What changed in this filing

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Item 1. Business

2024-03-12 compared with 2023-03-01 · 215 added, 209 removed, 431 unchanged (50% of the section changed)

Company Overview

The Beauty Health Company is a global category-creating company focused on delivering beauty health experiences that help consumers reinvent their relationship with their skin, bodies and self-confidence.

Our flagship brand, Hydrafacial, created the category of hydradermabrasion by using a patented Vortex-Fusion Delivery System (“Delivery System”) to cleanse, extract, and hydrate the skin with proprietary solutions and serums.

Hydrafacial provides a non-invasive and approachable skincare experience.

Together, with our powerful community of aestheticians, consumers and partners, we are personalizing skin care solutions for all ages, genders, skin tones, and skin types .

The Beauty Health Company (the “Company” or “we”) is a global category-creating company focused on delivering skin health experiences that help consumers reinvent their relationship with their skin, bodies, and self-confidence.

The Company and its subsidiaries design, develop, manufacture, market, and sell esthetic technologies and products.

Together, with its powerful global community of estheticians, partners, and consumers, the Company is personalizing skin health for all ages, genders, skin tones, and skin types.

The following chart reflects our brand portfolio:

Hydrafacial is our flagship brand and cornerstone of our portfolio.

Hydrafacial created the category of hydradermabrasion with its patented delivery system (“Delivery System”) that cleanses, extracts, and hydrates the skin with proprietary solutions and serums.

To date, Hydrafacial has a foundation of more than 30,000 Delivery Systems across 90+ countries.

SkinStylus is a pioneer in microneedling with its products that are designed to provide a minimally-invasive microneedling skin treatment to help stimulate collagen and elastin production.

Keravive is a pioneer in scalp health with its products that are designed to cleanse, exfoliate, and hydrate the scalp and hair follicles.

Hydrafacial Products

At the core of Hydrafacial’s product offerings are the Syndeo device, the current generation Delivery System (“Syndeo”), and its associated serum solutions and consumables.

Syndeo is designed to connect providers to consumers’ preferences to create more personalized skin care experiences.

The hardware and software in Syndeo has been fully updated and includes Wi-Fi connectivity and radio frequency identification.

These technologies allow us and providers to collect data on Hydrafacial consumers to ultimately provide a better consumer experience.

Consumables consist of single-use tips, solutions, and serums used to provide a Hydrafacial treatment (collectively, “Consumables”).

The table below summarizes the Consumables product offerings:

Replenishment Frequency

Tips Patented, patterned caps placed on the handpiece of the Delivery System to create pneumatic suction and deliver solutions and serums to the skin.

Minimum of 3 single-use tips used per Hydrafacial treatment.

Solutions Proprietary formulations of ingredients delivered to the skin at different steps during the Hydrafacial treatment.

4 bottle stock-keeping units (“SKUs”) required to provide a Hydrafacial treatment;

the bottles provide for approximately 12-15 treatments.

4 SKUs contain varying strength chemical peel treatments.

The provider chooses which strength to use during treatment, and each SKU lasts 1-2 treatments.

Serums Optional add-on to target specific skin concerns.

Offering includes proprietary boosters co-developed via collaborations with various skincare brands.

1-2 treatments per serum vial.

The Hydrafacial Experience

A Hydrafacial treatment is a noninvasive hydradermabrasion process that utilizes a patented Delivery System to cleanse, extract, and hydrate the skin with proprietary solutions and serums.

We believe Hydrafacial is accessible and appropriate for consumers across all genders, ages, skin types, and skin tones.

A Hydrafacial treatment results in instantly gratifying, glowing skin and a “gunkie” container that collects dead skin cells and debris that were extracted from the skin.

We believe the instant gratification provided by our Hydrafacial treatment generates high consumer and provider affinity for our brand.

A summary of the Hydrafacial treatment is set forth below.

In addition, consumers and providers can personalize their Hydrafacial treatments to target specific skin concerns or needs by adding customized chemical peels, various serums, LED light therapy, and/or lymphatic drainage.

Furthermore, a Hydrafacial treatment can be applied to the neck/decolletage, back, hands, or other parts of the body.

Hydrafacial Treatment Steps

Cleanse Skin is cleansed through Vortex Fusion Technology, a specially designed tip, and a cleansing solution.

The outermost layer of skin is exfoliated with a customized peel that removes dead skin cells.

Extract Extractions and removal of remaining debris is performed with Vortex Fusion Technology, a specialized tip, and proprietary solutions.

Hydrate Vortex Fusion Technology is paired with a specialized tip to deliver and infuse hyaluronic acid and antioxidants to the skin to nourish, hydrate, and protect.

SkinStylus Products

SkinStylus SteriLock Microsystem

The Company has been offering the SkinStylus SteriLock Microsystem since February 2023, after its indirect, wholly-owned subsidiary, Edge Systems Intermediate, LLC, acquired SkinStylus.

The SkinStylus SteriLock Microsystem is a microneedling device where it and its related accessories are intended to be used as a treatment to improve the appearance of (i) surgical or traumatic hypertrophic scars on the abdomen in adults aged 22 years and older, and (ii) facial acne scarring in Fitzpatrick skin types I, II, and III in patients aged 22 years and older.

As of the date of this report, the FDA has only cleared the 36-pin cartridge of the SkinStylus SteriLock Microsystem to be used by providers to help treat facial acne scars.

Keravive Products

At the core of Keravive’s product offering is the Keravive Peptide Solution that is designed to be delivered to the individual’s scalp using a Delivery System, and a take home spray that is intended to be used once daily at home for 30-days after the individual receives an in-office Keravive treatment to help boost results.

We are evaluating the optimal re-launch strategy for Keravive and believe it will take time before sales of Keravive become a meaningful part of our business.

Product Development Pipeline

A key differentiating factor of the Hydrafacial treatment is how we partner with leading skincare brands to co-develop boosters, an optional add-on serum that tailors a Hydrafacial treatment based on a consumer’s skincare concerns.

By leveraging the unique technologies of our partners, we believe our booster strategy allows us to innovate rapidly and cost effectively, staying current with dynamic skincare trends and gaining exposure to new consumers through our partner brands.

We currently offer a portfolio of approximately 15 boosters and intend to continue strategically partnering with new brands internationally and locally to offer innovative and tailored booster products to our consumers.

MyBeautyHealth Mobile Application

Launched in November 2023, the MyBeautyHealth mobile application rewards consumers for investing in their skin health.

Through the app, consumers can earn loyalty points and unlock exclusive savings with every treatment;

log skin concerns and receive personalized treatment plans;

and find and connect with local Hydrafacial providers.

For Hydrafacial providers, the MyBeautyHealth loyalty program is a value-add that comes at no cost to them, incentivizing their customers to maintain regular treatments.

Growth Strategy in General

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Expand our footprint by selling innovative products and connected experiences to providers and consumers

Invest in our providers, especially the trusted aesthetician, to help turn them into brand evangelists and advocates providing first-class experiences

Nurture direct relationships with our consumers, building brand awareness and driving them to our trusted community

Invest in our providers, especially the trusted esthetician, to help turn them into brand evangelists and advocates providing first-class experiences

Nurture direct relationships with our consumers, building brand awareness and driving them to our trusted community of providers

Leverage our global infrastructure and a connected technology platform to fuel growth and community engagement

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Our strategy begins with developing a network of providers, brand partners, and retail partners to build a distribution platform for our innovative products and experiences.

