What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 149 added, 143 removed, 410 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except for share amounts)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Current assets:

1 unchanged sentence

$ 349,544 $ 523,025

Accounts receivable, net of allowances for estimated credit losses of $ 7,228 and $ 6,604 at March 31, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowances for estimated credit losses of $ 8,257 and $ 6,604 at June 30, 2024 and December 31, 2023, respectively

41,409 54,697

14 unchanged sentences

Accrued payroll-related expenses 17,146 22,028

Syndeo Program reserves

Lease liabilities, current 4,278 4,598

Income tax payable 2,360 2,759

Syndeo Program reserves

Other accrued expenses 24,044 19,846

11 unchanged sentences

320,000,000 shares authorized;

123,453,419 and 122,899,002 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

123,993,785 and 122,899,002 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 553,420 541,281

8 unchanged sentences

(in thousands, except for share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Net sales $ 90,594 $ 117,479 $ 171,997 $ 203,757

7 unchanged sentences

Loss from operations ( 22,111 ) ( 13,146 ) ( 39,102 ) ( 30,456 )

( 16,991 ) ( 17,310 )

Interest expense 2,452 3,429 5,481 6,846

3 unchanged sentences

Foreign currency transaction loss (gain), net 1,144 ( 397 ) 2,441 ( 1,546 )

Loss before provision for income taxes ( 1,338 ) ( 23,921 )

(Loss) income before provision for income taxes ( 151 ) 1,171 ( 1,489 ) ( 22,750 )

Income tax benefit ( 353 ) ( 2,193 ) ( 1,012 ) ( 5,855 )

Net loss $ ( 679 ) $ ( 20,259 )

Comprehensive loss, net of tax:

Net income (loss) $ 202 $ 3,364 ( 477 ) ( 16,895 )

Comprehensive income (loss), net of tax:

Foreign currency translation adjustments ( 816 ) ( 367 ) ( 1,863 ) 521

Comprehensive loss $ ( 1,726 ) $ ( 19,371 )

Net loss per share

Comprehensive (loss) income $ ( 614 ) $ 2,997 $ ( 2,340 ) $ ( 16,374 )

Net income (loss) per share

$ 0.00 $ 0.03 $ 0.00 $ ( 0.13 )

19 unchanged sentences

BALANCE, March 31, 2023 132,626,954 $ 14 $ 555,046 $ ( 3,642 ) $ ( 399,010 ) $ 152,408

Net income — — — — 3,364 3,364

Issuance of Common Stock pursuant to equity compensation plan 254,742 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 83,234 ) — ( 545 ) — — ( 545 )

Issuance of Common Stock relating to employee stock purchase plan 82,955 — 698 — — 698

Share-based compensation — — 8,524 — — 8,524

Accelerated share repurchase payment — — ( 2,240 ) — — ( 2,240 )

Foreign currency translation adjustment — — — ( 367 ) — ( 367 )

BALANCE, June 30, 2023 132,881,417 $ 14 $ 561,483 $ ( 4,009 ) $ ( 395,646 ) $ 161,842

BALANCE, December 31, 2023 122,899,002 $ 12 $ 541,281 $ ( 3,036 ) $ ( 478,867 ) $ 59,390

5 unchanged sentences

BALANCE, March 31, 2024 123,453,419 $ 12 $ 546,912 $ ( 4,083 ) $ ( 479,546 ) $ 63,295

Net income — — — — 202 202

Issuance of Common Stock pursuant to equity compensation plan 454,362 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 104,120 ) — ( 368 ) — — ( 368 )

Issuance of Common Stock relating to employee stock purchase plan 190,124 — 378 — — 378

Share-based compensation — — 6,498 — — 6,498

Foreign currency translation adjustment — — — ( 816 ) — ( 816 )

BALANCE, June 30, 2024 123,993,785 $ 12 $ 553,420 $ ( 4,899 ) $ ( 479,344 ) $ 69,189

The accompanying notes are an integral part of these unaudited financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

18 unchanged sentences

Other, net ( 4,848 ) ( 4,420 )

Net cash used for operating activities ( 16,854 ) ( 13,010 )

Net cash (used for) provided by operating activities ( 10,653 ) 8,956

Cash flows from investing activities:

6 unchanged sentences

Payment of tax withholdings on vested stock awards ( 1,285 ) ( 2,083 )

Payment of accelerated share repurchases — ( 2,240 )

Other, net — 582

Net cash used for financing activities ( 157,367 ) ( 3,741 )

24 unchanged sentences

As a result of the Second Merger, the Company owns 100 % of the outstanding interests in Merger Sub II.

