What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 149 added, 66 removed, 162 unchanged (57% of the section changed)

1 unchanged sentence

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the three months ended March 31, 2024 (“the Quarterly Report on Form 10-Q”) contains “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.

This Quarterly Report on Form 10-Q for the three months ended June 30, 2024 (the “Quarterly Report on Form 10-Q”) contains “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.

When used in this Quarterly Report on Form 10-Q, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.

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Business and Macroeconomic Conditions

During the three months ended March 31, 2024, we continued to execute against our plan to expand our footprint by selling and placing our patented hydradermabrasion delivery systems (“Delivery Systems”) worldwide, drive consumables, which consist of single-use tips, solutions, serums and other consumables used to provide a hydrafacial treatment that cleanses, extracts, and hydrates the skin (collectively “Consumables”), invest in our community of providers, partners, and consumers, drive brand awareness, and optimize our global infrastructure.

During the three and six months ended June 30, 2024 , we continued to execute against our plan to expand our footprint by selling and placing our patented hydradermabrasion delivery systems (“Delivery Systems”) worldwide, drive consumables, which consist of single-use tips, solutions, serums and other consumables used to provide a hydrafacial treatment that cleanses, extracts, and hydrates the skin (collectively “Consumables”), invest in our community of providers, partners, and consumers, drive brand awareness, and optimize our global infrastructure.

Although we believe we can be successful in our current operating environment, various factors may impact our business in unpredictable ways such as:

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• Ongoing issues related to new and older models of Hydrafacial’s current generation Delivery System, Syndeo (“Syndeo”), and our actions to remediate such ongoing issues.

The Company has continued to execute replacements under the Syndeo Program and continues to address customer cases under warranty.

The Company has accrued approximately $8 million as part of its Syndeo Program and approximately $7 million for its warranty reserve as of March 31, 2024 based on the Company’s estimated cost to replace older Syndeo models and address incidences for delivery systems under warranty.

The Company executed replacements under the Syndeo Program and continues to address customer cases under warranty.

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

We may be able to offset cost pressures through increasing the selling prices of some of our products, increasing value engineering efforts to optimize product costs, increasing the diversification of our suppliers and supplier contracts, increasing natural foreign currency hedging, as applicable, and reducing discretionary spending.

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We remain attentive to these business and macroeconomic conditions that may materially impact our business, and we continue to explore and implement reporting and quality management systems and risk mitigation strategies in the face of these unfolding conditions to remain agile in adopting to changing circumstances.

Comparison of Three Months Ended March 31, 2024 to Three Months Ended March 31, 2023

Comparison of Three Months Ended June 30, 2024 to Three Months Ended June 30, 2023

The following tables set forth our consolidated results of operations in dollars and as a percentage of net sales for the periods presented.

The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

The results of operations data for the three months ended March 31, 2024 and March 31, 2023 have been derived from the condensed consolidated financial statements included elsewhere in this Form 10-Q.

The results of operations data for the three months ended June 30, 2024 and June 30, 2023 have been derived from the condensed consolidated financial statements included elsewhere in this Form 10-Q.

Amounts and percentages may not foot due to rounding.

Three Months Ended March 31,

Three Months Ended June 30,

(in millions) 2024 % of Net Sales 2023 % of Net Sales

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Loss from operations (22.1) (24.4) (13.1) (11.2)

(17.0) (20.9) (17.3) (20.1)

Interest expense 2.5 2.7 3.4 2.9

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Foreign currency transaction loss (gain), net 1.1 1.3 (0.4) (0.3)

Loss before provision for income tax

(1.3) (1.6) (23.9) (27.7)

(Loss) income before provision for income taxes (0.2) (0.2) 1.2 1.0

Income tax benefit (0.4) (0.4) (2.2) (1.9)

Net income $ 0.2 0.2 % $ 3.4 2.9 %

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

Delivery Systems

$ 35.2 $ 65.6 $ (30.4) (46.3) %

Consumables 55.4 51.9 3.5 6.7 %

Total net sales $ 90.6 $ 117.5 $ (26.9) (22.9) %

Percentage of net sales

Delivery Systems 38.9% 55.8%

Consumables 61.1% 44.2%

Total 100.0% 100.0%

Total net sales for the three months ended June 30, 2024 decreased $26.9 million , or 22.9% , compared to the three months ended June 30, 2023.

Delivery Systems net sales for the three months ended June 30, 2024 decreased $30.4 million , or 46.3% , compared to the three months ended June 30, 2023, with decreases across all regions.

The decrease in Delivery Systems net sales reflects a challenging year-over-year comparison due to the prior year international launch of Syndeo, which included trade-up net sales.

Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions and as the Company works to strengthen customer confidence in Syndeo.

Consumables net sales for the three months ended June 30, 2024 increased $3.5 million , or 6.7% , compared to the three months ended June 30, 2023.

The increase in Consumables net sales was primarily attributable to increased placements of Delivery Systems and the adjoining consumption of Consumables during the three months ended June 30, 2024.

Cost of Sales, Gross Profit, and Gross Margin

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

Cost of sales $ 49.7 $ 49.6 $ 0.1 0.1%

Gross profit $ 40.9 $ 67.9 $ (26.9) (39.7)%

Gross margin 45.2 % 57.8 %

Cost of sales for the three months ended June 30, 2024 increased $0.1 million, compared to the three months ended June 30, 2023 primarily due to higher inventory related charges, offset by lower net sales .

Cost of sales for the three months ended June 30, 2024 include $13.8 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.

Gross margin decreased to 45.2% during the three months ended June 30, 2024 from 57.8% during the three months ended June 30, 2023 primarily due to higher inventory related charges resulting from the inventory write-downs.

Operating Expenses

Selling and Marketing

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

Selling and marketing $ 30.5 $ 43.0 $ (12.6) (29.2) %

As a percentage of net sales 33.6 % 36.6 %

Selling and marketing expense for the three months ended June 30, 2024 decreased $12.6 million, or 29.2%, compared to the three months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, including sales commission expense and lower marketing spend.

Research and Development

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

Research and development $ 1.2 $ 2.9 $ (1.7) (59.8) %

As a percentage of net sales 1.3 % 2.5 %

Research and development expense for the three months ended June 30, 2024 decreased $1.7 million, or 59.8%, compared to the three months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense.

General and Administrative

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

General and administrative $ 31.4 $ 35.1 $ (3.7) (10.5) %

As a percentage of net sales 34.7 % 29.9 %

General and administrative expense for the three months ended June 30, 2024 decreased $3.7 million, or 10.5%, compared to the three months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, including share-based compensation expense.

Interest Income, Change in Fair Value of Warrant Liabilities, and Other Income, Net

Three Months Ended June 30, Change

(in millions) 2024 2023 Amount %

Interest income

$ (4.2) $ (5.7) $ 1.5 (26.6) %

Three Months Ended March 31, Change

Change in fair value of warrant liabilities

$ (4.0) $ (11.6) $ 7.5 (65.1) %

Other income, net

$ (17.3) $ — $ (17.3) N/M

N/M - Not meaningful

Interest income for the three months ended June 30, 2024 decreased $1.5 million compared to the three months ended June 30, 2023 primarily due to lower average invested balances during the three months ended June 30, 2024 .

During the three months ended June 30, 2024 , the Company recognized income of $4.0 million related to the change in the fair value of the warrant liabilities, a decrease of $7.5 million, as compared to income of $11.6 million for the three months ended June 30, 2023 , driven primarily by the fluctuation of the Company’s stock price.

During the three months ended June 30, 2024 , the Company recognized $17.3 million net gain related to the repurchase of its 1.25% Convertible Senior Notes due 2026 (the “Notes”).

Comparison of Six Months Ended June 30, 2024 to Six Months Ended June 30, 2023

The following tables set forth our consolidated results of operations in dollars and as a percentage of net sales for the periods presented.

The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

The results of operations data for the six months ended June 30, 2024 and June 30, 2023 have been derived from the condensed consolidated financial statements included elsewhere in this Form 10-Q.

Amounts and percentages may not foot due to rounding.

Six Months Ended June 30,

(in millions) 2024 % of Net Sales 2023 % of Net Sales

Net sales $ 172.0 100.0 % $ 203.8 100.0 %

Cost of sales 82.7 48.1 81.8 40.1

Gross profit 89.3 51.9 122.0 59.9

Operating expenses

Selling and marketing 64.2 37.3 81.7 40.1

Research and development 4.0 2.3 5.2 2.6

General and administrative 60.3 35.0 65.5 32.1

Total operating expenses 128.4 74.7 152.4 74.8

Loss from operations (39.1) (22.7) (30.5) (14.9)

Interest expense 5.5 3.2 6.8 3.4

Interest income (9.6) (5.6) (10.0) (4.9)

Other income, net (33.4) (19.4) (0.5) (0.2)

Change in fair value of warrant liabilities (2.6) (1.5) (2.5) (1.2)

Foreign currency transaction loss (gain), net 2.4 1.4 (1.5) (0.8)

Loss before provision for income taxes (1.5) (0.9) (22.8) (11.2)

Income tax benefit (1.0) (0.6) (5.9) (2.9)

Net loss $ (0.5) (0.3) % $ (16.9) (8.3) %

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

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Total 100.0% 100.0%

Total net sales for the three months ended March 31, 2024 decreased $4.9 million , or 5.7% , compared to the three months ended March 31, 2023.