We intend to utilize our sales force to sell our offering, inviting providers and partners to become a part of our community.

We believe that each placement of our offering will grow the platform and increase consumers’ awareness of us, ultimately building a recognizable and aspirational brand drawing in consumers.

In this process, we will particularly focus on the trusted aesthetician.

We intend to utilize our sales force to sell our offering by inviting providers and partners to become a part of our community.

We believe that each placement of our offering will grow the platform and increase consumers’ awareness of our Company, ultimately building a recognizable and aspirational brand drawing in consumers.

In this process, we will particularly focus on the trusted esthetician.

Historically, companies in the medical aesthetics industry focused on physicians, nurses, front-office staff, and business owners.

Notably absent from their focus was the aesthetician, a highly influential provider who serves as a source of skincare information and recommendations for their clients and patients.

We recognized the opportunity to empower the aesthetician and created programs to elevate their skills, knowledge, and confidence through a continued relationship so they feel supported.

As a result, we have open dialogue with our aesthetician providers and receive valuable information on consumer preferences and behaviors they see in their practices.

These aestheticians have since become our most influential ambassadors, driving awareness, recommending our products, and becoming a point of education for our consumers.

While they are not our employees or contractors, we believe they provide an important competitive advantage to us, as a well-trained aesthetician can provide consumers with a consistent, memorable, first-class experience no matter where a consumer accesses our products and experiences.

Notably absent from their focus were the estheticians, highly influential providers who serve as a source of skincare information and recommendations for their clients and patients.

We recognized the opportunity to empower estheticians and created programs to elevate their skills, knowledge, and confidence through a continued relationship so they feel supported.

As a result, we have open dialogue with our esthetician providers and receive valuable information on consumer preferences and behaviors they see in their practices.

These estheticians have since become our most influential ambassadors, driving awareness, recommending our products, and becoming a point of education for our consumers.

While they are not our employees or contractors, we believe they provide an important competitive advantage to us, as a well-trained esthetician can provide consumers with a consistent, memorable, first-class experience no matter where a consumer accesses our products and experiences.

We believe that this in turn builds loyalty from the consumer to BeautyHealth.

Aestheticians are one part of our community that we recognize as powerful.

Estheticians are one part of our community that we recognize as powerful.

We continue to focus on our other providers, including physicians, nurses, and other partners to build consumer awareness for our brands.

By investing in our providers, we believe we are creating a thriving community as they recommend our products and experiences as part of any skincare and wellness routine.

In our view, investing our efforts in any part of our community drives utilization amongst consumers, resulting in a potent formula for growth.

In our view, investing our efforts in any part of our community drives utilization amongst consumers, resulting in a potentially potent formula for growth.

Another focus area of our growth strategy is nurturing our relationship with the consumer.

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We employ a multi-pronged approach to consumer acquisition and engagement, including but not limited to agile marketing activation events, storytelling, gamification, and loyalty.

We believe driving increased consumer traffic to our network of providers, retailers, and brand

partners will increase the utilization of our products and experiences, further cementing the compelling value proposition we offer to our partners and thereby driving increased purchases from them.

We believe driving increased consumer traffic to our network of providers, retailers, and brand partners will increase the utilization of our products and experiences, further cementing the value proposition we offer to our partners and thereby driving increased purchases from them.

We believe our products and experiences are universal in their appeal across cultures, genders, skin tones, and skin types, making a compelling case for our international expansion.

We believe there is significant opportunity in exporting our products and experiences to global markets and applying our strategy abroad to further increase the reach and influence of our platform.

Our offering is available in over 90 countries through either a direct commercial presence or distributors.

We have global commercial infrastructure supporting our 16 direct markets across the world, which should position us to quickly adapt to and penetrate these key markets.

Our offering is available globally through a combination of having a direct commercial presence in certain countries, or utilizing a distributor model or hybrid model in other countries.

Lastly, we intend to supercharge our platform via targeted acquisitions, expanding the breadth of our platform with additional innovative products and experiences.

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Include a differentiated product or service, which can generally be demonstrated with a high Net Promoter Score, which is a customer loyalty and satisfaction measurement;

Complement our existing platform and community, leveraging the aesthetician;

Complement our existing platform and community, leveraging the esthetician;

Provide a financially attractive profile via compelling revenue growth, recurring revenue characteristics, or profitability.

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Any evaluation relating to the merits of a particular acquisition may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant.

Hydrafacial – Our Flagship Brand

Our first BeautyHealth brand and the cornerstone of our portfolio is Hydrafacial.

Using our patented Delivery System to cleanse, extract, and hydrate the skin with proprietary solutions and serums, Hydrafacial created the category of hydradermabrasion.

As an experience appropriate for all ages, genders, skin types, and skin tones, Hydrafacial bridges the world of medical skin correction to traditional over-the-counter beauty.

As such, we employ an omnichannel strategy to place Delivery Systems where consumers live, work, and play, including medical offices, medispas, day spas, hotels, resorts, gyms, wellness centers, and other retail settings.

We anticipate continuing to expand the types of channels where Delivery Systems are sold.

To date, Hydrafacial has a foundation of more than 25,000 Delivery Systems across 90+ countries.

Business Model

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The Delivery System, which facilitates the Hydrafacial treatment, is the razor.

Delivery Systems are purchased by providers to offer Hydrafacial to their clients and patients.

In conjunction with the sale of Delivery Systems, we also sell our serum solutions and consumables (collectively “Consumables”).

Delivery Systems are purchased by providers to offer Hydrafacial treatments to their clients and patients.

In conjunction with the sale of Delivery Systems, we also sell our Consumables.

The Consumables are akin to the razor blades, consisting of single-use tips, solutions, and serums used during a Hydrafacial treatment.

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Consumables follow a recurring revenue model as they are purchased on a periodic basis by providers as they exhaust their supplies.

The expansion of the number of Delivery Systems providing experiences, or “install base,” increases the foundation for future recurring revenue by providing a platform for more treatments, driving higher Consumables sales.

Additionally, increasing the utilization of the install base will also contribute to higher Consumables revenue.

The expansion of the number of Delivery Systems providing Hydrafacial treatments, or “install base,” increases the foundation for future recurring revenue by providing a platform for more treatments, driving higher Consumables sales.

Additionally, increasing the utilization of the install base should also contribute to higher Consumables revenue.

As we optimize our install base, we believe Consumables revenue will ultimately become a larger share of Hydrafacial’s business.

Hydrafacial operates through a direct sales force in 16 markets.

We believe Hydrafacial has significant upside opportunities across the globe, particularly in China, Japan, South Korea, and Europe.

These markets have a large and growing group of

consumers searching for non-invasive beauty health experiences, and we aim to invest in initiatives that will increase consumer penetration in these markets.

The Hydrafacial Experience

A Hydrafacial treatment is a noninvasive hydradermabrasion process utilizing a patented Delivery System to cleanse, extract, and hydrate skin with proprietary solutions and serums.