In connection with the closing of the Business Combination, the Company owns, directly or indirectly, 100 % of the stock of Hydrafacial and its subsidiaries and the stockholders of Hydrafacial as of immediately prior to the effective time of the First Merger (the “Hydrafacial Stockholders”) hold a portion of the Company’s Class A common stock, par value $ 0.0001 per share (the “Class A Common Stock”).

In connection with the closing of the Business Combination (the “Closing”), the Company owns, directly or indirectly, 100 % of the stock of Hydrafacial and its subsidiaries and the stockholders of Hydrafacial as of immediately prior to the effective time of the First Merger (the “Hydrafacial Stockholders”) hold a portion of the Company’s Class A common stock, par value $ 0.0001 per share (the “Class A Common Stock”).

Basis of Presentation

3 unchanged sentences

These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Subsequent to the issuance of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023, during the quarter ended June 30, 2023, the Company identified prior period misstatements related to the elimination of intercompany balances and right of return assets.

Although the Company concluded that these misstatements were not material, either individually or in the aggregate, the Company elected to revise its previously issued unaudited consolidated financial statements to correct for these misstatements.

The revision of the previously issued unaudited consolidated financial statements is presented in the accompanying unaudited consolidated financial statements and related disclosures.

For further detail, refer to Note 16 – Revision for Immaterial Misstatements.

Note 2 — Revenue

6 unchanged sentences

The Company’s revenue disaggregated by major product line consists of the following for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Net sales by geographic region were as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

7 unchanged sentences

Inventories consist of the following as of the periods indicated:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Raw materials $ 23,907 $ 24,406

1 unchanged sentence

Total inventories $ 77,143 $ 91,321

During the six months ended June 30, 2024, the Company recognized $ 19.3 million of inventory charges for discontinued, excess, obsolete inventory, including the write-down of Delivery System inventory to its net realizable value and the write-off of excess raw materials.

During the six months ended June 30, 2023 , the Company recognized $ 4.4 million of inventory charges for discontinued, excess, and obsolete inventory.

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Accrued compensation and payroll taxes

4 unchanged sentences

Other accrued expenses consist of the following as of the periods indicated:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

Sales and VAT tax payables $ 4,798 $ 4,971

Accrued interest 4,219 2,344

Deferred revenue 3,875 450

Royalty liabilities 3,769 3,914

Accrued interest 1,719 2,344

Other 9,883 8,167

Total other accrued expenses $ 24,044 $ 19,846

As of March 31, 2024 and December 31, 2023, the Company has approximately $ 12 million and $ 15 million, respectively, of non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture or assemble final products for the Company, which is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

As of June 30, 2024 and December 31, 2023, the Company has approximately $ 9 million and $ 15 million, respectively, of non-trade receivables from certain of its manufacturing vendors resulting from the sale of components to these vendors who manufacture or assemble final products for the Company, which is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company purchases components directly from suppliers and do not reflect the sale of these components to the manufacturing vendors in net sales.

As of March 31, 2024 and December 31, 2023, total warranty reserve was approximately $ 7 million and $ 6 million, respectively.

As of March 31, 2024, approximately $ 5 million was included in other accrued expenses and approximately $ 2 million was included in other long-term liabilities on the Condensed Consolidated Balance Sheets.

As of June 30, 2024 and December 31, 2023 , total warranty reserve was approximately $ 7 million and $ 6 million, respectively.

As of June 30, 2024 , approximately $ 5 million was included in other accrued expenses and approximately $ 2 million was included in other long-term liabilities on the Condensed Consolidated Balance Sheets.

As of December 31, 2023 , approximately $ 4 million was included in other accrued expenses and approximately $ 2 million was included in other long-term liabilities on the Consolidated Balance Sheets.

As of March 31, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards.

As of June 30, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards.

Note 4 — Fair Value Measurements

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

The three levels of the fair value hierarchy are as follows:

4 unchanged sentences

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

As of March 31, 2024

As of June 30, 2024

(in thousands) Level 1 Level 2 Level 3 Total

10 unchanged sentences

In October 2020, in connection with the consummation of Vesper Healthcare’s initial public offering, the Company issued 9,333,333 warrants to purchase shares of the Company’s Class A Common Stock at $ 11.50 per share (the “Private Placement Warrants”), to BLS Investor Group LLC.

As of March 31, 2024 and December 31, 2023, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation.

As of June 30, 2024 and December 31, 2023, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation.

