What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 176 added, 111 removed, 448 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except for share amounts)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current assets:

1 unchanged sentence

$ 358,892 $ 523,025

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

Accounts receivable, net of allowances for estimated credit losses of $ 11,025 and $ 6,604 at September 30, 2024 and December 31, 2023, respectively

36,279 54,697

30 unchanged sentences

320,000,000 shares authorized;

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

124,111,434 and 122,899,002 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 561,059 541,281

8 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

1 unchanged sentence

Cost of sales 38,153 109,966 120,849 191,743

Gross profit 40,940 67,876 89,301 121,980

Gross profit (loss) 40,649 ( 12,553 ) 129,950 109,427

Operating expenses:

8 unchanged sentences

Change in fair value of warrant liabilities ( 418 ) ( 5,855 ) ( 2,997 ) ( 8,364 )

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

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

Comprehensive income (loss), net of tax:

Foreign currency transaction (gain) loss, net ( 2,277 ) 2,270 164 724

Loss before provision for income taxes ( 16,343 ) ( 70,339 ) ( 17,832 ) ( 93,089 )

Income tax expense (benefit) 1,948 3,479 936 ( 2,376 )

Net loss $ ( 18,291 ) $ ( 73,818 ) ( 18,768 ) ( 90,713 )

Comprehensive loss, net of tax:

Foreign currency translation adjustments 1,187 ( 1,093 ) ( 676 ) ( 572 )

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

Net income (loss) per share

Comprehensive loss $ ( 17,104 ) $ ( 74,911 ) $ ( 19,444 ) $ ( 91,285 )

Net loss per share

$ ( 0.15 ) $ ( 0.56 ) $ ( 0.15 ) $ ( 0.68 )

Diluted $ ( 0.15 ) $ ( 0.56 ) $ ( 0.31 ) $ ( 0.68 )

Weighted average common shares outstanding

Weighted average common stock outstanding

124,057,602 132,896,626 123,630,811 132,679,547

24 unchanged sentences

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

Net loss — — — — ( 73,818 ) ( 73,818 )

Issuance of common stock pursuant to equity compensation plan 157,749 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 50,731 ) — ( 331 ) — — ( 331 )

Repurchase and retirement of common stock ( 419,242 ) — ( 4,828 ) — — ( 4,828 )

Share-based compensation — — 8,185 — — 8,185

Foreign currency translation adjustment — — — ( 1,093 ) — ( 1,093 )

BALANCE, September 30, 2023 132,569,193 $ 14 $ 564,509 $ ( 5,102 ) $ ( 469,464 ) $ 89,957

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss)

Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount

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

12 unchanged sentences

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

Net loss — — — — ( 18,291 ) ( 18,291 )

Issuance of common stock pursuant to equity compensation plan 171,021 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 53,372 ) — ( 73 ) — — ( 73 )

Share-based compensation — — 7,712 — — 7,712

Foreign currency translation adjustment — — — 1,187 — 1,187

BALANCE, September 30, 2024 124,111,434 $ 12 $ 561,059 $ ( 3,712 ) $ ( 497,635 ) $ 59,724

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

7 unchanged sentences

Inventory write-down 22,704 11,905

Syndeo inventory write-down — 18,809

Provision for estimated credit losses 5,135 2,760

19 unchanged sentences

Payment of accelerated share repurchases — ( 2,240 )

Payment of contingent considerations related to acquisitions — ( 1,819 )

Other, net — 356

18 unchanged sentences

Vesper Healthcare Acquisition Corp.) was incorporated in the State of Delaware on July 8, 2020.

On May 4, 2021, we consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020, by and among Vesper Healthcare Acquisition Corp.

On May 4, 2021, we consummated the business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020, by and among Vesper Healthcare Acquisition Corp.

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

18 unchanged sentences

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

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

Three Months Ended September 30, Nine Months Ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

7 unchanged sentences

Inventories consist of the following as of the periods indicated:

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

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

Raw materials $ 26,373 $ 24,406

1 unchanged sentence

Total inventories $ 73,443 $ 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.

During the nine months ended September 30, 2024, the Company recognized $ 22.7 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.

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

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

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

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

Sales and VAT tax payables $ 5,404 $ 4,971

Deferred revenue 3,875 450

Royalty liabilities 3,769 3,914

Accrued interest 3,486 2,344

Royalty liabilities 3,424 3,914

Deferred revenue 3,263 450

Other 12,516 8,167

Total other accrued expenses $ 28,093 $ 19,846

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.