We believe Hydrafacial is accessible and appropriate for consumers across all genders, ages, skin types, and skin tones.

The Hydrafacial experience results in instantly gratifying glowing skin and a “gunkie” container that collects dead skin cells and debris that were extracted from the skin.

We believe the instant gratification provided by our Hydrafacial treatment generates high consumer and provider affinity for our brand.

A summary of the Hydrafacial treatment is set forth below.

Furthermore, a Hydrafacial treatment can be applied to the neck/decolletage, back, hands, or other parts of the body.

Hydrafacial Treatment Steps

Skin is cleansed through Vortex Fusion Technology, a specially designed tip, and a cleansing solution.

The outermost layer of skin is exfoliated with a customized peel which removes dead skin cells.

Extractions and removal of remaining debris is performed with Vortex Fusion Technology, a specialized tip, and proprietary solutions.

Vortex Fusion Technology is paired with a specialized tip to deliver and infuse hyaluronic acid and antioxidants to the skin to nourish, hydrate, and protect.

Among consumers, the Hydrafacial experience has generated a high Net Promoter Score (“NPS”), a customer loyalty and satisfaction measurement assessed by asking customers how likely they are to recommend a certain product or service to others.

Based on a study performed by a major consulting firm on our behalf, which surveyed over 1,000 Hydrafacial users, Hydrafacial received an NPS of 44, considered a best-in-class score as it is higher than the NPS for other skin care regimens that Hydrafacial users reported they also commonly used.

Hydrafacial Products

At the core of Hydrafacial’s product offering is Syndeo, the current generation Delivery System, and its associated Consumables.

We believe each Delivery System provides an attractive return on investment to providers with a short payback period to recoup the cost of the Delivery System.

Syndeo is the current generation Hydrafacial Delivery System that launched in the United States in March 2022.

The system is designed to elevate every part of the treatment and connects providers to consumers’ preferences to create more personalized experiences.

The hardware and software in the Syndeo Delivery System has been fully updated and includes Wi-Fi connectivity and radio frequency identification (“RFID”).

These technologies allow providers and us to collect data on Hydrafacial consumers to ultimately provide a better experience for them.

We expect to launch Syndeo in our EMEA and APAC markets in the first half of 2023.

In the meantime, we are selling our Elite Tower Delivery System, our previous Delivery System model that was first launched in 2016, in the EMEA and APAC markets.

Upon Syndeo’s launch in EMEA and APAC, we anticipate that we will no longer market our Elite Tower in our direct markets.

Our Consumables consist of single-use tips, solutions, and serums used to provide a Hydrafacial treatment.

The table below summarizes our Consumables product offering:

Hydrafacial Consumables

Replenishment Frequency

Tips Patented, patterned caps placed on the handpiece of the Delivery System to create pneumatic suction and deliver solutions and serums to the skin

Minimum 3 single-use tips used per Hydrafacial experience

Solutions Proprietary formulations of ingredients delivered at different steps of the Hydrafacial experience 4 bottle SKUs required to provide a Hydrafacial experience;

the bottles provide for approximately 15 treatments

3 SKUs contain varying strength chemical peel treatments.

The provider chooses which strength to use during treatment, and each SKU lasts 1-2 treatments.

Serums Optional add-on to target specific skin concerns.

Offering includes proprietary boosters co-developed via collaborations with various skincare brands.

1-2 treatments per serum vial

Product Development Pipeline

We do not believe there is another beauty health offering in the market that features leading third-party skincare brands on its platform.

We currently offer a portfolio of approximately 20 boosters and intend to continue partnering with new brands internationally and locally to offer innovative and tailored booster products to our consumers.

Hydrafacial Nation App

A beta version of the Hydrafacial Nation app launched in 2021.

The app is intended to allow consumers to learn about their skin health, discover which treatment options are right for them, and track their treatments over time.

If a consumer elects to do so, the app will pair the consumer with Syndeo, allowing providers to share treatment details with the consumer and continue to build a 1:1 relationship outside of the treatment room.

Keravive is a treatment for scalp health that includes an in-office component and a 30-day take home spray.

The treatment is designed to cleanse, exfoliate, and hydrate the scalp, which helps lead to a healthier scalp and promotes healthier, thicker, and fuller-looking hair.

We are evaluating the optimal re-launch strategy for Keravive and believe it will take time before sales of Keravive become a meaningful part of Hydrafacial’s business.

Hydrafacial Growth Strategy

Our growth strategy for Hydrafacial is predicated on our BeautyHealth flywheel strategy.

First, we intend to expand our footprint by selling Delivery Systems and connected experiences to our community.

The Syndeo Delivery System represents a milestone for us in connecting our community, introducing a digital experience by collecting data to better understand consumer and provider behaviors.

With this data, we believe we will have meaningful opportunity to boost engagement and utilization via storytelling, branding, and gamification.

Second, we intend to invest in our providers as we enhance the overall consumer experience.

We also intend to employ unique activation and engagement programs that empower beauty health professionals to expand their knowledge of our products, experiences, industry, and marketing, which we believe will help turn our providers into brand evangelists and advocates that provide first-class experiences to consumers.

Third, we intend to nurture our relationship with consumers to help build awareness and drive them to our providers.

We will continue to pursue high return on investment opportunities within sales, marketing, and training to help catalyze our presence in business to consumer channels and expand our reach to consumers where they live, work, and play.

These investments include a focus on growth marketing efforts to build campaigns in paid social, influencer and content marketing.

Lastly, we intend to build out our global infrastructure to support our growth ambitions and connected platform.

We believe these investments should create degrees of operating leverage to accelerate our goal of increased profitability in the future.

Hydrafacial operates through a direct sales force in over 15 markets, and sells its products globally in other markets utilizing a distributor or hybrid business model.

We aim to invest in markets that have a large and growing group of consumers searching for non-invasive beauty health experiences, and invest in initiatives that will increase consumer penetration in these markets.

Industry Overview

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We outsource the manufacturing of many of our products to multiple contract manufacturers that are primarily located in North America, Europe, and Asia.

However, the Hydrafacial Delivery Systems are assembled in our Long Beach, California manufacturing facility, where our quality assurance team monitors and ensures the integrity of the Delivery Systems we manufacture and conducts compliance audits.

In the future, we plan to localize the assembly of delivery systems in the regions in which we operate, beginning with in-region manufacturing for China.

However, the Delivery Systems are manufactured and assembled in two locations:

one being our Long Beach, California manufacturing facility, and the other at our contract manufacturing partner located in China, where our quality assurance team monitors and ensures the integrity of the Delivery Systems and conducts compliance audits.

The components and raw materials used in our products are sourced from a variety of component and raw material suppliers.

To provide products to customers on a timely, cost-effective basis, we review existing contract manufacturers and suppliers and evaluate new partners and suppliers periodically with the objectives of improving quality, increasing innovation, accelerating speed-to-market, maintaining supply sufficiency, and reducing costs.

To provide products to customers in a timely, cost-effective manner, we review existing contract manufacturers and suppliers and evaluate new partners and suppliers periodically with the objectives of improving quality, increasing innovation, accelerating speed-to-market, maintaining supply sufficiency, and reducing costs.

