What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-12 compared with 2024-03-12 · 615 added, 794 removed, 521 unchanged (73% of the section changed)

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Consolidated Statements of Comprehensive Income (Loss )

Consolidated Statements of Stockholders’ Equity (Deficit )

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Beauty Health Company and its subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of The Beauty Health Company and its subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Syndeo Program Reserve — Refer to Note 18 to the financial statements

Inventories — Provision for obsolete and excess inventory – Refer to Notes 2 and 3 to the financial statements

Critical Audit Matter Description

The Company has accrued $21 million as of December 31, 2023, for the estimated cost for its remediation plan to upgrade or replace customer Syndeo 1.0 or 2.0 devices to meet the Syndeo 3.0 device standard.

The cost of the remediation program is based upon a number of estimates, including the customer response rate, the assumed method of remediation, and the cost of remediation, which include considerations such as the material and labor costs of upgrades and the manufacturing and logistics costs for replacement devices.

Given the significant judgments made by management in estimating the Syndeo Program Reserve, performing audit procedures to evaluate the reasonableness of the assumptions and estimates used by management required a high degree of auditor judgment and an increased extent of effort in evaluating the audit evidence obtained.

Inventories are stated at the lower of cost or net realizable value.

The Company estimates the net realizable value and makes a provision as necessary based on economic trends, future demand for products, and technological obsolescence to value goods that are obsolete or in excess.

As of December 31, 2024, the Company’s inventories balance was $69.1 million.

We identified the provision for obsolete and excess inventories as a critical audit matter because of the significant judgment required by management in developing its assumptions about future demand, selling prices and market conditions.

Testing management’s assumptions and estimates used in calculating the provision required a high degree of auditor judgment and the use of more experienced audit professionals.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to testing the Company's Syndeo Program Reserve included the following, among others:

• We tested the effectiveness of the controls over management’s methodology and assumptions used in the Syndeo Program Reserve.

• We tested the completeness and accuracy of the underlying data, including the total devices subject to the program, actual customer participation to-date activity, including the method of remediation, and the costs used in the computation of management’s estimate.

• We obtained information from Company personnel who are responsible for monitoring the status of Syndeo Program Reserve with customers to assess the reasonableness of assumptions used in the calculations.

• We evaluated the Company’s ability to estimate by comparing actual results to previous estimates and judgments made by management.

Our audit procedures related to testing the provision for obsolete and excess inventories included the following, among others:

• We observed the physical condition of inventories during physical inventory counts.

• We performed a retrospective review on the prior year provision for obsolete and excess inventories by considering current year write-off activity.

• We compared on-hand inventories to current year sales to assess the projected future demand and to identify potential indicators of excess inventory.

• For a sample of inventory products, we estimated the future demand based on historical usage, and compared the projected sell through to the quantity on hand, including consideration of expiration dates, if applicable.

• We corroborated the assumptions with individuals outside of the accounting department to identify whether any changes in the business would impact the future demand, selling prices, market conditions and technological obsolescence.

/s/ Deloitte & Touche LLP

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Current assets:

Cash and cash equivalents $ 523,025 $ 568,197

Cash, cash equivalents, and restricted cash

$ 370,063 $ 523,025

Accounts receivable, net of allowances for estimated credit losses of $ 9,597 and $ 6,604 at December 31, 2024 and December 31, 2023, respectively

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Accrued payroll-related expenses 17,636 22,028

Syndeo Program reserves

Lease liabilities, current 5,147 4,598

Income tax payable 3,426 2,759

Syndeo Program reserves

Other accrued expenses 20,002 19,846

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Loss from operations ( 67,774 ) ( 130,917 ) ( 25,841 )

( 130,917 ) ( 25,841 ) ( 39,928 )

Interest expense 10,412 13,649 13,392

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Change in fair value of warrant liabilities ( 3,067 ) ( 11,919 ) ( 78,343 )

Change in fair value of earn-out shares — — 47,100

Foreign currency transaction (gain) loss, net ( 2,385 ) 1,296 69

Foreign currency transaction loss (gain), net 4,638 ( 2,385 ) 1,296

(Loss) income before provision for income taxes ( 29,550 ) ( 101,889 ) 45,339

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Diluted $ ( 0.36 ) $ ( 0.76 ) $ ( 0.23 )

Weighted average common shares outstanding

Weighted average common stock outstanding

123,827,372 131,680,605 147,554,090

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THE BEAUTY HEALTH COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for share amounts)

Common Stock Additional Paid-in Capital Note Receivable from Stockholder Accumulated other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit)

Common Stock Additional Paid-in Capital Accumulated other Comprehensive Loss

Accumulated Deficit Total Stockholders’ Equity

Shares Amount

BALANCE, December 31, 2021 150,598,047 $ 16 $ 722,250 $ ( 1,257 ) $ ( 422,975 ) $ 298,034

Net loss — — — — — ( 378,764 ) ( 378,764 )

Issuance of Class A Common Stock in connection with business acquisitions 590,099 — 9,341 — — — 9,341

Issuance of earn-out shares 7,500,000 1 136,574 — — — 136,575

Issuance of Class A Common Stock pursuant to equity compensation plan 30,963 — — — — — —

Net income — — — — 44,224 44,224

Repurchase and retirement of common stock ( 18,759,243 ) ( 2 ) ( 159,998 ) — — ( 160,000 )

Equity forward contract in connection with accelerated share repurchase — — ( 40,000 ) — — ( 40,000 )

Issuance of common stock in connection with asset acquisition 28,733 — 500 — — 500

Issuance of common stock pursuant to equity compensation plan 409,565 — — — — —

Shares withheld for tax withholdings on vested stock awards ( 62,407 ) — ( 927 ) — — ( 927 )

Reverse recapitalization transaction, net 89,898,170 9 182,397 554 — — 182,960

Purchase of capped calls related to Convertible Senior Notes — — ( 90,150 ) — — — ( 90,150 )

Issuance of Class A Common Stock in connection with the Warrant Redemptions 17,083,884 2 457,718 — — — 457,720

Share-based compensation — — 28,495 — — 28,495

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BALANCE, December 31, 2022 132,214,695 $ 14 $ 550,320 $ ( 4,530 ) $ ( 378,751 ) $ 167,053

Net income — — — — — 44,224 44,224

Issuance of Class A Common Stock in connection with asset acquisition 28,733 — 500 — — — 500

Issuance of Class A Common Stock pursuant to equity compensation plan 409,565 — — — — — —

Repurchase and retirement of Class A Common Stock ( 18,759,243 ) ( 2 ) ( 159,998 ) — — — ( 160,000 )

Equity forward contract in connection with accelerated share repurchase — — ( 40,000 ) — — — ( 40,000 )

Net loss — — — — ( 100,116 ) ( 100,116 )

Repurchase and retirement of common stock ( 10,350,749 ) ( 2 ) ( 30,455 ) — — ( 30,457 )

Accelerated share repurchase payment

— — ( 2,240 ) — — ( 2,240 )

Issuance of common stock in connection with asset acquisition 109,625 — 1,310 — — 1,310

Issuance of common stock pursuant to equity compensation plan 1,039,176 — — — — —

Issuance of common stock relating to employee stock purchase plan 241,342 — 3,036 — — 3,036

Shares withheld for tax withholdings on vested stock awards ( 355,087 ) — ( 3,234 ) — — ( 3,234 )

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

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

THE BEAUTY HEALTH COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(in thousands, except for share amounts)

Common Stock Additional Paid-in Capital Note Receivable from Stockholder Accumulated other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount

BALANCE, December 31, 2022 132,214,695 $ 14 $ 550,320 $ — $ ( 4,530 ) $ ( 378,751 ) $ 167,053

Net loss — — — — ( 29,098 ) ( 29,098 )

Issuance of Class A Common Stock in connection with asset acquisition 109,625 — 1,310 — — — 1,310

Issuance of Class A Common Stock pursuant to equity compensation plan 1,039,176 — — — — — —

Issuance of Class A Common Stock relating to employee stock purchase plan 241,342 — 3,036 — — — 3,036

Issuance of common stock pursuant to equity compensation plan 2,407,671 — — — — —

Issuance of common stock relating to employee stock purchase plan 373,245 — 629 — — 629

Shares withheld for tax withholdings on vested stock awards ( 755,733 ) — ( 1,897 ) — — ( 1,897 )

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

Repurchase and retirement of Class A Common Stock ( 10,350,749 ) ( 2 ) ( 30,455 ) — — — ( 30,457 )

Share-based compensation — — 26,696 — — 26,696

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Amortization of debt issuance costs 3,319 4,229 4,229

Syndeo inventory write-down 19,568 — —

Inventory write-down 28,041 18,272 5,144

Syndeo inventory write-down — 19,568 —

Provision for estimated credit losses 5,134 5,153 1,622

Change in fair value adjustment of warrant liabilities ( 11,919 ) ( 78,343 ) 277,315

Change in fair value adjustment of earn-out shares — — 47,100

Change in fair value of warrant liabilities ( 3,067 ) ( 11,919 ) ( 78,343 )

Gain on repurchase of convertible senior notes, net ( 33,411 ) — —

Deferred income taxes ( 3,748 ) ( 1,079 ) ( 1,787 )

Other, net 15,981 7,067 12,210

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Inventories ( 10,500 ) ( 22,617 ) ( 84,363 )

Income taxes receivable ( 3,666 ) 3,871 35

Prepaid expenses and other current assets ( 3,285 ) ( 17,718 ) ( 5,067 )

Accounts payable 15,783 ( 262 ) 10,523

Accrued payroll and other expenses 26,936 ( 3,357 ) 24,784

Income taxes payable 1,282 665 ( 594 )

Prepaid expenses, other current assets, and income tax receivable 15,479 ( 6,951 ) ( 13,847 )

Accounts payable, accrued expenses, and income tax payable ( 43,776 ) 44,001 ( 2,954 )

Other, net ( 9,400 ) ( 7,597 ) ( 12,078 )

Net cash provided by (used for) operating activities 16,134 21,750 ( 106,600 )

Cash flows used in investing activities:

Cash flows from investing activities:

Cash paid for intangible assets ( 6,038 ) ( 9,224 ) ( 6,547 )

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Cash paid for asset acquisitions — ( 18,458 ) ( 1,475 )

Cash paid for business acquisition — — ( 22,896 )

Other, net — — 781

Net cash used for investing activities ( 6,794 ) ( 31,507 ) ( 18,869 )

Cash flows from financing activities:

Repurchases of Class A Common Shares ( 30,155 ) ( 160,000 ) —

Payment of accelerated share repurchases ( 2,240 ) — —

Repurchase of convertible senior notes ( 156,082 ) — —

Payment of tax withholdings on vested stock awards ( 1,957 ) ( 3,234 ) ( 927 )

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

Proceeds from issuance of convertible senior notes — — 750,000

Purchase of capped calls related to convertible senior notes — — ( 90,150 )

Proceeds from exercise of warrants — — 188,378

Proceeds from revolving facility — — 5,000

Repayment of revolving facility — — ( 5,000 )

The accompanying notes are an integral part of these consolidated financial statements

THE BEAUTY HEALTH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(in thousands)

Year Ended December 31,

2023 2022 2021

Payment of debt issuance costs — — ( 21,341 )

Repayment of term loan — — ( 225,486 )

Proceed from Business Combination — — 357,634

Repurchase of common stock — ( 30,155 ) ( 160,000 )

Advanced payment for equity forward contract — — ( 40,000 )

Payment of accelerated share repurchases — ( 2,240 ) —

Payment of contingent considerations related to acquisitions — ( 1,819 ) ( 4,315 )

Other, net ( 302 ) — —

Net cash (used for) provided by financing activities ( 37,448 ) ( 205,242 ) 959,035

Net change in cash and cash equivalents ( 47,205 ) ( 330,711 ) 892,943

Net cash used for financing activities ( 158,341 ) ( 37,448 ) ( 205,242 )

Net change in cash, cash equivalents, and restricted cash ( 149,001 ) ( 47,205 ) ( 330,711 )

Effect of foreign currency translation on cash ( 3,961 ) 2,033 ( 2,978 )

Cash and cash equivalents, beginning of period 568,197 901,886 9,486

Cash and cash equivalents, end of period $ 523,025 $ 568,197 $ 901,886

Supplemental disclosures of cash flow information and non-cash investing and financing activities:

Cash, cash equivalents, and restricted cash beginning of period 523,025 568,197 901,886

Cash, cash equivalents, and restricted cash end of period $ 370,063 $ 523,025 $ 568,197

Supplemental disclosures of cash flow information and non-cash investing activities:

Cash paid for interest $ 8,014 $ 9,375 $ 9,818

Class A Common Stock issued for asset acquisition 1,310 500 —

Cash paid (received) for income taxes 2,801 2,269 ( 1,339 )

Issuance of earn-out shares — — 136,575

Trade receivables due from seller — — 6,623

Notes payable to seller — — 2,153

Contingent consideration — — 783

Issuance of Class A Common Stock in connection with business acquisitions — — 9,341

Class A Common Stock issued for asset acquisition — 1,310 500

The accompanying notes are an integral part of these consolidated financial statements

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Note 1 — Description of Business

The Beauty Health Company (the “Company”) is a global category-creating company focused on delivering skin health experiences that help consumers reinvent their relationship with their skin, bodies, and self-confidence.

The Beauty Health Company (the “Company” or “we”) is a medtech meets beauty company that delivers 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.

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Hydrafacial in hydradermabrasion;

SkinStylus in microneedling;

SkinStylus in nanoneedling and microneedling;

and Keravive in scalp health.

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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.

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

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

Basis of Presentation

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

Note 2 — Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Consolidated Financial Statements in this Annual Report on Form 10-K are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the Company’s consolidated domestic and international subsidiaries.

Intercompany accounts and transactions have been eliminated.