Delivery System net sales for the three months ended March 31, 2024 decreased $9.6 million , or 21.1% , compared to the three months ended March 31, 2023, with decreases across all regions.

Delivery Systems net sales were impacted as the Company works to strengthen customer confidence in Syndeo.

Consumables net sales for the three months ended March 31, 2024 increased $4.7 million , or 11.5% , compared to the three months ended March 31, 2023.

The increase in Consumables net sales was primarily attributable to increased placements of delivery systems and the adjoining consumption of consumables during the three months ended March 31, 2024.

Total net sales for the six months ended June 30, 2024 decreased $31.8 million , or 15.6% , compared to the six months ended June 30, 2023.

Delivery System net sales for the six months ended June 30, 2024 decreased $40.0 million , or 36.0% , compared to the six months ended June 30, 2023, with decreases across all regions.

The decrease in Delivery Systems net sales reflects a challenging year-over-year comparison due to the prior year international launch of Syndeo, which included trade-up net sales.

Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions and as the Company works to strengthen customer confidence in Syndeo.

Consumables net sales for the six months ended June 30, 2024 increased $8.2 million , or 8.8% , compared to the six months ended June 30, 2023.

The increase in Consumables net sales was primarily attributable to increased placements of Delivery Systems and the adjoining consumption of Consumables during the six months ended June 30, 2024.

Cost of Sales, Gross Profit, and Gross Margin

Three Months Ended March 31, Change

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

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Gross margin 51.9 % 59.9 %

Cost of sales for the three months ended March 31, 2024 increased $0.9 million, which was impacted by higher indirect product costs and inventory related charges .

Gross profit decreased from $54.1 million during the three months ended March 31, 2023 to $48.4 million during the three months ended March 31, 2024, which was impacted by higher indirect product costs and inventory related charges.

Cost of sales for the six months ended June 30, 2024 increased $0.9 million, compared to the six months ended June 30, 2023 primarily due to higher inventory related charges, offset by lower net sales.

Cost of sales for the six months ended June 30, 2024 include $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.

Gross margin decreased to 51.9% during the six months ended June 30, 2024 from 59.9% during the six months ended June 30, 2023 primarily due to higher inventory related charges resulting from the inventory write-downs.

Operating Expenses

Selling and Marketing

Three Months Ended March 31, Change

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

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As a percentage of net sales 37.3 % 40.1 %

Selling and marketing expense for the three months ended March 31, 2024 decreased $5.0 million, or 13.0%, compared to the three months ended March 31, 2023.

Selling and marketing expense for the six months ended June 30, 2024 decreased $17.6 million, or 21.5%, compared to the six months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, including sales commission expense and lower marketing spend.

Research and Development

Three Months Ended March 31, Change

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

1 unchanged sentence

As a percentage of net sales 2.3 % 2.6 %

Research and development expense for the three months ended March 31, 2024 increased $0.5 million, or 20.2%, compared to the three months ended March 31, 2023.

The increase is primarily driven by higher share-based compensation expense.

Research and development expense for the six months ended June 30, 2024 decreased $1.3 million, or 24.0%, compared to the six months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, including lower share-based compensation expense.

General and Administrative

Three Months Ended March 31, Change

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

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As a percentage of net sales 35.0 % 32.1 %

General and administrative expense for the three months ended March 31, 2024 decreased $1.5 million, or 5.0%, compared to the three months ended March 31, 2023.

The decrease is primarily driven by lower professional fees and software expenses, partially offset by higher share-based compensation expense.

General and administrative expense for the six months ended June 30, 2024 decreased $5.2 million , or 8.0% , compared to the six months ended June 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, professional fees, and software expenses.

Interest Income, Change in Fair Value of Warrant Liabilities, and Other Income, Net

Three Months Ended March 31, Change

Six Months Ended June 30, Change

(in millions) 2024 2023 Amount %

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N/M - Not meaningful

Interest income for the three months ended March 31, 2024 increased $1.0 million compared to the three months ended March 31, 2023 primarily due to higher interest earned on our investment in money market funds.

During the three months ended March 31, 2024 , the Company recognized income of $1.5 million related to the change in the fair value of the warrant liabilities, a decrease of $7.6 million, as compared to income of $9.1 million for the three months ended March 31, 2023 , driven primarily by the fluctuation of the Company’s stock price.

During the three months ended March 31, 2024 , the Company recognized $16.1 million net gain related to the repurchase of its Notes.

Interest income for the six months ended June 30, 2024 decreased $0.5 million compared to the six months ended June 30, 2023 primarily due to lower average invested balances during the six months ended June 30, 2024 .

During the six months ended June 30, 2024 , the Company recognized income of $2.6 million related to the change in the fair value of the warrant liabilities, an increase of $0.1 million , as compared to income of $2.5 million for the six months ended June 30, 2023 , driven primarily by the fluctuation of the Company’s stock price.

During the six months ended June 30, 2024 , the Company recognized $33.4 million net gain related to the repurchase of its Notes.

Liquidity and Capital Resources

Our primary sources of capital have been (i) cash flow from operating activities, (ii) net proceeds received from the consummation of the Business Combination, (iii) net proceeds received from the 1.25% Convertible Senior Notes due 2026 (the “Notes”), and (iv) net proceeds received from the exercise of public and private placement warrants.

As of March 31, 2024 , we had cash, cash equivalents, and restricted cash of approximately $444.6 million.

A revolving credit facility of $50 million is also available to us as a source of capital.

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

Our primary sources of capital have been (i) cash flow from operating activities, (ii) net proceeds received from the consummation of the Business Combination, (iii) net proceeds received from the Notes, and (iv) net proceeds received from the exercise of public and private placement warrants.

As of June 30, 2024 , we had cash, cash equivalents, and restricted cash of approximately $349.5 million.

Our operating cash flows result primarily from cash received from sales of Delivery Systems and Consumables, offset primarily by cash payments made for products and services, employee compensation, payment processing and related transaction costs, operating leases, marketing expenses, and interest payments on our long-term obligations.

Cash received from our customers and other activities generally corresponds to our net sales.

Our sources of liquidity and cash flows are used to fund ongoing operations, research and development projects for new products, services, and technologies, and provide ongoing support services for our providers and customers, including liabilities associated with the Syndeo Program .

As part of our business strategy, we occasionally evaluate potential acquisitions of businesses and products and technologies.

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Based on our sources of capital, management believes that we have sufficient liquidity to satisfy our anticipated working capital requirements for our ongoing operations and obligations for at least the next 12 months.

timing of new product launches, timing and investments needed for international expansion, the continuing market acceptance of the Company’s products and services, expansion, and overall economic conditions.

The Company may also evaluate opportunities to repurchase and retire debt;

the Company repurchased its Notes in both the first and second quarter of 2024.

However, we will continue to evaluate our capital expenditure needs based upon factors including but not limited to our rate of revenue growth, potential acquisitions, the timing and amount of spending on research and development, growth in sales and marketing activities, the timing of new product launches, timing and investments needed for international expansion, the continuing market acceptance of the Company’s products and services, expansion, and overall economic conditions.

We may, from time to time, seek to redeem or repurchase our outstanding debt or equity securities through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise.

Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

For information regarding the Company’s repurchases of its Notes during the first and second quarter of 2024, see Note 7, Long-Term Debt, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

If cash generated from operations is insufficient to satisfy our capital requirements, we may have to sell additional equity or debt securities or obtain expanded credit facilities to fund our operating expenses.

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However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional capital were obtained, then management would restructure the Company in a way to preserve our business while maintaining expenses within operating cash flows.

Amended and Restated Credit Agreement

On November 14, 2022, the Company, as successor by assumption to Hydrafacial (formerly known as Edge Systems LLC), 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 Credit Agreement provides for a $50.0 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 $50.0 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 restrictive and financial covenants of the Credit Agreement.

Convertible Senior Notes

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The Notes issued on September 14, 2021 include the $100.0 million principal amount of Notes issued pursuant to the full exercise by the initial purchasers of such option.

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 .

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.

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.

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.

The total amount paid to repurchase $192.3 million principal amount was $156.1 million for the six months ended June 30, 2024.

Capped Call Transactions

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

Amended and Restated Credit Agreement

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 $50.0 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.

Known Tren ds or Uncertainties

The majority of our customers operate within the medical industry (dermatologists and plastic surgeons), esthetician, and beauty retail industry.

Although we have not seen any significant reduction in revenues to date due to consolidations, we have seen some consolidation in our industry during economic downturns.

The majority of our customers operate within the medical industry (dermatologists and plastic surgeons), esthetician industry, and beauty retail industry.

Although we have not seen any significant reduction in revenues to date due to consolidations, we have seen some consolidation in these industries during economic downturns.

These consolidations have not had a negative effect on our total sales;

however, should consolidations and downsizing in the industry continue to occur, those events could adversely impact our revenues and earnings going forward.

however, should consolidations and downsizing in the industries continue to occur, those events could adversely impact our revenues and earnings going forward.