As we integrate acquired businesses, distributors, and/or brands, we will continually seek new ways to leverage our production and sourcing capabilities to improve our overall supply chain performance.

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We also have our suppliers and contract manufacturers go through a vendor qualification and audit process to verify and ensure that they meet our manufacturing standards and expectations.

We ensure our partners have the requisite experience to produce our products and accessories and develop relationships with them to maintain access to the resources needed to scale.

We ensure our partners have the requisite experience to produce our products and develop relationships with them to maintain access to the resources needed to scale.

To have control of supply and component pipelines, we own certain tooling and equipment required to manufacture our products.

While we have single supply relationships for certain of our key components, we try to mitigate related risks through various measures.

We qualify alternative suppliers and manufacturers when possible, maintain controls and methods to mitigate risk through buffer maintenance, implement dual and/or co-sourcing, if needed, and develop contingency plans for responding to disruptions, such as maintaining inventory of single source components or leverage alternative freight modes that can have cost implications.

However, given the current global supply and freight constraints driven by the COVID-19 pandemic, as well as natural disasters, we have faced, and may continue to face, challenges with various manufacturing related components and raw material shortages.

We qualify alternative suppliers and manufacturers when possible, maintain controls and methods to mitigate risk through buffer inventory, implement dual and/or co-sourcing, if needed, and develop contingency plans for responding to disruptions, such as maintaining inventory of single source components or leverage alternative freight modes that can have cost implications.

However, in the event we experience war, natural disasters, pandemics, or epidemics, we may encounter challenges with various manufacturing related components and raw material shortages.

Notwithstanding the foregoing, we believe that we currently have adequate sources of supply for all our products.

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Research and Development

Our research and development team, which includes scientists, engineers, analysts, and other employees involved in product and packaging innovation, works closely with our marketing and product development teams and third-party suppliers to generate ideas, develop new products and product line extensions, create new packaging concepts, and improve, redesign, or reformulate existing products.

Our research and development team works closely with our marketing and product development teams and third-party suppliers to generate ideas, develop new products and product line extensions, create new packaging concepts, and improve, redesign, or reformulate existing products.

In addition, these research and development personnel work to identify recent trends using market intelligence and consumer needs to bring products to market.

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Quality and Regulatory

Our quality and regulatory team are responsible for registrations, ensuring product safety, and meeting regulatory compliance for all jurisdictions in which we operate.

Our quality and regulatory team are responsible for registrations, ensuring product safety and reliability, and meeting regulatory compliance for all jurisdictions in which we operate.

The beauty and personal care market is fragmented and highly competitive, with several companies specializing in different subsectors, including skincare, haircare, supplements, and medical products and procedures.

Many of our competitors such as DiamondGlow, Dermasweep, Cartessa, OxyGeneo, Venus Glow, JetPeel, SaltFacial, and Glownar seek to compete with us by offering similar skin care and facial treatment products and services, and offering such products and services at similar or aggressive pricing.

Our ability to compete successfully depends heavily on ensuring the continuing and timely introduction of new products and services, as well as staying relevant within the market and conforming to beauty and health trends.

Principal competitive factors important to us include price, product and service features and offerings, relative price to performance, beauty health trends, marketing and distribution capability, service and support, and corporate reputation.

Our ability to compete successfully depends heavily on ensuring the continued and timely introduction of new and reliable products and services, as well as staying relevant within the market and conforming to beauty and health trends.

We believe our efforts to expand our brand recognition, cultivate our BeautyHealth community, invest in marketing capabilities, and activate consumers across channels will allow us to compete effectively as we expand globally.

We are focused on expanding the beauty health category and creating a premier beauty health experience.

Sales and Marketing

Marketing Approach

We deploy a dual marketing model with targeted strategies to engage audiences through a combination of in-real-life and digital experiences and organic and paid tactics.

With aided brand awareness at 41% among U.S.

aesthetics consumers (Ipsos.

Consumers of the aesthetic and professional beauty category (n=1001);

Brand Aided Awareness), we are focused on introducing our brand to highly targeted consumer growth markets around the world.

Push and Pull Marketing

Our ability to effectively market our brand is critical to our operational success.

Our marketing spend is based on a targeted “push and pull” marketing model that engages with both providers and consumers.

On the “push” side, we intend to continue investing in training aestheticians and other providers (as further explained below), creating a loyalty program, and supporting other ongoing engagements.

Over the last few years, we have focused on developing the marketing “pull” side by creating consumer demand, which is expected to be one of the key elements of growth to lead to an increase in recurring revenue from our customers.

Our ability to effectively market our brands is critical to our operational success.

Part of our marketing spend is based on a targeted “push and pull” marketing model that engages with both providers and consumers.

On the “push” side, we foster our relationships with our providers by investing in them by providing things such as proprietary training programs for estheticians and other providers;

marketing and social materials that they can use to help advertise our brands and their own practices;

a loyalty program that offers tiered pricing on consumables based on their spend;, and supporting other ongoing engagements.

Over the last few years, we have focused on developing the marketing “pull” side by creating consumer demand by engaging in marketing activities such as location-based experiences such as our GLOWvolution tour, and targeted paid campaigns.

We believe developing the marketing “pull” side will be one of the key elements of growth to lead to an increase in recurring revenue from our customers.

This focus on business to consumer marketing began with our rebranding of Hydrafacial in 2017, which provided a unique, differentiated identity.

We believe transformational experiences are key to growing brand awareness.

With aided brand awareness at 8%, we have focused on introducing our brand to highly targeted consumer growth markets around the world.

We intend to continue our marketing activation efforts by using digital and location-based engagement.

Digital Marketing

We are also continuously innovating to increase our sales by elevating our digital presence, social media presence, and influencer marketing efforts all designed to build brand equity and consumer engagement.

Furthermore, we utilize different methods to customize the consumer experience, including using artificial intelligence-powered tools to provide personalized advice on selecting and using products.

The majority of our customers are providers within the professional medical industry (dermatologists, plastic surgeons, and medical spas), aesthetician, and beauty retail industry (spas, hotels, and other retailers).

We currently sell approximately 66% of our Delivery Systems and Consumables into the professional medical channel.

We are also continuously innovating in order to help increase our sales by elevating our digital presence, social media presence, and influencer marketing efforts all designed to help build brand equity and consumer engagement.

Furthermore, we utilize different methods to customize the consumer experience, including using artificial intelligence-powered tools to help provide personalized advice on selecting and using products.

The majority of our customers are providers within the professional medical industry (dermatologists, plastic surgeons, and medical spas), esthetician, and beauty retail industry (spas, hotels, and other retailers).

We currently sell approximately 68% of our Delivery Systems and Consumables into the professional medical channel in the United States and Canada.

No individual customer accounted for 10% or more of our net sales in fiscal 2023.

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In 2023, revenue derived from markets outside the United States and Canada comprised approximately 46% of total revenue.

Going forward, we expect total revenue share from our global markets to increase as we continue to invest in expanding our global footprint in markets such as China, Japan, South Korea, and Europe.

Going forward, we expect total revenue share from our global markets to be higher than the total revenue we derive from the United States and Canada.