Note 5 — Property and Equipment, net

Property and equipment consist of the following as of the periods indicated:

Property and equipment, net consist of the following as of the periods indicated:

(in thousands) Useful life

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Leasehold improvements Shorter of remaining lease

11 unchanged sentences

Note 6 — Goodwill and Intangible Assets, net

The changes in the carrying value of goodwill for the three months ended March 31, 2024 is as follows (in thousands):

The changes in the carrying value of goodwill for the six months ended June 30, 2024 is as follows (in thousands):

December 31, 2023 $ 125,818

Foreign currency translation impact

March 31, 2024 $ 125,365

June 30, 2024 $ 124,822

Intangible Assets, Net

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of March 31, 2024 were as follows:

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of June 30, 2024 were as follows:

(in thousands) Gross

34 unchanged sentences

Note 7 — Long-Term Debt

Amended and Restated Credit Facility

On November 14, 2022, the Company, as successor by assumption to Hydrafacial, a California limited liability company, entered into an Amended and Restated Credit Agreement (as it may be further amended, restated, supplemented or modified from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A.

(the “Administrative Agent”).

The Credit Agreement provides for a $ 50 million revolving credit facility with a maturity date of November 14, 2027.

In addition, the Company has the ability from time to time to increase the revolving commitments or enter into one or more tranches of term loans up to an additional aggregate amount not to exceed $ 50 million, subject to receipt of lender commitments and certain conditions precedent.

As of March 31, 2024, the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Company’s ability to incur indebtedness and certain liens, make certain investments, become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00.

As of March 31, 2024, the Company was in compliance with all restricted and financial covenants of the Credit Agreement.

Convertible Senior Notes

5 unchanged sentences

The following is a summary of the Company’s Notes for the periods indicated:

(in thousands) March 31, 2024 December 31, 2023

(in thousands) June 30, 2024 December 31, 2023

1.25 % Convertible Notes due 2026

4 unchanged sentences

$ 550,625 $ 738,372

In January 2024, the Company repurchased $ 75.0 million principal amount of its Notes at a weighted-average price equal to 77 % for $ 57.8 million resulting in a net gain of $ 16.1 million, which includes $ 1.2 million of unamortized debt issuance costs related to the repurchase.

During the three months ended March 31, 2024, the Company repurchased $ 75.0 million principal amount of its Notes at a weighted-average price equal to 77 % for $ 57.8 million and recognized a net gain of $ 16.1 million, which includes $ 1.2 million of unamortized debt issuance costs related to the repurchase.

Additionally, during the three months ended June 30, 2024, the Company repurchased $ 117.3 million principal amount of its Notes at a weighted-average price equal to 84 % for $ 98.3 million and recognized a net gain of $ 17.3 million, which includes $ 1.6 million of unamortized debt issuance costs related to the repurchase.

The total amount paid and net gain recognized to repurchase $ 192.3 million principal amount during the six months ended June 30, 2024 was $ 156.1 million and $ 33.4 million, respectively.

The net gain is included in other income, net in the Condensed Consolidated Statements of Comprehensive Income (Loss).

Additionally, in April 2024, the Company repurchased $ 98.3 million principal amount of its Notes at a weighted-average price equal to 84 % for $ 82.4 million.

In the month of May, through May 8, 2024, the Company repurchased $ 19.0 million principal amount of its Notes at a weighted-average price equal to 84 % for $ 15.9 million.

As of March 31, 2024 and December 31, 2023 , the estimated fair value of the Notes was approximately $ 554 million and $ 558 million, respectively.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on March 31, 2024 and December 31, 2023, and are classified as Level 2 within the fair value hierarchy.

As of June 30, 2024 and December 31, 2023 , the estimated fair value of the Notes was approximately $ 464 million and $ 558 million, respectively.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on June 30, 2024 and December 31, 2023, and are classified as Level 2 within the fair value hierarchy.

Capped Call Transactions

7 unchanged sentences

Holders of the Notes will not have any rights with respect to the Capped Call Transactions.

Amended and Restated Credit Facility

(the “Administrative Agent”).

The Credit Agreement provides for a $ 50.0 million revolving credit facility with a maturity date of November 14, 2027.

As of June 30, 2024, the Credit Agreement was undrawn and there was no outstanding balance under the revolving credit facility.

On August 6, 2024, the Company prepaid all obligations and terminated all commitments, liabilities, and other obligations under the Credit Agreement.

There were no material early termination penalties incurred in connection therewith, all outstanding obligations and commitments under the Credit Agreement were satisfied and terminated, and all related security interests and liens securing such obligations and commitments were released.

Note 8 — Income Taxes

The income tax benefit for the three months ended March 31, 2024 is $ 0.7 million.

The income tax benefit for the three months ended March 31, 2023 was $ 3.7 million.

The effective tax rate for the three months ended March 31, 2024 is 49.3 % .

The effective tax rate for the three months ended March 31, 2023 was 15.3 % .