As of September 30, 2024 and December 31, 2023, the Company has approximately $ 3 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 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 June 30, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards.

During the three months ended September 30, 2024, in connection with the Company’s manufacturing optimization plans, the Company recorded approximately $ 8 million of contract termination related costs, which was recorded within cost of sales on the Condensed Consolidated Statements of Comprehensive Income (Loss).

As of September 30, 2024, the Company has accrued approximately $ 2 million for the contract termination related costs, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets.

As of September 30, 2024, total warranty reserve was approximately $ 6 million, which was included in other accrued expenses on the Condensed Consolidated Balance Sheets.

As of December 31, 2023 , total warranty reserve was approximately $ 6 million, of which 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 September 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 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 following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 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 June 30, 2024

As of September 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 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.

As of September 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

1 unchanged sentence

(in thousands) Useful life

June 30, 2024 December 31, 2023

September 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 six months ended June 30, 2024 is as follows (in thousands):

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

December 31, 2023 $ 125,818

Foreign currency translation impact

June 30, 2024 $ 124,822

September 30, 2024 $ 125,455

Intangible Assets, Net

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

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

(in thousands) Gross

41 unchanged sentences

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

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

1.25 % Convertible Notes due 2026

$ 557,700 $ 750,000

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

Notes due in 2026 $ 557,700 $ 750,000

Unamortized debt issuance costs

2 unchanged sentences

$ 551,411 $ 738,372

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.

During the three months ended September 30, 2024, there were no repurchases related to the Notes.

During the nine months ended September 30, 2024, the Company repurchased $ 192.3 million principal amount of the Notes for $ 156.1 million and recognized a net gain of $ 33.4 million, which includes $ 2.8 million of unamortized debt issuance costs related to the repurchase.

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

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.

As of September 30, 2024 and December 31, 2023 , the estimated fair value of the Notes was approximately $ 461 million and $ 558 million, respectively.

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

Capped Call Transactions

2 unchanged sentences

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 Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s Class A Common Stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s Class A 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 Class A Common Stock on September 9, 2021.

The cost of the Capped Call Transactions was $ 90.2 million.

4 unchanged sentences

(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.

The Credit Agreement provided the Company with a $ 50.0 million revolving credit facility that had a maturity date of November 14, 2027.

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

1 unchanged sentence

Note 8 — Income Taxes

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.

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”) 740-270, 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.

For the three and nine months ended September 30, 2024 , the Company recorded foreign income tax expense of $ 1.9 million and $ 0.9 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.

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

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

3 unchanged sentences

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.

For the three and nine months ended September 30, 2023 , the Company recorded income tax expense of $ 3.5 million and income tax benefit of $ 2.4 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 statutory tax rate of 21% due primarily to income 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.

4 unchanged sentences

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.

The Company has gross unrecognized tax benefits of $ 1.4 million and $ 1.1 million as of September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Total share-based compensation $ 7,712 $ 8,185 $ 20,846 $ 20,286

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.

As of September 30, 2024 , total unrecognized compensation expense related to unvested share-based compensation totaled $ 38.2 million and is expected to be recognized over a weighted-average period of 1.8 years.

Note 10 — Commitments and Contingencies

Cartessa Aesthetics, LLC

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 hydrodermabrasion system that Hydrafacial alleged has infringed five of Hydrafacial’s patents on its device.

1:20-cv-6082 (the “Cartessa Case”), 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.

1 unchanged sentence

On June 6, 2023, the New York Court granted Hydrafacial’s Motion for Summary Judgment of No Invalidity of the fourth patent-in-suit and granted Cartessa’s Motion for Summary Judgment of non-infringement of that same patent.

As of the date of this report, Hydrafacial and Cartessa are awaiting the New York Court to set a trial date on Hydrafacial’s remaining three patents-in-suit in the Cartessa Complaint.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Cartessa.

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

The parties have agreed to dimiss the remaining claims without prejudice so that Hydrafacial can appeal the New York Court’s grant of Cartessa’s Motion for Summary Judgment.

On June 11, 2024, Hydrafacial filed a complaint against Cartessa and its foreign manufacturer, Eunsung Global Corp (“Eunsung”), 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 (the “ITC Cartessa Matter”).