Trademarks, Patents and Domain Names

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patents directed to features of the Hydrafacial MD® liquid-based skin exfoliation system.

The portfolio includes issued U.S.

patents, which will begin to expire in 2026, directed to the manifold and console of the Hydrafacial MD® system and skin treatment tips used in the system.

As of the date of this report, the portfolio includes 9 issued U.S.

patents directed to the manifold and console of the Hydrafacial MD® system and skin treatment tips used in the system that will expire in 2026.

We also own and have applied to register numerous trademarks and service marks in the United States and in other countries throughout the world.

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The duration of trademark registrations varies from country to country.

However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.

However, trademarks are generally valid and may be renewed indefinitely so long as they are in use and/or their registrations are properly maintained.

In addition, we have registered and maintain numerous internet domain names.

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Net sales can also be affected when consumers and distributors anticipate a product introduction.

Additionally, the COVID-19 pandemic has had an impact on consumer behaviors worldwide resulting in changes in the seasonal fluctuations of our business, especially in China since the second fiscal quarter of 2022.

Furthermore, as our business outside of the United States grows, seasonal fluctuations may smooth out.

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Regulation of Medical Devices

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance and/or approval, adverse event reporting, advertising, promotion, marketing, distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

FDA Premarket Clearance and Approval Requirements

Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a premarket notification submitted under Section 510(k) of the FDCA, or approval of a premarket approval application (“PMA”).

Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a premarket notification submitted under Section 510(k) of the FDCA, the De Novo pathway, or approval of a premarket approval application (“PMA”).

Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure the device’s safety and effectiveness.

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Class II devices are subject to the FDA’s General Controls, and Special Controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device.

These Special Controls can include performance standards, post-market surveillance, patient registries and recommendations set forth in FDA guidance documents.

These Special Controls can include performance standards, post-market surveillance, patient registries, and any additional recommendations set forth in FDA guidance documents.

While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification application under Section 510(k) of the FDCA before engaging in commercial distribution for the device.

The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.

Some pre-amendment devices are unclassified, but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed.

Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting, some implantable devices, or devices that have a new intended use or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA.

Some pre-amendment devices, which are devices legally marketed prior to May 28, 1976, are unclassified but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed.

510(k) Clearance Marketing Pathway

To obtain 510(k) clearance, the sponsor must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to, including that it is as safe and as effective as, a legally marketed predicate device.

A predicate device is a legally marketed device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device which has been reclassified from Class III to Class II or I, a device which has been found to be substantially equivalent through the 510(k) process, or a device that was granted marketing authorization via the De Novo classification process under section 513(f)(2) of the FDCA and not exempt from premarket notification requirements.

To obtain 510(k) clearance, the sponsor must submit to the FDA a premarket notification submission demonstrating that the proposed device is as safe and effective as, or “substantially equivalent” to, a legally marketed predicate device.

A predicate device is a legally marketed device that was legally marketed prior to May 28, 1976 (pre-amendment device), a device which has been reclassified from Class III to Class II or I, a device which has been found to be substantially equivalent through the 510(k) process, or a device that was granted marketing authorization via the De Novo classification process under Section 513(f)(2) of the FDCA and not exempt from premarket notification requirements.

Once submitted, the FDA’s 510(k) clearance process usually takes from three to twelve months, but may take longer.

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§ 360c, or submit a PMA application.

While the De Novo pathway is available in response to a 510(k) denial, it does not require a 510(k) denial and is available as the initial pathway for approval if appropriate for the device.

After a device receives the 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or different intended use, will require a new 510(k) clearance or, depending on the modification, a PMA approval.

The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA application in the first instance, but the FDA may review such decision and may disagree with a manufacturer’s determination.

If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until such marketing authorization has been granted.

If the change alters the device in a way that renders the initially approved device unavailable as a predicate and no other predicate exists, the De Novo pathway may be used.

The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA application before the modified device may be marketed, but the FDA may review such decision and may disagree with a manufacturer’s determination.

If the manufacturer markets the modified device without first obtaining what the FDA deems to be the proper approval or clearance, then the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until such marketing authorization has been granted.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, or other regulatory actions from the FDA.

Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.

For example, in November 2018, FDA officials announced steps that the FDA intended to take to modernize the 510(k) pathway.

Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates.

These proposals included

plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

These proposals have not yet been finalized or adopted, although the FDA may work with Congress to implement such proposals through legislation.

More recently, in September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

The FDA has developed and maintains a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

In September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

The FDA has developed and maintains a list of device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

Most recently, in September 2023, the FDA released three draft guidance documents proposing recommendations on best practices for selecting a predicate device, situations in which clinical data may be necessary in a 510(k) submission, and evidentiary expectations for 510(k) submissions for implanted devices.

The FDA recommended the use of best practices such as choosing a predicate device that meets or exceeds expected safety and performance, or that does not have unmitigated use-related or design-related safety issues.

Further, the FDA recommended that manufacturers describe how the best practices in guidance documents were used to select the predicate device chosen in the 510(k) summary of their new device.

Additionally, the FDA outlined situations in which innovation in materials could lead to differences in the technological characteristics of a new device and the predicate device, which may result in the need for clinical data in a 510(k) submission.

Updated recommendations for manufacturers of implant devices regarding the design and execution of appropriate performance testing for 510(k) submissions, and the content and labeling information to be included, were also outlined and are expected to be considered in future applications.

The FDA also introduced guidance regarding the use and device status of products that utilize artificial intelligence that may be utilized in the marketplace, and relevant considerations for approval, testing, and marketing of these devices.

Furthermore, as devices continue to become more interconnected, cybersecurity risks continue to develop and grow exponentially.

As a result, the FDA released guidance in September 2023 on the evolving landscape of cybersecurity threats in relation to premarket review and quality systems.

The FDA intends to promote consistency, facilitate efficient premarket review, and ensure that devices are sufficiently resilient to cybersecurity threats by establishing recommended design, labeling, and documentation of testing to be included in premarket submissions of relevant devices.

Class III devices require PMA approval before they can be marketed, although some pre-amendment Class III devices for which FDA has not yet required a PMA are cleared through the 510(k) process.

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If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s review often takes significantly longer, and can take up to several years.

An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device.

Various actions can result in the pause or reset of the 180-day timeframe, resulting in an extended and lengthy approval process.

These actions can include requests for additional information or data to supplement the application, panel reviews if the FDA determines expert panel input would be useful, or any decision by a manufacturer to make an administrative appeal regarding an FDA determination during this process.

As mentioned above, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device.

The FDA may or may not accept the panel’s recommendation.

In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR.

PMA applications are also subject to the payment of user fees, which for fiscal year 2023 includes a standard application fee of $441,547.

PMA applications are also subject to the payment of user fees, which for fiscal year 2024 includes a standard application fee of $483,560 or a small business fee of $120,890.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).

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All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“ IDE ”) regulations that govern investigational device labeling and prohibit promotion of the investigational device while specifying an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the

device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

If the device under evaluation does not present a significant risk to human health, then the device sponsor is not required to submit an IDE application to the FDA before initiating human clinical trials, but must still comply with abbreviated IDE requirements when conducting such trials.

