What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-08 · 92 added, 91 removed, 220 unchanged (45% of the section changed)

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.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q for the three months ended September 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.

21 unchanged sentences

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.

During the three and nine months ended September 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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• Global economic conditions, including inflation, recession, changes in foreign currency exchange rates, higher interest rates, and other changes in economic conditions;

• 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.

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

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

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

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.

As of September 30, 2024, the Syndeo Program is 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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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

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 so that the Company can remain agile in responding to changing circumstances.

Comparison of Three Months Ended September 30, 2024 to Three Months Ended September 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.

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

Amounts and percentages may not foot due to rounding.

Three Months Ended June 30,

Three Months Ended September 30,

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

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Cost of sales 38.2 48.4 110.0 112.9

Gross profit 40.9 45.2 67.9 57.8

Gross profit (loss) 40.6 51.6 (12.6) (12.9)

Operating expenses

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Change in fair value of warrant liabilities (0.4) (0.5) (5.9) (6.0)

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 %

Three Months Ended June 30, Change

Foreign currency transaction (gain) loss, net (2.3) (2.9) 2.3 2.3

Loss before provision for income taxes (16.3) (20.7) (70.3) (72.2)

Income tax expense 1.9 2.5 3.5 3.6

Net loss $ (18.3) (23.2) % $ (73.8) (75.8) %

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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Total net sales $ 78.8 $ 97.4 $ (18.6) (19.1) %

Three Months Ended September 30,

Percentage of net sales 2024 2023

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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

Total net sales for the three months ended September 30, 2024 decreased $18.6 million , or 19.1% , compared to the three months ended September 30, 2023.

Delivery Systems net sales for the three months ended September 30, 2024 decreased $23.4 million , or 45.9% , compared to the three months ended September 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 net sales from the trade-up program.

Delivery Systems net sales were also 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 September 30, 2024 increased $4.8 million , or 10.4% , compared to the three months ended September 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 September 30, 2024.

Cost of Sales, Gross Profit (Loss), and Gross Margin

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

Cost of sales $ 38.2 $ 110.0 $ (71.8) (65.3)%

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

Gross profit (loss)

$ 40.6 $ (12.6) $ 53.2 N/M

Gross margin 51.6 % (12.9) %

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.

N/M - Not meaningful

Cost of sales for the three months ended September 30, 2024 decreased $71.8 million, compared to the three months ended September 30, 2023 primarily due to the absence of charges and inventory write-downs associated with the Syndeo Program of $63.1 million in 2023, and lower net sales, inventory related charges and product costs, partially offset by approximately $8 million of manufacturing optimization related costs incurred during the three months ended September 30, 2024 .

Gross margin increased to 51.6% for the three months ended September 30, 2024 from (12.9)% for the three months ended September 30, 2023 primarily due to prior year’s charges and inventory write-downs associated with the Syndeo Program and lower inventory related charges and product costs, partially offset by the manufacturing optimization related costs.

Operating Expenses

Selling and Marketing

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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As a percentage of net sales 35.0 % 31.5 %

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.

Selling and marketing expense for the three months ended September 30, 2024 decreased $3.1 million, or 10.1%, compared to the three months ended September 30, 2023.

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

Research and Development

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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As a percentage of net sales 1.4 % 1.9 %

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.

Research and development expense for the three months ended September 30, 2024 decreased $0.7 million, or 39.7%, compared to the three months ended September 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

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

1 unchanged sentence

As a percentage of net sales 42.4 % 38.0 %

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.

General and administrative expense for the three months ended September 30, 2024 decreased $3.5 million, or 9.6%, compared to the three months ended September 30, 2023.

The decrease is primarily driven by lower losses on sale of assets and personnel-related expenses, partially offset by higher provision for estimated credit losses.

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

Three Months Ended June 30, Change

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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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

$ (0.1) $ (4.9) $ 4.8 (98.6) %

Interest income for the three months ended September 30, 2024 decreased $1.9 million compared to the three months ended September 30, 2023 primarily due to lower average invested balances during the three months ended September 30, 2024 .

During the three months ended September 30, 2024 , the Company recognized income of $0.4 million related to the change in the fair value of the warrant liabilities, a decrease of $5.4 million, as compared to income of $5.9 million for the three months ended September 30, 2023 , driven primarily by the fluctuation of the price of the Company’s Class A common stock (the “Class A Common Stock”).

Other income, net for the three months ended September 30, 2024 decreased $4.8 million compared to the three months ended September 30, 2023 primarily due to $4.9 million received for the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) during the three months ended September 30, 2023.

Comparison of Nine Months Ended September 30, 2024 to Nine Months Ended September 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.