In the ITC Cartessa Matter, Hydrafacial has asserted that Cartessa and Eunsung infringe Hydrafacial’s U.S.

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

Eunsung has consented to an exclusion order during the term of the Hydrafacial patent-in-suit.

The ITC Cartessa Matter is in its early stages, and Hydrafacial continues to seek an exclusion order preventing importation or sale of Cartessa’s hydrodermabrasion systems within the United States.

Medicreations LLC

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 Case”), for patent infringement arising from Medicreations’ sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed twelve of Hydrafacial’s patents.

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

Sinclair Pharma US, Inc

On July 24, 2024, Hydrafacial filed a complaint against Sinclair Pharma US, Inc (“Sinclair”), and its distributor Viora, Inc (“Viora”), in the United States District Court for the Central District of California, Case No.

2:24-cv-06250 (the “Sinclair Case”), for patent infringement arising from Sinclair’s sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The Sinclair Case is in its early stages.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against Sinclair and Viora.

On August 2, 2024, Hydrafacial filed a complaint against Sinclair, Aesthetic Management Partners, their foreign manufacturer, EMA Aesthetics, Ltd.

(“EMA Aesthetics”), and H.R.

Meditech (“H.R.

Meditech”) in the United States International Trade Commission.

A Notice of Institution of Investigation was issued on September 10, 2024, and the investigation was assigned investigation number 337-TA-1416 (the “ITC Sinclair Matter”).

In the ITC Sinclair Matter, Hydrafacial has asserted that Sinclair, Aesthetic Management Partners, EMA Aesthetics, and H.R.

Meditech infringe Hydrafacial’s U.S.

11,865,287 and 9,550,052, which relate to hydrodermabrasion systems.

The ITC Sinclair Matter is in its early stages, and Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

Aesthetic Management Partners Inc.

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

2:24-cv-02480-JPM-TMP (the “AMP Case”), 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 Case is now stayed, and there will be no activity until the conclusion of the ITC Sinclair Matter.

After conclusion of the ITC Sinclair Matter, Hydrafacial plans to reopen the AMP Case to seek monetary damages and plans to vigorously pursue its claims against Aesthetic Management Partners.

Medical Purchasing Resource, LLC

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.

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

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

Luvo Medical Technologies Inc

On August 16, 2024, Hydrafacial filed a complaint against Luvo Medical Technologies Inc (“Luvo”), Healthcare Markets, Inc (“Healthcare Markets”), and their foreign manufacturer Eunsung in the United States District Court of Utah, Case No.

2:24-cv-00587 (the “Luvo Case”), for patent infringement arising from Healthcare Markets’ sale of Luvo’s hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The Luvo Case is now stayed, and there will be no any activity until the conclusion of the ITC Luvo Matter.

After conclusion of the ITC’s investigation, Hydrafacial plans to reopen the Luvo Case to seek monetary damages and plans to vigorously pursue its claims against Luvo, Healthcare Markets, and Eunsung.

On August 7, 2024, Hydrafacial filed a complaint against Luvo, its distributor Healthcare Markets, Medical Purchasing Resource, eMIRAmed, and its manufacturer, MIRAmedtech, in the United States International Trade Commission.

A Notice of Institution of Investigation was issued on September 16, 2024, and the investigation was assigned investigation number 337-TA-1417 (the “ITC Luvo Matter”).

In the ITC Luvo Matter, Hydrafacial has asserted that Luvo, Healthcare Markets, Medical Purchasing Resource, and eMIRAmed USA, LLC (“eMIRAmed”) infringe Hydrafacial’s U.S.

11,446,477, which is not asserted in the ITC Cartessa Matter or ITC Sinclair Matter, and relates to hydrodermabrasion systems.

The ITC Luvo Matter is in its early stages, and Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

eMIRAmed USA, LLC

On August 26, 2024, Hydrafacial filed a complaint against eMIRAmed USA, LLC (“eMIRAmed”), and its manufacturer MIRAmedtech UG (“MIRAmedtech”), in the United States District Court for the Central District of California, Case No.

2:24-cv-01865 (the “eMIRAmed Case”), for patent infringement arising from eMIRAmed’s sale of hydrodermabrasion systems that Hydrafacial alleged to have infringed five of Hydrafacial’s patents on its device.