Subsequent to the issuance of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, during the six months ended June 30, 2023, the Company identified prior period misstatements related to the elimination of intercompany balances and right of return assets.

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

These misstatements impacted the fiscal years 2020 to 2022.

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

For further detail, refer to Note 19 – Revision for Immaterial Misstatements.

Certain prior period amounts have been reclassified to conform to the current period presentation, including previously reported inventories in the consolidated statement of cash flows which were disclosed net of $ 5.1 million and $ 1.1 million inventory write-down for the years ended December 31, 2022 and December 31, 2021, respectively.

We reclassified the inventory write-down in the prior period to conform to the current period presentation of inventory write-down as an adjustment to reconcile net income to net cash from operating activities.

This reclassification had no effect on the previously reported net cash used for operating activities.

Note 2 — Summary of Significant Accounting Policies

Business Combination

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP.

Under this method of accounting, the Company is treated as the “acquired” company for financial reporting purposes and Hydrafacial is treated as the accounting acquirer.

This determination was primarily based on the following:

• the Hydrafacial stockholders as of immediately prior to the effective time of the First Merger considered in the aggregate have the largest minority interest of the voting power in the combined entity after taking into account actual redemptions;

• the operations of Hydrafacial prior to the acquisition comprise the only ongoing operations of the post-combination company;

• senior management of Hydrafacial comprises the senior management of the post-combination company;

• the relative size and valuation of Hydrafacial compared to the Company;

• pursuant to that certain Investor Rights Agreement, dated as of May 4, 2021, by and between the Company and Hydrafacial, Hydrafacial was given the right to designate certain initial members of the Board of Directors of the Company immediately after giving effect to the transactions contemplated by the Merger Agreement.

Consideration was also given to the fact that the Company paid a purchase price consisting of a combination of cash and equity consideration and its stockholders may have a significant amount of voting power, should the Company’s public stockholders be considered in the aggregate.

However, based on the aforementioned factors of management, board representation, largest minority stockholder as noted above, and the continuation of the Hydrafacial business as well as its size, it was determined that accounting for the Business Combination as a reverse recapitalization was appropriate.

Accordingly, for accounting purposes, the financial statements of the Company represent a continuation of the financial statements of Hydrafacial with the acquisition being treated as the equivalent of Hydrafacial issuing stock for the net assets of the Company, accompanied by a recapitalization.

The net assets of the Company are stated at historical cost, with no goodwill or other intangible assets recorded.

In connection with the Business Combination each share of Hydrafacial common stock outstanding immediately prior to the Business Combination converted into the right to receive 653.109 shares (the “Exchange Ratio”) of Class A Common Stock of the Company.

The recapitalization of the number of shares of Class A Common Stock attributable to Hydrafacial is reflected retroactively to the earliest period presented based upon the Exchange Ratio and is utilized for calculating earnings per share in all prior periods presented.

Use of estimates and assumptions in preparing consolidated financial statements

Use of Estimates

In preparing its consolidated financial statements in conformity with GAAP, the Company makes assumptions, estimates, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.

On an ongoing basis, the Company evaluates its estimates, including, among others, those related to revenue related reserves, allowance for estimated credit losses, the realizability of inventory, fair value measurements including common stock, warrant liabilities and earn-out shares liability valuations, useful lives of property and equipment, goodwill and finite-lived intangible assets, accounting for income taxes, stock-based compensation expense and commitments and contingencies.

On an ongoing basis, the Company evaluates its estimates, including, among others, those related to revenue related reserves, allowance for estimated credit losses, the realizability of inventory, fair value measurements including common stock and warrant liabilities, useful lives of property and equipment, goodwill and finite-lived intangible assets, accounting for income taxes, stock-based compensation expense and commitments and contingencies.

The Company’s estimates are based on historical experience and on its future expectations that are believed to be reasonable.

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Cost is determined using weighted average costs, and includes all costs incurred to deliver inventory to the Company’s distribution centers including freight, non-refundable taxes, duty, and other landing costs.

The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete, have quality issues, or are damaged.

The Company periodically reviews its inventories and makes a provision as necessary to appropriately value goods that are obsolete or in excess, have quality issues, or are damaged.

The amount of the provision is equal to the difference between the cost of the inventory and its net realizable value based upon assumptions about product quality, damages, future demand, selling prices, and market conditions.

If changes in market conditions result in reductions in the estimated net realizable value of its inventory below its previous estimate, the Company would decrease its basis in the inventory in the period in which it made such a determination.

During the quarter ended December 31, 2023, the Company determined with respect to Syndeo devices, to market and sell Syndeo 3.0 devices exclusively, and as such, the Company designated all Syndeo 1.0 and 2.0 builds on-hand as obsolete, resulting in an inventory write-down of $ 19.6 million during the year ended December 31, 2023.

Refer to Note 18 – Restructuring Charges for further detail.

Business Combinations

The purchase price of an acquisition is measured as the aggregate of the fair value of the consideration transferred including the acquisition-date fair value of the Company’s previously held equity interests.

The purchase price is allocated to the fair values of the tangible and intangible assets acquired and liabilities assumed, with any excess recorded as goodwill.

These fair value determinations require judgment and may involve the use of significant estimates and assumptions.

The purchase price allocation may be provisional during a measurement period of up to one year to provide reasonable time to obtain the information necessary to identify and measure the assets acquired and liabilities assumed.

Any such measurement period adjustments are recognized in the period in which the adjustment amount is determined.

Transaction costs associated with the acquisition are expensed as incurred.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the assets acquired and liabilities assumed.

Goodwill is not amortized but is evaluated for impairment annually or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist.

The Company has one reporting unit and management evaluates the carrying value of the Company’s goodwill annually at the end of its fiscal year or whenever events or changes in circumstances indicate that an impairment may exist.

When testing goodwill for impairment, management has the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis to determine if it is necessary to perform a quantitative goodwill impairment test.

In performing the qualitative assessment, management considers the extent to which unfavorable events or circumstances identified, such as changes in economic conditions, industry and market conditions or company specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount.

If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management is required to perform a quantitative impairment test.

Quantitative impairment testing for goodwill is based upon the fair value of a reporting unit as compared to its carrying value.

Under a quantitative impairment test, management will make certain judgments and assumptions in allocating assets and liabilities to determine carrying values for our reporting unit.

The impairment loss recognized would be the difference between a reporting unit’s carrying value and fair value in an amount not to exceed the carrying value of the reporting unit’s goodwill.

Testing goodwill for impairment requires management to estimate fair values of reporting units using significant estimates and assumptions.

The assumptions made will impact the outcome and ultimate results of the testing.

Management will use industry accepted valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, we will engage independent third-party valuation specialists for advice.

The key estimates and factors used in the valuation models would include revenue growth rates and profit margins based on our internal forecasts, our specific weighted-average cost of capital used to discount future cash flows, and comparable market multiples for the industry segment, when applicable, as well as our historical operating trends.

Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumer consumption and demands, could result in changes to these assumptions and judgments and could cause the fair values of the reporting units to fall below their respective carrying values, resulting in a non-cash impairment charge.

Such charge could have a material effect on the consolidated financial statements.

Intangible Assets

Intangible assets are composed of developed technology, customer relationships and trademarks.

At initial recognition, intangible assets acquired in a business combination are recognized at their fair value as of the date of acquisition.

Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any, and are amortized on a straight-line basis over the estimated useful life of the asset.

We assess the impairment of intangible assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

If necessary, we will use an industry accepted valuation model to estimate the fair value of the intangible assets.

The fair value calculation requires significant judgments in determining both the assets’ estimated cash flows potentially the appropriate discount and royalty rates applied to those cash flows to determine fair value.

Variations in economic conditions or a change in general consumer demands, operating results estimates or the application of alternative assumptions could produce significantly different results.

If these assumptions differ materially from future results, we may record impairment charges in the future.

Property and Equipment

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Depreciation is recorded on a straight-line basis over each asset’s estimated useful life.

Leasehold improvements are depreciated on a straight-line basis over the lesser of the length of the lease and the estimated useful life of the improvement.

Leasehold improvements are depreciated on a straight-line basis over the lesser of the length of the lease or the estimated useful life of the improvement.

Leased Property and Equipment

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The Company uses an incremental borrowing rate to determine the present value of lease payments as the rate implicit in the lease is generally not readily determinable.

The Company excludes right-of-use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet,and combines lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance expenses, property taxes, property insurance, and management fees.

The Company excludes right-of-use assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and combines lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance expenses, property taxes, and management fees.

The Company determines if an arrangement is a lease at inception by assessing whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

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Operating lease costs are recognized on a straight-line basis over the lease term.

Intangible Assets

Intangible assets primarily consist of developed technology, capitalized software, customer relationships and trademarks and are amortized on a straight-line basis over the estimated useful life of the asset.

Impairment of Long-lived Assets

Long-lived assets, including intangible assets with finite lives and right-of-use assets, are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition.

Long-lived assets, including property and equipment, right-of-use assets, and intangible assets with finite lives are evaluated for impairment when the occurrence of events or a change in circumstances indicates that the carrying value of the assets may not be recoverable as measured by comparing their carrying value to the estimated undiscounted future cash flows generated by their use and eventual disposition.

Impaired assets are recorded at fair value, determined principally by discounting the future cash flows expected from their use and eventual disposition.

Reductions in asset values resulting from impairment valuations are recognized in income in the period that the impairment is determined.

Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the assets acquired and liabilities assumed.

Goodwill is not amortized but is evaluated for impairment at least annually or more frequently if indicators of impairment are present or changes in circumstances suggest that impairment may exist.

The Company has one reporting unit and management evaluates the carrying value of the Company’s goodwill annually in the fourth quarter of its fiscal year or whenever events or changes in circumstances indicate that an impairment may exist.

If management concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, management is required to perform a quantitative impairment test.

Quantitative impairment testing for goodwill is based upon the fair value of the reporting unit as compared to its carrying value.

The impairment loss recognized would be the difference between the reporting unit’s carrying value and fair value in an amount not to exceed the carrying value of the reporting unit’s goodwill.

Testing goodwill for impairment requires management to estimate fair value of the reporting unit using significant estimates and assumptions.

The assumptions made will impact the outcome and ultimate results of the testing.

The key estimates and factors used in the valuation models may include as applicable, revenue growth rates and profit margins based on internal forecasts, weighted-average cost of capital used to discount future cash flows, comparable market multiples for the industry segment, and historical operating trends.

Certain future events and circumstances, including deterioration of market conditions, higher cost of capital, a decline in actual and expected consumer consumption and demands, could result in changes to these assumptions and judgments and could cause the fair value of the reporting unit to fall below its respective carrying value, resulting in a non-cash impairment charge.

Such charge could have a material effect on the consolidated financial statements.

Warrant Liabilities

During October 2020, in connection with Vesper’s initial public offering, the Company issued 15,333,333 warrants to purchase shares of the Company’s common stock at $ 11.50 per share (the “Public Warrants”).

Simultaneously, with the consummation of Vesper’s initial public offering, the Company issued 9,333,333 warrants to purchase shares of the Company’s common stock at $ 11.50 per share (the “Private Placement Warrants”), to BLS Investor Group LLC (the “Sponsor”).

On November 3, 2021 all of the Public Warrants that were outstanding were redeemed (the “Redemption Date”).

As of December 31, 2023 and 2022, no Public Warrants were outstanding and approximately 7 million Private Placement Warrants remain outstanding.

As of December 31, 2023 and 2022, the Private Placement Warrants are measured at fair value using a Monte Carlo simulation model because these warrants are not subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share.

The Private Placement Warrants are classified as a Level 3 financial instruments as of December 31, 2023 and 2022.

The Private Placement Warrants expire five years after the Business Combination.

The Company classified the Public Warrants and currently classifies the Private Placement Warrants as liabilities on its Consolidated Balance Sheets as these instruments are precluded from being indexed to our own stock given the terms allow for a settlement adjustment that does not meet the scope of the fixed-for-fixed exception in ASC 815, Derivatives and Hedging .

In certain events outside of the Company’s control, the Private Placement Warrant holders are entitled to receive cash while in certain scenarios the holders of the Company’s common stock are not entitled to receive cash or may receive less than 100% of any proceeds in cash, which precludes these instruments from being classified within equity pursuant to ASC 815-40.

The Public and Private Placement Warrants were initially recorded at fair value on the date of the Business Combination and are subsequently adjusted to fair value at each subsequent reporting date.

Changes in the fair value of these instruments are recognized within change in fair value of warrant liabilities in the Company’s Consolidated Statements of Comprehensive Income (Loss) .

Earn-out Shares Liability

In addition to the consideration paid at the closing of the Business Combination, the former stockholders of Hydrafacial received contingent consideration in the form of an aggregate of 7.5 million shares of the Company’s Class A Common Stock (the “Earn-out Shares”) as a result of the Company’s completion of the acquisitions of four target businesses, as contemplated by the Merger Agreement, in June and July 2021 that were identified by Hydrafacial.

With the closing of these four distributor acquisitions in Australia, France, Germany and Mexico, the 7.5 million Earn-out Shares were earned and subsequently issued on July 15, 2021.

The Company accounted for the Earn-out Shares liability as contingent consideration and recorded an Earn-out Shares liability for the Earn-out Shares in accordance with ASC 480 – Distinguishing Liabilities from Equity .

The liability was included as part of the consideration transferred in the Business Combination and was recorded at its then current fair value.

The Earn-out Shares liability was recorded at fair value and remeasured at the end of each reporting period, with the corresponding gain or loss recorded in the Company’s Consolidated Statements of Comprehensive Income (Loss) as change in the fair value of earn-out shares liability.

In October 2020, in connection with Vesper’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, which will expire five years after the Business Combination.

The Company classifies the Private Placement Warrants as liabilities on its Consolidated Balance Sheets as these instruments are precluded from being indexed to its own stock given the terms allow for a settlement adjustment that does not meet the scope of the fixed-for-fixed exception in Accounting Standards Codification (“ ASC”) 815, Derivatives and Hedging .