The results of operations data for the nine months ended September 30, 2024 and September 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,

Nine Months Ended September 30,

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

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Change in fair value of warrant liabilities (3.0) (1.2) (8.4) (2.8)

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

Foreign currency transaction loss, net 0.2 0.1 0.7 0.2

Loss before provision for income taxes (17.8) (7.1) (93.1) (30.9)

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

Income tax expense (benefit) 0.9 0.4 (2.4) (0.8)

Net loss $ (18.8) (7.5) % $ (90.7) (30.1) %

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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Total net sales $ 250.8 $ 301.2 $ (50.4) (16.7) %

Nine Months Ended September 30,

Percentage of net sales 2024 2023

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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.

Total net sales for the nine months ended September 30, 2024 decreased $50.4 million , or 16.7% , compared to the nine months ended September 30, 2023.

Delivery System net sales for the nine months ended September 30, 2024 decreased $63.4 million , or 39.1% , compared to the nine months ended September 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 net sales from the trade-up program.

Delivery Systems net sales were also 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 nine months ended September 30, 2024 increased $13.0 million , or 9.3% , compared to the nine months ended September 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 nine months ended September 30, 2024.

Cost of Sales, Gross Profit, and Gross Margin

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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Gross margin 51.8 % 36.3 %

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.

Cost of sales for the nine months ended September 30, 2024 decreased $70.9 million, compared to the nine months ended September 30, 2023 primarily due to the absence of charges and inventory write-downs associated with the Syndeo Program of $63.1 million in 2023 and lower net sales, partially offset by higher inventory related charges and approximately $8 million of manufacturing optimization related costs incurred in 2024.

Cost of sales for the nine months ended September 30, 2024 include $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.

Gross margin increased to 51.8% for the nine months ended September 30, 2024 from 36.3% for the nine months ended September 30, 2023 primarily due to prior year’s charges and inventory write-downs associated with the Syndeo Program, partially offset by higher inventory related charges and the manufacturing optimization related costs.

Operating Expenses

Selling and Marketing

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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As a percentage of net sales 36.6 % 37.3 %

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.

Selling and marketing expense for the nine months ended September 30, 2024 decreased $20.7 million, or 18.4%, compared to the nine months ended September 30, 2023.

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

Research and Development

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

1 unchanged sentence

As a percentage of net sales 2.0 % 2.3 %

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.

Research and development expense for the nine months ended September 30, 2024 decreased $2.0 million, or 28.1%, compared to the nine months ended September 30, 2023.

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

General and Administrative

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

1 unchanged sentence

As a percentage of net sales 37.4 % 34.0 %

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.

General and administrative expense for the nine months ended September 30, 2024 decreased $8.8 million , or 8.5% , compared to the nine months ended September 30, 2023.

The decrease is primarily driven by lower personnel-related expenses, losses on the sale of assets, and software expenses, partially offset by higher provision for estimated credit losses.

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

Six Months Ended June 30, Change

Nine Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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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.

Interest income for the nine months ended September 30, 2024 decreased $2.4 million compared to the nine months ended September 30, 2023 primarily due to lower average invested balances during the nine months ended September 30, 2024 .

During the nine months ended September 30, 2024 , the Company recognized income of $3.0 million related to the change in the fair value of the warrant liabilities, a decrease of $5.4 million , as compared to income of $8.4 million for the nine months ended September 30, 2023 , driven primarily by the fluctuation of the price of the Class A Common Stock.

Other income, net for the nine months ended September 30, 2024 increased $28.1 million compared to the nine months ended September 30, 2023 primarily due to a net gain of $33.4 million related to the repurchase of the Company’s 1.25% Convertible Senior Notes due 2026 (the “Notes”).

During the nine months ended September 30, 2023, the Company received $4.9 million for the Employee Retention Credit under the CARES Act.

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.

As of September 30, 2024 , we had cash, cash equivalents, and restricted cash of approximately $358.9 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.

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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.

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.

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

During the nine months ended September 30, 2024, t he Company repurchased $192.3 million principal amount of the Notes for $156.1 million.

Capped Call Transactions

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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.

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(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.

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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;

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

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

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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.

During the nine months ended September 30, 2023 and the year ended December 31, 2023, the Company recognized approximately $12 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 discontinued 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.

Six Months Ended June 30,

Nine Months Ended September 30,

(Dollars in millions) 2024 2023

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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.

Net cash used for operating activities for the nine months ended September 30, 2024 was $0.3 million, as compared to net cash provided by operating activities of $26.9 million for the nine months ended September 30, 2023 .

The change in cash used for operating activities was primarily related to higher working capital usage and changes in net loss and 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 the Company’s Notes.

The prior year net loss and non-cash adjustments, and changes in working capital include the impact of the Syndeo Program charges.

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 .

Net cash used for investing activities for the nine months ended September 30, 2024 was $5.9 million, as compared to $29.3 million for the nine months ended September 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 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.

Net cash used for financing activities for the nine months ended September 30, 2024 was $157.6 million, as compared to $6.1 million for the nine months ended September 30, 2023 .

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

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis