market efforts across our entire product portfolio in the U S, including elite and Allegra.

Marla Beck: This will allow us to offer more accessible price points other than some doubt. This good better best approach affords our providers three distinct price points when it comes to their equipment purchasing options over 30% of devices sold in the second quarter, and the United States, where Nansen day, either elite or Allegro with price sensitivity.

Marla Beck: Among many of our smaller business owners, we can expect this number to grow.

Marla Beck: Second, we have engaged an outside consulting firm to help us restructure our sales strategy, including better processes, tools, and technology to support our capital sales managers and business development managers. Examples include stronger analytics to improve our lead targeting, segmenting, and pipeline forecasting. We expect this project to be completed by the end of the third quarter and to begin to see results later this year.

Operator: The program is about to begin. If you should need audio systems or in today's program, please press star zero.

Marla Beck: Second we have engaged an outside consulting firm to help us restructure our sales strategy, including better processes tools and technology to support our capital sales managers and business development managers. Examples include stronger analytics to improve our lead targeting segmenting and pipeline forecasting.

Marla Beck: We expect this project to be completed by the end of the third quarter and to begin to see results later this year.

Marla Beck: Lastly, we are lowering barriers to entry by improving the availability of financing options, in particular with new and or single-location providers. In June, we developed and launched new options to lower the upfront investment required for new customers to purchase a device. We will continue to refine these offerings in the second half of the year.

Marla Beck: Lastly, we are lowering barriers to entry by improving the availability of financing options, in particular with new and/or single location providers. In June, we developed and launched new options to lower the upfront investment required for new customers to purchase a device. We will continue to refine these offerings in the second half of the year.

Marla Beck: Lastly, we are lowering barriers to entry by improving the availability of financing options in particular with new <unk> single location providers in June we developed and launched new options to lower the upfront investment required for new customers to purchase a device. We will continue to refine these offerings in the second half of the year.

Norberto Aja: Please note this event is being recorded and I would like to now turn the conference over to Norberto Aja for investor relations. Please go ahead.

Norberto Aja: Thank you operator and good afternoon everyone. Thank you for joining the Beauty Health Company's conference call. The Discussor 2nd quarter 2024 financial results, which were released earlier this afternoon and which can be found on our corporate website at beautyhealth.com.

Marla Beck: <unk>.

Marla Beck: In addition to the above, we are also evaluating our geographic footprint. A few years ago, the company expanded into several new direct markets. To have a meaningful impact in our respective markets, we need to focus and invest and invest behind the brand in a targeted way. We are in the process of evaluating our go-to-market strategy in each country to determine the best way to leverage our brand and products to generate attractive returns.

Marla Beck: In addition to the above, we are also evaluating our geographic footprint. A few years ago, the company expanded into several new direct markets. To have a meaningful impact in our respective markets, we need to focus, invest, and invest behind the brand in a targeted way. We are in the process of re-evaluating our go-to-market strategy in each country to determine the best way to leverage our brand and products to generate attractive returns.

Marla Beck: In addition to the above we are also evaluating our geographic footprint a few years ago. The company expanded into several new direct markets to have a meaningful impact in our respective markets, we need to focus to invest and invest behind the brand in a targeted way we.

Norberto Aja: Leading the call today is Beauty Health Chief Executive Officer Marla Beck and her chief financial officer Mike Monahan. Before we begin, however, I would like to remind everyone 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 risk and uncertainties that could cause actual results to the firm materially. Listeners are caution not to place any reliance on any forward looking statements.

Marla Beck: We were in the process of evaluating our go to market strategy in each country to determine the best way to leverage our brand and products to generate attractive returns.

Marla Beck: We will have a more detailed update on this initiative on our third quarter call.

Marla Beck: We will have a more detailed update on this initiative on our third quarter call. Regarding operational excellence, I am pleased with our progress. Our new Chief Supply Chain and Operations Officer has been in the seat for just a few months and has already made meaningful contributions. To best address the headwinds related to Sundeo, she has instituted a quality improvement program that has resulted in improved Sundeo system performance and customer satisfaction. We've also completed our global Sundeo replacement program, ensuring all our providers are able to operate on the latest 3.0 standard device.

Marla Beck: We will have a more detailed update on this initiative on our third quarter call.

Marla Beck: Regarding operational excellence, I am pleased with our progress. Our new Chief Supply Chain and Operations Officer has been in the seat for just a few months and has already made meaningful contributions. To best address the headwinds related to Sendeo, she has instituted a quality improvement program that has resulted in improved Sendeo system performance and customer satisfaction. We have also completed our global Sendeo replacement program, ensuring all our providers are able to operate on the latest 3.0 standard device. In addition, we have taken the first steps toward refining our global supply chain strategy. We are implementing new inventory management processes and working to realign our global manufacturing capacity and improve our growth margins.

Marla Beck: Regarding the operational excellence I am pleased with our progress our new chief supply chain and operations officer has been in the seat for just a few months and has already made meaningful contributions.

Norberto Aja: For further discussion of risks related to our business, please see the company's filings with the SEC. This call will present non-gap financial measures reconciliation of these non-gap measures to the most comparable gap measures are in the earnings press release furnished to the SEC and available on our website.

Marla Beck: To best address the headwinds related to Cindy She has instituted a quality improvement program that has resulted in improved and diode system performance and customer satisfaction. We've also completed our global Sunday or replacement program, ensuring all of our providers are able to operate on the latest 3.0 standard device.

Norberto Aja: Following management's prepared remarks, we will open the call for a question and answer session.

Norberto Aja: With that, I would now like to turn the call over to our CEO Marla Beck. Please go ahead Marla. Thank you, Norberto.

Marla Beck: In addition, we've taken the first steps toward refining our global supply chain strategy. We are implementing new inventory management processes and working to realign our global manufacturing capacity and improve our growth margin. On our next call, I will share the results of this review and the actions we will take, and As for Financial Discipline, we significantly reduced our operating expenses. Our first half 2024 operating expenses are down $24 million versus the prior year.

Marla Beck: In addition, we've taken the first steps toward refining our global supply chain strategy, we are implementing new inventory management processes and working to realign our global manufacturing capacity and improve our gross margins.

Marla Beck: Good afternoon and thank you for joining us today. During my short time as CEO, we have solved our most pressing device issues identified and began to address the remaining business challenges and made significant strides in realigning the cost structure and overall operations of the business. While this work will take some time, I am confident we are on the right path to return the company to long term profitable growth. Today, I will walk through a summary of our second quarter results and then I will explain the initiatives we have already put in place to turn the business around along with the longer term initiatives we are executing against to fully realize the company's potential.

Marla Beck: On our next call, I will share the results of this review and the actions we will take.

Marla Beck: On our next call I will share the results of this review and the actions we will take.

Marla Beck: And as for financial discipline, we significantly reduced our operating expenses. Our first half 2024 operating expenses are down $24 million versus the prior year. This was achieved through diligent management of expenses and shifting the corporate culture towards cost consciousness and data-driven decision making.

Marla Beck: And as for financial discipline, we significantly reduced our operating expenses. Our first half 2024 operating expenses are down $24 million versus the prior year.

Marla Beck: This has been achieved through diligent management of expenses and shifting the corporate culture towards cost consciousness and data-driven decision making. It is important to note that our global footprint is a driver of our operating expenses. As we look at each region, we will be evaluating the growth potential and the cost to support each of the markets.

Marla Beck: This was achieved through diligent management of expenses and shifting the corporate culture towards cost consciousness and data driven decision, making it is important to note that our global footprint as a driver of our operating expenses as we look at each region, we will be evaluating the growth potential in the cost to support each of.

Marla Beck: Thank you. It is important to note that our global footprint is a driver of our operating expenses. As we look at each region, we will be evaluating the gross potential and the cost to support each of the markets. I am confident that the above actions will best position the company to take advantage of the large and growing market and leverage the incredible Hydrafacial brand and products.

Marla Beck: Our plan revolves around the three core areas of focus that I outlined on our last earnings call, sales execution, operational excellence and financial discipline. Our second quarter results reflect a slower than expected recovery of device sales partially due to macro economic pressures as well as internal execution. We have an incredible global sales team and we need to supply them with additional products, tools, processes and structure to capture the demand for our products.

Marla Beck: The markets.

Marla Beck: I am confident that the above actions will best position the company to take advantage of the large and growing market and leverage the incredible hydrafacial brand and product. I will now turn the call over to Mike to discuss our second quarter financial results and revised guidance. After Mike finishes his prepared remarks, I would like to close by discussing our innovation strategy and plans that are underway to capture market share in the future. Thank you.

Marla Beck: I am confident that the above actions will best position the company to take advantage of the large and growing market and leverage the incredible hydro facial brand and products.

Michael Monahan: I will now turn the call over to Mike to discuss our second quarter financial results and revise guidance.

Speaker Change: I will now turn the call over to Mike to discuss our second quarter financial results and revised guidance. After Mike finishes. His prepared remarks, I would like to close with discussing our innovation strategy and plans that are underway to capture market share in the future Mike.

Michael Monahan: After Mike finishes his prepared remarks, I would like to close with discussing our innovation strategy and plans that are underway to capture market share in the future.

Marla Beck: Hydrofacial was in a hyper growth mode for many years prior to going public. During that time, the company did not fully implement and enduring and scalable infrastructure needed to maximize market share and drive profitability for a company of this size. We are in the process of fixing that.

Michael Monahan: Mike. Thank you, Marla. Despite the headwinds of the business space during the first half of the year, I am encouraged by the progress we are making to both address the present challenges as well as to strategically position the company to benefit from the many opportunities in front of us over the mid to long term. Our second quarter outlook assumes near-term pressure on capital equipment sales, reflecting a challenging comparison due to the international launch of Sendeio in the prior year, along with some unfavorable macro conditions. As we progress throughout the quarter, many of our smaller providers experience prolonged pressures related to the tight credit environment, which had a greater than anticipated impact on sales.

Michael Monahan: Thank you, Marla. Despite the headwinds the business faced during the first half of the year, I am encouraged by the progress we are making to both address the present challenges as well as to strategically position the company to benefit from the many opportunities in front of us over the mid to long term. Our second quarter outlook assumed near-term pressure on capital equipment sales, reflecting a challenging comparison due to the international launch of Sundeo in the prior year, along with some unfavorable macro conditions. As we progressed throughout the quarter, many of our smaller providers experienced prolonged pressures related to the tight credit environment, which had a greater-than-anticipated impact on sales.

Mike Monahan: Despite the headwinds the business faced during the first half of the year I am encouraged by the progress we're making to both address the present challenges as well as to strategically position the company to benefit from the many opportunities in front of us over the mid to long term.

Marla Beck: To drive top line growth, we've implemented three immediate actions to support sales and improve sales execution. First, we have refocused our sales and go to market efforts across our entire product portfolio in the U.S., including Elite and Allegro. This will allow us to offer more accessible price points other than Sandao. This good, better best approach affords our providers three distinct price points when it comes to their equipment purchasing options. Over 30% of devices sold in the second quarter in the United States were non-Sandao, either Elite or Allegro. With price sensitivity among many of our smaller business owners, we can expect this number to grow.

Marla Beck: Our second quarter outlook assume near term pressure on capital equipment sales, reflecting a challenging comparison due to the international launch of <unk> in the prior year, along with some unfavorable macro conditions.

Marla Beck: As we progressed throughout the quarter many of our smaller providers experienced prolonged pressures related to the tight credit environment, which had a greater than anticipated impact on sales.

Michael Monahan: During the second quarter, we incurred several unanticipated inventory-related write-offs totaling approximately $17 million, which I will address and add details shortly. Second quarter revenue came in below our guidance at 91 million, representing a 23% year-over-year decline. This reflects a 46% decline in global equipment sales, offset by a 7% increase in consumable sales. Adjusted EBITDA loss of $5.2 million versus a $12.4 million gain in the second quarter of 2023 was also below our prior stated guidance. Adjusted EBITDA includes $17 million in unanticipated inventory write-offs. On a pro-forma basis, excluding these charges, we would have come in well above our guidance.

Michael Monahan: During the second quarter, we incurred several unanticipated inventory-related write-offs, totaling approximately $17 million, which I will address in added detail shortly. Second quarter revenue came in below our guidance at $91 million, representing a 23% year-over-year decline. This reflects a 46% decline in global equipment sales offset by a 7% increase in consumable sales. Adjusted EBITDA loss of $5.2 million versus a $12.4 million gain in the second quarter of 2023 was also below our prior stated guidance.

Marla Beck: During the second quarter, we incurred several unanticipated inventory related write offs totaling approximately $17 million, which I'll address in added detail shortly.