In certain events outside of the Company’s control, the Private Placement Warrant holders are entitled to receive cash while in certain scenarios the holders of the Company’s Class A common stock are not entitled to receive cash or may receive less than 100% of any proceeds in cash, which precludes these instruments from being classified within equity pursuant to ASC 815-40.

The Private Placement Warrants were initially measured at fair value at inception and are subsequently adjusted to fair value at each subsequent reporting date.

The fair value of the Private Placement Warrants was determined using a Monte Carlo simulation model.

Changes in the fair value of these instruments are recognized within change in fair value of warrant liabilities in the Consolidated Statements of Comprehensive Income (Loss) .

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $ 750 million in principal amount of its 1.25 % Convertible Senior Notes due 202 6 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

On September 14, 2021, the Company issued an aggregate of $ 750.0 million in principal amount of 1.25 % Convertible Senior Notes due 202 6 (the “Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of September 14, 2021, between the Company and U.S.

Bank National Association, as trustee (the “Trustee”).

The Company accounts for the Notes under Accounting Standards Codification (“ASC”) ASC 470-20 - Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity's Own Equity (“ASU 2020-06”), which the Company early ad opted in the first quarter of 2021 concurrent with the issuance of the Notes.

The Company accounts for the Notes under ASC 470-20 - Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity's Own Equity , which the Company early ad opted in the first quarter of 2021 concurrent with the issuance of the Notes.

The Company records the Notes as a long-term liability at face value net of issuance costs.

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Refer to Note 7 – Long-term Debt for further detail.

Capped Call Transactions

Capped call transactions cover the aggregate number of shares of the Company’s common stock that will initially underlie the Notes, and generally reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company may make in excess of the principal amount of the 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 Company determined that the freestanding capped call option contracts qualify as equity under the accounting guidance on indexation and equity classification, and recognized the contract by recording an entry to additional paid-in capital (“APIC”) in stockholders’ equity in its Consolidated Balance Sheets.

The Company also determined that the capped call option contracts meet the definition of a derivative under ASC 815 — Derivatives and Hedging (“ASC 815”), but are not required to be accounted for as a derivative as they meet the scope exception outlined in ASC 815.

The capped call options are recorded in APIC and not remeasured.

Issuance Costs

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For all customers, each invoice is considered a separate contract for accounting purposes.

Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for the sale of its products which is determined based upon the sales price per the invoice or contract and the estimated fair market value of any non-cash consideration, if applicable.

Revenue is recognized in an amount that reflects the consideration that the Company expects to be entitled to in exchange for the sale of its products which is determined based upon the sales price per the invoice or contract and the estimated fair market value for any non-cash consideration received in connection with the trade-in program.

During the years ended December 31, 2023 and 2022 the Company provided certain customers with the option to trade-in their existing Delivery System and applied the fair value of their old Delivery System towards the transaction price of a Syndeo device.

The Company determined that the trade-in is viewed as a marketing offer due to the fact that it did not constitute the Company’s customary business practice and was not offered at contract inception.

Therefore, the trade-in was accounted for under ASC 606, Revenue from Contracts with Customers, and represented a type of noncash consideration, which the Company measured at its estimated fair value.

The estimated fair value represented the estimated selling price, less the cost to refurbish the inventory and the expected margin to be earned on the refurbishment, along with the expected margin to be earned on the selling effort.

The estimated selling price was determined based on the Company’s historical experience of reselling refurbished Delivery Systems.

The Company recognized revenue based on the estimated fair value of such Delivery Systems for the years ended December 31, 2023 and 2022 of approximately $ 17 million and $ 9 million, respectively.

No trade-in revenue was recognized for the year ended December 31, 2024.

Discounts applied to invoices are not associated with future purchases and solely relate to the product invoiced.

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The Company’s sales terms for its Delivery Systems generally allow for the right of return within 30 days, subject to a restocking fee.

Estimates for variable consideration, which relate to sales returns associated with Delivery Systems, are based on the expected amount the Company will be entitled to receive, subject to constraint, and is recorded as a reduction against net sales.

Estimates for variable consideration, which relate to sales returns associated with Delivery Systems, are based on the expected amount the Company will be expected to be entitled to, subject to constraint, and is recorded as a reduction against net sales.

Sales returns are estimated based on historical sales and returns data and have not significantly impacted net sales because sales returns are not material.

Depending on the type of Delivery System that was purchased, the Company offers its customers with a one -year or two -year standard type warranty that provides the customer with the assurance that its Delivery Systems will function as intended.

Payment terms vary by customer but typically provide for the customer to pay within less than a year;

however, the Company provides options for qualified customers through third party financing companies, generally without recourse to the Company, or through internal financing to pay for Delivery Systems over 12 monthly installments or less.

Under certain limited arrangements, which are not material, the customer’s receivable balance is with recourse whereby we are responsible for repaying the financing company should the customer default.

The Company performs credit evaluations of customers and evaluates the need for allowances for potential credit losses based on historical experience, as well as current and expected general economic conditions.

The Company elected the practical expedient and does not evaluate contracts of one year or less for the existence of a significant financing component.

Depending on the type of Delivery System that was purchased, the Company offers its customers with a one to two-year standard type warranty from point of sale that provides the customer with the assurance that its Delivery Systems will function as intended.

During the fourth quarter of 2023, the Company announced a one year extension of warranty for certain Syndeo systems from the date it was either brought to the 3.0 standards or the customer received a Syndeo 3.0 device.

The warranty reserve is assessed periodically, and the reserve is adjusted as necessary based on a review of historical warranty experience as well as the length and actual terms of the warranties.

Total warranty reserve was approximately $ 6 million and $ 2 million as of December 31, 2023 and 2022, respectively.

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 December 31, 2022, approximately $ 2 million was included in other accrued expenses on the Consolidated Balance Sheets.

As of December 31, 2024, total warranty reserve was approximately $ 4 million, which was included in other accrued expenses on the 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.

The Company also has a loyalty program that allows members to receive points based on qualifying Consumable purchases that may be redeemed as a discount on future Consumable purchases.

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The related loyalty program deferred revenue included in other accrued expenses on the Consolidated Balance Sheets was approximately $ 1 million as of December 31, 2024 and 2023.

In addition, during the fiscal years 2023 and 2022 the Company provided certain customers with the option to trade-in their existing Delivery System and apply the fair value of their old Delivery System towards the transaction price of a Syndeo device, the Company’s current generation Delivery System (“Syndeo”).

The Company determined that the trade-in is viewed as a marketing offer due to the fact that it does not constitute the Company’s customary business practice and was not offered at contract inception.

Therefore, the trade-in is accounted for under ASC 606 and represents a type of noncash consideration, which the Company measures at its estimated fair value.

The estimated fair value represents the estimated selling price, less the cost to refurbish the inventory and the expected margin to be earned on the refurbishment, along with the expected margin to be earned on the selling effort.

The estimated selling price is determined based on the Company’s historical experience of reselling refurbished Delivery Systems.

The Company recognized revenue based on the estimated fair value of such Delivery Systems for the fiscal years ended 2023 and 2022 of approximately $ 17 million and $ 9 million, respectively.

Payment terms vary by customer but typically provide for the customer to pay within less than a year;

The Company does not evaluate contracts of one year or less for the existence of a significant financing component.

Cost of Sales

The Company’s cost of sales consists of Delivery Systems and Consumables product costs, including the cost of materials, labor costs, overhead, depreciation and amortization of developed technology, shipping and handling costs, and the costs associated with excess and obsolete inventory.

Cost of sales primarily consists of Delivery Systems and Consumables product costs, including the cost of materials, labor costs, overhead, depreciation and amortization of developed technology, shipping and handling costs, and the costs associated with excess and obsolete inventory.

Selling and Marketing Expense

Selling and marketing expense consists of personnel-related expenses, sales commissions, travel costs, training, and advertising expenses incurred in connection with the sale of our products.

Selling and marketing expense primarily consists of personnel-related expenses, sales commissions, travel costs, training, and advertising expenses incurred in connection with the sale of our products.

Advertising costs are expensed in the period in which they are incurred.

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Research and development expense primarily consists of personnel-related expenses, tooling and prototype materials, technology investments, and other expenses incurred in connection with the development of new products and internal technologies.

Research and development expenses are expensed in the period in which they are incurred.

General and Administrative Expense

General and administrative expenses include personnel-related expenses, professional fees, credit card and wire fees and facilities-related costs primarily for our executive, corporate affairs, finance, accounting, legal, human resources, and information technology (“IT”) functions.

General and administrative expense primarily consists of personnel-related expenses, credit card and wire fees and facilities-related costs primarily for our executive, corporate affairs, finance, accounting, legal, human resources, and information technology (“IT”) functions.

General and administrative expense also includes fees for professional services principally comprising legal, audit, tax and accounting services, and insurance.

Interest Expense

Interest expense primarily consists of interest accrued on the Company’s Notes and amortization of debt issuance costs relating to the Notes.

Interest expense consists of interest accrued on the Company’s Notes and amortization of debt issuance costs relating to the Notes.

The Notes mature on October 1, 2026 and accrue interest at a rate of 1.25 % per annum.

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Interest Income

Interest income consists of interest earned from investments in money market funds that the Company classifies as cash equivalents.

Change in Fair Value of Warrant Liabilities

In accordance with ASC 815-40 – Contracts in Entity's Own Equity , the Company’s Public and Private Placement Warrants are accounted for as liabilities in the Consolidated Balance Sheets and measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Company’s Consolidated Statements of Comprehensive Income (Loss).

There were no Public Warrants outstanding as of December 31, 2023 and 2022.

The value of the Private Placement Warrants was determined at year end using the Monte Carlo simulation model.

Changes around share price volatility and assumptions and inputs used in the Monte Carlo model can result in an increase or decrease in fair value which can substantially impact the outstanding liability and the change in fair value of warrant liabilities.

Changes in fair value of warrant liabilities as a percentage of revenue will fluctuate period to period along with fluctuations in fair value, which is not related to normal business operations.

Change in Fair Value of Earn-out Shares Liability

In accordance with ASC 480 – Distinguishing Liabilities from Equity , the Company accounted for its Earn-out Shares liability as contingent consideration and recorded an Earn-out Shares liability for the Earn-out Shares.

The Earn-out Shares were earned and subsequently issued on July 15, 2021.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) for the expected future tax consequences of events that have been included in the financial statements.

Under this method, it determines DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

The Company recognizes DTAs to the extent that it believes these assets are more likely than not to be realized.

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized based on currently available evidence.

If the Company determines that it would be able to realize our DTAs in the future in excess of the net recorded amount, it would make an adjustment to the DTA valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

If any, the Company recognizes interest and penalties on unrecognized tax benefits in income tax expense.

Interest income primarily consists of interest earned from investments in money market funds that the Company classifies as cash equivalents.

The Company follows the asset and liability method for accounting for income taxes.

This approach requires recognizing deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”) based on the expected future tax consequences of events recorded in the financial statements.

DTAs and DTLs are determined by the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates applicable to the periods in which these differences are expected to reverse.

Any changes in tax rates affecting DTAs and DTLs are recorded in income during the period the tax rate change is enacted.

The Company recognizes DTAs only when it believes they are more likely than not to be realized.

This assessment considers various factors, including future reversals of taxable temporary differences, projected taxable income, tax-planning strategies, potential carrybacks (if permitted by law), and recent operating results.

A valuation allowance is applied when necessary to reduce DTAs to the amount expected to be realized.

If the Company later determines that additional DTAs can be utilized, it will adjust the valuation allowance, reducing income tax expense.

For uncertain tax positions, the Company applies ASC 740, Income Taxes , using a two-step approach:

(1) determining whether a tax position is more likely than not to be upheld based on its technical merits, and (2) recognizing the largest amount of tax benefit that is more than 50 percent likely to be realized upon settlement with the tax authority.

Any interest and penalties related to unrecognized tax benefits are recorded in income tax (benefit) expense on the Consolidated Statements of Comprehensive Loss.

Foreign Currency

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Assets and liabilities of each foreign entity are translated into U.S.

dollars at the exchange rate in effect on the balance sheet date.

Net revenue and expenses are translated at the average rate in effect during the period.

The resulting currency translation adjustments are recorded as a component of accumulated other comprehensive loss within stockholders' equity.

Transactions between the parent company and its foreign subsidiaries are denominated in U.S.

Dollars or in local currency.

Accordingly, amounts are remeasured on the balance sheet date and recorded as a foreign currency transaction gain or loss in the Consolidated Statements of Comprehensive Income (Loss).

Foreign currency transaction gains and losses are generated by intercompany balances and transactions denominated in other currencies other than the functional currency of the entity.

dollars at the foreign currency exchange rate in effect on the balance sheet date.

Net revenue and expenses are translated at the average foreign currency rate in effect during the period.

The resulting foreign currency translation adjustments are recorded as a component of accumulated other comprehensive loss within Consolidated Statements of Stockholders' Equity.

Foreign currency transaction gains and losses are generated by intercompany balances and transactions denominated in other currencies other than the functional currency of the entity and are recorded in foreign currency transaction loss (gain), net on the Consolidated Statements of Comprehensive Income (Loss) in the period in which the foreign currency exchange rate changes.

Concentration of Credit Risk

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Concentration of credit risk with respect to accounts receivable is generally mitigated by the Company performing ongoing credit evaluations of its customers.

Stock-based Compensation

The Company accounts for stock-based compensation transactions using a fair-value method and recognizes the fair value of each award as an expense over the service period.

Share-Based Compensation

The Company accounts for share-based compensation transactions using a fair-value method and recognizes the fair value of each award as an expense over the service period.

The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model.

The use of the Black-Scholes model requires a number of estimates, including the expected option term, the expected volatility in the price of the Company’s common stock, the risk-free rate of interest and the dividend yield on the Company’s common stock.