The effective tax rate differs from the federal statutory rate of 21% due primarily to a full valuation allowance against the Company’s U.S.

deferred tax assets, foreign jurisdictions that are taxed at different rates, state taxes, and the impact of discrete items that may occur in any given year but which are not consistent from year to year.

The Company is required to calculate its interim income tax provision using the estimated annual effective tax rate (“AETR”) method prescribed by Accounting Standards Codification (“ASC”) 740 - Income Taxes, and as such, excludes losses in jurisdictions where the Company cannot benefit in computing its worldwide AETR.

A separate AETR is computed and applied to ordinary losses in the U.S.

jurisdiction as required by ASC 740-270-30-36(a).

For the three and six months ended June 30, 2024 , the Company recorded foreign income tax benefit of $ 0.4 million and $ 1.0 million, respectively, and U.S.

income tax expense of zero .

Additionally, during the three months ended June 30, 2024 , the Company recorded true-up adjustments related to foreign income tax returns filed.

The Company’s effective tax rate for the three months ended June 30, 2024 was affected by a mix of ordinary losses in foreign jurisdictions that are tax-effected using a worldwide AETR of 30%, and ordinary income in the U.S.

jurisdiction that was tax-effected using a separate U.S.

The separate U.S.

AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to a full valuation allowance against the Company's U.S.

deferred tax assets.

For the three and six months ended June 30, 2023 , the Company recorded income tax benefit of $ 2.2 million and $ 5.9 million, respectively.

The estimated worldwide AETR differed from the U.S.

federal statutory tax rate of 21% due primarily to losses in foreign jurisdictions that are taxed at higher rates than the U.S.

federal rate, a full valuation allowance against the Company's U.S.

deferred tax assets, and the impact of accounting for business combination.

The Company has established a valuation allowance in the U.S.

against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized.

against its deferred tax assets because it is more likely than not that the deferred tax assets will not be realized.

In determining whether deferred tax assets are realizable, the Company considers numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize deferred tax assets.

The Company applies Accounting Standards Codification 740 – Income Taxes, the accounting standard addressing the accounting for uncertainty in income taxes, which prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return.

The Company has gross unrecognized tax benefits of $ 0.3 million and $ 1.1 million as of March 31, 2024 and December 31, 2023, respectively.

The Company applies ASC 740, the accounting standard addressing the accounting for uncertainty in income taxes, which prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return.

The Company has gross unrecognized tax benefits of $ 1.4 million and $ 1.1 million as of June 30, 2024 and December 31, 2023, respectively.

Note 9 — Share-Based Compensation

3 unchanged sentences

Share-based compensation expense was as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Total share-based compensation $ 6,498 $ 8,524 $ 13,134 $ 12,101

As of March 31, 2024 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 36.7 million and is expected to be recognized over a weighted-average period of 1.5 years.

As of June 30, 2024 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 44.8 million and is expected to be recognized over a weighted-average period of 1.9 years.

Note 10 — Commitments and Contingencies

On October 21, 2020, Hydrafacial filed a complaint (the “California Complaint”) against Ageless Serums LLC (“Ageless”) in the United States District Court for the Central District of California, Western Division, captioned Edge Systems LLC v.

Ageless Serums LLC, Case No.

2:20-cv-09669-FMO-PVC (the “California Case”), for various claims, including contributory trademark infringement, false designation of origin, induced breach of contract, tortious interference with contractual relations, and unfair competition.

In the California Complaint, Hydrafacial alleged that Ageless is selling its serums to Hydrafacial customers and intentionally encouraging those customers to market treatments performed by such customers as “Hydrafacial Treatments,” in violation of the customers’ license agreements with Hydrafacial and that Ageless is improperly marketing its products for use as part of the Hydrafacial treatment.

Hydrafacial sought monetary damages and injunctive relief from Ageless in the California Case.

Additionally, on December 22, 2020, Hydrafacial filed a complaint (the “Texas Complaint”) against Ageless in the United States District Court for the Southern District of Texas, Houston Division, captioned Edge Systems LLC v.

Ageless Serums LLC, Case No.

4:20-cv 04335 (the “Texas Case”), alleging infringement of six of Hydrafacial’s patents.

Hydrafacial sought monetary damages and injunctive relief from Ageless in the Texas Case.

On November 30, 2020, Ageless answered the California Complaint and asserted counterclaims for violation of antitrust, California statutory and common law unfair competition, false advertising, defamation, and tortious interference with prospective and actual economic advantage.

On July 12, 2021, Ageless answered the Texas Complaint and asserted similar counterclaims as those in the California Case.

On May 5, 2022, Ageless filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Houston Bankruptcy Court”), and the California Case and Texas Case were thus stayed under 11 U.S.C.