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or otherwise presents a potential for serious risk to a subject.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

An IDE application must be supported by appropriate data, which may include animal or laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin.

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As a manufacturer, we are subject to periodic scheduled and unscheduled inspections by the FDA.

Failure to maintain compliance with the QSR requirements could result in adverse inspection or audit reports such as Form 483 Notices of Inspectional Observations;

Failure to maintain compliance with the QSR requirements could result in an adverse inspection or audit reports such as Form 483 Notices of Inspectional Observations;

the shut-down of, or restrictions on, manufacturing operations;

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The FDCA defines cosmetics as articles or components of articles intended for application to the human body to cleanse, beautify, promote attractiveness, or alter the appearance.

The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations.

The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and various regulations.

Cosmetics are not subject to pre-market approval by the FDA;

however, certain ingredients, such as color additives, must be pre-approved for the specific intended use of the product and are subject to certain restrictions on their use.

however, certain ingredients, such as some types of color additives, must be pre-approved for the specific intended use of the product and are subject to certain restrictions on their use.

If a company has not adequately substantiated the safety of its products or ingredients by, for example, performing appropriate toxicological tests or relying on already available toxicological test data, then a specific warning label is required.

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In addition to FDA requirements, the FTC as well as state consumer protection laws and regulations can subject a cosmetics company to a range of requirements and theories of liability, including similar standards regarding false and misleading product claims, under which FTC or state enforcement or class-action lawsuits may be brought.

In the United States, the FDA has not promulgated regulations establishing GMPs for cosmetics.

However, Congress enacted the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”) on December 29, 2022 that requires FDA to promulgate regulations relating to GMPs for cosmetics.

The effective date for most of the MoCRA provisions is December 29, 2023.

Specifically with regard to GMPs for cosmetics, FDA is required to promulgate the proposed rules by December 29, 2024, and final regulations by December 29, 2025.

Subsequently, compliance with such GMP requirements will become mandatory for

manufacturers of cosmetic products.

Until then, FDA’s existing draft guidance on cosmetic GMPs, most recently updated in June 2013 and other guidance such as the FDA’s Good Manufacturing Practice (GMP) Guidelines/Inspection Checklist from February 2022, will continue to provide guidance and recommendations related to process documentation, recordkeeping, building and facility design, and equipment maintenance and personnel.

In the United States, the FDA has not promulgated regulations establishing GMPs (as defined below) for cosmetics.

However, Congress enacted the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”) on December 29, 2022, which directed the FDA to implement a set of new regulatory requirements that previously were not applicable to cosmetic products.

Pursuant to MoCRA, the FDA will subject manufacturers and cosmetic products to requirements such as facility registration and product listing requirements, compliance with certain GMP requirements, adverse event reporting requirements, and other labeling requirements.

Some of the requirements became applicable on December 29, 2023, although many of the requirements, such as those relating to labeling, will become applicable in 2024 and 2025.

For instance, the FDA is required to promulgate proposed rules regarding GMPs for cosmetics by December 29, 2024, and final regulations by December 29, 2025.

Subsequently, compliance with such GMP requirements will become mandatory for manufacturers of cosmetic products.

Until then, the FDA’s existing draft guidance on cosmetic GMPs, most recently updated in June 2013, and other guidance such as the FDA’s Good Manufacturing Practice (GMP) Guidelines/Inspection Checklist from February 2022, will continue to provide guidance and recommendations related to process documentation, recordkeeping, building and facility design, and equipment maintenance and personnel.

Compliance with these recommendations can reduce the risk that products will be adulterated or misbranded in violation of the FDCA and its regulations.

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For example, cosmetic manufacturing and processing facilities will be required to be registered with FDA, and any products that are marketed after MoCRA’s effective date will need to be listed with FDA.

The FDA has extended the effective date for the registration and listing requirements under MoCRA to July 1, 2024.

Adulterated or misbranded cosmetic products will be subject to recalls that are mandated by FDA, similar to medical devices.

In addition, a responsible person will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the person, and the records relating to each adverse event report will be required to be kept for six years.

In addition, a responsible person, as defined under FDA regulations, will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the person, and the records relating to each adverse event report will be required to be kept for six years.

Additionally, cosmetic labels will need to identify the responsible person for the purpose of serious adverse event reporting, and cosmetic labels will also need to identify fragrance allergens.

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Inspections also may arise from consumer or competitor complaints filed with the FDA.

In the event the FDA identifies unsanitary conditions, false or misleading labeling, or any other violation of FDA regulation, FDA may request or a manufacturer may independently decide to conduct a recall or market withdrawal of product or to make changes to its manufacturing processes or product formulations or labels.

In the event the FDA identifies unsanitary conditions, false or misleading labeling, or any other violation of FDA regulation, FDA may request or a manufacturer may independently decide to conduct a recall or market withdrawal of a product or to make changes to its manufacturing processes or product formulations or labels.

Foreign Government Regulation

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To demonstrate compliance with the essential requirements laid down in Annex I to the EU Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the

essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.

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Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market.

A notified body would typically audit and examine a product’s technical dossiers and the manufacturers’ quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).

A notified body would typically audit and examine a product’s technical dossiers and the manufacturer’s quality system (the notified body must presume that quality systems which implement the relevant harmonized standards – which is ISO 13485:2016 for Medical Devices Quality Management Systems – conform to these requirements).

If satisfied that the relevant product conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

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On April 5, 2017, the EU Medical Devices Regulation was adopted with the aim of ensuring better protection of public health and patient safety.

The EU Medical Devices Regulation establishes a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensure a high level of safety and health while supporting innovation.

The EU Medical Devices Regulation establishes a uniform, transparent, predictable and sustainable regulatory framework across the EU for medical devices and ensures a high level of safety and health while supporting innovation.

Unlike the EU Medical Devices Directive, the EU Medical Devices Regulation is directly applicable in EU member states without the need for member states to implement into national law.

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However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation, in particular the obligations described below.

On January 6, 2023, the European Commission proposed a draft regulation to extend the transition periods under the EU Medical Devices Regulation for certain devices and thus extending the validity of the CE certificates that were issued under the EU Medical Devices Directive.

The Commission also proposes to delete the ‘sell-off’ deadline.

The draft amending regulation is subject to the accelerated adoption procedure of the European Parliament and Council.

The European Commission further extended the transitional provisions of the EU Medical Devices Regulation through Regulation (EU) 2023/607 on March 15, 2023, whereby manufacturers and notified bodies are given more time to carry out, in accordance with the EU Medical Devices Regulation, the conformity assessment of devices covered by a certificate or declaration of conformity issued in accordance with the EU Medical Devices Directive.

Moreover, the “sell-off” deadline in the EU Medical Devices Regulation is deleted which aims to prevent unnecessary disposal of safe devices.

The transition period of devices is extended through to December 31, 2027 or December 31, 2028 depending on the device risk classification and certain other conditions being satisfied.

The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (Eudamed), unless they have already registered.

The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the

person or persons responsible for regulatory compliance.

The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the person or persons responsible for regulatory compliance.

The new Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier (“UDI”) database.