The fair value of the Company’s restricted stock units is the closing price of the Company’s common stock on the grant date.

The use of the Black-Scholes model requires a number of estimates, including the expected option term, the expected volatility in the price of the Company’s Class A Common Stock, the risk-free rate of interest and the dividend yield on the Company’s Class A Common Stock.

The fair value of the Company’s restricted stock units is the closing price of the Company’s Class A Common Stock on the grant date.

The fair value of the Company’s performance-based restricted stock units is estimated using a Monte Carlo simulation model.

The consolidated financial statements include amounts that are based on the Company’s best estimates and judgments.

The Company classifies compensation expense related to these awards in the Consolidated Statements of Comprehensive Income (Loss) based on the department to which the recipient reports.

The Company’s policy is to account for forfeitures in period that they occur.

The Company classifies compensation expense related to these awards on the Consolidated Statements of Comprehensive Income (Loss) based on the department to which the recipient reports.

Forfeitures are accounted for in the period they occur.

Earnings per Share

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Diluted earnings per share is calculated by dividing net income available to stockholders for the period by the diluted weighted average number of shares outstanding during the period.

Diluted earnings per share reflects the potential dilution from common shares issuable through stock options, performance-based restricted stock units, and restricted stock units using the treasury stock method and the "if-converted" met hod related to the Notes .

Diluted earnings per share reflects the potential dilution from common shares issuable through stock options, performance-based restricted stock units, restricted stock units, and Private Placement Warrants using the treasury stock method and the "if-converted" met hod related to the Notes .

Fair Value of Financial Instruments

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

New Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update 2023-07 "Segment Reporting (Topic 280):

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

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

The Company adopted ASU 2023-07 during the year ended December 31, 2024 on a retrospective basis.

See Note 16 - Segment, Geographic, and Other Information for additional information.

New Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740):

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

Note 3 — Business Combinations

Business Combination — Reverse Recapitalization

The closing of the Business Combination occurred on May 4, 2021.

In connection with the Business Combination:

• Certain accredited investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors agreed to purchase 35,000,000 shares (the “PIPE Shares”) of the Company’s Class A Common Stock at a purchase price per share of $ 10.00 for an aggregate purchase price of $ 350.0 million (the “PIPE Investment”).

The PIPE Investment was consummated substantially concurrently with the Closing of the Business Combination.

• Prior to the Business Combination, the Company issued an aggregate of 11,500,000 shares of the Company’s Class B Common Stock (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $ 25,000 in cash.

All outstanding Founder Shares were automatically converted into shares of the Company’s Class A Common Stock on a one -for-one basis at the Closing and will continue to be subject to the transfer restrictions applicable to such shares.

• In connection with the Closing, holders of 2,672,690 shares of the Company’s Class A Common Stock exercised their rights for the Company to redeem their respective shares for cash at an approximate price of $ 10.00 per share, for an aggregate of approximately $ 26.7 million, which was paid to such holders at Closing.

• Immediately after giving effect to the Merger and the PIPE Investment, there were 125,329,053 shares of the Company’s Class A Common Stock issued and outstanding.

• The aggregate gross cash consideration received by the Company in connection with the Business Combination was $ 783 million, which consisted of proceeds of $ 350 million from the PIPE Investment, plus approximately $ 433 million of cash from the Company’s trust account that held the proceeds from the Company’s initial public offering (the “Trust Account”).

The aggregate gross cash consideration received was reduced by $ 368 million, which consisted of cash payments made to the former stockholders of Hydrafacial, and further reduced by an additional $ 57 million for the payment of direct transaction costs incurred by Hydrafacial and the Company which were reflected as a reduction of proceeds.

The Company used the net proceeds to repay all of its outstanding indebtedness at the Closing.

The remainder of the consideration paid to the Hydrafacial stockholders consisted of 35,501,743 newly issued shares of Class A Common Stock (the “Stock Consideration”).

The net cash received from the Business Combination was subject to a working capital adjustment of $ 0.9 million.

The Company also issued 70,860 shares related to the working capital adjustment.

The following table reconciles the elements of the Business Combination to the Company’s Consolidated Statements of Cash Flows and the Consolidated Statements of Stockholders’ Equity (Deficit) for the year ended December 31, 2021:

(in thousands) Recapitalization

Cash in trust, net of redemptions $ 433,382

Cash — PIPE 350,000

Cash paid out to Former Parent ( 367,870 )

Transaction costs and advisory fees ( 56,976 )

Cash paid out from net working capital adjustment related to acquisitions ( 902 )

Net Cash Received from Business Combination $ 357,634

The number of shares of Class A Common Stock issued following the consummation of the Business Combination:

Number of Shares

Class A common stock outstanding prior to Business Combination 46,000,000

Redemption of Vesper Class A Common Stock ( 2,672,690 )

Class A common stock of Vesper 43,327,310

Founder shares (Vesper Class B Common Stock) 11,500,000

PIPE Shares 35,000,000

Business Combination and PIPE shares 89,827,310

Legacy Hydrafacial shares (1)

Working capital adjustment Class A Common Stock issued 70,860

Total Shares of Class A Common Stock after Business Combination 125,399,913

_______________

(1) The number of Legacy Hydrafacial shares was determined from the 54,358 shares of Hydrafacial common stock outstanding immediately prior to the closing of the Business Combination multiplied by the Exchange Ratio of 653.109 .

Distributor Acquisitions

On June 4, 2021, the Company acquired High Tech Laser, Australia Pty Ltd (“HTL”), a distributor of the Company’s products in Australia.

On July 1, 2021, the Company acquired Wigmore Medical France (“Wigmore”), Ecomedic GmbH (“Ecomedic”) and Sistemas Dermatologicos Internacionales (“Sidermica”), distributors of the Company’s products in France, Germany and Mexico, respectively.

Through these acquisitions, the Company plans to directly sell to the respective markets and improve services for its products.

Cash paid for the four distributors totaled $ 25.7 million.

Subsequent to the purchase price measurement period, the Company made contingent consideration payments totaling $ 1.6 million in connection with the Ecomedic and Sidermica acquisitions which were recorded in other expense, net in the Consolidated Statements of Comprehensive Income (Loss) .

The Company applied the acquisition method of accounting and established a new basis of accounting on the dates of the respective acquisitions.

The assets acquired by the Company are accordingly measured at their estimated fair values as of the acquisition date.

The goodwill arising from the acquisitions consists largely of the business reputation of the acquired company in the marketplace and its assembled workforce.

The goodwill is not deductible for income tax purposes.

The Company finalized the valuation of assets acquired and liabilities assumed for the distributor acquisitions as of June 30, 2022.

The following table summarizes the consideration and fair values assigned to the assets acquired and liabilities assumed at the dates of acquisition for the Wigmore, Ecomedic and Sidermica acquisitions and summarizes the HTL acquisition after measurement period adjustments.

(in thousands) HTL Wigmore (2)

Sidermica (4)

Consideration paid:

Cash, net of cash acquired $ 4,920 $ 2,540 $ 11,338 $ 6,861

Class A Common Stock issued (1)

1,557 456 6,513 815

Trade receivables due from seller 1,027 2,336 1,679 1,581

Notes payable to seller — — 2,153 —

$ 7,504 $ 5,332 $ 21,683 $ 9,257

Identifiable assets acquired and liabilities assumed

Accounts receivable $ 1,110 $ 2,079 $ 15 $ 1,657

Non-compete agreement 100 60 588 100

Customer relationships 2,696 2,276 5,487 2,700

Inventory and other assets 354 341 1,262 454

Accounts payable ( 45 ) ( 456 ) ( 772 ) —

Deferred tax liabilities, net ( 675 ) ( 842 ) ( 2,008 ) —

Accrued and other liabilities ( 802 ) ( 317 ) ( 340 ) —

Total identifiable net assets 2,738 3,141 4,232 4,911

Goodwill $ 4,766 $ 2,191 $ 17,451 $ 4,346

(1) Class A Common Stock issued as consideration for the acquisitions was 110,726 , 28,157 , 401,021 and 50,195 shares for HTL, Wigmore, Ecomedic and Sidermica, respectively.

(2) During the fourth quarter of 2021, adjustments were made to the Wigmore valuation pertaining to contingent consideration and intangible assets.

Goodwill was adjusted due to an increase of $ 0.3 million in contingent consideration and a decrease of $ 1.0 million in intangible assets.

Contingent consideration payments for the Wigmore acquisition were paid during the three months ended March 31, 2022.

(3) During the first quarter of 2022, adjustments were made to the Ecomedic valuation pertaining to acquisition date tax liability.

Goodwill was adjusted due to an increase of $ 0.2 million to acquisition date tax liability.

(4) During the second quarter of 2022, adjustments were made to the Sidermica valuation pertaining to contingent consideration.

Goodwill was adjusted due to finalization of the valuation of contingent consideration of $ 1.98 million.

Contingent consideration payments for the Sidermica acquisition were paid during the three months ended June 30, 2022.

Intangible assets acquired included customer relationships and non-compete agreements.

The valuation of the acquired intangible asset was estimated by performing projections of discounted cash flows, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk.

The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs).

The weighted average amortization period of customer relationship was 5 years, while the non-compete agreements are amortized over 3 years.

The operating results of the distributor acquisitions from the dates of acquisitions are included in the Consolidated Statements of Comprehensive Income (Loss).

The historical operating results are not material to the consolidated financial statements, and, therefore, the Company has not presented the unaudited pro forma results of operations for the distributor acquisitions.

Note 4 — Revenue

The Company manages its business on the basis of one operating segment and one reportable segment.

As a result, the chief operating decision maker, who is the Chief Executive Officer, reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.

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

Year Ended December 31,

(in thousands) 2023 2022 2021

Delivery Systems

$ 206,630 $ 206,235 $ 139,464

Consumables 191,361 159,641 120,622

Total net sales $ 397,991 $ 365,876 $ 260,086

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

Year Ended December 31,

(in thousands) 2023 2022 2021

Americas $ 227,709 $ 243,243 $ 169,426

Asia-Pacific 82,193 54,306 43,701

Europe, the Middle East and Africa 88,089 68,327 46,959

Total net sales $ 397,991 $ 365,876 $ 260,086

No single customer accounted for 10% or more of consolidated net sales during the years ended December 31, 2023, 2022, and 2021.

As of December 31, 2023, the Company had no customers that accounted for 10% or more of the Company’s accounts receivable balance.

As of December 31, 2022, the Company had one customer that accounted for 12 % of the Company’s accounts receivable balance.

The changes in allowance for estimated credit losses are as follows:

(in thousands) Year Ended December 31, 2023

Beginning balance

Provision for estimated credit losses

Write-offs, recoveries of previous write-offs, and foreign currency translation impact

Ending balance

In November 2024, the FASB issued ASU 2024-03 “Disaggregation of Income Statement Expenses” which expands interim and annual requirements to disclose about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses.

The guidance will be effective for annual periods beginning after December 15, 2026, with either retrospective or prospective application.

The standard allows for early adoption of these requirements.

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

Note 3 — Balance Sheet Components

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Total inventories $ 69,113 $ 91,321

As a result of the Company’s decision, with respect to Syndeo devices, to market and sell Syndeo 3.0 devices exclusively, the Company has designated all Syndeo 1.0 and 2.0 builds on-hand as obsolete, resulting in an inventory write-down of $ 19.6 million during the year ended December 31, 2023.

Refer to Note 18 – Restructuring Charges for further detail.

The Company also identified $ 18.3 million in discontinued, excess, or obsolete inventory during the year ended December 31, 2023.

During the year ended December 31, 2024, the Company recognized $ 28.0 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:

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Sales and VAT tax payables $ 5,244 $ 4,971

Royalty liabilities 3,914 2,348

Accrued interest 1,743 2,344

Note payable due seller — 1,819

Royalty liabilities 1,897 3,914

Deferred revenue 2,375 450

Other 8,743 8,167

Total other accrued expenses $ 20,002 $ 19,846

Long-lived assets, which includes property and equipment, net and right-of-use assets, net, by geographic region were as follows for the periods indicated:

(in thousands) December 31, 2023 December 31, 2022

$ 13,937 $ 19,974

United Kingdom 4,174 3,577

China 3,398 4,620

Rest of World 4,837 5,650

Total long-lived assets $ 26,346 $ 33,821

As of December 31, 2023 and 2022, the Company has approximately $ 15 million and $ 6 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.

During the year ended December 31, 2024, in connection with the Company’s manufacturing optimization plans, the Company recorded approximately $ 8 million of contract termination costs related to the Company concluding its relationship with its third-party manufacturing partner in China, which was recorded within cost of sales on the Consolidated Statements of Comprehensive Income (Loss).

As of December 31, 2024, the Company has accrued $ 0.5 million for the contract termination related costs, which was included in other accrued expenses on the Consolidated Balance Sheets.

As of December 31, 2024, total warranty reserve was approximately $ 4 million, which was included in other accrued expenses on the 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 December 31, 2024, the Company has approximately $ 2 million in restricted cash held as collateral for the Company’s credit cards, which was included in cash, cash equivalents and restricted cash on the Consolidated Balance Sheets.

As of December 31, 2024 and December 31, 2023, the Company has approximately $ 1 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.