The eMIRAmed Case is in its early stages.

Hydrafacial is seeking monetary damages and plans to vigorously pursue its claims against eMIRAmed and MIRAmedtech.

Securities Class Action

16 unchanged sentences

District Judge Sherilyn Peace Garnett.

On September 30, 2024, the Company filed a motion to dismiss the consolidated amended class action complaint in its entirety.

Plaintiffs’ opposition brief is due on November 22, 2024, the Company’s reply brief is due December 23, 2024, and the hearing on the motion is set for January 15, 2025.

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

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.

Consumer Class Action

On October 24, 2024, Jason Davalos, Sonia Davalos, and Sol Tan Tanning & Spa LLC (“Class Action Plaintiffs”), individually and on behalf of all others similarly situated, filed a putative class action complaint against Hydrafacial LLC d/b/a The Hydrafacial Company and The Beauty Health Company (collectively, the “Class Action Defendants”) for alleged violations of New York consumer fraud statutes, breach of contract, and common law breach of implied warranties (the “Consumer Class Action”).

The case is captioned Jason Davalos, Sonia Davalos, Sol Tan Tanning & Spa LLC, on behalf of themselves and all others similarly situated v.

Hydrafacial LLC dba The Hydrafacial Company, and The Beauty Health Company, Case No.

24-cv-8073 (S.D.N.Y.) (Caproni, J.) The complaint alleges that all three versions of the Syndeo machine (Syndeo 1.0, Syndeo 2.0, and Syndeo 3.0) were defective and did not perform in the manner in which it had been represented by Class Action Defendants.

Class Action Plaintiffs claim that Class Action Defendants made various misrepresentations in its marketing and sales of the Syndeo machines and, rather than provide a refund to customers for the defective machines, replaced them with another Syndeo machine that exhibited the same defects.

Class Action Plaintiffs purport to bring claims on behalf of themselves, and all other similarly situated purchasers within the United States, of Class Action Defendants’ Syndeo machines.

The complaint asserts five causes of action:

(1) violations of N.Y.

G.B.L., § 349, the state consumer production statute;

(2) violations of N.Y.

G.B.L., § 350, the state’s false advertising statute;

(3) breach of contract;

(4) breach of the implied warranty of merchantability;

and (5) breach of the implied warranty of fitness.

The relief sought in the complaint includes monetary damages allegedly suffered by Class Action Plaintiffs and other members of the putative class as a result of Class Action Defendants’ alleged violations and breaches, including a trebling of any money damages award for alleged violations of N.Y.

G.B.L., § 349 and § 350.

The Company believes that the claims asserted in the Consumer Class Action have no merit and Class Action Defendants intend to vigorously defend them.

Consolidated Derivative Action

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The complaint, styled Margie Elstein, derivatively on behalf of The Beauty Health Company v.

Brenton Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle C.

Kerrick, Brian Miller, Doug Schillinger Andrew Stanleick, and Liyuan Woo, C.A.

Brenton Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, Doug Schillinger, Andrew Stanleick, and Liyuan Woo, C.A.

2024-0114-LWW (Del.

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

Andrew Stanleick, Liyuan Woo, Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle C.

Kerrick, Brian Miller, and Doug Schillinger, C.A.

Andrew Stanleick, Liyuan Woo, Brent Saunders, Marla Beck, Michael Capellas, Julius Few, Desiree Gruber, Michelle Kerrick, Brian Miller, and Doug Schillinger, C.A.

2024-0463-LWW (Del.

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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.

Additionally, the Consolidation Order designated the complaint filed in the Elstein Derivative Action as the operative complaint for the Consolidated Derivative Action, 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 complaint filed in the Elstein Derivative Action by August 25, 2024.

This response deadline was subsequently vacated, prior to plaintiffs’ filing, on September 9, 2024, of their Verified Consolidated Amended Stockholder Derivative Complaint (the “Operative Complaint”).

On September 16, 2024, defendants filed their Motion to Dismiss the Operative Complaint, or Alternatively, Stay the Proceedings (the “Motion to Dismiss”).

A briefing schedule for the Motion to Dismiss has not yet been set.

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

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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 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.

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 Class A 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 Class A 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.

The Company filed such registration statement on July 19, 2021 and it was declared effective by the SEC on July 26, 2021.