Marla Beck: Second quarter revenue came in below our guidance at $91 million, representing a 23% year over year decline.

Marla Beck: Second, we have engaged in outside consulting firm to help us restructure our sales strategy, including better processes, tools, and technology to support our capital sales managers and business development managers. Examples include stronger analytics to improve our lead targeting, segmenting, and pipeline forecasting. We expect this project to be completed by the end of the third quarter and to begin to see results later this year.

Marla Beck: This reflects a 46% decline in global equipment sales offset by a 7% increase in consumable sales.

Marla Beck: Adjusted EBITDA loss of $5 2 million versus $12 4 million gain in the second quarter of 2023 was also below our prior stated guidance.

Michael Monahan: Adjusted EBITDA includes $17 million in unanticipated inventory write-offs. On a pro forma basis, excluding these charges, we would have come in well above our guidance. More importantly, this is added proof that we are indeed making early progress in gaining cost leverage while addressing historical operational issues that have impacted our bottom line results.

Marla Beck: Adjusted EBITDA includes $17 million in unanticipated inventory write offs on a pro forma basis. Excluding these charges, we would have come in well above our guidance more.

Marla Beck: Lastly, we are lowering barriers to entry by improving the availability of financing options in particular with new and or single location providers. In June, we developed and launched new options to lower the upfront investment required for new customers to purchase a device. We will continue to refine these offerings in the second half of the year.

Michael Monahan: More importantly, this is added proof that we are, indeed, making early progress and gaining cost leverage while addressing historical operational issues that have impacted our bottom line results. Looking ahead, we are now projecting third quarter net sales of between $70 million to $80 million and an adjusted EBITDA loss of negative $6 million to negative $1 million. We expect revenue to increase sequentially from Q3 to Q4, leading to full-year 2024 revenue between $325 million to $345 million. And we expect full-year adjusted EBITDA to be in the range of a loss of negative $10 million to break even.

Marla Beck: More importantly, this isn't this is added proof that we are indeed, making early progress in gaining cost leverage while addressing historical operational issues that have impacted our bottom line results.

Michael Monahan: Looking ahead, we are now projecting third-quarter net sales of between $70 million and $80 million and an adjusted EBITDA loss of negative $6 million to negative $1 million. We expect revenue to increase sequentially from Q3 to Q4, leading to full-year 2024 revenue between $325 million and $345 million. And we expect full-year adjusted EBITDA to be in the range of a loss of negative $10 million to break even. Capital expenditures are expected to be approximately $12 million for the full year 2024.

Marla Beck: Looking ahead, we are now projecting third quarter's net sales of between $70 million to $80 million and an adjusted EBITDA loss of negative $6 million to negative $1 million, we expect.

Marla Beck: Revenue to increase sequentially from Q3 to Q4, leading to full year 2020 for revenue between 325 million to $345 million.

Marla Beck: We expect full year adjusted EBITDA to be in the range of a loss of negative $10 million to breakeven.

Marla Beck: We will have a more detailed update on this initiative on our third quarter call.

Michael Monahan: Capital expenditures are expected to be approximately $12 million for the full-year 2024. This guidance implies continued pressure across our top lines driven by equipment sales, specifically outside of the United States, along with a challenging margin operating environment. We expect to deliver positive adjusted EBITDA in the fourth quarter, reflecting increased sales over the third quarter, along with the impact we expect from the various initiatives Mila outlined in her prepared remarks.

Marla Beck: Capital expenditures are expected to be approximately $12 million for the full year 2024.

Marla Beck: Regarding operational excellence, I am pleased with our progress. Our new chief supply chain and operations officer has been in the seat for just a few months and has already made meaningful contributions. To best address the headwinds related to Sendeo, she has instituted a quality improvement program that has resulted in improved Sendeo system performance and customer satisfaction. We have also completed our global Sendeo replacement program ensuring all our providers are able to operate on the latest 3.0 standard device. In addition, we have taken the first steps toward refining our global supply chain strategy. We are implementing new inventory management processes and working to realign our global manufacturing capacity and improve our growth margins.

Michael Monahan: This guidance implies continued pressure across our top line driven by equipment sales, specifically outside of the United States, along with a challenging margin operating environment. We expect to deliver positive adjusted EBITDA in the fourth quarter, reflecting increased sales over the third quarter, along with the impact we expect from the various initiatives Marla outlined in her prepared remarks. Our guidance range is wider than we have given in the past, given the macroeconomic uncertainty and continued realignment of our operations.

Marla Beck: This guidance implies continued pressure across our top line driven by equipment sales specifically outside of the United States, along with a challenging margin operating environment.

Speaker Change: We expect to deliver positive adjusted EBITDA in the fourth quarter, reflecting increased sales over the third quarter, along with the impact we expect from the various initiatives mile outlined in her prepared remarks.

Michael Monahan: Box. Our guidance range is wider than we have given in the past, given the macroeconomic uncertainty and continued realignment of our operations. Taking a closer look at Q2 results, overall revenue was 90.6 million compared to 117.5 million in the prior year period, and 81.4 million in Q1 of this year. The decline in revenue was primarily driven by soft capital equipment and sales. This brings our six-month revenue total to 172 million compared to 203.8 million for the first half of 2023. From a geographical perspective, revenue in the America is decline 9% while revenue across APAC and AMIA decline by 46% and 33% respectively.

Marla Beck: Our guidance range is wider than we have given in the past given the macroeconomic uncertainty and continued realignment of our operations.

Michael Monahan: Taking a closer look at Q2 results, overall revenue was $90.6 million compared to $117.5 million in the prior year period and $81.4 million in Q1 of this year. The decline in revenue was primarily driven by soft capital equipment sales. This brings our six-month revenue total to $172 million compared to $203.8 million for the first half of 2023. From a geographical perspective, revenue in the Americas declined 9%, while revenue across APAC and EMEA declined by 46% and 33%, respectively.

Speaker Change: Taking a closer look at Q2 results overall revenue was $90 6 million compared to $117 5 million in the prior year period, and $81 4 million in Q1 of this year. The decline in revenue was primarily driven by soft capital equipment sales.

Marla Beck: On our next call, I will share the results of this review and the actions we will take.

Speaker Change: This brings our six month revenue totaled to $172 million compared to $203 8 million for the first half of 2000.

Marla Beck: In 'twenty three.

Marla Beck: From a geographical perspective revenue in the Americas declined 9%, while revenue across APAC, and EMEA declined by 46% and 33% respectively and.

Michael Monahan: In APAC, China accounted for 7.8 million of the region's revenue, a decline of 52.8% year over year. The decline in China reflects a 65.2% drop in new system sales, partially offset by an increase in consumables growth. As a reminder, this in dayo launch in China in Q2 2023 draws increased sales. We are actively working on solutions to grow our market in China. In AMIA, capital equipment declined 51% due to comping this in dayo launch in the prior year, coupled with interest rate pressures and financing challenges which slowed the sales cycle. Looking at equipment sales, during the quarter, we sold 1,285 systems at an average selling price of $27,400.

Michael Monahan: In APAC, China accounted for $7.8 million of the region's revenue, a decline of 52.8% year-over-year. The decline in China reflects a 65.2% drop in new system sales, partially offset by an increase in consumables growth. As a reminder, the Sundeo launch in China in Q2 2023 drove increased sales. We are actively working on solutions to grow our market in China.

Marla Beck: In APAC, China accounted for $7 8 million of the region's revenue a decline of 52, 8% year over year. The decline in China reflects a 65, 2% drop in new system sales, partially offset by an increase in consumables growth.

Marla Beck: As a reminder, this <unk> launch in China in Q2, 2023 drove increased sales.

Michael Monahan: I will now turn the call over to Mike to discuss our second quarter financial results and revise guidance.

Marla Beck: We are actively working on solutions to grow our market in China.

Michael Monahan: After Mike finishes his prepare remarks, I would like to close with discussing our innovation strategy and plans that are underway to capture market share in the future.

Michael Monahan: In EMEA, capital equipment declined 51% due to the comparison of the Sendai launch in the prior year, coupled with interest rate pressures and financing challenges which slowed the sales cycle. Looking at equipment sales during the quarter, we sold 1,285 systems at an average selling price of $27,400. This brings the total year to date to 2,702 systems and the total active machines in the field to 33,504 units versus 29,682 units at the end of Q2 2023.

Marla Beck: In EMEA capital equipment declined 51% due to comping the <unk> launch in the prior year, coupled with interest rate pressures and financing challenges, which slowed the sales cycle.

Michael Monahan: Mike. Thank you, Marla. Despite the headwinds of the business space during the first half of the year, I am encouraged by the progress we are making to both address the present challenges as well as to strategically position the company to benefit from the many opportunities in front of us over the mid to long term. Our second quarter outlook assume near-term pressure on capital equipment sales, reflecting a challenging comparison due to the international launch of Sendeio in the prior year along with some unfavorable macro conditions. As we progress throughout the quarter, many of our smaller providers experience prolonged pressures related to the tight credit environment, which had a greater than anticipated impact on sales.

Marla Beck: Looking at equipment sales during the quarter, we sold 1285 systems at an average selling price of $27400. This brings the total year to date to 2000, and 702 systems and the total active machines in the field to 33504 units.

Michael Monahan: This brings the total year-to-date to 2,702 systems and the total active machines in the field to 33,504 units versus 29,682 units at the end of Q2 2023. Moving to consumables, sales grew 6.7% to 55.4 million, reflecting the continued and growing demand for hydrofacial. Consumable sales were led by an 8.3% increase in the Americas and a 7.6% increase in APAC, while AMIA consumable sales were flat. This brings our consumable sales for the first six months of 2024 to 101 million, compared to 92.8 million for the first six months of 2023. This led to a gap growth profit of 40.9 million compared to 67.9 million in Q2 2023, resulting in a gap growth margin of 45.2% versus 57.8% in Q2 2023.

Marla Beck: Versus 29682 units at the end of Q2 2023.

Michael Monahan: Moving to consumables, sales grew 6.7% to 55.4 million, reflecting the continued and growing demand for hydrofacial. Consumable sales were led by an 8.3% increase in the Americas and a 7.6% increase in APAC, while EMEA consumable sales were flat. This brings our consumable sales for the first six months of 2024 to $101 million, compared to $92.8 million for the first six months of 2023. This led to a gap gross profit of $40.9 million compared to $67.9 million in Q2 of 2023, resulting in a gap gross margin of 45.2% versus 57.8% in Q2 of 2023.

Speaker Change: Moving to consumables sales grew six 7% to 55 four.

Marla Beck: $4 million, reflecting the continued and growing demand for hydro faithful.

Michael Monahan: During the second quarter, we incurred several unanticipated inventory-related write-offs totaling approximately $17 million, which I will address and added details shortly. Second quarter revenue came in below our guidance at 91 million, representing a 23% year-over-year decline. This reflects a 46% decline in global equipment sales offset by a 7% increase in consumable sales. Adjusted EBITDA loss of $5.2 million versus a $12.4 million gain in the second quarter of 2023 was also below our prior stated guidance.

Marla Beck: Consumable sales were led by an eight 3% increase in the Americas and a seven 6% increase in APAC, while EMEA consumable sales were flat.

Marla Beck: This brings our consumable sales for the first six months of 2000 $24 million to $101 million compared to $92 8 million for the first six months of 2023.

Marla Beck: This led to a GAAP gross profit of $40 9 million compared to $67 9 million in Q2 of 2023, resulting in a GAAP gross margin of 45, 2% versus 57, 8% in Q2 of 2023.

Michael Monahan: Cost of sales was flat year over year due to inventory charges of approximately 17 million, offset by lower sales. The charges result from a write down of delivery system inventory, excess raw materials, and other inventory related charges. Adjusting for non-cash charges such as depreciation, amortization, and stock-based compensation, we delivered adjusted growth profit of 44.8 million for a 49.4% adjusted growth margin. We did not adjust for inventory-related charges in Q2 2021.

Michael Monahan: Cost of sales was flat year over year due to inventory charges of approximately $17 million, offset by lower sales. The charges result from a write-down of delivery system inventory, excess raw materials, and other inventory-related charges. Adjusting for non-cash charges such as depreciation, amortization, and stock-based compensation, we delivered adjusted gross profit of $44.8 million for a 49.4% adjusted gross margin. However, we did not adjust for inventory-related charges in Q2 2024.

Michael Monahan: Adjusted EBITDA includes $17 million in unanticipated inventory write-offs. On a pro-forma basis, excluding these charges, we would have come in well above our guidance. More importantly, this is added proof that we are, indeed, making early progress and gaining cost leverage while addressing historical operational issues that have impacted our bottom line results. Looking ahead, we are now projecting third quarter net sales of between $70 million to $80 million and an adjusted EBITDA loss of negative $6 million to negative $1 million.