Section 362(a)(1).

On September 7, 2022, Hydrafacial filed a proof of claim, asserting general unsecured claim for damages arising from claims alleged in the California Case and Texas Case.

On January 4, 2023, Hydrafacial filed an Objection to the Confirmation of Debtor’s Subchapter V Plan of Reorganization and Brief in Support.

On March 8, 2023, Hydrafacial and Ageless engaged in mediation to settle the claims alleged in the California Case and Texas Case.

Ultimately, Hydrafacial and Ageless reached a tentative settlement agreement of all claims alleged in the California Case and Texas Case.

On September 18, 2023, Ageless filed the Debtor’s Third Amended Subchapter V Plan of Reorganization (the “Plan”).

The Plan incorporated the material terms of the settlement that Hydrafacial and Ageless reached at the mediation.

Under the Plan, Ageless was required to pay to Hydrafacial $ 0.1 million on or before October 15, 2023 and tender thirteen (13) subsequent quarterly payments, each consisting of $ 0.1 million, for a total of $ 1.4 million.

Ageless also agreed to various sales and marketing conditions that restrict Ageless from selling to Hydrafacial’s customers that use Hydrafacial’s service mark to provide hydradermabrasion treatments.

Ageless agreed to other covenants that are contained in Article VIII of the Plan.

The Plan also includes mutual releases between Hydrafacial and Ageless.

The Plan includes remedies for Hydrafacial’s benefit in the event that Ageless defaults on any of its material obligations under the Plan.

The Houston Bankruptcy Court considered confirmation of the Plan at a hearing held on September 22, 2023, and Hydrafacial expressed its support of the Plan at the hearing.

The Houston Bankruptcy Court entered the Findings of Fact, Conclusions of Law, and Order Confirming Debtor’s Third Amended Plan of Reorganization on September 22, 2023.

The Plan contains various conditions precedent to the effectiveness of the Plan that are contained in Article X of the Plan.

The Plan required Hydrafacial to dismiss the California Case and the Texas Case within ten (10) days of the occurrence of the effective date of the Plan.

On October 13, 2023, Ageless tendered its initial payment of $ 0.1 million to Hydrafacial pursuant to the terms and conditions of the Plan.

On February 2, 2024, all claims, counterclaims, and defenses in the California Case and the Texas Case were dismissed with prejudice.

On December 14, 2020, Hydrafacial filed a complaint (the “Cartessa Complaint”) against Cartessa Aesthetics, LLC (“Cartessa”) in the United States District Court for the Eastern District of New York (the “New York Court”), captioned Edge Systems LLC v.

Cartessa Aesthetics, LLC, Case No.

1:20-cv-6082, for patent infringement arising from Cartessa’s sale of Cartessa’s hydradermabrasion system that Hydrafacial alleged has infringed five of Hydrafacial’s patents on its device.

1:20-cv-6082, for patent infringement arising from Cartessa’s sale of Cartessa’s hydrodermabrasion system that Hydrafacial alleged has infringed five of Hydrafacial’s patents on its device.

Hydrafacial narrowed its allegation in the Cartessa Complaint to assert infringement of just four of its patents.

4 unchanged sentences

Hydrafacial also plans to appeal the New York Court’s grant of Cartessa’s Motion for Summary Judgment.

Cartessa - Eunsung Global Corp.

On June 11, 2024, Hydrafacial filed a complaint against Cartessa and its foreign manufacturer, Eunsung Global Corp., in the United States International Trade Commission.

A Notice of Institution of Investigation was issued on July 11, 2024, and the investigation was assigned investigation number 337-TA-1408.

In the investigation, Hydrafacial has asserted a single patent, U.S.

11,865,287, which relates to hydrodermabrasion systems but was not asserted in the Cartessa Complaint.

The investigation is in the early stages, and Hydrafacial is seeking an exclusion order preventing importation or sale of Cartessa’s hydrodermabrasion systems within the U.S.

Medicreations

On May 6, 2024, Hydrafacial filed a complaint against Medicreations LLC (“Medicreations”) in the United States District Court for Nevada, Case Number 2:24-cv-00855 (the “Medicreations Complaint”), for patent infringement arising from Medicreations’ sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed twelve of Hydrafacial’s patents.

The Medicreations Complaint is in its early stages, and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Medicreations.

Aesthetic Management Partners

On July 8, 2024, Hydrafacial filed a complaint against Aesthetic Management Partners Inc.

(“Aesthetic Management Partners”) in the United States District Court for the Western District of Tennessee, Case No.

