SkinHealth Systems Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Statements 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. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled Risk Factors of this filing and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2024 (the “Annual Report on Form 10-K”). Important factors, among others, that may affect actual results or outcomes include the inability to recognize the anticipated benefits of the business combination consummated on May 4, 2021 pursuant to a certain Agreement and Plan of Merger entered into by and among the Company and other parties (the “Business Combination”); costs related to the Business Combination; the Company’s availability of cash for debt service and exposure to risk of default under debt obligations; the Company’s ability to manage growth; the Company’s ability to execute its business plan; potential litigation involving the Company; changes in applicable laws or regulations; and the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and also with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K. Unless the context otherwise requires, references to the “Company”, “Hydrafacial”, “we”, “us”, and “our” in this section are intended to mean the business and operations of The Beauty Health Company and its consolidated subsidiaries. Company Overview The Beauty Health Company is a global category-creating company 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. The Company’s brands are pioneers: Hydrafacial in hydradermabrasion; SkinStylus in microneedling; and Keravive in scalp health. 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. 20 Business and Macroeconomic Conditions 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: • Disruptions in transportation and other supply chain related constraints, such as labor strife in the transportation industry; • Global economic conditions, including inflation, recession, changes in foreign currency exchange rates, higher interest rates, and other changes in economic conditions; and • 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 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. However, our pricing actions could have an adverse impact on demand, and may in turn, cause our providers to halt or decrease Delivery Systems and/or Consumables spending, and our actions may not be sufficient to cover unexpected increased costs that we may experience. Business and macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, the beauty health industry, our providers and their budgets with us, our business, the Company’s brand reputation, financial condition, and results of operations. 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 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 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. 21 Three Months Ended June 30, (in millions) 2024 % of Net Sales 2023 % of Net Sales Net sales $ 90.6 100.0 % $ 117.5 100.0 % Cost of sales 49.7 54.8 49.6 42.2 Gross profit 40.9 45.2 67.9 57.8 Operating expenses Selling and marketing 30.5 33.6 43.0 36.6 Research and development 1.2 1.3 2.9 2.5 General and administrative 31.4 34.7 35.1 29.9 Total operating expenses 63.1 69.6 81.0 69.0 Loss from operations (22.1) (24.4) (13.1) (11.2) Interest expense 2.5 2.7 3.4 2.9 Interest income (4.2) (4.6) (5.7) (4.9) Other income, net (17.3) (19.1) — — Change in fair value of warrant liabilities (4.0) (4.5) (11.6) (9.9) Foreign currency transaction loss (gain), net 1.1 1.3 (0.4) (0.3) (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 % Net Sales Three Months Ended June 30, Change (in millions) 2024 2023 Amount % Net sales 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. 22 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. 23 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) % 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”). 24 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) % Net Sales Six Months Ended June 30, Change (in millions) 2024 2023 Amount % Net sales Delivery Systems $ 71.0 $ 110.9 $ (40.0) (36.0) % Consumables 101.0 92.8 8.2 8.8 % Total net sales $ 172.0 $ 203.8 $ (31.8) (15.6) % Percentage of net sales Delivery Systems 41.3% 54.4% Consumables 58.7% 45.6% Total 100.0% 100.0% 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. 25 Cost of Sales, Gross Profit, and Gross Margin Six Months Ended June 30, Change (in millions) 2024 2023 Amount % Cost of sales $ 82.7 $ 81.8 $ 0.9 1.1% Gross profit $ 89.3 $ 122.0 $ (32.7) (26.8)% Gross margin 51.9 % 59.9 % 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 Six Months Ended June 30, Change (in millions) 2024 2023 Amount % Selling and marketing $ 64.2 $ 81.7 $ (17.6) (21.5) % As a percentage of net sales 37.3 % 40.1 % 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 Six Months Ended June 30, Change (in millions) 2024 2023 Amount % Research and development $ 4.0 $ 5.2 $ (1.3) (24.0) % As a percentage of net sales 2.3 % 2.6 % 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 Six Months Ended June 30, Change (in millions) 2024 2023 Amount % General and administrative $ 60.3 $ 65.5 $ (5.2) (8.0) % As a percentage of net sales 35.0 % 32.1 % 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. 26 Interest Income, Change in Fair Value of Warrant Liabilities, and Other Income, Net Six Months Ended June 30, Change (in millions) 2024 2023 Amount % Interest income $ (9.6) $ (10.0) $ 0.5 (4.8) % Change in fair value of warrant liabilities $ (2.6) $ (2.5) $ (0.1) 2.8 % Other income, net $ (33.4) $ (0.5) $ (32.9) N/M N/M - Not meaningful 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 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 recently completed Syndeo Program . As part of our business strategy, we occasionally evaluate potential acquisitions of businesses and products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products, services, or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all. 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. 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. 27 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. The sale of additional equity would result in additional dilution to our stockholders. Also, the incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. In the event such additional capital is needed in the future, there can be no assurance that such capital will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. 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. Convertible Senior Notes On September 14, 2021, the Company issued an aggregate of $750.0 million in principal amount of its Notes. The Notes were issued pursuant to, and are governed by, an indenture dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee (the “Indenture”). Pursuant to the purchase agreement between the Company and the initial purchasers of the Notes, the Company granted the initial purchasers an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $100.0 million principal amount of Notes. 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. 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 On September 9, 2021, in connection with the pricing of the offering of Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with the Bank of Montreal, Credit Suisse Capital LLC, Deutsche Bank AG, London Branch, Goldman Sachs & Co. LLC, JPMorgan Chase Bank, National Association, Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (collectively, the “Option Counterparties”). In addition, on September 10, 2021, in connection with the initial purchasers’ exercise of their option to purchase additional Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions”, and together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties. The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $47.94, which represents a premium of 100% over the last reported sale price of the Company’s common stock on September 9, 2021. The cost of the Capped Call Transactions was $90.2 million. The Capped Call Transactions are separate transactions, each between the Company and the applicable option counterparty, and are not part of the terms of the Notes and do not affect any holder’s rights under the Notes or the Indenture. Holders of the Notes will not have any rights with respect to the Capped Call Transactions. 28 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 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 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 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 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 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. 29 Cash Flows The following table summarizes the activities from our statements of cash flows. Amounts may not foot due to rounding. Six Months Ended June 30, (Dollars in millions) 2024 2023 Cash, cash equivalents, and restricted cash at beginning of period $ 523.0 $ 568.2 Operating activities: Net loss (0.5) (16.9) Non-cash adjustments 23.2 36.0 Changes in working capital (33.3) (10.1) Net cash (used for) provided by operating activities (10.7) 9.0 Net cash used for investing activities (3.8) (24.9) Net cash used for financing activities (157.4) (3.7) Net change in cash, cash equivalents, and restricted cash (171.9) (19.7) Effect of foreign currency translation (1.6) 1.2 Cash, cash equivalents, and restricted cash at end of period $ 349.5 $ 549.7 Operating Activities 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 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. and Anacapa Aesthetics LLC for $16.9 million. Financing Activities 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. Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity/deficit, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions. There have been no changes to our critical accounting policies since our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Recent Accounting Pronouncements See Part I, Item 1 "Financial Statements—Note 14 to the Consolidated Financial Statements—New Accounting Pronouncements" of this Quarterly Report on Form 10-Q. 30 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market risks relating to our operations result primarily from changes in interest rates, foreign currency, and inflation risk. There were no material changes to our market risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.