Marla Beck: Cost of sales was flat year over year due to inventory charges of approximately $17 million offset by lower sales.

Marla Beck: The charges results from a write down of delivery system inventory excess raw materials and other inventory related charges.

Marla Beck: Adjusting for noncash charges, such as depreciation amortization and stock based compensation, we delivered adjusted gross profit of $44 8 million for a 49, 4% adjusted gross margin, we did not adjust for inventory related charges in Q2 2024.

Michael Monahan: for. We expect adjusted gross margin to be relatively consistent or to slightly improve compared with our first quarter levels for the balance of 2024, as we continue to work to evaluate and optimize our supply chain strategy. As a relate operating expenses, I'm pleased to report at the client of 17.9 million, down approximately 22% year over year as we continue to have success and more strategically managing expenses. Felling and marketing expense was down approximately 29% to 30.5 million, reflecting a lower marketing spend as well as lower compensation and sales commissions. R&D expense was also down 1.7 million, while GNA expense was 31.4 million, down 10.5%, with savings primarily driven by lower compensation expense.

Michael Monahan: We expect revenue to increase sequentially from Q3 to Q4 leading to full-year 2024 revenue between $325 million to $345 million. And we expect full-year adjusted EBITDA to be in the range of a loss of negative $10 million to break even. Capital expenditures are expected to be approximately $12 million for the full-year 2024. This guidance implies continued pressure across our top lines driven by equipment sales, specifically outside of the United States, along with a challenging margin operating environment. We expect to deliver positive adjusted EBITDA in the fourth quarter, reflecting increased sales over the third quarter, along with the impact we expect from the various initiatives Mila outlined in her prepared remarks.

Michael Monahan: We expect adjusted gross margin to be relatively consistent or to slightly improve compared with our first quarter levels for the balance of 2024 as we continue to work to evaluate and optimize our supply chain strategy. As it relates to operating expenses, I'm pleased to report a decline of $17.9 million, down approximately 22% year over year, as we continue to have success in more strategically managing expenses. Selling and marketing expense was down approximately 29% to $30.5 million, reflecting a lower marketing spend as well as lower compensation and sales commission.

Marla Beck: We expect adjusted gross margin to be relatively consistent or to slightly improved compared with our first quarter levels for the balance of 2024, as we continue to work to evaluate and optimize our supply chain strategy.

Marla Beck: As it relates to operating expenses I am pleased to report a decline of $17 9 million down approximately 22% year over year as we continue to have success in more strategically managing expenses.

Marla Beck: Selling and marketing expense was down approximately 29% to $35 million, reflecting a lower marketing spend as well as lower compensation and sales commissions.

Michael Monahan: R&D expense was also down $1.7 million, while G&A expense was $31.4 million, down 10.5%, with savings primarily driven by lower compensation expenses. During the quarter, the company recognized a $17.3 million gain on the repurchase of its convertible notes. This resulted in a net income of $200,000 compared to $3.4 million in Q2 of 2023. Normalizing for non-cash items and certain discrete charges, our adjusted EBITDA was a loss of $5.2 million compared to an adjusted EBITDA gain of $12.4 million in Q2 of 2023.

Marla Beck: R&D expense was also down $1 7 million, while G&A expense was $31 4 million down 10, 5% with savings primarily driven by lower compensation expense.

Michael Monahan: Box. Our guidance range is wider than we have given in the past, given the macroeconomic uncertainty, and continued reallignment of our operations. Taking a closer look at Q2 results, overall revenue was 90.6 million compared to 117.5 million in the prior year period, and 81.4 million in Q1 of this year. The decline in revenue was primarily driven by soft capital equipment and sales. This brings our six month revenue total to 172 million compared to 203.8 million for the first half of 2023.

Michael Monahan: Within the quarter, the company recognized a 17.3 million dollar gain on the repurchase of its convertible notes. This resulted in a net income of 200,000 compared to 3.4 million in Q2 of 2023. Normalizing for cash items in certain discreet charges, our adjusted EBITO was a loss of 5.2 million compared to an adjusted EBITO gain of 12.4 million in Q2 2023. As I mentioned during my guidance remarks, the decline in EBITO year over year was primarily driven by several unanticipated inventory-related write-offs totaling approximately 17 million, as well as lower revenue.

Marla Beck: Within the quarter the company recognized a $17 $3 million gain on the repurchase of its convertible notes.

Marla Beck: This resulted in a net income of 200000 compared to $3 4 million in Q2 of 2023.

Marla Beck: Normalizing for noncash items and certain discrete charges. Our adjusted EBITDA was a loss of $5 2 million compared to an adjusted EBITDA gain of $12 4 million in Q2 2023.

Michael Monahan: As I mentioned during my guidance remarks, the decline in EBITDA year-over-year was primarily driven by several unanticipated inventory-related write-offs totaling approximately $17 million, as well as lower revenue. Moving to the balance sheet, we ended the quarter with approximately $349.5 million in cash. As of today, we deployed $156 million of cash to repurchase $192 million of our convertible debt. We feel we have a healthy and robust liquidity position to adequately support the business, including our growth initiatives.

Marla Beck: As I mentioned during my guidance remarks, the decline in EBIT year over year was primarily driven by several unanticipated inventory related write offs totaling approximately $17 million as well as lower revenue.

Michael Monahan: From a geographical perspective, revenue in the America is decline 9% while revenue across APAC and AMIA decline by 46% and 33% respectively. In APAC, China accounted for 7.8 million of the region's revenue, a decline of 52.8% year over year. The decline in China reflects 65.2% drop in new system sales, partially offset by an increase in consumables growth. As a reminder, this in dayo launch in China in Q2 2023 draws increased sales.

Michael Monahan: Moving to the balance sheet, we ended the quarter with approximately 349.5 million in cash. As of today, we deployed 156 million of cash to repurchase the 192 million of our convertible debt. We feel we have a healthy and robust liquidity position to adequately support the business, including our growth initiatives. This sentiment is further strengthened by the cost reductions we are gaining as we take additional actions to improve the efficiency of the business. Looking at inventory, we ended the quarter with approximately $77.1 million, a decrease compared to $91.3 million in December of 2023. The decrease was primarily driven by lower purchases and excess and obsolescence charges.

Marla Beck: Moving to the balance sheet, we ended the quarter with approximately $349 5 million in cash as of today, we deployed $156 million of cash to repurchase $192 million of our convertible debt.

Marla Beck: We feel we have a healthy and robust liquidity position to adequately support the business, including our growth initiatives.

Michael Monahan: This sentiment is further strengthened by the cost reductions we are gaining as we take additional actions to improve the efficiency of the business. Looking at inventory, we ended the quarter with approximately $77.1 million, a decrease compared to $91.3 million in December of 2023. The decrease was primarily driven by lower purchases and excess and obsolescence charges.

Marla Beck: This sentiment is further strengthened by the cost reductions we are gaining as we take additional actions to improve the efficiency of the business.

Michael Monahan: We are actively working on solutions to grow our market in China. In AMIA, capital equipment declined 51% due to comping this in dayo launch in the prior year, coupled with interest rate pressures and financing challenges which slowed the sales cycle. Looking at equipment sales, during the quarter, we sold 1,285 systems at an average selling price of $27,400. This brings the total year-to-date to 2,702 systems and the total active machines in the field to 33,504 units versus 29,682 units at the end of Q2 2023.

Marla Beck: Looking at inventory, we ended the quarter with approximately $77 1 million a decrease compared to $91 $3 million in December of 2023.

Marla Beck: The decrease was primarily driven by lower purchases in excess and obsolescence charges.

Michael Monahan: As of June 30th, we have 689 elite trade-up machines that expect to sell over the next 18 months. We completed our Sunday replacement program during the quarter. As of June 30th, we have a $900,000 accrual that will be used for certain in-process replacements. Our warranty accrual of approximately $7 million as of June 2024 is in place to cover our total global systems. Inclusive of extended Sunday warranties, we issued to support our providers during 2023.

Michael Monahan: As of June 30th, we have 689 elite trade-up machines that we expect to sell over the next 18 months. We completed our Sundeo replacement program during the quarter. As of June 30th, we have a $900,000 accrual that will be used for certain in-process replacement. Additionally, our warranty accrual of approximately $7 million as of June 2024 is in place to cover our total global systems, inclusive of extended Sundeo warranties we issued to support our providers during 2023.

Marla Beck: As of June 30, we have 689 and lead trade up machines that expect to sell over the next 18 months.

Marla Beck: We completed our sendero replacement program during the quarter as of June 30th.

Marla Beck: Have a $900000 accrual that will be used for certain in process replacements.

Marla Beck: Our warranty accrual of approximately $7 million as of June 2024 is in place to cover our total global systems inclusive of extended Sunday of warranties, we issued to support our providers during 2023.

Michael Monahan: Moving to consumables, sales grew 6.7% to 55.4 million reflecting the continued and growing demand for hydrofacial. Consumable sales were led by an 8.3% increase in the Americas and a 7.6% increase in APAC while AMIA consumable sales were flat. This brings our consumable sales for the first six months of 2024 to 101 million compared to 92.8 million for the first six months of 2023. This led to a gap growth profit of 40.9 million compared to 67.9 million in Q2 2023 resulting in a gap growth margin of 45.2% versus 57.8% in Q2 2023.

Michael Monahan: In closing, I would like to reiterate our commitment to the turnaround plan Marla outlined. We firmly believe that focusing on the three-core priorities of sales execution, operational excellence, and financial discipline will position us to achieve long-term profitable growth. I also want to acknowledge the hard work and resilience of our team, while we have faced significant hurdles. Our commitment to improving just about every aspect of our business remains unwavering.

Michael Monahan: In closing, I would like to reiterate our commitment to the turnaround plan Marla outlined. We firmly believe that focusing on the three core priorities of sales execution, operational excellence, and financial discipline will position us to achieve long-term profitable growth. I also want to acknowledge the hard work and resilience of our team. While we have faced significant hurdles, our commitment to improving just about every aspect of our business remains unwavering. I will now turn the call back to Marla. Marla? Thank you, Michael.

Speaker Change: In closing I would like to reiterate our commitment to the turnaround plan Marla outlined we firmly believe that focusing on the three core priorities of sales execution operational excellence and financial discipline will position us to achieve long term profitable growth.

Marla Beck: I also want to acknowledge the hard work and resilience of our team while we have faced significant hurdles our commitment to improving just about every aspect of our business remains unwavering.

Marla Beck: I will now turn the call back to Marla. Marla?

Tomorrow Tomorrow: I will now turn the call back Tomorrow Tomorrow.

Marla Beck: Thank you, Mike. Despite our recent challenges, Beauty Health is a unique company at the intersection of beauty, aesthetics, health, and wellness. We are the market leader and category creator for minimally invasive skin health treatments with a brand that consumers ask for by name across the globe. Our business thrives because of the combined power of devices and consumables, what we refer to as MedTech meets Beauty. The combination of our patented technology with our clinically effective solution serums and peels results in healthy, glowing skin that cannot be achieved with any other minimally invasive treatment. With one of the largest installed bases in the world, including over 33,000 devices, we are focused on optimizing this vast device footprint.

Tomorrow Tomorrow: Thank you Mike.

Marla Beck: Despite our recent challenges, Beauty Health is a unique company at the intersection of beauty, aesthetics, health, and wellness. We are the market leader and category creator for minimally invasive skin health treatments with a brand that consumers ask for by name across the globe. Our business thrives because of the combined power of devices and consumables, what we refer to as MedTech meets beauty. The combination of our patented technology with our clinically effective solutions, serums, and peels results in healthy, glowing skin that cannot be achieved with any other minimally invasive treatment. With one of the largest installed bases in the world, including over 33,000 devices, we are focused on optimizing this vast device footprint.

Tomorrow Tomorrow: Despite our recent challenges DD health is a unique company at the intersection of beauty aesthetics health and wellness we are.

Michael Monahan: Cost of sales was flat year over year due to inventory charges of approximately 17 million offset by lower sales. The charges result from a write down of delivery system inventory, excess raw materials and other inventory related charges. Adjusting for non-cast charges such as depreciation, amortization, and stock-based compensation, we delivered adjusted growth profit of 44.8 million for a 49.4% adjusted growth margin. We did not adjust for inventory related charges in Q2 2021, for.

Speaker Change: The market leader in category creator for minimally invasive skin health treatments with a brand that consumers ask for by name across the globe our business thrive because of the combined power of devices and consumables, what we refer to as med Tech meets beauty.

Speaker Change: The combination of our patented technology with our clinically effective solutions Serums Appeals resulted in healthy glowing skin that cannot be achieved with any other minimally invasive treatment.

Speaker Change: It's one of the largest installed bases in the world, including over 33000 devices. We are focused on optimizing this fast device footprint doing so will not only allow us to further expand our installed base, but serve as a powerful catalyst for our consumable sales.

Michael Monahan: We expect adjusted gross margin to be relatively consistent or to slightly improve compared with our first quarter levels for the balance of 2024, as we continue to work to evaluate and optimize our supply chain strategy. As a relate operating expenses, I'm pleased to report at the client of 17.9 million down approximately 22% year over year as we continue to have success and more strategically managing expenses. Felling and marketing expense was down approximately 29% to 30.5 million, reflecting a lower marketing spend as well as lower compensation and sales commissions.

Marla Beck: Doing so will not only allow us to further expand our installed base but also serve as a powerful catalyst for our consumable sales. Looking beyond our sales, operational, and financial initiatives, we have not lost focus on the potential of this business, including bringing innovation to the market. The work we are doing to lower costs and drive inventory improvements furthers our ability to accelerate the product pipeline and leverage our over 120 patents as we look to bring new products to market.

Marla Beck: Doing so will not only allow us to further expand our installed base, but serve as a powerful catalyst for our consumable sales.

Marla Beck: Looking beyond our sales, operational, and financial initiatives, we have not lost focus on the potential of this business, including bringing innovation to the market. The work we are doing to lower costs and drive inventory improvements, further our ability to accelerate the product pipeline and leverage our over 120 patents as we look to bring new products to market.

Speaker Change: Beyond our sales operational and financial initiatives, we have not lost focus on the potential of this business, including bringing innovation to the market.

Speaker Change: Work, we are doing to lower costs and drive the inventory improvements furthers, our ability to accelerate the product pipeline and leverage our over 120 patents as we look to bring new products to market.

Marla Beck: This fall, I am excited to confirm that we will be bringing a new hydrophacial booster to the market, the first supported by extensive clinical claims. We are in the early stages of evaluating the launch of the skincare line planned for 2025 as part of our strategy to wrap the treatment room. It would serve as a complement to hydrophacial, and we believe this will create added revenue for our providers while extending the efficacy of our treatments. As we have highlighted before, consumables remain a significant opportunity and driver of margin expansion moving forward.

Marla Beck: This fall, I'm excited to confirm that we will be bringing a new hydrofacial booster to the market, the first supported by extensive clinical claims. Additionally, we are in the early stages of evaluating the launch of a skin care line planned for 2025 as part of our strategy to wrap the treatment room. It would serve as a complement to Hydrafacial, and we believe this will create added revenue for our providers while extending the efficacy of our treatment.

Speaker Change: This fall I am excited to confirm that we will be bringing a new hydro facial booster to the market. The first supported by extensive clinical claims.

Michael Monahan: R&D expense was also down 1.7 million, while GNA expense was 31.4 million down 10.5% with savings primarily driven by lower compensation expense. Within the quarter, the company recognized a 17.3 million dollar gain on the repurchase of its convertible notes. This resulted in a net income of 200,000 compared to 3.4 million in Q2 of 2023. Normalizing for cash items in certain discreet charges, our adjusted EBITO was a loss of 5.2 million compared to an adjusted EBITO gain of 12.4 million in Q2 2023.

Speaker Change: We are in the early stages of evaluating the launch of the skincare line plan for 2025 as part of our strategy to wrap the treatment round. It would serve as a complement to hydro facial and we believe this will create added revenue for our providers, while extending the efficacy of our treatments.

Marla Beck: As we've highlighted before, consumables remain a significant opportunity and driver of margin expansion moving forward. We are also working to enhance our digital capabilities to support our product strategy, reduce friction, and provide a seamless user experience for our providers and their clients. We will continue to reinforce our value proposition as a business and revenue generator for our providers. Investment by our providers in a hydrofacial device has the potential for a payback in less than six months and has proven to be a driver of incremental revenue for providers.

Speaker Change: As we've highlighted before our consumables remain a significant opportunity and driver of margin expansion moving forward. We are also working to enhance our digital capabilities to support our product strategy reduce friction and provide a seamless user experience for our providers and their clients.

Marla Beck: We are also working to enhance our digital capabilities to support our product strategy, reduce friction, and provide a seamless user experience for our providers and their clients. We will continue to reinforce our value proposition as a business and revenue generator for our providers. Investment by our providers in a hydrophacial device has the potential for a payback in less than six months and has proven to be a driver of incremental revenue for providers. Long-term market trends are in our favor, including a return to a more natural-looking aesthetic, an increase in the use of weight loss drugs, driving demand for skin rejuvenation treatments, and the popularity of lasers paired with hydrophacial treatments.

Speaker Change: We will continue to reinforce our value proposition as a business and revenue generator for our providers and investment by our providers and our hydro facial device has the potential for a payback in less than six months and has proven to be a driver of incremental revenue for providers.

Michael Monahan: As I mentioned during my guidance remarks, the decline in EBITO year over year was primarily driven by several unanticipated inventory related right off totaling approximately 17 million as well as lower revenue. Moving to the balance sheet, we ended the quarter with approximately 349.5 million in cash. As of today, we deployed 156 million of cash to repurchase the 192 million of our convertible debt. We feel we have a healthy and robust liquidity position to adequately support the business, including our growth initiatives.

Marla Beck: Long-term market trends are in our favor, including a return to a more natural-looking aesthetic, an increase in the use of weight-loss drugs driving demand for skin rejuvenation treatments, and the popularity of lasers paired with hydrofacial treatments. I observed this recently while touring and talking with our providers and doctors in Europe. We are working with leading dermatologists to validate the power of lasers combined with hydrofacial treatments with clinical data and hope to see this study published soon.

Speaker Change: Long term market trends are in our favor, including a return to a more natural looking esthetic and an increase in the use of weight loss drug is driving demand for skin rejuvenation treatments and the popularity of lasers paired with hydro facial treatments.

Marla Beck: I observe this recently while touring and talking with our providers and doctors in Europe. We are working with leading dermatologists to validate the power of lasers combined with hydrophacial treatments with clinical data and hope to see this study published soon.

Speaker Change: I observed this recently, while touring and talking with our providers and doctors in Europe, we're working with leading dermatologists to validate the power of lasers combined with hydro facial treatments with clinical data and hope to see this study published soon.

Marla Beck: Although marketplace dynamics have changed our 2024 outlook, I am confident the actions we have taken so far will create a solid foundation and help restore growth across our business and improve margins as these headwinds subside. We are on track to finish the year with improved operations, more effective sales execution, and a lower cost structure. We will take whatever actions necessary to return to top-line growth and improved margins. I will now turn the call back to the operator for Q&A.

Marla Beck: Although marketplace dynamics have changed, our 2024 outlook, I am confident that actions we have taken so far will create a solid foundation and help restore growth across our business and improve margins as these headwinds subside. We are on track to finish the year with improved operations, more effective sales execution, and a lower cost structure. We will take whatever actions necessary to return to toppling growth and improved margins.

Speaker Change: Although marketplace dynamics have changed our 2024 outlook I am confident the actions we have taken so far will create a solid foundation and help restore growth across our business and improve margins as these headwinds subside.

Speaker Change: We are on track to finish the year with improved operations more effective sales execution and a lower cost structure, we will take whatever actions necessary to return to top line growth and improved margins I will now turn the call back to the operator for Q&A.

Michael Monahan: We completed our Sunday replacement program during the quarter. As of June 30th, we have a $900,000 accrual that will be used for certain in-process replacements. Our warranty accrual of approximately $7 million as of June 2024 is in place to cover our total global systems. Inclusive of extended Sunday warranties, we issued to support our providers during 2023.

Operator: I will now turn the call back to the operator for Q&A. Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. We do ask that you limit yourself to one question today, and once again, that is star one to ask a question.

Operator: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. We do ask that you limit yourself to one question today. And once again, that is star 1 to ask a question. We will now take our first question from Susan Anderson with Canaccord Genuity. Please go ahead.

Speaker Change: Thank you at this time, if you would like to ask a question. Please press the star and one on your telephone keypad, you may remove yourself from the queue at any time by pressing star two.

Michael Monahan: In closing, I would like to reiterate our commitment to the turnaround plan Marla outlined. We firmly believe that focusing on the three-core priorities of sales execution, operational excellence, and financial discipline will position us to achieve long-term profitable growth. I also want to acknowledge the hard work and resilience of our Team, while we have faced significant hurdles or commitment to improving just about every aspect of our business remains unwavering.

Speaker Change: Do ask that you limit yourself to one question today.

Speaker Change: Once again that is star one to ask a question.

Alec Legg: We will now take our first question from Susan Anderson with can't accord genuity. Please go ahead. Hi, good afternoon. Alec Legg on for Susan. Question on the provider sentiment by region, so with the new machine placements kind of being the major headwind here, whereas consumables are still strong. Can you give some details on the headwinds by region?

Speaker Change: We will now take our first question from Susan Anderson with Canaccord Genuity. Please go ahead.

Speaker Change: Yes.

Alec Legon: Hi, good afternoon, Alec Legon for Susan. Question on provider sentiment by region. So with the new machine placements kind of being the major headwind here, whereas consumables are still strong, can you give some details on the headwinds by region? It sounds like in China, it's more of a macro and credit issue. But what about provider sentiment around the reliability of the newest Sundeo machine? Any details there would be helpful? Yeah

Speaker Change: Hi, good afternoon, Alex leg on for Susan question on the provider sentiment by region. So with the new machine placements kind of being the major headwind here, whereas consumables is still strong.

Marla Beck: I will now turn the call back to Marla. Marla? Thank you, Mike.

Speaker Change: Can you give some details on the headwinds by region. It sounds like in China, It's more of a macro and credit issue, but what about provider sentiment around the reliability of the U S machine any details there would be helpful. Thanks.

Marla Beck: It sounds like in China, it's more of a macro and credit issue, but what about provider sentiment around the reliability of the US and data machine? Any details there would be helpful, thanks.

Marla Beck: Despite our recent challenges, Beauty Health is a unique company at the intersection of beauty, aesthetics, health, and wellness. We are the market leader and category creator for minimally invasive skin health treatments with a brand that consumers ask for by name across the globe. Our business thrives because of the combined power of devices and consumables, what we refer to as MedTech meets beauty. The combination of our patented technology with our clinically effective solution serums and peels results in healthy, glowing skin that cannot be achieved with any other minimally invasive treatment.

Marla Beck: Yeah, thank you for your question.

Marla Beck: Yeah, thank you for your question. First, I'll talk about Sendaio, which is our quality improvement program that is showing significant results, and it was implemented just this last quarter. So we're hearing great feedback from our providers around the Sendaio 3.0 systems, and the data is showing our return rate of new Sendaio 3.0 devices is significantly better than what we have experienced in the past. Additionally, the provider community continues to show unwavering passion for hydrafacial and the devices.

Speaker Change: Yeah. Thank you for your question first I will talk about <unk>, which is our quality improvement program is showing significant results and it was implemented just in this last quarter.

Marla Beck: First, I'll talk about Sendeo, which is our quality improvement program, is showing significant results, and it was implemented just in this last quarter. So we're hearing great feedback from our providers around this Sendeo 3.0 systems, and the data is showing our return rate of news and data 3.0 devices is significantly better than what we have experienced in the past. Additionally, the provider community continues to show unwavering passion for Hydrafacial and the devices. We did a recent survey with our US providers, and 90 percent said they've either increased or maintained their revenue from the hydrophacial treatments over the past 12 months, and 95 percent of providers expect the trend to continue.

Speaker Change: So we're hearing great feedback from our providers around this Sunday of three point out the systems and the data is showing a return rate of NUCYNTA as three point out devices is significantly better than what we have experienced in the past.

Marla Beck: With one of the largest installed bases in the world, including over 33,000 devices, we are focused on optimizing this vast device footprint. Doing so will not only allow us to further expand our installed base, but serve as a powerful catalyst for our consumable sales.

Speaker Change: Additionally, the provider community continues to show unwavering passion for hydro facial and the devices. We did a recent survey with our U S providers.

Marla Beck: We did a recent survey with our US providers, and 90% said they've either increased or maintained their revenue from hydrafacial treatments over the past 12 months, and 95% of providers expect the trend to continue. So our consumable sales are strong, and the provider sentiment is great.

Speaker Change: And 90% said they have either increased or maintained our revenue from the hydro facial treatments over the past 12 months and 95% of providers expect the trend to continue so our consumable sales are strong.

Marla Beck: So our consumable sales are strong, and the provider sentiment is great.

Speaker Change: And the provider sentiment.

Speaker Change: Great.

Marla Beck: Thanks.

Speaker Change: Thanks, so much.

Marla Beck: And the consumer, you know, it looks like they're still going. But is it the same consumer that's going in and maybe using add-ons to help boost, you know, the average price for treatment, or is it, you know, new customer acquisition, just any insight there?

Marla Beck: The consumer looks like they're still going. Is it the same consumer that's going in, and maybe using add-ons to help boost the average price for treatment, or is it a new customer acquisition? Just any insight there? I would say, in terms of the end consumer, that has to do with our providers and their insights, I think we can take some examples from our national accounts, which are seeing sort of significant increase in consumables, and they tell us that hydrophacial is really a traffic driver for them, so they're leaning into hydrophacial.

Speaker Change: The consumer.

Speaker Change: It looks like there is still going is it the same consumer that's going in and maybe using add ons to help boost the average price per treatment or is it new customer acquisition, just any insight there.

Marla Beck: We are in the early stages of evaluating the launch of the skincare line planned for 2025 as part of our strategy to wrap the treatment room. It would serve as a complement to hydrophacial and we believe this will create added revenue for our providers while extending the efficacy of our treatments. As we have highlighted before, consumables remain a significant opportunity and driver of margin expansion moving forward. We are also working to enhance our digital capabilities to support our product strategy, reduce friction, and provide a seamless user experience for our providers and their clients.

Marla Beck: I mean, I would say, you know, in terms of the end consumer, that has to do with our providers and their insights. You know, I think we can take some examples from our national accounts, which are seeing sort of a significant increase in consumables, and they tell us that hydrafacial is really a traffic driver for them. So they're leaning into hydrafacial.

Speaker Change: I mean, I would say in terms of the end consumer or that has to do with our providers and their insights.

Speaker Change: We can take some examples from our national accounts, which are seen sort of a.

Speaker Change: Increasing consumables and they tell us that hydro facial is really a traffic driver for them, so they're leaning into hydro facial.

Marla Beck: Thank you.

Operator: Thank you. We will now take our next question from Alan Gong with J.P. Morgan. Please go ahead.

Speaker Change: Thank you we will now take our next question from Allen Gong with J P. Morgan. Please go ahead.

Alan Gong: We will now take our next question from Alan Gong with JP Morgan. Please go ahead. Thanks for the question. For the first one, I kind of want to dive into the guide a little bit more. You're pointing to sales around 75 million in the second and third quarter, but then to get to the midpoint of your guide, you have a pretty strong rebound in the fourth quarter, and I know that your business model has always been pretty fourth quarter weighted, but this 10 million plus step-up seems like similar to the normal seasonality that you would normally see supported by strong system sales.

Alan Gong: Thanks for the question. You know, for the first one, I kind of want to dive into the guide a little bit more.

Speaker Change: Thanks for the question for the first one I kind of wanted to dive into the guide a little bit more youre pointing to sales around $75 million in second and third quarter, but then.

Marla Beck: We will continue to reinforce our value proposition as a business and revenue generator for our providers. Investment by our providers in a hydrophacial device has the potential for a payback in less than six months and has proven to be a driver of incremental revenue for providers.

Alan Gong: You're pointing to sales around $75 million in the third quarter. But then, you know, to get to the midpoint of your guide, you have a pretty strong rebound in the fourth quarter. And I know that your business model has always been pretty fourth-quarter weighted. But, you know, this $10 million plus step up seems similar to the normal seasonality that you would normally see supported by strong system sales. So if we're in kind of a weaker market environment, and you know, the cost of borrowing is a little bit worse, what gives you confidence that you'll see that normal seasonal step up?

Speaker Change: To get to the midpoint of your guide you have pretty strong rebound in the fourth quarter and I know that your business model has always been pretty fourth quarter weighted but this $10 million plus step up seems like similar to the normal seasonality that you would normally see supported by a strong system sales. So if we're in kind of a weaker.

Marla Beck: Long-term market trends are in our favor, including a return to a more natural-looking aesthetic, an increase in the use of weight loss drugs, driving demand for skin rejuvenation treatments, and the popularity of lasers paired with hydrophacial treatments. I observe this recently while touring and talking with our providers and doctors in Europe. We are working with leading dermatologists to validate the power of lasers combined with hydrophacial treatments with clinical data and hope to see this study published soon.

Michael Monahan: So if we're in kind of a weaker market environment and the cost of borrowing is a little bit worse, what gives you confidence that you'll see that normal seasonal step-up.

Speaker Change: Market environment and the cost of borrowing is a little bit worse, what gives you confidence that youll see that normal seasonal step up.

Marla Beck: Great question. I'm going to have Mike take that.

Michael Monahan: Great question. I'm going to have Mike take that. Yeah, thanks, Alan. I think, you know, overall when you look at the pressure we're seeing on the capital side, we're seeing the largest point coming from outside of the US. So I think that's the first point I would make. The second point is the seasonality still exists within the business, the way we're seeing it. Now we're just seeing that overall pressure because of interest rates, environments, and you know, some of the access to credit.

Speaker Change: Great question, and I'll have Mike take that.

Michael Monahan: Yeah, thanks Alan. I think, you know, overall, when you look at the pressure we're seeing on the capital side, we're seeing the largest pressure coming from outside of the U.S., so I think that's the first point I would make. The second point is seasonality still exists within the business, the way we're seeing it now. We're just seeing that overall pressure because of interest rates, environments, and, you know, some access to credit.

Mike Monahan: Yes, Thanks, Shaun I think overall when you look at the pressure we're seeing in on the capital side, we're seeing the largest point coming from outside of the U S. So I think that's the first point I would make.

Marla Beck: Although marketplace dynamics have changed our 2024 outlook, I am confident that actions we have taken so far will create a solid foundation and help restore growth across our business and improve margins as these headwinds subside. We are on track to finish the year with improved operations, more effective sales execution, and a lower cost structure. We will take whatever actions necessary to return to toppling growth and improved margins.

Mike Monahan: The second point is the seasonality still exists within the business. The way we are seeing and now we're just seeing that overall.

Speaker Change: Pressure because of interest rates environment and.

Speaker Change: Some of the access to credit we're taking a couple of actions that we believe we will start to see traction in the back half of the year. The first is overall financing we introduced a couple of new financing programs.

Michael Monahan: We're taking a couple of actions that we believe will start to see traction in the back half of the year. The first is overall financing. We introduced a couple of new financing programs to lower the barriers to entry for potential providers. This is where we're extending the payment period up to three years, and having it step up over the course of the period where they're paying it back. We think we're going to get some traction off of that as we refine that through the second half of the year. The second point is we're opening up the product portfolio, as Marla mentioned, and we really think this will start to have an impact as well because the Elite and the Allegro are at lower price points and will enable some of our smaller providers, where we're seeing most of the pressure come from, to access Hydrafacial and get in a lower price point.

Operator: I will now turn the call back to the operator for Q&A. Thank you.

Speaker Change: To lower the barriers to entry for potential providers. This is where we're extending the payment period of up to three years and having it step up over the course of.

Operator: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.

Marlon: The period, where there were where they are paying it back we think we're going to get some traction off of that as we refine that through the second half of the year. The second point is we're opening up the product portfolio is Marlon mentioned and we really think this will start to have an impact as well because the lead in the allegro are at lower price points and we will.

Operator: We do ask that you limit yourself to one question today, and once again, that is star one to ask a question.

Michael Monahan: The second point is we're opening up the product portfolio, as Marla mentioned, and we really think this will start to have an impact as well because the Elite and the Allegro are at lower price points and will enable some of our smaller providers, where we're seeing most of the pressure come from, to access Hydro Facial and get in at a lower price point. So we are optimistic, and we feel confident in the guidance that we provide.

Alec Legg: We will now take our first question from Susan Anderson with can't accord genuity, please go ahead. Hi, good afternoon, Alec Legg on for Susan. Question on the provider sentiment by region, so with the new machine placements kind of being the major headwind here, whereas consumables are still strong. Can you give some details on the headwinds by region? It sounds like in China, it's more of a macro and credit issue, but what about provider sentiment around the reliability of the US and data machine? Any details there would be helpful, thanks. Yeah, thank you for your question.

Speaker Change: Enable some of our smaller providers, where we're seeing most of the pressure come from to.

Speaker Change: To access hydro facial and get in at a lower price point. So we are we are optimistic and we feel confident in the guidance that we provided.

Michael Monahan: So we are optimistic and we feel confident in the guidance that we've provided.

Michael Monahan: Got it. And then this is a quick follow up. I know you highlighted strong consumables in the quarter, and you were able to grow year over year, but you know, you're clearly working with a bit of a larger installed base this year. You know, arguably last year consumables because you had this and day a launch with the kind of, you know, consumables bundled into those initial placements. You know, that could have arguably represented an easy comp.

Michael Monahan: Got it. And then, just as a quick follow-up, I know you highlighted strong consumables in the quarter, and you were able to grow year over year. But, you know, you're clearly working with a bit of a larger installed base this year, and arguably last year's consumables because you had the Sundeo launch with the kind of, you know, consumables bundled into those initial placements, that could have arguably represented an easy comp.

Speaker Change: Got it and then just as a quick follow up I know you highlighted strong consumables in the quarter and you were able to grow year over year, but.

Speaker Change: We're clearly working with a bit of a larger installed base. This year arguably last year consumables. Because you had the same day of launch with the kind of consumables bundled into those initial placements that could arguably represented an easy comp. So what are you seeing in terms of the underlying demand for consumable.

Marla Beck: First, I'll talk about Sendeo, which is our quality improvement program is showing significant results, and it was implemented just in this last quarter. So we're hearing great feedback from our providers around this Sendeo 3.0 systems, and the data is showing our return rate of news and data 3.0 devices is significantly better than what we have experienced in the past. Additionally, the provider community continues to show unwavering passion for hydrophacial and the devices.

Michael Monahan: So what are you seeing in terms of the underlying demand for consumables and the health of that, especially, you know, again, given the macro dynamic, fully understanding that you would do play at the lower cost and of the spectrum. So you've been able to kind of avoid some of that and consumer softness up until now.

Michael Monahan: So what are you seeing in terms of the underlying demand for consumables and the health of that, especially, you know, again, given the macro dynamic, fully understanding that, you know, you do play at the lower cost end of the spectrum. So you've been able to kind of avoid some of that end consumer softness up until now? Thank you.

Speaker Change: <unk> and the health of that especially again, given the macro dynamic fully understanding that you would do play at the lower cost and.

Speaker Change: The spectrum, so <unk> been able to kind of avoid some of the end consumer softness up until now thank.

Michael Monahan: Thank you. Yeah, I'm happy to talk about that. So as we grow our installed base, we're seeing an increase in the overall sales of consumables. Consumables sales per device did go down year over year in the second quarter.

Speaker Change: Thank you.

Marla Beck: We did a recent survey with our US providers, and 90 percent said they've either increased or maintained their revenue from the hydrophacial treatments over the past 12 months, and 95 percent of providers expect the trend to continue. So our consumable sales are strong, and the provider sentiment is great.

Marla Beck: Yeah, I'm happy to talk about that. So as we grow our installed base, we're seeing an increase in overall sales of consumables. Consumable sales per device did go down year over year in the second quarter. But if you look at the U.S. market, which is really our cleanest market to understand in terms of data, it was down 2 to 3 percent, driven by a lot of different factors, including the fact that we did not have any new launches this year.

Speaker Change: Yes, I'm happy to talk about that so as we grow our installed base, we're seeing an increase in the overall sales of consumables.

Speaker Change: <unk> sales per device did go down year over year in the second quarter, but if you look at the U S market, which is really our cleanest market to understand in terms of data and it was down 2% to 3% driven by a lot of different factors.

Michael Monahan: But if you look at the US market, which is really our cleanest market to understand in terms of data, it was down two to three percent, driven by a lot of different factors, including the fact that we did not have any new lawns in terms of how much is this year. So if you look at the mix, it's our core consumables, our core solutions are up; it's our boosters that are not keeping pace, and that's primarily due to launches. And so the core Hydrafacial business and core consumables business is incredibly strong.

Marla Beck: Thanks.

Marla Beck: The consumer looks like they're still going, is it the same consumer that's going in, and maybe using add-ons to help boost the average price for treatment, or is it a new customer acquisition just any insight there? I would say in terms of the end consumer that has to do with our providers and their insights, I think we can take some examples from our national accounts, which are seeing sort of significant increase in consumables, and they tell us that hydrophacial is really a traffic driver for them so they're leaning into hydrophacial.

Speaker Change: <unk>. The fact that we did not have any new launches this year.