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Until Eudamed is fully functional, the corresponding provisions of the EU Medical Devices Directive continue to apply.

A serious incident is defined as any malfunction or deterioration in the characteristics or performance of a device made available on the market, including use-error due to ergonomic features, as well as any inadequacy in the information supplied by the manufacturer and any undesirable side-effect, which, directly or indirectly, might have led or might lead to the death of a patient or user or of other persons or to a temporary or permanent serious deterioration of a patient's, user's or other person's state of health or a serious public health threat.

A serious incident is defined as any malfunction or deterioration in the characteristics or performance of a device made available on the market, including user-error due to ergonomic features, as well as any inadequacy in the information supplied by the manufacturer and any undesirable side-effect, which, directly or indirectly, might have led or might lead to the death of a patient or user or of other persons or to a temporary or permanent serious deterioration of a patient's, user's or other person's state of health or a serious public health threat.

Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk of a serious incident associated with the use of a medical device that is made available on the market.

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FSCAs must be communicated by the manufacturer or its legal representative to its customers and/or to the end users of the device through Field Safety Notices.

For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or an FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

The advertising and promotion of medical devices is subject to some general principles set forth in EU legislation as well as in national legislation of the EU Member States and industry codes of conduct.

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Certain countries also mandate implementation of commercial compliance programs.

The aforementioned EU rules are generally applicable in the European Economic Area (“EEA”), which consists of the 27 EU Member States plus Norway, Liechtenstein and Iceland.

UK Regulation of Medical Devices following Brexit

The aforementioned EU rules are generally applicable in the European Economic Area, which consists of the 27 EU Member States plus Norway, Liechtenstein and Iceland.

United Kingdom (“UK”) Regulation of Medical Devices following Brexit

Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”), has become the sovereign regulatory authority responsible for Great Britain (i.e.

England, Wales and Scotland) medical device market according to the requirements provided in the UK Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol.

Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA (but manufacturers were given a grace period of four to 12 months to comply with the new

registration process) before being placed on Great Britain market.

The MHRA only registers devices where the manufacturer or their United Kingdom (“UK”) Responsible Person has a registered place of business in the UK.

The MHRA only registers devices where the manufacturer or their UK Responsible Person has a registered place of business in the UK.

Manufacturers based outside the UK need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with the MHRA in line with the grace periods.

By July 1, 2024, in Great Britain, all medical devices will require a UK Conformity Assessed (“UKCA”) mark but CE marks issued by EU notified bodies will remain valid until this time.

Manufacturers may choose to use the UKCA mark on a voluntary basis until June 30, 2024.

However, UKCA marking will not be recognized in the EU.

All medical devices require in principle a UK Conformity Assessed (“UKCA”) mark but manufacturers can continue to place CE marked medical devices on the UK market during a transitional period.

This transitional period was extended through newly introduced legislation effective June 30, 2023, to take account of the new transitional measures taken under the EU Medical Devices Regulation.

While CE marking continues to be recognized on the UK market, UKCA marking is not recognized in the EU.

The rules for placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those in the rest of the UK.

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In June 2022, the UK government published its response to the consultation regarding the new UK medical device regulatory framework which seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical Devices Directive, the EU AIMD and the EU In Vitro Diagnostic Medical Devices Directive 98/79/EC), in particular to create a new access pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform in vitro diagnostic medical devices regulation, and foster sustainability through the reuse and remanufacture of medical devices.

The regime is expected to come into force in July 2024, coinciding with the end of the acceptance period for EU CE marks in Great Britain, subject to appropriate transitional arrangements.

The regime is expected to come into force in July 2025, subject to appropriate transitional arrangements.

The consultation indicated that the MHRA will publish guidance in relation to the changes to the regulatory framework and may rely more heavily on guidance to add flexibility to the regime.

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However, to date, there are no significant differences between the frameworks of the UK Cosmetics Regulation and the EU Cosmetics Regulation.

The main difference currently is that the UK Government has established a cosmetic product notification service to replace the EU’s CPNP in Great Britain, and that serious undesirable effects (“SUEs”) now should be notified on the new UK SUE form.

Environmental Regulations

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We recognize that technology presents opportunities for competitive advantage, and we continue to invest in new capabilities and the use of emerging technologies across various aspects of our business.

During fiscal 2022, we continued to respond to shifting employee, provider, and consumer behaviors driven by the COVID-19 pandemic, which included new, hybrid ways of working for our office-based employees.

We invested in hardware, software, education and support structures to create engaging and collaborative work environments across our facilities, in both virtual and hybrid settings.

We also continued to

invest in new marketing and provider and consumer engagement capabilities globally with a focus on innovative digital experiences across our omnichannel landscape.

Our strategy over the next few years includes continuing to build a strong and secure technology infrastructure to adapt to evolving business dynamics, which includes the expansion of our omnichannel capabilities, modernizing and upgrading our existing facilities to be powered by technology, and the utilization of data-driven analytics to optimize our supply and demand planning.

During fiscal 2023, we continued to invest in hardware, software, education and support structures to create engaging and collaborative work environments across our facilities, in both virtual and hybrid settings.

We also continued to invest in new marketing and provider and consumer engagement capabilities globally with a focus on innovative digital experiences across our omnichannel landscape.

Our strategy over the next few years includes continuing to build a strong and secure technology infrastructure to adapt to evolving business dynamics, which includes the expansion of our omnichannel capabilities, upgrading our existing hardware and software to be more streamlined, and the utilization of data-driven analytics to optimize our supply and demand planning.

Data Privacy and Security

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In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other personal information.

laws assess penalties on a “per violation” basis and some include a private right of action.

In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.

For example, the EU General Data Protection Regulation (“GDPR”) imposes strict requirements for processing the personal data of individuals within the European Economic Area.

For example, the EU General Data Protection Regulation (“GDPR”) and United Kingdom GDPR (“UK GDPR”) imposes strict requirements for processing the personal data of individuals within the European Economic Area.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Further, from January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom (“UK”) GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

Against this backdrop, we also recognize that the personal information collected in the course of our business is important to providing our products and strategically important to meeting our customer’s expectations.

Because of this, we are committed to processing personal information pursuant to applicable laws.

We also endeavor to have our employees, agents, contractors, suppliers, and other third parties that we work with comply with our procedures set out in our data protection policies.

We continue to maintain and enhance our data collection and use practices as a part of our information technology infrastructure to align with our long-term strategy.

We also regularly review our practices against our regulatory requirements to remain current with the changing landscape of the collection, use, disclosure, and protection of health-related and other personal information.

Effect of Government Regulations

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We value consumer privacy and have implemented certain policies and procedures that are designed to protect the data we collect.

Our website includes our privacy policy, which describes how we use and disclose the data we collect, and provides options for controlling personal data, including opting-out, accessing, updating, or deleting it.

Our website includes our privacy policy, which describes how we use and disclose the data we collect, and provides information for controlling personal data, including opting-out, accessing, updating, or deleting it.

In recognition of the importance of data protection to our operations, including cybersecurity, we have certain measures in places that are designed to safeguard the security, confidentiality, and privacy of our systems and information assets.

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We participate in a recycling program through our local waste management facility to divert all recyclable materials – bottles, cans, plastics, paper, and cardboard – from landfills.