Note 6 — Leases

Operating right-of-use assets and lease liabilities as of December 31, 2023 and December 31, 2022 comprises the following:

The changes in allowance for estimated credit losses are as follows:

Year Ended December 31,

(in thousands) 2024 2023 2022

Beginning balance $ 6,604 $ 2,929 $ 2,681

Provision for estimated credit losses 5,134 5,153 1,622

Write-offs, recoveries of previous write-offs, and foreign currency translation impact ( 2,141 ) ( 1,478 ) ( 1,374 )

Ending balance $ 9,597 $ 6,604 $ 2,929

Note 4 — Property and Equipment, net

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

(in thousands) Useful life

December 31, 2024 December 31, 2023

Right-of-use assets, net

Leasehold improvements Shorter of remaining lease

term or estimated useful life

$ 12,019 $ 12,323

Machinery and equipment 2 - 5

Furniture and fixtures 2 - 7

Computers and equipment 3 - 5

Tooling 5 732 887

Autos and trucks 5 59 242

Construction in progress — 748

Total property and equipment 31,478 34,179

accumulated depreciation and amortization ( 25,500 ) ( 19,953 )

Property and equipment, net $ 5,978 $ 14,226

Note 5 — Leases

Operating leases primarily consist of property leases related to the Company’s warehouse, which also serves as its production, manufacturing, and distribution facility, corporate offices, experience centers, and sales and marketing offices.

Operating right-of-use assets and lease liabilities as of December 31, 2024 and December 31, 2023 comprises the following:

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

Right-of-use assets, net $ 13,590 $ 12,120

Lease liabilities, current $ 5,147 $ 4,598

$ 4,598 $ 4,958

Lease liabilities, non-current 10,813 9,319

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Operating lease costs for the years ended December 31, 2024, 2023, and 2022 were $ 5.9 million, $ 5.2 million, and $ 5.0 million, respectively.

Short-term lease cost and variable lease costs were immaterial for the years ended December 31, 2023, 2022, and 2021.

Short-term lease costs and variable lease costs were immaterial for the years ended December 31, 2024, 2023, and 2022.

The following table summarizes future operating lease payments as of December 31, 2024 :

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Present value of net lease payments $ 15,960

The following table includes supplemental operating lease information:

The following table includes supplemental operating lease information (dollars in thousands):

Year Ended December 31,

Supplemental Cash Flow Information (dollars in thousands) 2023 2022 2021

2024 2023 2022

Cash paid for amounts included in the measurement of lease liabilities $ 5,123 $ 5,419 $ 2,981

Lease liabilities arising from new right-of-use assets

Right-of-use assets obtained in exchange for new and modified lease liabilities

$ 6,593 $ 1,181 $ 4,476

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Weighted average discount rate 4.6 % 3.2 % 3.0 %

Finance lease balances are not material and are included in property and equipment and other accrued expenses on the Consolidated Balance Sheets.

Note 7 — Property and Equipment, net

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

(in thousands) Useful life

December 31, 2023 December 31, 2022

Furniture and fixtures 2 - 7

$ 5,903 $ 5,364

Computers and equipment 3 - 5

Machinery and equipment 2 - 5

Autos and trucks 5 242 161

Tooling 5 887 638

Leasehold improvements Shorter of remaining lease

term or estimated useful life

12,323 11,812

Construction in progress 748 1,375

Total property and equipment 34,179 30,678

accumulated depreciation and amortization ( 19,953 ) ( 12,494 )

Property and equipment, net $ 14,226 $ 18,184

Finance leases are not material and are included in property and equipment, net and other accrued expenses on the Consolidated Balance Sheets.

Note 6 — Goodwill and Intangible Assets, net

The changes in the carrying value of goodwill are as follows:

Year Ended December 31,

(in thousands) 2023 2022 2021

Beginning balance $ 124,593 $ 123,694 $ 98,531

Measurement period adjustments — 2,154 26,600

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

December 31, 2023 $ 125,818

Foreign currency translation impact

Ending balance $ 125,818 $ 124,593 $ 123,694

December 31, 2024 $ 123,499

The Company performed its annual impairment test and determined that goodwill was not impaired since the reporting unit's fair value exceeded its carrying value.

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Developed technology $ 91,629 $ ( 74,655 ) $ 16,974 3 - 10

Capitalized software 22,983 ( 8,027 ) 14,956 3 - 5

Customer relationships 17,569 ( 13,696 ) 3,873 5 - 10

Trademarks 11,674 ( 6,189 ) 5,485 15

Non-compete agreement 5,814 ( 2,605 ) 3,209 3

Patents 3,781 ( 766 ) 3,015 3 - 19

Total intangible assets $ 153,450 $ ( 105,938 ) $ 47,512

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2023 were as follows:

(in thousands) Gross

Value Accumulated

Amortization Net Carrying

Value Estimated

Developed technology $ 91,629 $ ( 64,453 ) $ 27,176 3 - 10

Capitalized software 18,423 ( 4,078 ) 14,345 3 - 5

Customer relationships 18,809 ( 11,317 ) 7,492 5 - 10

Trademarks 11,521 ( 5,367 ) 6,154 15

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Acquisition of Esthetic Medical, Inc.

and Anacapa Aesthetics LLC

In February 2023, Edge Systems Intermediate, LLC, an indirect, wholly-owned subsidiary of the Company, acquired all of the outstanding shares of Esthetic Medical, Inc.

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Obtaining the Facial Indication Approval triggered a $ 1.3 million contingent payment made in July 2023 by the Company to the Seller, which was previously not considered probable of payment.

Acquisition of Anacapa Aesthetics LLC

In March 2023, the Company acquired assets from Anacapa Aesthetics LLC and recognized approximately $ 5 million of intangible assets, primarily related to non-compete agreements.

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2022 were as follows:

(in thousands) Gross

Value Accumulated

Amortization Net Carrying

Value Estimated

Developed technology $ 73,188 $ ( 54,422 ) $ 18,766 3 - 8

Customer relationships 18,089 ( 7,602 ) 10,487 5 - 10

Trademarks 10,907 ( 4,119 ) 6,788 15

Capitalized software 9,620 ( 1,507 ) 8,113 3 - 5

Non-compete agreement 776 ( 395 ) 381 3

Patents 2,226 ( 375 ) 1,851 3 - 19

Total intangible assets $ 114,806 $ ( 68,420 ) $ 46,386

Acquisition of The Personalized Beauty Company, Inc.

On April 12, 2022, the Company, through its indirect, wholly-owned subsidiary, Edge Systems Intermediate, LLC, acquired The Personalized Beauty Company, Inc., a Delaware corporation d.b.a.

Consideration paid in the aggregate was $ 1.5 million plus equity consideration of $ 0.5 million or 28,733 shares of the Company’s Class A Common Stock.

Depending on the achievement of certain revenue milestones, the former Mxt shareholders are entitled to receive up to $ 30 million of earn-out payments.

The estimated fair value of the earn-out was not material as of the acquisition date and as of December 31, 2022.

The Company accounted for this transaction as an asset acquisition based on an evaluation of the U.S.

GAAP guidance for business combinations and concluded that the Company acquired developed technology of $ 1.9 million and inventory of $ 0.1 million.

The Company concluded that the developed technology acquired from Mxt comprised substantially all of the fair value of the gross assets acquired and that the assets acquired did not meet the definition of a business under the guidance for business combinations.

In April 2022, Edge Systems Intermediate, LLC, acquired The Personalized Beauty Company, Inc., a Delaware corporation d.b.a.

Mxt in exchange for (i) cash payment of $ 1.5 million and (ii) 28,733 shares of the Class A Common Stock of the Company ($ 0.5 million).

In addition, depending on the achievement of certain revenue milestones, the former Mxt shareholders were entitled to receive up to $ 30 million of earn-out payments.

The Company accounted for this transaction as an asset acquisition and allocated substantially all of the purchase price totaling $ 1.9 million to intangible assets, primarily related to developed technology.

During the year ended December 31, 2023, Mxt was sold, resulting in a loss on sale of $ 2.8 million.

3 unchanged sentences

Thereafter 9,279

The Company tests its amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

As of December 31, 2023 and 2022, the Company’s amortizable intangible assets were not impaired.

Note 7 — Long-Term Debt

Amended and Restated Credit Facility

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

(the “Administrative Agent”).

Hydrafacial and the Administrative Agent were party to that certain Credit Agreement, dated as of December 30, 2021 (the “Original Credit Agreement”).

The Company, Hydrafacial, the other loan parties thereto, the lenders party thereto, and the Administrative Agent agreed to amend and restate the Original Credit Agreement in order to (i) extend the maturity date with respect to the existing revolving credit facility under the Original Credit Agreement to November 14, 2027, (ii) re-evidence the “Obligations” under, and as defined in, the Original Credit Agreement, which shall be repayable in accordance with the terms of the Credit Agreement, (iii) set forth the terms and conditions under which the lenders will, from time to time, make loans and extend other financial accommodations to or for the benefit of the Company and (iv) transition from LIBOR to the secured overnight financing rate (SOFR), (v) provide that the Company shall assume all of the rights and “Obligations” of Hydrafacial under, and as each such term is defined in, the Original Credit Agreement and (vi) provide that Hydrafacial shall be released and discharged solely from the obligations of the “Borrower” under, and as defined in, the Original Credit Agreement, and shall be a subsidiary guarantor and a loan party thereunder.

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

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

Borrowings under the Credit Agreement are secured by certain collateral of the loan parties and are guaranteed by all of the Company’s domestic subsidiaries, each of whom will derive substantial benefit from the revolving credit facility.

In specified circumstances, additional guarantors are required to be added.

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

As of December 31, 2023 the Company was in compliance with all restricted and financial covenants of the Credit Agreement.

The leverage ratio also determines pricing under the Credit Agreement.

At the Borrower’s option, borrowings under the revolving credit facility accrue interest at a rate equal to either Term SOFR Rate or a specified base rate plus an applicable margin.

The applicable margin is linked to the leverage ratio.

The margins range from 1.50 % to 2.00 % per annum for Term SOFR Rate loans and 0.50 % to 1.00 % per annum for base rate loans.

The revolving credit facility is subject to a commitment fee payable on the unused revolving credit facility commitments ranging from 0.25 % to 0.35 %, depending on the Borrower’s leverage ratio.

As of December 31, 2023 the Company’s unused commitment rate was 0.25 %.

The Borrower is also required to pay certain fees to the administrative agent and letter of credit issuers under the revolving credit facility.

During the term of the revolving credit facility, the Borrower may borrow, repay and re-borrow amounts available under the revolving credit facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

In addition, the Credit Agreement includes events (including, without limitation, a non-payment under the loan, a breach of warranties and representations in any material respect, non-compliance with covenants by a loan party, cross-default for payment defaults and cross-acceleration for other defaults under material debt or a change of control) which, if not cured within the time period, if any, specified would constitute an event of default.

Upon the occurrence of such events of default, the Company could not request borrowings and the lenders may elect to accelerate the outstanding principal and accrued and unpaid interest under the revolving credit facility.

Further, outstanding principal and accrued and unpaid interest thereon automatically accelerate upon the entry of an order for relief with respect to any loan party under any bankruptcy, insolvency or other similar law.

As of December 31, 2023 the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $ 750.0 million in principal amount of its 1.25 % Convertible Senior Notes due 2026.

The Notes were issued pursuant to, and are governed by, the Indenture between the Company and U.S.

Bank National Association, as trustee.

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.

8 unchanged sentences

From and after April 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The initial conversion rate is 31.4859 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 31.76 per share of common stock.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its Class A Common Stock or a combination of cash and shares of its Class A Common Stock , at the Company’s election.

The initial conversion rate is 31.4859 shares of Class A Common Stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $ 31.76 per share of Class A Common Stock .

The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defi ned in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The conversion price as of December 31, 2023 was $ 31.76 per share of common stock.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after October 6, 2024, and on or before the 40 th scheduled trading day immediately before the maturity date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

The conversion price as of December 31, 2024 was $ 31.76 per share of Class A Common Stock.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after October 6, 2024, and on or before the 40 th scheduled trading day immediately before the maturity date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company’s Class A Common Stock exceeds 130 % of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and (ii) the trading day immediately before the date the Company sends such notice.

3 unchanged sentences

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s Class A Common Stock .

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following:

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The Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act.

The total amount of debt issuance costs of $ 21.3 million was recorded as a reduction to “Convertible senior notes, net” in the Company’s Consolidated Balance Sheets and are being amortized as interest expense over the term of the Notes using the effective interest method.

The total amount of debt issuance costs of $ 21.3 million was recorded as a reduction to Convertible senior notes, net in the Consolidated Balance Sheets and are being amortized as interest expense over the term of the Notes using the effective interest method.

During the years ended December 31, 2024, 2023, and 2022, the Company recognized $ 3.3 million, $ 4.2 million, and $ 4.2 million, respectively, in interest expense related to the amortization of the debt issuance costs related to the Notes.

1 unchanged sentence

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

1.25 % Convertible Notes due 2026

$ 750,000 $ 750,000

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

Unamortized debt issuance costs

3 unchanged sentences

The Notes are carried at face value less the unamortized debt issuance costs on the Company’s Consolidated Balance Sheets.

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 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 (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 approximately $ 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.

Business Combination

In connection with the Closing of the Business Combination, all of Hydrafacial’s existing debt under its credit facilities were repaid and its credit facilities were extinguished.

T he related write-off of the deferred financing costs totaled $ 2.3 million and prepayment penalties totaled $ 2.0 million for the year ended December 31, 2021.

Both are included in the Other (income) expense, net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Defer red financing costs expense for the year ended December 31, 2022 amounted to $ 0.5 million for the existing debt prior to the Closing of the Business Combination while the amortization of issuance costs for the Notes amounted to $ 1.3 million for the year ended December 31, 2021 .

Debt Repurchase

In January 2024, the Company redeemed $ 75.0 million principal amount of our Notes at a weighted-average redemption price equal to 77 % for $ 57.8 million.

Notes Repurchase

During the year ended December 31, 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 on the Consolidated Statements of Comprehensive Income (Loss).

Amended and Restated Credit Facility

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

(the “Administrative Agent”).

The Credit Agreement 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.

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

Note 8 — 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 (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.

On September 15, 2022, the New York Court granted Hydrafacial’s Motion for Summary Judgment of No Unclean Hands and denied Cartessa’s Motion for Summary Judgment of non-infringement on three of the four patents-in-suit.

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.