Speaker Change: So if you look at the mix, it's our core consumables, our core solutions are up.

Marla Beck: So if you look at the mix, our core consumables and core solutions are up. It's our boosters that are not keeping pace, and that's primarily due to launches. And so the core hydrofacial business and core consumables business is incredibly strong.

Speaker Change: <unk> boosters that or not.

Marla Beck: Thank you.

Speaker Change: Keeping pace.

Speaker Change: That's primarily due to launches and so.

Speaker Change: Core hydro facial business in core consumables business is incredibly strong.

Operator: Thank you. We will now take our next question from Allie, Ashley Helgans with Jeffreys. Please go ahead.

Speaker Change: Thank you we will now take our next question from Ali Ashley Hogan with Jefferies. Please go ahead.

Ashley Helgans: Well, Ashley Helgins with Jeffries, please go ahead. Hi, this is Blake. I'm for Ashley. Thanks for taking our question. I wanted to ask if you could comment at all, first of all, on any monthly trends, do you spell on the business and kind of how to think about the current quarter to date on the top line?

Blake: Hi, this is Blake. I'm on behalf of Ashley. Thanks for taking our question. I wanted to ask if you could comment at all, first of all, on any monthly trends you saw in the business and kind of how you think about the current quarter so far.

Speaker Change: Hi, This is Blake on for Ashley. Thanks for taking my question wanted to ask if you can.

Alan Gong: We will now take our next question from Alan Gong with JP Morgan. Please go ahead. Thanks for the question. For the first one, I kind of want to dive into the guide a little bit more. You're pointing to sales around 75 million in second and third quarter, but then to get to the midpoint of your guide, you have a pretty strong rebound in the fourth quarter, and I know that your business model has always been pretty fourth quarter weighted, but this 10 million plus step-up seems like similar to the normal seasonality that you would normally see supported by strong system sales. So if we're in kind of a weaker market environment and the cost of borrowing is a little bit worse, what gives you confidence that you'll see that normal seasonal step-up.

Blake: Could comment at all first of all on a monthly trends you saw in the business and kind of how to think about the.

Blake: Current quarter to date.

Speaker Change: On the topline.

Michael Monahan: Mike, do you want to take that? Sure. The business tends to, on the capital side, to be back end. And so we tend to close a lot of our capital equipment sales towards the end of the quarter. And so the current monthly trends are consistent with what we've seen in, you know, in prior quarters and how this business, you know, overall works. When we try, we also track consumable sales, which tend to be, you know, more consistent kind of throughout the quarter. And we factor that into the guidance we gave for Q3 and for the remainder of the year.

Michael Monahan: Mike, do you want to take that? Sure.

Blake: Mike do you want to take that.

Michael Monahan: Sure. The business tends, on the capital side, to be back-end weighted, and so we tend to close a lot of our capital equipment sales towards the end of the quarter. And so the current monthly trends are consistent with what we've seen in prior quarters and how this business overall works. We also track consumable sales, which tend to be more consistent kind of throughout the quarter, and we factor that into the guidance we gave for Q3 and for the remainder of the year.

Mike Monahan: Sure the business turns.

Mike Monahan: On the capital side to be back end weighted and so we tend to close a lot of our capital equipment sales towards the end of the quarter.

Mike Monahan: And so the current monthly trends are consistent with what we've seen in prior quarters and how this business overall works when we we also track.

Mike Monahan: <unk> sales, which tend to be.

Blake: More consistent kind of throughout the quarter and we factor that into the guidance we gave for Q3.

Michael Monahan: Great question. I'm going to have Mike take that. Yeah, thanks, Alan. I think, you know, overall when you look at the pressure we're seeing on the capital side, we're seeing the largest point coming from outside of the US, so I think that's the first point I would make. The second point is the seasonality still exists within the business, the way we're seeing it. Now we're just seeing that overall pressure because of interest rates, environments, and you know, some of the access to credit.

Blake: And for the remainder of the year.

Michael Monahan: That's helpful. And then on the macro, I know you mentioned that some of the softness was skewed towards international. I didn't know if you could expand on that. I think we've seen a lot of the headlines, but anything you could provide color on in terms of how international is a little bit softer, maybe in Europe versus Asia.

Speaker Change: That's helpful and then on the macro I know you mentioned I think some more of the softness was skewed towards international I don't know if you could expand I think we've seen a lot of the headlines but anything you could provide color on in terms of.

Speaker Change: How international is a little bit softer or maybe in Europe versus Asia.

Michael Monahan: Mike, why don't you take them? Sure. So we'll start in Europe. Europe, we have seen sensitivity to the interest rate environment and access to credit. That's been something that we're focused on. We started in the US with the new financing options that we tested late in June and are continuing to refine. And we're looking to roll them out, you know, throughout the back half of the year. So we think that'll have, you know, an overall positive impact. Each market within a Mia has a slightly different focus. Some focus a little bit more on medical, some on non-medical.

Michael Monahan: Mike, why don't you take that? Sure. So we'll start.

Speaker Change: My planning it takes them.

Michael Monahan: Sure. So, we'll start in Europe. In Europe, we have seen sensitivity to the interest rate environment and access to credit. That's been something that we're focused on. We started in the U.S. with the new financing options that we tested late in June and are continuing to refine, and we're looking to roll them out throughout the back half of the year. So, we think that'll have an overall positive impact. Each market within EMEA has a slightly different focus.

Speaker Change: So we'll start in Europe Europe.

Speaker Change: Have seen sensitivity to the interest rate environment and access to credit.

Speaker Change: Thats been.

Speaker Change: Something that we're focused on we started in the U S with the new financing options that we tested late in June and are continuing to refine.

Speaker Change: And we're looking to roll them out.

Blake: Throughout EMEA.

Speaker Change: Throughout the back half of the year. So we think that will have an overall positive impact.

Michael Monahan: The second point is we're opening up the product portfolio, as Marla mentioned, and we really think this will start to have an impact as well because the elite and the Allegro are at lower price points and will enable some of our smaller providers, where we're seeing most of the pressure come from to access hydrophacial and get in a lower price point. So we are optimistic and we feel confident in the guidance that we've provided. Got it.

Speaker Change: Each market within EMEA.

Speaker Change: Has a slightly different focus some focus a little bit more on medical some on non medical so we're digging into the.

Michael Monahan: Some focus a little bit more on medical, some on non-medical. So, we're digging into the channel segmentation, and we think we can have an impact there on a positive basis. Overall, in China, and mainly in China, we're seeing a little bit less on the interest rate, and there are more headwinds relating to competition.

Michael Monahan: So we're digging into the, you know, channel segmentation. And we think we can have an impact there on a positive basis. Overall in China and mainly in China, we're seeing a little bit less on the interest rate. And there's more; some headwinds related to competition. And then we have some internal execution that we're working on, mainly around the number of sales reps that we have. We have a really terrific team in APAC. But we have a number of sales reps, positions that are open. So our leadership there is actively working to kind of bring them on.

Speaker Change: Channel segmentation and we think we can have an impact there on a positive basis overall in China and mainly in China.

Speaker Change: Seeing a little bit less on the interest rate and there is more some headwinds related to <unk>.

Speaker Change: Competition.

Speaker Change: And then we have some internal execution that we're working on mainly around the number of sales reps that we have we have a really terrific team in APAC, but we have a number of sales reps positions that are open. So our leadership there is actively working to kind of bring them on.

Michael Monahan: And then this is a quick follow up. I know you highlighted strong consumables in the quarter and you were able to grow year over year, but you know, you're clearly working with a bit of a larger installed base this year, you know, arguably last year consumables because you had this and day a launch with the kind of, you know, consumables bundled into those initial placements. You know, that could have arguably represented an easy comp.

Michael Monahan: And then we have some internal execution that we're working on, mainly around the number of sales reps that we have. We have a really terrific team in APAC, but we have a number of sales rep positions that are open. So, our leadership there is actively working to kind of bring them on, and we think that'll have a positive impact once we have a full team.

Michael Monahan: And we think that'll have a positive impact once we have a full team.

Speaker Change: And we think that'll have a positive impact once we have a full team.

Michael Monahan: So what are you seeing in terms of the underlying demand for consumables and the health of that, especially, you know, again, given the macro dynamic fully understanding that you would do play at the lower cost and of the spectrum. So you've been able to kind of avoid some of that and consumer softness up until now. Thank you. Yeah, I'm happy to talk about that. So as we grow our installed base, we're seeing an increase in the overall sales of consumables consumables sales per device did go down year over year in the second quarter.

Margaret Cather: Thank you. We will now take our next question from Margaret Cather with William Blair. Please go ahead. Hey everyone. This is McCollion from Margaret. Thanks for taking our question. Marla, I know you mentioned we should be getting more of that operational and efficiency update in Q3. But obviously, you brought on Sherry last quarter. And it seems like she's making some changes already that have been implemented.

Operator: Thank you. We will now take our next question from Margaret Casser with William Blair. Please go ahead.

Speaker Change: Thank you we will now take our next question from Margaret Kaczor with William Blair. Please go ahead.

Macaulay Kilbane: Hey everyone, this is Macaulay on from Margaret. Thanks for taking our question. Marla, I know you mentioned we should be getting more of that operational and efficiency update in Q3, but obviously, you brought in Sherry last quarter and it seems like she's making some changes already that have been implemented. I'd like a bit more detail on what exactly has been implemented thus far, and how those changes are significantly helping some of those efficiencies, both on the quality and the supply chain side of things.

Margaret Kaczor: Hey, everyone. This is more color on for Margaret Thanks for taking our question.

Margaret Kaczor: Manuel I know you mentioned, we should be getting more of that operational and efficiency update in Q3, but obviously you brought on charity last quarter and it seems like you're making some changes already that have been implemented. So wondering if we could get a bit more detail on what exactly has been implemented thus far how those chain.

Marla Beck: So wondering if we could get a bit more detail on what exactly has been implemented thus far, how those changes are directionally helping some of those efficiencies, both on the quality and the supply chain side of things. Yeah. She joined in April. So really, within the last quarter, a couple of things. One is the first focus was really on Cendeo restoring the trust in Cendeo and driving our quality improvement program. So it was all hands on deck for that. And we've seen amazing results. Now she's turning towards our global manufacturing and supply chain strategy, looking at new inventory management processes and really taking a hard look at our manufacturing capacity and how we improve our gross margins.

Michael Monahan: But if you look at the US market, which is really our cleanest market to understand in terms of data, it was down two to three percent driven by a lot of different factors, including the fact that we did not have any new lawns in terms of how much is this year. So if you look at the mix, it's our core consumables, our core solutions are up, it's our boosters that are not keeping pace, and that's primarily due to launches. And so the core hydrophacial business and core consumables business is incredibly strong.

Margaret Kaczor: <unk>.

Speaker Change: Or directionally, helping some of those have cushion for us.

Speaker Change: Both on the quality and the supply chain side of things, yes. She joined in April so really within the last quarter.

Marla Beck: Yeah. She joined in April, so really within the last quarter, a couple things. One is that our first focus was really on Sundeo, restoring trust in Sundeo and driving our quality improvement program. So it was all hands on deck for that, and we've seen amazing results. Now she's turning towards our global manufacturing and supply chain strategy, looking at new inventory management processes, and really taking a hard look at our manufacturing capacity and how we can improve our growth margins.

Speaker Change: Couple of things one is the first focus was really on <unk>.

Speaker Change: <unk>, restoring trust and Sunday Island, driving our quality improvement program. So it was all hands on deck for that and we've seen amazing resolved now she is turning towards our global manufacturing and supply chain strategy looking at new inventory management processes, and really taking a hard look.

Speaker Change: Our manufacturing capacity and how we improve our gross margins and as mentioned.

Marla Beck: And as mentioned, on our next call, we'll have a full strategy to share with you, but I want to give her time to really finish her evaluation and put together a strategy that is impactful to the bottom line.

Blake Anderson: Well, Ashley Helgins with Jeffries, please go ahead. Hi, this is Blake, I'm for Ashley, thanks for taking our question. I wanted to ask if you could comment at all, first of all, on any monthly trends, do you spell on the business and kind of how to think about the current quarter to date on the top line? Mike, do you want to take that? Sure. The business tends to, on the capital side to be back end.

Marla Beck: And, as mentioned on our next call, we'll have a full strategy to share with you. But I want to give her time to really finish her evaluation and put together a strategy. It is impactful to the bottom line. I understand. Thanks for that.

Speaker Change: On our next call, we'll have a full strategy to share with you, but I want to give her time to really finish her evaluation.

Speaker Change: And put together a strategy that is impactful to the bottom line.

Michael Monahan: understand. Thanks for that. And then just a quick follow up for Mike in terms of the cash balance and what to expect for the cash burn both in the back half and especially as we exit the year heading into 25.