Across our organization, our facilities provide for recycling, and our electronic waste is sent to locally approved e-waste recycling centers.

Our facilities provide for recycling, and our electronic waste is sent to locally approved e-waste recycling centers.

Business Ethics

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We believe strong corporate governance provides the foundation for financial integrity and stockholder confidence.

Directors is responsible for the oversight of risks facing the Company, and our management is responsible for the day-to-day management of risk.

Our Board of Directors, as a whole, directly oversees our strategic and business risk, including risks related to financial reporting, compensation practices, ESG, and product developments.

Our Board of Directors is responsible for the oversight of risks facing the Company, and our management is responsible for the day-to-day management of risk.

Our Board of Directors, as a whole, oversees our strategic and business risk, including risks related to financial reporting, compensation practices, ESG, and product developments.

More information about our corporate governance features (including information about our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee) can be found in our annual proxy statement.

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We have built a team of industry professionals focused on beauty health.

As of December 31, 2022, we employed approximately 1,034 employees, of whom approximately 83% were salaried, with the remainder being compensated on an hourly basis.

As of December 31, 2023, and as a result of our reduction in workforce that we announced in November 2023, we employed approximately 881 employees, of whom approximately 85% were salaried, with the remainder being compensated on an hourly basis.

Set forth below is the geographic makeup of our workforce:

Geographic Location

Number of Employees

% of Total Workforce

Geographic Location Number of Employees % of Total Workforce

United States of America (1) 494 56%

APAC (Asia-Pacific)

EMEA (Europe, Middle East, and Africa)

Asia-Pacific (“APAC”)

Europe, Middle East, and Africa (“EMEA”)

Canada & Latin America 49 5%

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Workplace Practices and Policies

The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.

The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment and discrimination.

Diversity and Inclusion

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For instance, in addition to base pay (which is based on specific circumstances, including role and experience, geographic location, and performance), we offer annual cash performance-based incentives and equity-based long-term incentive awards for eligible employees.

Our robust benefit programs, which vary by country, include basic and supplemental health and insurance benefits, health savings and flexible spending accounts, access to a personal health advocate, family leave, life and disability insurance, employee assistance programs, physical, mental and financial wellbeing programs, a U.S.

employee stock purchase plan, retirement savings plans, and pet insurance, to name a few.

Workplace Health and Safety

We work to prioritize the health and welfare of our employees and our environment.

The core elements of our employee health and safety strategy are risk analysis, incident management, documented processes, training, and occupational health.

We continually strive to improve processes across field safety training, incident training, and professional investigations.

Throughout the height of the COVID-19 pandemic, we implemented health and safety protocols and modified our business practices to protect our employees.

After our original plan was disseminated to our employees, additional updates from management have included the most up-to-date information from the U.S.

Department of State, Center for Disease Control (“CDC”) and World Health Organization (“WHO”), and we have, at all times, encouraged employees to keep management informed of the need for any additional support.

Our health and safety protocols specify several CDC-recommended measures to mitigate the spread of COVID-19 in the workplace, the importance of social and physical distancing and frequent handwashing, and that employees are to remain home if feeling unwell and self-quarantine following any possible exposure to

In addition to these measures, we have increased sanitation procedures and updated our travel policy to ensure the safety of those employees who have resumed working in the office and those who travel for business.

We will continue to monitor mandates, guidelines, and recommendations issued by CDC, WHO, and local governments as they are released, and revise our health and safety protocols accordingly.

Maintenance of a safe, healthy work environment is a basic policy of our Company.

The backbone of our Safety & Health program is the accountability of line management, who are informed and guided by supporting staff.

Our policy is to maintain the safety and healthfulness of the workplace for all employees, contractors, and visitors to reduce the probability and magnitude of injuries, illnesses, and financial loss.

Our program requirements and statement of basic policy represent the essential elements of our Safety & Health program.

These requirements define minimum standards that apply, in a program and physical sense, to every employee and every workplace in which our people are employed.

These requirements establish a frame of reference for assessing our progress in achieving important program objectives.

Such progress will be monitored, but with the understanding that, in some of our facilities, subject to the influence of prevailing local practices and limited capabilities, certain requirements represent longer-range commitments that cannot be fully implemented in the short term.

Changes and additions to the program requirements will take place as needed through legal consultation to ensure the maintenance of a Safety & Health program that reflects the commitment and best interests of all at the Company.

The establishment and maintenance of a safe environment is the shared responsibility between the employer and employees at all levels of the organization.

To this end, every reasonable effort will be made in achieving the goal of accident prevention and health preservation.

The Company has developed and implemented a comprehensive Injury and Illness Prevention Program.

The goal of this program is to protect employees, agency employees, contractors, and visitors by providing an active safety program for the prevention of injuries, accidents, and illnesses.

The Company has a designated environmental, health, and safety (“EHS”) department to provide a clear focal point for the safety program.

The EHS department has appointed “Department Safety

Coordinators” to implement and maintain the program at each location.

The Department Safety Coordinators are the Department Heads of the Company and are an integral part of the Safety Awareness Team.

The Beauty Health Company (f.k.a.

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(“Vesper Healthcare”), Hydrate Merger Sub I, Inc.

(“Merger Sub I”), Hydrate Merger Sub II, LLC (“Merger Sub II”), LCP Edge Intermediate, Inc., the indirect parent of Edge Systems LLC d/b/a The Hydrafacial Company (“Hydrafacial”), and LCP Edge Holdco, LLC (“LCP,” or “Former Parent,” and, in its capacity as the stockholders’ representative, the “Stockholders’ Representative”) (the “Merger Agreement”), which provided for:

(“Merger Sub I”), Hydrate Merger Sub II, LLC (“Merger Sub II”), LCP Edge Intermediate, Inc., the indirect parent of HydraFacial LLC, (f.k.a.

Edge Systems LLC) (“Hydrafacial”), and LCP Edge Holdco, LLC (“LCP,” or “Former Parent,” and, in its capacity as the stockholders’ representative, the “Stockholders’ Representative”) (the “Merger Agreement”), which provided for:

(a) the merger of Merger Sub I with and into Hydrafacial, with Hydrafacial continuing as the surviving corporation (the “First Merger”), and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Hydrafacial with and into Merger Sub II, with Merger Sub II continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”).

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Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available on our website free of charge at http://beautyhealth.com under “Financials—SEC Filings,” as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission.

The content of our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission.

The Securities and Exchange Commission maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

The address of the website is www.sec.gov.

Our internet address is www.beautyhealth.com.

At our investor relations website, www.investors.beautyhealth.com, we make available free of charge a variety of information for investors, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission at www.sec.gov.

Further, corporate governance information, including our corporate governance guidelines, board committee charters, and code of conduct, are also available on our investor relations website at:

www.investors.beautyhealth.com/corporate-governance/documents-and-charters.

The information contained on or made available through our website or any of the websites referred to above are not incorporated by reference into, and does not form a part of, this Annual Report on Form 10-K or in any other report or document we file with or furnish to the Securities and Exchange Commission.

Further, references to the URLs for these websites are intended to be inactive textual references only.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business