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

Final judgment was entered on October 15, 2024.

On October 8, 2024, Hydrafacial filed an appeal in the New York Court challenging the New York Court’s final judgment and summary judgment decision of Cartessa’s non-infringement regarding the fourth patent-in-suit.

On November 13, 2024, Cartessa filed a cross-appeal challenging the New York Court’s final judgment and summary judgment decision of granting Hydrafacial’s motion for summary judgment of no invalidity regarding the fourth patent-in-suit.

The appeal is in its early stages with opening briefs set to be exchanged on March 12, 2025.

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.

In the ITC Cartessa Matter, both fact and expert discovery have been completed, motions for summary determination have been filed, and the parties are preparing for evidentiary hearing, which will be held April 9-15, 2025.

Hydrafacial continues to seek an exclusion order preventing importation or sale of Cartessa’s hydrodermabrasion systems within the United States.

Cartessa Aesthetics, LLC - Second Complaint

On June 14, 2024, Hydrafacial filed a complaint (the “Second Cartessa Complaint”) against Cartessa in the New York Court, captioned HydraFacial LLC v.

Cartessa Aesthetics, LLC, Case No.

2:24-cv-04253 (the “Second Cartessa Case”), for patent infringement arising from Cartessa’s sale of Cartessa’s hydrodermabrasion system that Hydrafacial alleged has infringed Hydrafacial’s U.S.

The Second Cartessa Case has been stayed pending resolution of the ITC Cartessa Matter and there will be no activity until the conclusion of the ITC Cartessa Matter.

After conclusion of the ITC Cartessa Matter, Hydrafacial plans to reopen the Second Cartessa Case to seek monetary damages and plans to vigorously pursue its claims against Cartessa.

Eunsung Global Corp (and Sinclair Pharma Ltd)

On September 30, 2024, Eunsung filed a Petition for inter partes review (“IPR”), IPR2024-01491, challenging the validity of Hydrafacial’s U.S.

On November 25, 2024, Sinclair Pharma Ltd filed a similar IPR Petition, IPR2025-00145, challenging the same patent and relying on the same arguments.

On January 10, 2025, Eunsung filed an IPR Petition, IPR2025-00445, challenging the validity of Hydrafacial’s U.S.

On January 13, 2025, Eunsung filed an IPR Petition, IPR2025-00452, challenging the validity of Hydrafacial’s U.S.

On January 14, 2025, Eunsung filed an IPR Petition, IPR2025-00453, challenging the validity of Hydrafacial’s U.S.

These IPR proceedings are in their early stages, with initial briefing due between March-May 2025, and Hydrafacial plans to vigorously defend its patents against each of these challenges.

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.

On July 26, 2024, Medicreations filed a motion to dismiss the complaint.

Briefing on the motion to dismiss is complete, but no order has been issued yet.

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 has been stayed pending the resolution of the ITC Sinclair Matter, discussed below, and there will be no activity on the Sinclair Case until the conclusion of the ITC Sinclair Matter.

After conclusion of the ITC Sinclair Matter, Hydrafacial plans to reopen the Sinclair Case to seek 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, Inc.

(“AMP”), 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, AMP, EMA Aesthetics, and H.R.

Meditech infringe Hydrafacial’s U.S.

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

Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

On February 19, 2025, the Administrative Law Judge issued an Initial Determination granting Hydrafacial’s motion to terminate the ITC Sinclair Matter.

Aesthetic Management Partners Inc.

On July 8, 2024, Hydrafacial filed a complaint against AMP in the United States District Court for the Western District of Tennessee, Case No.

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 AMP.

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 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.

Hydrafacial is seeking an exclusion order preventing importation or sale of each of the respondents’ hydrodermabrasion systems within the United States.

In the ITC Luvo Matter, the parties have completed fact discovery and will complete expert discovery on February 20, 2025.

The evidentiary hearing is scheduled for April 23-29, 2025.

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.

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

On January 22, 2025, Hydrafacial moved for default judgment against eMIRAmed and MIRAmedtech.

On January 30, 2025, eMIRAmed filed notice of Chapter 7 bankruptcy.

Securities Class Action

On November 16, 2023, a putative class action was filed in the United States District Court for the Central District of California against the Company, its then-current President and Chief Executive Officer, Andrew Stanleick, its former Chief Financial Officer, Liyuan Woo, and its current Chief Financial Officer, Michael Monahan.

The complaint, styled Abduladhim A.

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

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

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

Ca.) (the “Securities Class Action”), asserts claims for violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder against all defendants (First Claim), and violation of Section 20(a) of the Exchange Act against the individual defendants (Second Claim).

The complaint alleges that, between May 10, 2022 and November 13, 2023, defendants materially misled the investing public by publicly issuing false and/or misleading statements and/or omissions relating to Hydrafacial's business, operations, and prospects, specifically with respect to the performance of and demand for the Syndeo 1.0 and 2.0 devices.

The relief sought in the complaint includes a request for compensatory damages suffered by the plaintiff and other members of the putative class for damages allegedly sustained as a result of the alleged securities violations.

On January 16, 2024, putative class members Jeff and Kevin Brown (the “Browns”), Priscilla and Martjn Dijkgraaf (the “Dijkgraafs”), and Joseph Jou filed three competing motions for appointment as lead plaintiff under the Private Securities Litigation Reform Act (“PSLRA”), 17 U.S.C.

§ 78u-4(a)(3).

On January 31, 2024, Joseph Jou filed a notice of non-opposition to the Browns’ and Dijkgraafs’ motions for appointment as lead plaintiff.

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

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

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

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 filed their opposition brief on November 22, 2024, and the Company filed its reply brief on December 23, 2024.

A hearing on the Defendants’ motion to dismiss was scheduled for January 15, 2025.

On January 10, 2025, the court granted the parties’ joint stipulation to adjourn the January 15, 2025 hearing.

On January 17, 2025, the court granted the parties’ joint stipulation to withdraw briefing on Defendants’ motion to dismiss without prejudice to refiling and to briefly stay proceedings so that the parties can complete a private mediation that is scheduled to occur on March 27, 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 (“Jason Davalos”), Sonia Davalos (“Sonia Davalos”, and collectively with Jason Davalos, the “Davaloses”), and Sol Tan Tanning & Spa LLC (“Sol Tan”, and collectively with the Davaloses, the “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.

On December 30, 2024, the Class Action Defendants filed a motion to dismiss the Consumer Class Action complaint in its entirety.

On January 3, 2025, the Class Action Defendants filed a motion to stay discovery during the pendency of their motion to dismiss.

On January 8, 2025, the Davaloses voluntarily dismissed their claims against the Class Action Defendants pursuant to Fed.

41(a)(1)(A)(i), leaving Plaintiff Sol Tan as the sole remaining Consumer Class Action Plaintiff.

Plaintiff Sol Tan filed their opposition brief on January 9, 2025, and the Class Action Defendants filed their reply brief on January 13, 2025.

On January 16, 2025, the court granted the parties’ joint stipulation to adjourn the January 17, 2025 initial pretrial conference and stay the action pending the parties’ completion of a private mediation.

As part of its order, the court also (1) adjourned Plaintiff Sol Tan’s deadline to respond to the Class Action Defendants’ motion to dismiss sine die pending the outcome of mediation;

(2) denied as moot the Class Action Defendants’ motion to stay discovery in light of the parties’ agreement to stay discovery pending the outcome of mediation;

and (3) directed the parties to (a) file a joint letter on or before February 7, 2025, indicating the date (not later than May 8, 2025) on which the mediation is scheduled to occur;

and (b) within seven days after the mediation, either (i) file a joint letter indicating that settlement was reached;

or (ii) file a revised proposed case management plan and a revised joint letter required by the court’s Notice of Initial Pretrial Conference.

On February 7, 2025, the parties filed a joint letter notifying the court that they had agreed to mediate before Greg Danilow of Phillips ADR Enterprises on April 29, 2025.

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

On February 8, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former President and Chief Executive Officer, Andrew Stanleick;

its former Chief Financial Officer, Liyuan Woo, and current members of the Company’s Board of Directors (the “Board of Directors”):

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

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

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.

Ch.) (the “Elstein Derivative Action”), asserts a single claim for breach of fiduciary duty against the individual defendants based on the alleged disclosure of knowingly false information and/or the alleged failure to respond to red flags relating to Hydrafacial’s business, operations, and prospects, specifically with respect to the performance of and demand for the Syndeo 1.0 and 2.0 devices.

The plaintiff-stockholder further maintains that no demand was made upon the Company’s Board of Directors prior to the initiation of the Elstein Derivative Action based on allegations that a majority of the Board of Directors was not disinterested or independent with respect to the fiduciary duty claim, such that demand should be excused as futile.

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

On May 1, 2024, a derivative complaint was filed in the Delaware Court of Chancery against the Company’s former President and Chief Executive Officer, Andrew Stanleick;

its former Chief Financial Officer, Liyuan Woo, and current members of the Company’s Board of Directors:

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

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

2024-0463-LWW (Del.

Ch.) (the “Montague Derivative Action”), asserts claims for (i) breach of fiduciary duty, (ii) gross mismanagement, (iii) waste of corporate assets, (iv) unjust enrichment, and (v) aiding and abetting against the individual defendants based on allegations that the individual defendants made materially false and/or misleading statements, as well as failing to disclose material adverse facts about the Company’s business, operations, and prospects, specifically relating to the Syndeo 1.0 and 2.0 devices.

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

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

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

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

2024-0114-LWW (Del.

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

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

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

as Delaware counsel for plaintiffs in the Consolidated Derivative Action.

Additionally, the Consolidation Order designated the complaint filed in the Elstein Derivative Action as the operative complaint for the Consolidated Derivative Action, 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”).

Defendants filed their opening brief in support of their Motion to Dismiss and stay on February 28, 2025.

Pursuant to a scheduling order entered by the court, Plaintiffs’ answering brief is due May 2, 2025, and Defendants’ reply brief is due June 3, 2025.

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

Securities and Exchange Commission (the “SEC”) Subpoena

The Division of Enforcement of the SEC has issued a subpoena in connection with a formal order of investigation of the Company seeking documents and information from us.

The Company is in the process of responding to the subpoena and intends to fully cooperate with the SEC investigation.

We cannot predict the duration, scope, or outcome of this matter at this time.

Contractual Obligations and Other Commercial Commitments

As of December 31, 2024, the Company has $ 30.2 million of non-cancelable contractual obligations and other commercial commitments related to the purchase of inventory, service, other items, of which $ 21.8 million will be paid within the next twelve months.

Note 9 — Related-Party Transactions

Registration Rights Agreement

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 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 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 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

In connection with the consummation of the Business Combination, on May 4, 2021, the Company and LCP Edge Holdco, LLC entered into that certain Investor Rights Agreement (the “Investor Rights Agreement”).

Pursuant to the Investor Rights Agreement, LCP has the right to designate a number of directors for appointment or election to the Company’s Board of Directors as follows:

(i) one director for so long as LCP holds at least 10 % of the outstanding Class A Common Stock, (ii) two directors for so long as LCP holds at least 15 % of the outstanding Class A Common Stock, and (iii) three directors for so long as LCP holds at least 40 % of the outstanding Class A Common Stock.

Pursuant to the Investor Rights Agreement, for so long as LCP holds at least 10 % of the outstanding Class A Common Stock, LCP will be entitled to have at least one of its designees represented on the compensation committee and nominating committee and corporate governance committee of the Company’s Board of Directors.

Note 10 — Stockholders' Equity

The Company is authorized to issue 320,000,000 shares of Class A Common Stock, par value of $ 0.0001 per share.

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

As of December 31, 2024 and December 31, 2023, there were 124,924,185 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 .

Common Stock Repurchases

On September 12, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $ 100.0 million of the Company’s Class A Common Stock.

Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing.

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 year ended December 31, 2024, the Company did no t repurchase any shares of its Class A Common Stock.

On September 26, 2022, the Company’s Board of Directors approved a common stock repurchase program pursuant to which the Company may repurchase up to $ 200.0 million of its outstanding shares of Class A Common Stock.

The Company entered into two accelerated share repurchase agreements on September 27, 2022 and November 9, 2022, respectively, with a financial institution to repurchase a total of $ 200.0 million of Class A Common Stock.

Under the September 27, 2022 accelerated share repurchase agreement, the Company repurchased and retired 9.3 million shares for $ 100.0 million.

Under the November 9, 2022 accelerated share repurchase agreement, the Company made a payment of $ 100.0 million and received initial deliveries of 9.5 million shares, which were also retired, which represented 80 % of the payment amount divided by the Company’s closing stock price on that date.

During the year ended December 31, 2023, the Company paid $ 2.2 million as the final settlement of the November 9, 2022 accelerated share repurchase agreement, which was based upon the average daily volume weighted average price of the Company’s Class A Common Stock during the repurchase period, less an agreed upon discount.

The accelerated share repurchase agreements are accounted for as a repurchases and retirements of shares and as equity forward contracts indexed to the Company’s Class A Common Stock.

The equity forward contracts are classified as equity instruments under ASC 815-40, Contracts in Entity's Own Equity.

The par value of the initial shares received is recorded as a reduction to the Company’s Class A Common Stock and the excess of par value is recognized as a reduction to additional paid in capital.

The equity forward stock purchase contracts are classified as equity instruments and are recognized as a reduction to additional paid in capital.

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

Note 11 — Fair Value Measurements

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023 and 2022, and indicates 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 December 31, 2024 and December 31, 2023, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

As of December 31, 2024

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents:

Cash, cash equivalents, and restricted cash:

Money market funds $ 284,462 $ — $ — $ 284,462

International treasuries $ — $ 3,777 $ — $ 3,777

Warrant liability — Private Placement Warrants $ — $ — $ 488 $ 488

1 unchanged sentence

(in thousands) Level 1 Level 2 Level 3 Total

Cash and cash equivalents:

Cash, cash equivalents, and restricted cash:

Money market funds $ 458,676 $ — $ — $ 458,676

International treasuries $ — $ 3,777 $ — $ 3,777

Warrant liability — Private Placement Warrants $ — $ — $ 3,555 $ 3,555

2 unchanged sentences

The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data.

The Company reviews security pricing and assesses liquidity on a quarterly basis.

The Company reviews security pricing and assesses liquidity on a quarterly bas is.

As of December 31, 2024 , the Company’s U.S.

portfolio had no material exposure to money market funds with a fluctuating net asset value.

Warrant Liabilities

The Public Warrants and Private Placement Warrants (collectively, the “Warrants”) are accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities on the Company’s Consolidated Balance Sheets.

The Warrants are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Company’s Consolidated Statements of Comprehensive Income (Loss) .

On October 4, 2021, the Company issued a press release stating that it would redeem all of the Public Warrants that remained outstanding on November 3, 2021, for a redemption price of $ 0.10 per Public Warrant.

On November 3, 2021, all 16.2 million outstanding Public Warrants were either exercised for cash or on a cashless basis or were redeemed.

These outstanding Public Warrants that were exercised comprised 15.3 million Public Warrants issued in connection with the Vesper initial public offering and an additional 0.9 million warrants that became Public Warrants due to the sale of Private Placement Warrants.

Approximately 16.1 million Public Warrants were exercised for cash at an exercise price of $ 11.50 per share of Class A Common Stock, 74,104 Public Warrants were exercised on a cashless basis in exchange for an aggregate of 26,732 shares of Class A Common Stock, and 75,016 warrants were redeemed for $ 0.10 per warrant, in each case in accordance with the terms of the Warrant Agreement.

In 2021, total cash proceeds generated from exercises of the Public Warrants were $ 185.4 million.

In addition, 0.3 million Private Placement Warrants were exercised in 2021 for total cash proceeds of $ 3.0 million.

Accordingly, as of December 31, 2023 and 2022, there were no Public Warrants outstanding.

As of December 31, 2023 and 2022, the Company had approximately 7 million Private Placement Warrants outstanding, for which the fair value was determined using a Monte Carlo simulation model.

Private Placement Warrants

As of December 31, 2024 and 2023, the Company had approximately 7 million Private Placement Warrants outstanding for which the fair value was determined using a Monte Carlo simulation model because these warrants are not subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share.

Long-Term Debt

2 unchanged sentences

The estimated fair values have been calculated based on broker quotes or rates for the same or similar instruments and are classified as Level 2 within the fair value hierarchy.

Note 12 — Share-Based Compensation

The Beauty Health Company 2021 Incentive Award Plan (the “2021 Plan”) became effective upon the consummation of the Business Combination.

Pursuant to the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other stock or cash based awards to eligible service providers.

The aggregate number of shares of the Company’s Class A Common Stock that may be issued pursuant to awards granted under the 2021 Plan is the sum of (i) 14,839,640 and (ii) an annual increase on January 1 of each calendar year (commencing with January 1, 2022 and ending on and including January 1, 2031) equal to a number of shares equal to 4 % of the aggregate shares outstanding as of December 31 of the immediately preceding calendar year (or such lesser number of shares as is determined by the Company’s Board of Directors), subject to adjustment by the plan administrator in the event of certain changes in our corporate structure.

The maximum number of shares that may be granted with respect to incentive stock options under the 2021 Plan is 7,500,000 .

At December 31, 2024 , approximately 17 million shares of the Company’s Class A Common Stock were reserved for the issuance of awards under the 2021 Plan.

Stock Options

The following table summarizes the Company’s stock option activity:

Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value

(in thousands)

Outstanding - January 1, 2024

3,732,420 $ 14.00 6.73 $ —

Forfeited ( 141,900 ) 17.54

Expired ( 107,450 ) 21.28

Outstanding - December 31, 2024

3,483,070 13.64 5.29 —

Vested and Exercisable - December 31, 2024

2,769,240 13.60 5.01 —

Options vested and expected to vest - December 31, 2024

3,483,070 $ 13.64 5.29 $ —

At December 31, 2024, aggregate unrecognized compensation cost for unvested stock options was $ 1.9 million recognized over a weighted average period of 0.4 years .

The stock options granted generally vest over a four year period.

There were no stock options granted during the year ended December 31, 2023.

The weighted average grant date fair value of the stock options granted during the year ended December 31, 2022 was $ 12.23 .

The intrinsic value of a stock option is the amount by which the current market value of the underlying stock exceeds the exercise price of the option.

For the year ended December 31, 2023, t he total intrinsic value of stock options exercised was immaterial.

There were no stock options exercised during the year ended December 31, 2022.

Restricted Stock Units (“RSU”) and Performance-based Restricted Stock Units (“PSU”)

The Company reserves the right to grant RSUs to certain employees, executives and directors.

The RSUs granted are eligible to vest over the service period, which is generally over three to four years , subject to the recipient’s continued employment through each vesting date.

PSUs are granted to select executive officers pursuant to the 2021 Plan and vest based on either (i) the performance of the Company’s Class A Common Stock (“Top-hat”) or (ii) the total shareholder return of the Company’s Class A Common Stock relative to a defined peer group (“TSR”).

Top-hat PSUs are earned over a three or four-year performance period, based on the attainment of pre-determined goals related to the performance of the Company’s Class A Common Stock, and subject to the recipient’s continued employment through the end of the performance period.

The actual number of shares of the Company’s Class A Common Stock to be issued related to Top-hat PSUs will range from 0 % to 100 % of the number of PSUs granted.

TSR PSUs are earned over a three-year performance period, based on the attainment of pre-determined goals related to the Company’s total shareholder return relative to a defined peer group, and subject to the recipient’s continued employment through the end of the performance period.

The actual number of shares of the Company’s Class A Common Stock to be issued related to TSR PSUs will range from 0 % to 200 % of the number of PSUs granted.

The fair value of PSUs is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved.

The fair value of PSUs was determined using a Monte Carlo simulation subject to the performance conditions of the underlying PSUs with the following assumptions:

Input 2024 Grants 2023 Grants 2022 Grants

Risk-free interest rate 4.5 %

1.5 % - 4.2 %

Expected volatility of the Company’s Class A Common Stock 101.5 %

57.7 % - 66.0 %

The following table summarizes the Company’s RSU and PSU activity for the year ended December 31, 2024:

Weighted Average Grant Date Fair Value

Outstanding - January 1, 2024

5,242,680 1,306,558 $ 8.77 $ 9.13

Granted 6,421,618 1,258,112 3.17 5.27

Vested ( 2,407,671 ) — 7.69 —

Forfeited ( 2,002,236 ) ( 375,097 ) 6.68 9.80

Cancelled (1)

— ( 951,751 ) — 7.93

Outstanding - December 31, 2024

7,254,391 1,237,822 $ 4.56 $ 5.93

(1) Cancelled PSU shares represent Top-hat PSUs and TSR PSUs that were not earned for the performance period that ended during the year ended December 31, 2024.

The fair value of RSUs that vested, determined based on their respective fair values at vesting date, during the years ended December 31, 2024, 2023, and 2022 was $ 5.9 million, $ 9.7 million, and $ 2.7 million, respectively.

At December 31, 2024, the aggregate unrecognized compensation cost for unvested RSUs and PSUs was $ 21.4 million and $ 4.9 million, respectively, recognized over a weighted average period of 1.8 years and 1.9 years, respectively.

The weighted average grant date fair value of RSUs granted during the years ended December 31, 2023 and 2022 was $ 8.58 and $ 13.47 , respectively.

The weighted average grant date fair value of PSUs granted during the years ended December 31, 2023 and 2022 was $ 17.54 and $ 8.79 , respectively.

Employee Stock Purchase Plan (“ESPP”)

The Company maintains the ESPP for employees located in the United States, which became effective upon the consummation of the Business Combination.

Under the ESPP, eligible employees can have up to 10 % of their earnings withheld, up to certain maximums, to be used to purchase shares of the Company’s Class A Common Stock at certain purchase dates.

The price of the Company’s Class A Common Stock purchased under the ESPP for the offering periods is equal to 85 % of the lesser of the fair market value of a share of Class A Common Stock of the Company on the beginning or the end of the offering period.

In November 2024, the Company suspended the operation of the ESPP after the conclusion of its sixth offering period.

The aggregate number of shares of the Company’s Class A Common Stock initially reserved for issuance pursuant to rights granted under the ESPP was 2,000,000 .

In addition, on the first day of each calendar year beginning on January 1, 2022 and ending on (and including) January 1, 2031, the number of shares available for issuance under the ESPP will be increased by a number of shares equal to the lesser of (1) one percent ( 1 %) of the shares outstanding on the final day of the immediately preceding calendar year, and (2) such smaller number of shares as determined by the Company’s Board of Directors.

As of December 31, 2024, approximately 5 million shares were reserved for the future issuance under the ESPP.

Share-Based Compensation Expense

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

Year Ended December 31,

(in thousands) 2024 2023 2022

Cost of sales $ 52 $ 1,513 839

Selling and marketing 7,716 7,962 9,363

Research and development 345 1,425 602

General and administrative 18,583 11,644 17,691

Total share-based compensation

$ 26,696 $ 22,544 $ 28,495

Note 13 — Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan that all regular domestic employees are eligible to participate in after one month of service.

Contributions to the 401(k) plan include voluntary contributions by eligible employees and employer matching contributions by the Company.

Certain international employees participate in other defined contribution retirement plans with varying vesting and contribution provisions.

Defined contributions expense was $ 2.7 million, $ 3.0 million and $ 2.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Note 14 — Income Taxes

The Inflation Reduction Act, signed into law on August 16, 2022, provides tax incentives for certain industries and imposes a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on stock buybacks.

The Company is subjected to the new excise tax on certain stock buybacks that occur after December 31, 2023.

The Company does not anticipate a material impact from the Inflation Reduction Act on the Company's consolidated financial statements.

The following table presents domestic and foreign components of (loss) income before income taxes as follows for the periods indicated:

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(Loss) income before taxes $ ( 29,550 ) $ ( 101,889 ) $ 45,339

$ ( 101,889 ) $ 45,339 $ ( 380,639 )

The federal, state and foreign components of the income tax (benefit) expense are summarized as follows:

The federal, state and foreign components of the income tax (benefit) expense are summarized as follows for the periods indicated:

Year Ended December 31,

8 unchanged sentences

Total deferred tax benefit ( 3,595 ) ( 5,816 ) ( 1,787 )

( 5,816 ) ( 1,787 ) ( 3,396 )

Total income tax (benefit) expense $ ( 452 ) $ ( 1,773 ) $ 1,115

$ ( 1,773 ) $ 1,115 $ ( 1,875 )

The effective tax rate of the provision for income tax differs from the federal statutory rate as follows for the periods indicated:

5 unchanged sentences

Change in fair value of warrants ( 644 ) 2.2 ( 2,503 ) 2.5 ( 16,452 ) ( 36.3 )

Change in fair value of earn-out shares — — — — 9,891 ( 2.6 )

Transaction costs — — — — ( 32 ) ( 0.1 )

— — ( 32 ) ( 0.1 ) 3,312 ( 0.9 )

Share-based compensation 5,130 ( 17.4 ) 2,922 ( 2.9 ) — —

2,922 ( 2.9 ) — — — —

Foreign rate differential ( 64 ) 0.2 338 ( 0.3 ) ( 10 ) —

1 unchanged sentence

Permanent differences 296 ( 1.0 ) 2,183 ( 2.1 ) — —

2,183 ( 2.1 ) — — — —

Change in valuation allowance 1,006 ( 3.4 ) 18,400 ( 18.1 ) 6,242 13.8

1 unchanged sentence

Income tax (benefit) expense $ ( 452 ) 1.5 % $ ( 1,773 ) 1.7 % $ 1,115 2.4 %

$ ( 1,773 ) 1.7 % $ 1,115 2.4 % $ ( 1,875 ) 0.5 %

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

18 unchanged sentences

Right-of-use assets ( 3,401 ) ( 2,506 )

( 2,506 ) ( 3,966 )

Property and equipment ( 630 ) ( 2,165 )

1 unchanged sentence

Valuation allowance ( 34,244 ) ( 33,239 )

Net deferred income tax liabilities $ ( 171 ) $ ( 1,196 )

The Company’s net deferred tax liability as presented in the consolidated balance sheets consists of the following items as of the dates indicated:

Net deferred income tax assets (liabilities)

$ 3,498 $ ( 171 )

The Company’s net deferred income tax assets (liabilities) as presented on the Consolidated Balance Sheets consists of the following items as of the dates indicated:

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

1 unchanged sentence

Deferred income tax liabilities ( 396 ) ( 702 )

Net deferred income tax liabilities

Net deferred income tax assets (liabilities)

$ 3,498 $ ( 171 )

The Company has established a valuation allowance against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized.

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

The valuation allowance increased $ 18.4 million in 2023 from 2022 primarily due to recognizing valuation allowances against deferred tax assets of certain state and foreign net operating loss carryforwards and federal and state interest carryforwards.

The Company increased the valuation allowance on the net U.S.

federal and state deferred tax assets by $ 1.0 million for the year ended December 31, 2024.

The Company has provided a full valuation allowance against the net U.S.

federal and state deferred tax assets that management believes is not more likely than not to be realized.

If the Company were to release the valuation allowance upon management determining that it is more likely than not the deferred tax assets could be recognized, $ 34.2 million of income tax benefit would be recorded to continuing operations.

At December 31, 2023, the Company had gross federal, state and foreign net operating loss carryforwards of $ 42.6 million, $ 57.3 million and $ 1.8 million, respectively.

The state losses expire beginning in 2030 and the foreign losses beginning in 2028.