Speaker Change: Understand thanks for that and then just a quick follow up for Mike in terms of.

Michael Monahan: And then just a quick follow-up for Mike in terms of the cash balance and what to expect for the cash burn as both in the back half and especially as we exit the year having ended 25. Yeah, I mean, the our our just a little bit of guidance implies. You know, you're roughly flat to slightly down in the back half of the year on a just a little bit of we're pulling back on some of the cat backs that we had just for some of the planned initiatives. And so I would expect us to be to use cash in the back half of the year, but I don't look at it to be materially different from where we sit today from our goal.

Mike Monahan: The cash balance and what to expect for the cash burn is.

Blake Anderson: And so we tend to close a lot of our capital equipment sales towards the end of the quarter. And so the current monthly trends are consistent with what we've seen in, you know, in prior quarters and how this business, you know, overall works. When we try, we also track consumable sales, which tend to be, you know, more consistent kind of throughout the quarter. And we factor that into the guidance we gave for Q3 and for the remainder of the year.

Mike Monahan: Both in the back half and especially as we exit the year heading into 'twenty five.

Michael Monahan: Our adjusted EBITDA guidance implies, you know, you're roughly flat to slightly down in the back half of the year on adjusted EBITDA. We're pulling back on some of the CAPEX that we had just for some of the planned initiatives, and so I would expect us to be using cash in the back half of the year, but I don't look at it to be materially different from where we sit today from our goal. So we're sitting a little bit below 350 million today.

Mike Monahan: Yes.

Mike Monahan: Our adjusted EBIT guidance implies.

Speaker Change: You are roughly flat to slightly down in the back half of the year on.

Speaker Change: On adjusted EBITDA, we're pulling back on some of the Capex that we had just for some of the planned initiatives and so I would expect us to be to use cash in the back half of the year, but I don't look at it to be materially different from where we sit today from our goal. So we're sitting a little bit below $350 million today.

Michael Monahan: So we're sitting a little bit below 350 million today.

Michael Monahan: That's helpful. And then on the macro, I know you mentioned, I think some more of the softness was skewed towards international. I didn't know if you could expand. I think we've seen a lot of the headlines, but anything you could provide color on in terms of how international was a little bit softer maybe in Europe versus Asia. Mike, why don't you take them? Sure. So we'll start in Europe. Europe, we have seen sensitivity to the interest rate environment and access to credit.

Michael Monahan: Thank you.

Operator: Thank you. We will now take our next question from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

Speaker Change: Thank you.

Korinne Wolfmeyer: We will now take our next question from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

Mike Monahan: We will take our next question from Kevin <unk> with Piper Sandler.

Speaker Change: Please go ahead.

Marla Beck: Hi, this is Sarah on for cream. First thinking about the back half of the year, how should we be thinking about the top line cadence in Q3 and Q4 for both delivery systems and consumables. And then just in terms of innovation, where do you see the greatest white space opportunity, and then could we see that consumables innovation speed up sooner than that 2025-2026 target?

Sarah: Hi, this is Sarah on behalf of Korinne. First, just thinking about the back half of the year, how should we be thinking about the top line cadence in Q3 and Q4 for both delivery systems and consumables? And then, just in terms of innovation, where do you see the greatest white space opportunity? And then could we see that consumables innovation speed up sooner than that 20, 25, 20, 26 target? I'll take the

Speaker Change: Hi, This is Sarah on for Korean.

Sarah: First just thinking about the back half of the year, how should we be thinking about the top line cadence in Q3, and Q4 for both delivery systems and consumables.

Speaker Change: And then just in terms of innovation, where do you see the greatest white space opportunity and then could we see that consumables innovation speed up sooner than that 2025 2026 target.

Michael Monahan: That's been something that we're focused on. We started in the US with the new financing options that we tested late in June and are continuing to refine. And we're looking to roll them out, you know, throughout the back half of the year. So we think that'll have, you know, an overall positive impact. Each market within a Mia has a slightly different focus. Some focus a little bit more on medical, some on non-medical.

Marla Beck: I'll take the white space question and then turn it over to Mike to answer the cadence question. You know, we're starting with our innovation pipeline, the first big launches in the next couple of months, which is our first clinically proven booster that enhances the hydrofacial treatment. We are speeding up the innovation pipeline, but when we came to market this year, there was not much in the pipeline, and so that takes a little bit of time, but we're confident that we will start to set a pace in 2025 with both boosters, which enhance the hydrofacial treatment and results, and additional back-bar and skin care products. But we do need until 2025 to do that.

Marla Beck: I'll take the white space question, and then turn it over to Mike to answer the cadence question. You know, we're starting with our innovation pipeline, the first big launches in the next couple of months, which is our first clinically proven booster that enhances a Hydrafacial treatment. We are speeding up the innovation pipeline, but when we came to market this year, there was not much in the pipeline. And so that takes a little bit of time, but we're confident that we will start to set pace in 2025 of both boosters, which enhance the Hydrafacial treatment and results and additional back bar and skincare products.

Speaker Change: I'll take the White space question, and then turn it turn it over to Mike to answer the cadence question.

Mike Monahan: We're starting with our innovation pipeline that first big launches in the next couple of months, which is our first clinically proven booster that enhances our hydro facial treatment.

Mike Monahan: We are speeding up the innovation pipeline, but when we came to market. This year there was not much in the pipeline and so that takes a little bit of time, but we're confident that we will start to set pace in 2025 of both boosters, which enhance the hydro facial treatment and results and additional.

Michael Monahan: So we're digging into the, you know, channel segmentation. And we think we can have an impact there on a positive basis. Overall in China and mainly in China, we're seeing a little bit less on the interest rate. And there's more some headwinds related to competition. And then we have some internal execution that we're working on mainly around the number of sales reps that we have. We have a really terrific team in APAC.

Sarah: Back bar and skin care products, but we do need until 2025 to do that.

Marla Beck: But we do need till 2025 to do that.

Michael Monahan: For the revenue decline in the back half of the other primary driver of the decline within the capital equipment in the forecast, not just Q2, but also in the forecast that Q3 and Q4 consumables are down somewhat, but that's largely as a result of lower system sold in Q2 to Q4.

Michael Monahan: For the revenue decline in the back half of the year, the primary driver of the decline was capital equipment in the forecast, not just Q2, but also in the forecast for Q3 and Q4. Consumables are down somewhat, but that's largely a result of lower systems sold in Q2 to Q4.

Speaker Change: For the revenue decline in the back half of the other primary driver of the decline within the capital equipment and the forecast not just Q2, but also in the forecast for Q3 and Q4 consumer consumables are down.

Michael Monahan: But we have a number of sales reps, positions that are open. So our leadership there is actively working to kind of bring them on. And we think that'll have a positive impact once we have a full team.

Michael Monahan: Thank you.

Sarah: Somewhat but thats largely as a result of lower system sold in Q2 to Q4.

Michael Monahan: Great. Thank you.

Speaker Change: Okay. Thank you.

Margaret Cather: We will now take our next question from Margaret Cather with William Blair. Please go ahead. Hey everyone. This is McCollion from Margaret. Thanks for taking our question. Marla, I know you mentioned we should be getting more of that operational and efficiency update in Q3. But obviously you brought on Sherry last quarter. And it seems like she's making some changes already that have been implemented. So wondering if we could get a bit more detail on what exactly has been implemented thus far, how those changes are directionally helping some of those efficiencies, both on the quality and the supply chain side of things.

Joe Federico: And we will now take our next question from John Blockwith. Steve, please go ahead.

Operator: And we will now take our next question from John Block with Stiefel. Please go ahead.

Speaker Change: And we will now take our next question from Jon Block with Stifel. Please go ahead.

Joe Federico: Hey, everyone, this is Joe Federico on for John Block. Thanks for taking the questions. I think that you said that you've now completed the Global Sunday Overplacement Program, but then as part of the new strategies, it seems like putting a greater emphasis on the weed and the lead grow. So the legacy systems, I think you said 30% in the quarter where those legacy systems, Nonsendale, I think that you said that should increase in coming quarters, but I was just curious if there are placement program is completed why, you know, isn't moving more towards those legacy systems. Is it just cost sensitivity from the providers?

Joe Federico: Hey everyone, this is Joe Federico on for John Block. Thanks for taking the questions. I think that you said that you've now completed the Global Sundeo Replacement Program, but then, you know, as part of the new strategies, it seemed like, you know, putting a greater emphasis on Elite and Allegro, the legacy systems. I think you said 30% of the quarter was those legacy systems, non-Sundeo. I think that you said that should increase in the coming quarters, but I was just curious if the replacement program is completed, why is it moving more towards those legacy systems? Or is it just cost sensitivity from the providers?

Speaker Change: Hey, everyone. This is Joe Federico on for Jon block, Thanks for taking the questions.

Joe Federico: I think that you said that you have now completed the globals and Dio replacement program.

Speaker Change: But then as part of the new strategies that seemed like putting a greater emphasis on <unk> and the like grow the legacy systems. I think you said, 30% in the quarter were those legacy systems Nansen Dale.

Speaker Change: That you said that should increase in coming quarters, but I was just curious if the replacement program is completed y.

Speaker Change: Is it moving more towards those legacy systems as it just cost sensitivity from the providers.

Margaret Cather: Yeah. She joined in April. So really within the last quarter, a couple of things. One is the first focus was really on Cendeo restoring the trust in Cendeo and driving our quality improvement program. So it was all hands on deck for that. And we've seen amazing results. Now she's turning towards our global manufacturing and supply chain strategy, looking at new inventory management processes and really taking a hard look at our manufacturing capacity and how we improve our gross margins.

Marla Beck: So, that's a great question. Yes, we have completed the Global Sundeo Replacement Program. The reason we opened up the portfolio was really cost for the providers. There have been requests for more excessively priced devices; the cost of the Sundeo is significantly more. And so, given the macroeconomic trends and the difficulty in obtaining financing, the easiest thing, the way to deal with that and to make more hydrofacial devices available is to actually introduce, sort of reintroduce, the tried and tested devices, the Allegra and the Elite.

Marla Beck: Bill, that's a great question. Yes, we have completed the Global Sondeo Replacement Program. The reason we opened up the portfolio was really for cost for the providers. There have been requests for more excessively priced devices; the cost of the Sondeo is significantly more. And so, given the macroeconomic trends and the difficulty in obtaining financing, the easiest thing, the way to deal with that and to make more hydrophacial devices available is to actually introduce, to sort of try, reintroduce, to try and test it, sort of devices the Allegro in the lead. And it really just makes the hydrafacial device more affordable, but also it shows the demand for a device.

Speaker Change: Yes, that's a great question, yes, we have completed the global Sunday, our replacement program.

Speaker Change: The reason, we opened up the portfolio.

Speaker Change: Does really for costs for the providers.

Speaker Change: <unk> been request for more accessibly priced devices, the cost of the Signet <unk> significantly more.

Speaker Change: So given the macroeconomic trends and the difficulty in obtaining financing the easiest thing the way to deal with that too.

Speaker Change: Make more hydro facial devices available to actually introduce two sort of tried reintroduced to tried and tested.

Margaret Cather: And as mentioned on our next call, we'll have a full strategy to share with you. But I want to give her time to really finish her evaluation and put together a strategy. It is impactful to the bottom line. I understand thanks for that.

Speaker Change: Devices the libre in the lead and it really just makes the hydro facial device more affordable, but also it shows the demand for a device. This is a device that really adds to the revenue for the providers and as an economic engine for many single room, Esthetician and also brand new med spas and so.

Marla Beck: And it really just makes the hydrofacial device more affordable, but it shows the demand for a device. You know, this is a device that really adds to the revenue for the providers and is an economic engine for many single-room estheticians and also brand new med spas. And so, you know, it's an opportunity for people to get into a hydrofacial device and a hydrofacial business that they may not have had if we only focused on Sundeos.

Marla Beck: You know, this is a device that really adds to the revenue for providers and is an economic engine for many single-room expeditions and also brand-new med-spos. And so, you know, it's an opportunity for people to get into a hydrophacial device and a hydrophacial business that they may not have had if we only focused on sondeos. Okay, that makes sense; that's very helpful.

Michael Monahan: And then just a quick follow up for Mike in terms of the cash balance and what to expect for the cash burn as both in the back half and especially as we exit the year having ended 25. Yeah, I mean, the our our just a little bit of guidance implies. You know, you're roughly flat to slightly down in the back half of the year on a just a little bit of we're pulling back on some of the cat backs that we had just for some of the planned initiatives.

Speaker Change: It's an opportunity for people to get into a hydro facial device hydro facial business that they may not have had if we only focused on Sundays.