The Hydrafacial Stockholders are entitled to make up to an aggregate of two demands for registration, excluding short form demands, that the Company register shares of common stock held by these parties.

The Hydrafacial Stockholders are entitled to make up to an aggregate of two demands for registration, excluding short form demands, that the Company register shares of Class A Common Stock held by these parties.

In addition, the Restricted Stockholders have certain “piggy-back” registration rights.

The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Registration Rights Agreement.

The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of common stock effected pursuant to the terms of the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, the Sponsor agreed to restrictions on the transfer of its securities issued in the Company’s initial public offering, which (i) in the case of the Founder Shares is one year after the completion of the Business Combination unless (A) the closing price of the common stock equals or exceeds $ 12.00 per share for 20 days out of any 30 -trading-day period commencing at least 150 days following the Closing of the Business Combination or (B) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property, and (ii) in the case of the Private Placement Warrants and the respective Class A Common Stock underlying the Private Placement Warrants is 30 days after the completion of the Business Combination.

The Sponsor and its permitted transferees will also be required, subject to the terms and conditions in the Registration Rights Agreement, not to transfer their Private Placement Warrants (as defined in the Registration Rights Agreement) or shares of common stock issuable upon the exercise thereof for 30 days following the Closing.

The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of Class A Common Stock effected pursuant to the terms of the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, the Sponsor agreed to restrictions on the transfer of its securities issued in the Company’s initial public offering, which (i) in the case of the Founder Shares is one year after the completion of the Business Combination unless (A) the closing price of the Class A Common Stock equals or exceeds $ 12.00 per share for 20 days out of any 30 -trading-day period commencing at least 150 days following the Closing of the Business Combination or (B) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property, and (ii) in the case of the Private Placement Warrants and the respective Class A Common Stock underlying the Private Placement Warrants is 30 days after the completion of the Business Combination.

The Sponsor and its permitted transferees will also be required, subject to the terms and conditions in the Registration Rights Agreement, not to transfer their Private Placement Warrants (as defined in the Registration Rights Agreement) or shares of Class A Common Stock issuable upon the exercise thereof for 30 days following the Closing.

Investor Rights Agreement

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

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.

As of September 30, 2024 and December 31, 2023, there were 124,111,434 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 .

3 unchanged sentences

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

During the three and nine months ended September 30, 2024, the Company did no t repurchase any shares of its Class A 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 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,

At September 30, 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 September 30, Nine Months Ended September 30,

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

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 - basic $ ( 18,291 ) $ ( 73,818 ) $ ( 18,768 ) $ ( 90,713 )

Adjustments related to the Notes (1)

— — ( 25,186 ) —

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

Weighted average common shares outstanding - basic

Net loss available to common stockholders - diluted $ ( 18,291 ) $ ( 73,818 ) $ ( 43,954 ) $ ( 90,713 )

Weighted average common stock outstanding - basic

124,057,602 132,896,626 123,630,811 132,679,547

Effect of dilutive shares:

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 income (loss) per share:

Notes — — 19,036,398 —

Weighted average common stock outstanding - diluted 124,057,602 132,896,626 142,667,209 132,679,547

Basic net loss per share:

$ ( 0.15 ) $ ( 0.56 ) $ ( 0.15 ) $ ( 0.68 )

Dilutive net (loss) income per share:

Dilutive net loss per share:

$ ( 0.15 ) $ ( 0.56 ) $ ( 0.31 ) $ ( 0.68 )

(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).

(1) For the nine months ended September 30, 2024, the adjustments related to the Notes include the net gain on repurchase offset by interest expense and amortization of debt issuance costs related to the Company’s 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

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

Notes 17,559,686 23,614,425 — 23,614,425

Restricted Stock Units

3 unchanged sentences

2,302,162 1,890,862 2,302,162 1,890,862

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.

For the three and nine months ended September 30, 2024 and 2023, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net loss per share of Class A Common Stock because their effect would be anti-dilutive.

Note 14 — New Accounting Pronouncements

11 unchanged sentences

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.

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

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;

1 unchanged sentence

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 September 30, 2024, the Syndeo Program is 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 usage for the three and six months ended June 30, 2024 (in thousands):

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

Program liability as of December 31, 2023

2 unchanged sentences

Program liability as of June 30, 2024 $ 912

Usage ( 912 )

Program liability as of September 30, 2024 $ —

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