2:24-cv-02480-JPM-TMP (the “AMP Complaint”), for patent infringement arising from Aesthetic Management Partners’ sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The AMP Complaint is in its early stages, and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Aesthetic Management Partners.

Medical Purchasing Resource

On June 4, 2024, Hydrafacial filed a complaint against Medical Purchasing Resource, LLC (“Medical Purchasing Resource”) in the United States District Court for the Central District of California, Case No.

2:24-cv-4655 (the “MPR Complaint”), for trademark infringement, false designation of origin, unfair competition, tortious interference, and other causes of action relating to Hydrafacial’s trademark rights.

The MPR Complaint is in its early stages, and Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Medical Purchasing Resource.

Securities Class Action

2 unchanged sentences

Alghazwi, individually and on behalf of all others similarly situated, v.

The Beauty Healthy Company, Andrew Stanleick, Liyuan Woo, and Michael Monahan, Case No.

The Beauty Health Company, Andrew Stanleick, Liyuan Woo, and Michael Monahan, Case No.

2:23-cv-09733 (C.D.

6 unchanged sentences

On May 2, 2024, the court granted the Dijkgraafs’ motion for appointment as lead plaintiff and approved the Dijkgraafs’ counsel, Hagens Berman, as lead counsel.

On May 8, 2024, the parties met and conferred to discuss a proposed schedule for the filing of a consolidated, amended complaint and defendants’ response(s) thereto.

On May 9, 2024, the parties submitted a joint stipulation to the court setting forth a proposed schedule for the filing of an amended complaint and defendants’ response thereto.

The proposed schedule has not yet been approved by the court.

On July 1, 2024, lead plaintiffs filed a consolidated amended class action complaint asserting the same causes of action as the original complaint.

The Securities Class Action case is assigned to U.S.

2 unchanged sentences

The Company is unable to reasonably estimate the possible loss or range of loss, if any, associated with these claims, and, accordingly, it has not accrued any liability associated with the Securities Class Action.

Derivative Action - Margie Elstein

Consolidated Derivative Action

On February 8, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former president and chief executive officer, Andrew Stanleick;

8 unchanged sentences

The relief sought in the complaint includes a finding of demand futility, a finding that the individual defendants are liable for breaching their fiduciary duties (as current/former officers and directors), and an award of compensatory damages for harm suffered by the Company and its stockholders for harm allegedly sustained as a result of the alleged fiduciary duty violation.

The Elstein Derivative Action has been assigned to Vice Chancellor Lori Will.

The Company believes that the claims asserted in the Elstein Derivative Action have no merit and intends to vigorously defend them.

Derivative Action - Richard Montague

On May 1, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former president and chief executive officer, Andrew Stanleick;

its former chief financial officer, Liyuan Woo, and current members of the Company’s Board of Directors:

Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, the Company as the nominal defendant.

Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, with the Company as the nominal defendant.

The complaint, styled Richard Montague, derivatively on behalf of The Beauty Health Company v.

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The relief sought in the Montague Derivative Action includes (a) awarding damages for harm suffered by the Company allegedly sustained as a result of the individual defendants’ alleged breach of fiduciary duties, gross mismanagement, waste of corporate assets, and unjust enrichment, (b) awarding damages for harm suffered by the Company allegedly sustained as a result of the Company’s directors’ alleged aiding and abetting of breaching their fiduciary duties, (c) directing the Company to reform and improve its corporate governance and internal procedures, to comply with its existing governance obligations and all applicable laws, and to protect its investors from a recurrence of the alleged damaging events, and (d) awarding the plaintiff-stockholder the costs and disbursements of the Montague Derivative Action, including reasonable attorneys’ fees, accountants’ and experts’ fees, costs, and expenses.

The Company believes that the claims asserted in the Montague Derivative Action have no merit and intends to vigorously defend them.

On May 22, 2024, the parties to the Elstein Derivative Action and Montague Derivative Action submitted a Stipulation and Proposed Order Governing Consolidation, Appointment of Lead, and Deadline to Respond to Operative Complaint.

On May 24, 2024, Vice Chancellor Will, who was assigned to both the Elstein Derivative Action and the Montague Derivative Action, entered the Stipulation and Order Governing Consolidation, Appointment of Lead, and Deadline to Respond to Operative Complaint (the “Consolidation Order”).

Per the Consolidation Order, the Elstein Derivative Action and the Montague Derivative Action were consolidated into a single derivative action, styled In re The Beauty Health Company Consolidated Stockholder Derivative Litigation, C.A.

2024-0114-LWW (Del.

Ch.) (the “Consolidated Derivative Action”).

The Consolidation Order designated the law firms of Gainey McKenna & Egleston and Komlossy Law, P.A.

as co-lead counsel for plaintiffs in the Consolidated Derivative Action, and designated the law firm of Cooch and Taylor, P.A.

as Delaware counsel for plaintiffs in the Consolidated Derivative Action.

Additionally, the Consolidation Order designated the complaint filed in the Elstein Derivative Action as the operative complaint for the Consolidated Derivative Action (the “Operative Complaint”), further providing that defendants are not obligated to answer or otherwise respond to the complaint filed in the Montague Derivative Action.

The Consolidation Order further provided that defendants shall answer or otherwise respond to the Operative Complaint by August 25, 2024.

The Company believes that the claims asserted in the Consolidated Derivative Action have no merit and intends to vigorously defend them.

Securities and Exchange Commission ( the “ SEC”) Subpoena

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In connection with the consummation of the Business Combination, on May 4, 2021, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with BLS Investor Group LLC and the Hydrafacial Stockholders.

Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding shares of Class A Common Stock or any other equity securities (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor or the Hydrafacial stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 shares of Class B common stock (the “Founder Shares”) that were owned by the Sponsor and converted into shares of Class A Common Stock in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the Hydrafacial stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights.

Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding shares of Class A Common Stock or any other equity securities (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by BLS Investor Group LLC (the “Sponsor”) or the Hydrafacial Stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 shares of Class B common stock (the “Founder Shares”) that were owned by the Sponsor and converted into shares of Class A Common Stock in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the Hydrafacial Stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights.

The Registration Rights Agreement provides that the Company will, within 60 days after the consummation of the Business Combination, file with the SEC a shelf registration statement registering the resale of the shares of common stock held by the Restricted Stockholders and will use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 60 days following the filing deadline.

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Holders of Class A Common Stock are entitled to one vote for each share.

As of March 31, 2024 and December 31, 2023, there were 123,453,419 and 122,899,002 , respectively, of Class A Common Stock issued and outstanding.

As of June 30, 2024 and December 31, 2023, there were 123,993,785 and 122,899,002 , respectively, of Class A Common Stock issued and outstanding.

The Company has not declared or paid any dividends with respect to its Class A Common Stock .

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Under this share repurchase program, for the year ended December 31, 2023, the Company repurchased and retired 10.4 million shares for $ 30.2 million excluding taxes.

During the three months ended March 31, 2024, the Company did not repurchase any shares of its common stock.

During the three and six months ended June 30, 2024, the Company did no t repurchase any shares of its common stock.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s Board of Directors.

At March 31, 2024 and December 31, 2023 , there were no shares of preferred stock issued or outstanding.

Note 13 — Net Loss Attributable to Common Stockholders

The following table sets forth the calculation of both basic and diluted net loss per share as follows for the periods indicated:

Three Months Ended March 31,

At June 30, 2024 and December 31, 2023 , there were no shares of preferred stock issued or outstanding.

Note 13 — Net Income (Loss) Attributable to Common Stockholders

The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except share and per share amounts) 2024 2023 2024 2023

Net loss available to common stockholders - basic

$ ( 679 ) $ ( 20,259 )

Net income (loss) available to common stockholders - basic $ 202 $ 3,364 $ ( 477 ) $ ( 16,895 )

Adjustments related to Convertible Notes (1)

Net loss available to common stockholders - diluted

( 14,651 ) — ( 27,722 ) —

Net (loss) income available to common stockholders - diluted $ ( 14,449 ) $ 3,364 $ ( 28,199 ) $ ( 16,895 )

Weighted average common shares outstanding - basic

2 unchanged sentences

Convertible Notes

18,208,953 — 19,782,868 —

Weighted average common shares outstanding - diluted

141,927,750 132,716,024 143,200,221 132,569,209

Basic net loss per share:

Basic net income (loss) per share:

$ 0.00 $ 0.03 $ 0.00 $ ( 0.13 )

Diluted net loss per share:

Dilutive net (loss) income per share:

$ ( 0.10 ) $ 0.03 $ ( 0.20 ) $ ( 0.13 )

(1) For the three months ended March 31, 2024, the adjustments related to Convertible Notes include the net gain on repurchase offset by interest expense and amortization of debt issuance costs related to our Notes (net of taxes).

(1) For the three and six months ended June 30, 2024, the adjustments related to Convertible Notes include the net gain on repurchase offset by interest expense and amortization of debt issuance costs related to our Notes (net of taxes).

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Convertible Notes — 23,614,425 — 23,614,425

4 unchanged sentences

2,302,162 2,168,560 2,302,162 2,168,560

For the three months ended March 31, 2024 and 2023, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net loss per common share because their effect would be antidilutive.

For the three and six months ended June 30, 2024 and 2023, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net (loss) income per common share because their effect would be antidilutive.

Note 14 — New Accounting Pronouncements

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The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In March 2024, the FASB issued ASU 2024-02 "Codification Improvements—Amendments to Remove References to the Concepts Statements." ASU 2024-02 amends the FASB Accounting Standards Codification to remove references to various FASB Concept Statements.

The amendments are considered to be codification improvements only and are effective for annual periods beginning January 1, 2025, with early adoption permitted.

Adoption of ASU 2024-02 is not expected to have a material impact to our consolidated financial statements or related disclosures.

Note 15 — Syndeo Program

To stand behind its commitment to its customers and protect the Company’s brand reputation, during October 2023, the Company’s management decided that, with respect to Syndeo devices, the Company will only market and sell Syndeo 3.0 devices.

The Company will provide, at no cost to the customer, the option of (i) a technician upgrade to their Syndeo 1.0 or 2.0 devices to 3.0 standards in the field;

The Company provided, at no cost to the customer, the option of (i) a technician upgrade to their Syndeo 1.0 or 2.0 devices to 3.0 standards in the field;

or (ii) a replacement Syndeo 3.0 device for their existing device (the “Syndeo Program”).

Additionally, the Company will extend the customer’s warranty by one year for each system from the date it was either brought to the 3.0 standards or the customer received a Syndeo 3.0 device.

Additionally, the Company extended the customer’s warranty by one year for each system from the date it was either brought to the 3.0 standards or the customer received a Syndeo 3.0 device.

As of June 30, 2024, the Syndeo Program is substantially complete.

As of December 31, 2023, the Company accrued costs of $ 21.0 million, primarily for the estimated cost to remediate, upgrade or exchange the remaining Syndeo 1.0 and 2.0 builds.

The following table summarizes the Syndeo Program charges and usage for the three months ended March 31, 2024 (in thousands):

The following table summarizes the Syndeo Program usage for the three and six months ended June 30, 2024 (in thousands):

Program liability as of December 31, 2023

Program liability as of March 31, 2024 $ 8,314

Note 16 — Revision for Immaterial Misstatements

As disclosed in Note 1 – Description of Business, subsequent to the issuance of the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023, during the quarter ended June 30, 2023, the Company identified misstatements related to the elimination of intercompany balances and right of return assets.

Although the Company concluded that these misstatements were not material, either individually or in the aggregate, the Company elected to revise its previously issued consolidated financial statements to correct for these misstatements.

The revision to the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) and Condensed Consolidated Statements of Cash Flows and related disclosures in Note 13 – Net Loss Attributable to Common Stockholders are detailed in the tables below.

As of December 31, 2022 and March 31, 2023, accumulated deficit was overstated $ 2.8 million and $ 4.7 million, respectively, and as such, previously reported stockholders’ equity of $ 164.3 million and $ 147.7 million was revised to $ 167.1 million and $ 152.4 million, respectively.

There were no other changes to the unaudited Condensed Consolidated Statements of Stockholders’ Equity (Deficit) that have not otherwise been reflected in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) as detailed in the tables below.

Three Months Ended March 31, 2023

Condensed Consolidated Statement of Comprehensive Income (Loss) (in thousands, except per share amounts) As Previously Reported Adjustment As Revised

Foreign currency transaction loss (gain), net $ 877 $ ( 2,026 ) $ ( 1,149 )

Loss before provision for income taxes $ ( 25,947 ) $ 2,026 $ ( 23,921 )

Net loss $ ( 22,285 ) $ 2,026 $ ( 20,259 )

Comprehensive loss $ ( 21,397 ) $ 2,026 $ ( 19,371 )

Net loss per share - Basic $ ( 0.17 ) $ 0.02 $ ( 0.15 )

Net loss per share - Diluted $ ( 0.17 ) $ 0.02 $ ( 0.15 )

Three Months Ended March 31, 2023

Condensed Consolidated Statement of Cash Flows (in thousands) As Previously Reported Adjustment As Revised

Net loss $ ( 22,285 ) $ 2,026 $ ( 20,259 )

Adjustments to reconcile net loss to net cash from operating activities:

Other, net $ 1,511 $ ( 2,026 ) $ ( 515 )

Change in operating assets and liabilities:

Inventories $ ( 15,771 ) $ 1,866 $ ( 13,905 )

Prepaid expenses, other current assets, and income tax receivable $ ( 203 ) $ ( 1,122 ) $ ( 1,325 )

Accounts payable, accrued expenses, and income tax payable $ ( 3,085 ) $ ( 744 ) $ ( 3,829 )

Usage ( 7,402 )

Program liability as of June 30, 2024 $ 912

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-Q

Item 1. Financial Statements