Joe Federico: Okay, that makes sense. That's very helpful.

Speaker Change: Okay that makes sense, that's very helpful. And then Mike maybe one for you just on EBITDA, obviously in the quarter was down year over year, but normalized.

Michael Monahan: And then Mike, maybe one for you just on EBITDA. Obviously, in the quarter was down year-over-year, but normalized was, you know, better than guidance and also above R estimates. And then I think EBITDA, you know, guiding to down slightly in the third quarter before turning positive in 4Q, but my question is just why, you know, is there such a reversal from kind of the solid normalized level in 2Q, expected in 3Q?

Speaker Change: As you said better than guidance and also above our estimates and then I think EBITDA guiding to down slightly in the third quarter before turning positive in <unk>, but my question is just why.

Michael Monahan: And so I would expect us to be to use cash in the back half of the year, but I don't look at it to be materially different from where we sit today from our goal. So we're sitting a little bit below 350 million today. Thank you.

Joe Federico: And then, Mike, maybe one for you just on EBITDA. Obviously, it was down year over year, but normalized, you know, as you said, better than guidance and also above our estimates. And then I think EBITDA, you know, guiding down slightly in the third quarter before turning positive in 4Q. But my question is just why such a reversal from kind of the solid normalized level in 2Q expected in 3Q? Is that some of like the warranty accrual dynamics?

Speaker Change: Is there such a reversal from kind of a solid normalized level in <unk>.

Speaker Change: Expected in <unk> is that some of the warranty accrual dynamics any any color you could provide there would be really helpful.

Michael Monahan: Is that some of like the warranty or cruel dynamics? Any color you could provide, there would be really helpful.

Sarah Morin: We will now take our next question from Korinne Wolfmeyer with Piper Sandler. Please go ahead. Hi, this is Sarah on for cream.

Michael Monahan: Any color you could provide there would be really helpful. Sure.

Michael Monahan: Sure. So the guidance for the back half of the year, the reason that there's a little bit more pressure is, you know, gross margins. We're expecting them to be consistent with more Q1, which we're in the 63-64% adjusted gross margin range. And that's largely due to lower production planned in the second half of 2024. When that happens, we take a higher percentage of our operations, labor, and overhead costs out of the P&L, and that offsets some of the improvements we made.

Michael Monahan: Sure. So the guidance in the back half of the year, the reason that there's a little bit more pressure is, you know, gross margins, we're expecting them to be consistent with more Q1, which were in the 63, 64% adjusted gross margin range.

Speaker Change: Sure.

Speaker Change: So the guidance in the back half of the year.

Speaker Change: Reason that there's a little bit more pressure is gross margins that we're expecting them to be consistent with more Q1, which were in the $63, 64% adjusted gross margin range and thats largely due to lower production planned in the second half of 2020 for when that happens, we take a higher percentage of our operations.

Marla Beck: First thinking about the back half of the year, how should we be thinking about the top line cadence in Q3 and Q4 for both delivery systems and consumables. And then just in terms of innovation, where do you see the greatest white space opportunity and then could we see that consumables innovation speed up sooner than that 2025 2026 target. I'll take the white space question and then turn it over to Mike to answer the cadence question.

Michael Monahan: And that's largely due to lower production planned in the second half of 2024. When that happens, we take a higher percentage of our operations labor and overhead costs through the P&L, and that offsets some of the improvements we made. So that's one.

Speaker Change: Labor and overhead costs through the P&L and that offset some of the improvements. We made so that's that's one and then two opex cost in the second half are expected to be flat to slightly up sequentially. When you look at kind of the first half of the year and that's largely due to some additional professional fees were incurred.

Michael Monahan: So that's one. And then two, OPEX costs in the second half are expected to be flat to slightly up sequentially when you look at kind of the first half of the year. And that's largely due to some additional professional fees we are incurring, mainly around kind of legal and consulting fees related to the Salesforce work we're doing.

Michael Monahan: And then two, op-X costs in the second half are expected to be flat to slightly up sequentially when you look at kind of the first half of the year, and that's largely due to some additional professional fees we are incurring, mainly around kind of legal and consulting fees related to the Salesforce work we're doing.

Marla Beck: You know, we're starting with our innovation pipeline, the first big launches in the next couple of months, which is our first clinically proven booster that enhances a hydrophacial treatment. We are speeding up the innovation pipeline, but when we came to market this year, there was not much in the pipeline. And so that takes a little bit of time, but we're confident that we will start to set pace in 2025 of both boosters, which enhance the hydrophacial treatment and results and additional back bar and skincare products. But we do need till 2025 to do that.

Speaker Change: During mainly around kind of legal and consulting fees related to the sales force work we're doing.

Operator: Thank you.

Operator: Thank you. Once again, ladies and gentlemen, that is Star One if you would like to ask a question. We will now hear from the line of Oliver Chen with T.D. Cohen. Please go ahead.

Speaker Change: Thank you once again, ladies and gentlemen that is star one if you would like to ask a question. We will now hear from the line of Oliver Chen with TD Cowen. Please go ahead.

Operator: Once again, ladies and gentlemen, that is star one if you would like to ask a question.

Neil Goh: We will now hear from the line of Oliver Chen with TD Cohen. Please go ahead.

Marla Beck: Hi, this is Neil Goon for Oliver today. I would love to just circle back on the Sindeo in terms of potential improve. Is there anything that you're still asking for? You mentioned return rates are improving, and then there's solid U.S. provider feedback. But how confident are you that those technical issues are away at this point? Now that we've had a couple quarters of observations here.

Neil Gaon: Hi, this is Neil Gaon for Oliver Today. I would love to just circle back on the Nissan Daewoo in terms of potential improvements. Not bad. That's sick.

Speaker Change: Hi, This is bill on for Oliver today.

Bill: Would love to just circle back on the scenario in terms of potential and curves.

Speaker Change: Nope.

Marla Beck: Nope. Is there anything that you're still asking for? You mentioned return rates are improving, and there's solid U.S. provider feedback, but, you know, how confident are you that those technical issues are away at this point now that we've had, you know, a couple quarters of observations here? Thanks.

Speaker Change: Is there anything thats still asking for you mentioned return rates are improving and they are solid U S provider feedback, but how confident are you that those technical issues are away at this point now that we've had a couple of quarters of observations.

Speaker Change: Observations here thanks.

Marla Beck: Thanks. Thanks for your question. The feedback from our providers is quite good, and our return rate has declined significantly, so we feel really good about where we are.

Marla Beck: Thanks for your question. You know, the feedback from our providers is quite good, and our return rate has declined significantly, so we feel really good about where we are. Our technical service team is really strong, and they're able to deal with any minor issues that we see in the field. And the response not just from the providers but from our sales teams, which is really important, is incredibly positive.

Speaker Change: Thanks for your question.

Speaker Change: The feedback from our providers is quite good.

Speaker Change: Our return rate has declined significantly.

Joe Federico: And we will now take our next question from John Blockwith, Steve, please go ahead. Hey, everyone, this is Joe Federico on for John Block. Thanks for taking the questions. I think that you said that you've now completed the Global Sunday Overplacement Program, but then as part of the new strategies, it seems like putting a greater emphasis on the weed and the lead grow.

Speaker Change: So we feel really good about where we are our technical service team is really strong and they are able to deal with any minor issues that we see in the field.

Marla Beck: Our technical service team is really strong, and they're able to deal with any minor issues that we see in the field, and the response not just from the providers, but from our sales teams, which is really important, is incredibly positive. Joseph.

Speaker Change: And the response not just from the providers, but from our sales teams, which is really important is incredibly positive.

Marla Beck: So the legacy systems, I think you said 30% in the quarter where those legacy systems, Nonsendale, I think that you said that should increase in coming quarters, but I was just curious if there are placement program is completed why, you know, isn't moving more towards those legacy systems. Is it just cost sensitivity from the providers? Bill, that's a great question. Yes, we have completed the Global Sondeo Replacement Program. The reason we opened up the portfolio was really for cost for the providers.

Speaker Change: Okay.

Operator: It appears that we have no further questions at this time.

Operator: And it appears that we have no further questions at this time. I will now turn the program back over to Ms. Beck for any additional or closing remarks. Thank you so much.

MS sacks: And it appears that we have no further questions. At this time I will now turn the program back over to MS sacks for any additional or closing remarks. Thank you so much.

Marla Beck: I will now turn the program back over to Ms. Beck for any additional or closing remarks. Thank you so much.

Marla Beck: Thank you so much. I would like to take a moment to express my gratitude to the entire Beauty Health team for your unwavering dedication and commitment to placing our providers at the center of everything we do. We are diligently working to set forth a path for growth that leverages the inherent accomplishments and successes of the company. I'm confident that these challenges can be overcome and that the steps we are taking will lay a strong foundation for restoring long-term profitable growth. Thank you to everyone for joining us today. We look forward to updating you on our next call.

Marla Beck: I would like to take a moment to express my gratitude to the entire Beauty Health team for your unwavering dedication and commitment to placing our providers at the center of everything we do. We are diligently working to set forth a path for growth that leverages the inherent accomplishments and successes of the company. Unconfident that these challenges are fixable and that the steps we are taking will lay a strong foundation for restoring long-term profitable growth. Thank you to everyone for joining us today.

MS sacks: I would like to take a moment to express my gratitude to the entire <unk> health team for your unwavering dedication and commitment to placing our providers at the center of everything we do we are diligently working to set forth a path for growth that leverages, the inherent accomplishments and successes of the company I am confident that these challenges are fixable.

Marla Beck: There have been requests for more excessively priced devices, the cost of the Sondeo significantly more. And so, given the macroeconomic trends and the difficulty in obtaining financing, the easiest thing, the way to deal with that and to make more hydrophacial devices available is to actually introduce, to sort of try, reintroduce, to try and test it, sort of devices the Allegro in the lead. And it really just makes the hydrophacial device more affordable, but also it shows the demand for a device.

MS sacks: And that the steps we are taking will lay a strong foundation for restoring long term profitable growth.

Speaker Change: You to everyone for joining us today, we look forward to updating you on our next call.

Operator: We look forward to updating you on our next call.

Operator: And this does conclude today's program. Thank you for your participation. You may now disconnect.

Operator: And this does conclude today's program. Thank you for your participation. You may now disconnect. Aesthetician

Speaker Change: And this does conclude today's program. Thank you for your participation you may now disconnect.

Speaker Change: Sure.

Speaker Change: Yes.

Unnamed: Aaaah!

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: Hum.

Speaker Change: Mhm.

Michael Monahan: Okay, that makes sense, that's very helpful. And then Mike, maybe one for you just on EBITDA. Obviously in the quarter was down year-over-year, but normalized was, you know, as you said, better than guidance and also above R estimates. And then I think EBITDA, you know, guiding to down slightly in the third quarter before turning positive in 4Q, but my question is just why, you know, is there such a reversal from kind of the solid normalized level in 2Q, expected in 3Q?

Michael Monahan: Is that some of like the warranty or cruel dynamics? Any color you could provide, there would be really helpful. Sure. So the guidance in the back half of the year, the reason that there's a little bit more pressure is, you know, gross margins, we're expecting them to be consistent with more Q1, which were in the 63, 64% adjusted gross margin range. And that's largely due to lower production planned in the second half of 2024.

Michael Monahan: When that happens, we take a higher percentage of our operations labor and overhead costs through the P&L, and that offsets some of the improvements we made. So that's one. And then two, op-X costs in the second half are expected to be flat to slightly up sequentially when you look at kind of the first half of the year, and that's largely due to some additional professional fees we are incurring mainly around kind of legal and consulting fees related to the Salesforce work we're doing.

Michael Monahan: Thank you.

Operator: Once again, ladies and gentlemen, that is star one, if you would like to ask a question.

Neil Goh: We will now hear from the line of Oliver Chen with TD Cohen. Please go ahead. Hi, this is Neil Goon for Oliver today.

Marla Beck: I would love to just circle back on the Sindeo in terms of potential improve. Is there anything that you're still asking for? You mentioned return rates are improving, and then there's solid U.S, provider feedback. But how confident are you that those technical issues are a way at this point? Now that we've had a couple quarters of observations here. Thanks. Thanks for your question. The feedback from our providers is quite good, and our return rate has declined significantly, so we feel really good about where we are.

Joseph Federico: Joseph.

Operator: It appears that we have no further questions at this time.

Marla Beck: I will now turn the program back over to Ms. Beck for any additional or closing remarks. Thank you so much.

Operator: And this does conclude today's program. Thank you for your participation.

Operator: You may now disconnect.

Q2 2024 The Beauty Health Company Earnings Call

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