In addition, we continue to face macro-economic challenges such as the possibility of recession or financial market instability, and the impact of any governmental actions on the economy.

These factors may adversely impact consumer, business, and government spending as well as customers' ability to pay for our products and services on an ongoing basis.

As a result, if economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, our growth rate could be affected by consolidation and downsizing in the medical, esthetician, and beauty retail industry.

These factors may adversely impact consumers, business, and government spending as well as our customers' ability to pay for our products and services on an ongoing basis.

If economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, our revenues could be adversely affected.

Macro-economic challenges and credit conditions have negatively impacted our revenues in 2024.

We are continuing to monitor these and other risks that may affect our business so that we can respond appropriately.

Negative trends in our financial performance or financial condition may result in a sustained decline in our stock price, which may result in a triggering event necessitating an interim goodwill impairment assessment and potential goodwill impairment.

Syndeo Program Costs

The Company has accrued $8.3 million as of March 31, 2024 for the estimated cost for its remediation plan to upgrade or exchange customer Syndeo devices to meet the Syndeo 3.0 device standard which is expected to be substantially complete by June 30, 2024 related to initial replacement devices.

The Company accrued $0.9 million as of June 30, 2024 for the remaining estimated cost for its remediation plan to upgrade or exchange customer Syndeo devices to meet the Syndeo 3.0 device standard.

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

Discontinuation of Trade-up Program in 2024

The Company has historically accepted Delivery Systems in trade-up transactions with the intent to refurbish and resell such Delivery Systems received from the customer.

During the year ended December 31, 2023, the Company recognized approximately $17 million of revenue based on the estimated fair value of such Delivery Systems.

The revenue recognized for such Delivery Systems during the three months ended March 31, 2023 was immaterial.

While the Company still expects to resell Delivery Systems previously received in trade-up transactions, starting in 2024, the Company will discontinue the use of trade-up transactions and the ensuing revenue recognition for noncash consideration.

During the six months ended June 30, 2023 and the year ended December 31, 2023, the Company recognized approximately $6 million and $17 million, respectively, of revenue based on the estimated fair value of such Delivery Systems.

While the Company still expects to resell Delivery Systems previously received in trade-up transactions, starting in 2024, the Company plans to discontinue the use of trade-up transactions and the ensuing revenue recognition for noncash consideration.

The following table summarizes the activities from our statements of cash flows.

Amounts may not foot due to rounding.

Three Months Ended March 31,

Six Months Ended June 30,

(Dollars in millions) 2024 2023

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Changes in working capital (33.3) (10.1)

Net cash used for operating activities (16.9) (13.0)

Net cash (used for) provided by operating activities (10.7) 9.0

Net cash used for investing activities (3.8) (24.9)

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Operating Activities

Net cash used for operating activities for the three months ended March 31, 2024 was $16.9 million, as compared to net cash used for operating activities of $13.0 million for the three months ended March 31, 2023 .

The change in cash used for operating activities was primarily related to the net impact of current year net loss and other non-cash adjustments, which include a net gain of $16.1 million related to the repurchase of our Notes .

The prior year net loss and non-cash adjustments include the impact of $9.1 million loss resulting from the change in fair value of the Company’s warrants.

Net cash used for operating activities for the six months ended June 30, 2024 was $10.7 million, as compared to net cash provided by operating activities of $9.0 million for the six months ended June 30, 2023 .

The change in cash used for operating activities was primarily related to higher working capital usage, the net impact of current year net loss, and other non-cash adjustments.

The current year net loss and non-cash adjustments include a net gain of $33.4 million related to the repurchase of our Notes and higher inventory related charges as compared to the prior year.

Investing Activities

Net cash used for investing activities for the three months ended March 31, 2024 was $1.8 million, as compared to $21.7 million for the three months ended March 31, 2023 .

Net cash used for investing activities for the six months ended June 30, 2024 was $3.8 million, as compared to $24.9 million for the six months ended June 30, 2023 .

The change in cash used for investing activities was primarily related to prior year’s asset acquisitions of Esthetic Medical Inc.

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Financing Activities

Net cash used for financing activities for the three months ended March 31, 2024 was $58.6 million, as compared to $2.2 million for the three months ended March 31, 2023 .

Net cash used for financing activities for the six months ended June 30, 2024 was $157.4 million, as compared to $3.7 million for the six months ended June 30, 2023 .

The change in cash used for financing activities was primarily related to the repurchase of $192.3 million principal amount of our Notes at a weighted-average price equal to 81% for $156.1 million.

12 unchanged sentences

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 2. Management’s Discussion and Analysis