At December 31, 2024, the Company had gross federal and state net operating loss carryforwards of $ 40.6 million and $ 23.0 million, respectively, that can be carried forward indefinitely, subject to an 80% taxable income limitation, and state net operating loss carryforward of $ 37.3 million, which will expire in varying amounts beginning in 2025.

The Company has federal and state research and development credit carryforwards of $ 1.0 million and $ 1.1 million, respectively.

The federal credits will expire in 2041 and the state credits are available indefinitely.

As of December 31, 2024 and December 31, 2023, the Company had recorded gross unrecognized tax benefits of $ 1.2 million and $ 1.1 million, respectively.

All of the unrecognized tax benefits as of December 31, 2023, if recognized, would not materially impact the effective tax rate.

As of December 31, 2023, there were no unrecognized tax benefits that the Company expects would change significantly over the next twelve months.

As of December 31, 2024, the Company has $ 0.2 million of unrecognized tax benefits that, if recognized and realized, will affect the effective tax rate.

The Company does not expect a significant change in the unrecognized tax benefits over the next 12 months.

The Company recognizes interest expense and penalties associated with uncertain tax positions as a component of income tax expense.

The Company has not recognized any interest or penalties because of losses.

Accruals for interest and penalties related to income tax matters were not material as of December 31, 2024.

A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:

4 unchanged sentences

Increases for tax positions in current period 261 312

Total unrecognized tax benefits $ 1,104 $ 674

The Company is subject to taxation and files income tax returns in the United States federal jurisdiction and many state and foreign jurisdictions.

Settlements/statute expirations

Unrecognized tax benefits at end of period

$ 1,194 $ 1,104

The Company is subject to taxation and files income tax returns in the U.S.

federal and various state and foreign jurisdictions.

The Company’s tax returns remain open for examination in the United States for years 2020 through 2023, while tax returns in the foreign jurisdictions in which the Company operates are generally subject to examination up to three years following the year in which the tax obligation originated.

The Company is not currently under examination by income tax authorities in federal, state, or other jurisdictions.

The Company’s tax returns remain open for examination in the United States for years 2020 through 2022.

Its foreign subsidiaries are generally subject to examination three years following the year in which the tax obligation originated.

The years subject to audit may be extended if the entity substantially understates corporate income tax.

APB 23 (codified as FASB ASC 740-10-25-3) allows an exception to the general rule that a U.S.

7 unchanged sentences

During the year ended December 31, 2023, the Company received $ 5.4 million for the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act, of which $ 4.9 million was recorded in other (income) expense, net and $ 0.5 million was recorded in interest income on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Note 12 — Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan that all regular domestic employees are eligible to participate in after one month of service.

Contributions to the 401(k) plan include voluntary contributions by eligible employees and employer matching contributions by the Company.

Certain international employees participate in other defined contribution retirement plans with varying vesting and contribution provisions.

Defined contributions expense was $ 3.0 million, $ 2.2 million and $ 1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Note 13 — Equity-Based Compensation

The Beauty Health Company 2021 Incentive Award Plan (the “2021 Plan”) became effective upon the consummation of the Business Combination.

The maximum number of shares that may be granted with respect to incentive stock options (“ISOs”) under the 2021 Plan is 7,500,000 .

At December 31, 2023 , approximately 15 million shares of the Company’s Class A Common Stock were reserved for the issuance of awards under the 2021 Plan.

Stock Options

The following table summarizes the Company’s stock option activity:

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value

(in thousands)

Outstanding - January 1, 2023

5,601,770 $ 15.21 8.34 $ —

( 31,000 ) 12.85

Forfeited ( 1,431,038 ) 17.34

Expired ( 407,312 ) 18.97

Outstanding - December 31, 2023

Note 15 — Net (Loss) Income Attributable to Common Stockholders

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

Year Ended December 31,

(in thousands, except share and per share amounts) 2024 2023 2022

Net (loss) income available to common stockholders - basic $ ( 29,098 ) $ ( 100,116 ) $ 44,224

Adjustments related to the Notes (1)

( 22,671 ) — —

Vested and Exercisable - December 31, 2023

Income on Private Placement Warrants

— — ( 78,343 )

Options vested and expected to vest - December 31, 2023

Net loss available to common stockholders - diluted $ ( 51,769 ) $ ( 100,116 ) $ ( 34,119 )

Weighted average common stock outstanding - basic

123,827,372 131,680,605 147,554,090

The weighted-average grant date fair value of the stock options granted during the years ended December 31, 2022 and 2021 was $ 12.23 and $ 7.84 , respectively.

At December 31, 2023, aggregate unrecognized compensation cost for unvested stock options was $ 8.6 million recognized over a weighted average period of 1.4 years.

The stock options granted generally vest over a four year period.

Restricted Stock Units (“RSUs”) and Performance-based Restricted Stock Units (“PSUs”)

The Company reserves the right to grant RSUs to certain employees, executives and directors.

The RSUs granted are eligible to vest over the service period, which is generally over three to four years , subject to the recipient’s continued employment through each vesting date.

PSUs are awarded to select executive officers pursuant to the 2021 Plan and vest based on either (i) the performance of the Company’s Class A Common Stock (“Top-hat”) or (ii) the total shareholder return of the Company’s Class A Common Stock relative to a defined peer group (“TSR”).

Top-hat PSUs are earned over a four-year performance period, based on the performance of the Company’s Class A Common Stock, and subject to the recipient’s continued employment through the end of the performance period.

The actual number of shares of the Company’s Class A Common Stock to be issued, ranging from 0 % to 100 % of the number of PSUs granted, will be determined based on the greater of (i) the Company’s average stock price during the 90 -day period ending on the third anniversary of the vesting commencement date and (ii) the Company’s average stock price during the 90 -day period ending on the fourth anniversary of the vesting commencement date.

The actual number of shares of the Company’s Class A Common Stock to be issued will range from 0 % to 200 % of the number of PSUs granted.

The fair value of PSU awards is recognized on a straight-line basis over their measurement period as compensation expense, and is not subject to reversal even if the market condition is not achieved.

The fair value of PSUs was determined using a Monte Carlo simulation subject to the performance conditions of the underlying PSUs with the following assumptions:

Input 2023 Grants

Risk-free interest rate 3.5 %

Effect of dilutive shares:

Notes 18,665,203 — —

Private Placement Warrants

Weighted average common stock outstanding - diluted 142,492,575 131,680,605 148,506,312

Basic net (loss) income per share:

$ ( 0.23 ) $ ( 0.76 ) $ 0.30

Dilutive net loss per share:

$ ( 0.36 ) $ ( 0.76 ) $ ( 0.23 )

Expected volatility of the Company’s Class A Common Stock 74.9 %

(1) For the year ended December 31, 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:

Year Ended December 31,

2024 2023 2022

The following table summarizes the Company’s equity award activity for the year ended December 31, 2023:

Weighted Average Grant Date Fair Value

RSUs PSUs RSUs PSUs

Outstanding - January 1, 2023

Notes — 23,614,425 23,614,425

7,254,391 5,242,680 2,580,152

Granted 5,572,679 402,518 8.58 17.54

Vested ( 1,007,176 ) — 12.57 —

Forfeited ( 1,902,975 ) ( 1,596,086 ) 13.35 11.58

Outstanding - December 31, 2023

Stock Options 3,483,070 3,732,420 5,601,770

1,237,822 1,306,558 2,500,126

The fair value of equity awards that vested, determined based on their respective fair values at vesting date, during the years ended December 31, 2023, 2022, and 2021 was $ 9.7 million, $ 2.7 million, and $ 0.7 million, respectively.

All of the outstanding equity awards are expected to vest.

At December 31, 2023, the aggregate unrecognized compensation cost for unvested RSUs and PSUs was $ 33.1 million and $ 5.8 million, respectively, recognized over a weighted average period of 1.9 years and 1.1 years, respectively.

Employee Stock Purchase Plan (“ESPP”)

The Company maintains the ESPP for employees located in the United States, which became effective upon the consummation of the Business Combination.

The aggregate number of shares of the Company’s Class A Common Stock initially reserved for issuance pursuant to rights granted under the ESPP was 2,000,000 .

As of December 31, 2023, approximately 4 million shares were reserved for the future issuance under the ESPP.

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

For the years ended December 31, 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 16 — Segment, Geographic, and Other Information

The Company manages its business on the basis of one operating segment and one reportable segment.

The chief operating decision maker (“CODM”), who is the Chief Executive Officer, assesses performance for the one operating segment and decides how to allocate resources based on consolidated net income (loss) and consolidated income (loss) from operations, which is also reported on the Consolidated Statements of Comprehensive Income (Loss).

Significant expenses within consolidated net (loss) income include cost of sales, total operating expenses, interest expense, interest income, other (income) expense, net, change in fair value of warrant liabilities, foreign currency transaction loss (gain), net, and income tax expense (benefit), all of which are each separately reported on the Consolidated Statements of Comprehensive Income (Loss).

The CODM also reviews the disaggregation of total operating expenses, of which significant segment expenses are related to personnel-related expenses, which includes sales commissions and share-based compensation expense.

Other segment expenses included in total operating expenses primarily consist of fees for professional services principally comprising legal, audit, tax and accounting services, depreciation and amortization expenses, advertising and marketing related expenses,

software, facilities-related costs, credit card and wire fees, and insurance.

The following summarizes the components of operating expenses for the periods indicated:

Year Ended December 31,

(in thousands) 2024 2023 2022

Cost of sales $ 1,513 $ 839 405

Selling and marketing 7,962 9,363 3,547

Research and development 1,425 602 195

General and administrative 11,644 17,691 8,271

Total share-based compensation $ 22,544 $ 28,495 $ 12,418

Note 14 — Commitments and Contingencies

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

Ageless Serums LLC, Case No.

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

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

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

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

Ageless Serums LLC, Case No.

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

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

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

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

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

Section 362(a)(1).

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

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

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

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

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

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

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

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

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

The Plan also includes mutual releases between Hydrafacial and Ageless.

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

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

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

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

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

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

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

Cartessa Aesthetics, LLC, Case No.

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

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

On September 15, 2022, the New York Court granted Hydrafacial’s Motion for Summary Judgment of No Unclean Hands and denied

Cartessa’s Motion for Summary Judgment of non-infringement on three of the four patents-in-suit.

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.

Securities Class Action

On November 16, 2023, a putative class action was filed in the United States District Court for the Central District of California against the Company, its then-current president and chief executive officer, Andrew Stanleick, its former chief financial officer, Liyuan Woo, and its current chief financial officer, Michael Monahan.

The complaint, styled, Abduladhim A.

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

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

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

On January 16, 2024, putative class members Jeff and Kevin Brown (the “Browns”), Priscilla and Martjn Dijkgraaf (the “Dijkgraafs”), and Joseph Jue filed three competing motions for appointment as lead plaintiff under the Private Securities Litigation Reform Act (“PSLRA”), 17 U.S.C.

§ 78u-4(a)(3).

On January 31, 2024, Joseph Jou filed a notice of non-opposition to the Browns’ and Dijkgraafs’ motions for appointment as lead plaintiff.

The court is currently deciding the motions for appointment of lead counsel and lead plaintiff..

Within ten days of entry of the order appointing lead plaintiff and approving lead counsel, the court-appointed lead plaintiff and defendants shall confer and submit a proposed schedule for the filing of an amended complaint and defendants’ response(s) thereto.

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

District Judge Sherilyn Peace Garnett.

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

Derivative Action

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

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

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

The complaint, styled 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.

2024-0114-LWW (Del.

Ch.) (the “Derivative Action”), asserts a single claim for breach of fiduciary duty against the individual defendants based on the alleged disclosure of knowingly false information and/or the alleged failure to respond to red flags relating to Hydrafacial’s business, operations, and prospects, specifically with respect to the performance of and demand for the Syndeo 1.0 and 2.0 devices.

The plaintiff-stockholder further maintains that no demand was made upon the Company’s board prior to the initiation of the Derivative Action based on allegations that a majority of the board was not disinterested or independent with respect to the fiduciary duty claim, such that demand should be excused as futile.

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

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

Contractual Obligations and Other Commercial Commitments

As of December 31, 2023, the Company has $ 73.7 million of non-cancelable contractual obligations and other commercial commitments related to the purchase of inventory, service, other items, of which the majority will be paid within the next twelve months.

Note 15 — Related-Party Transactions

Registration Rights Agreement

Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding shares of Class A Common Stock or any other equity securities (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor or the Hydrafacial stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 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.

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.

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.

Investor Rights Agreement

Pursuant to the Investor Rights Agreement, LCP has the right to designate a number of directors for appointment or election to the Company’s Board of Directors as follows:

Amended and Restated Management Services Agreement

Hydrafacial entered into a Management Services Agreement, dated December 1, 2016, with Linden Capital Partners III LP (“Linden Capital Partners III”) and DW Management Services, L.L.C.

(“DW Management Services”) pursuant to which the parties received quarterly monitoring fees of the greater of (a) $ 125,000 and (b) 1.25 % of Last Twelve Months EBITDA multiplied by the quotient of (x) the aggregate capital invested by the investors of DW Healthcare Partners IV (B), L.P.

(“DWHP Investors”) into LCP and/or its subsidiaries as of such date, divided by (y) the sum of (i) the aggregate capital invested by the DWHP Investors into LCP and/or its subsidiaries, plus (ii) the aggregate capital invested by Linden Capital Partners III into LCP and/or its subsidiaries as of the date of payment.

In addition, the management services agreement provided for other fees in relation to services that may be provided in connection with equity and/or debt financing, acquisition of any other business, company, product line or enterprise, or divestiture of any division, business, and product or material assets.

The fees varied between 1 % and 2 % of the related transaction amount.

Linden Capital Partners III also received a transaction fee upon the consummation of the Business Combination.

In connection with the consummation of the Business Combination, on May 4, 2021, the Company, its subsidiary, Edge Systems LLC, and Linden Capital III LLC, the general partner of Linden Manager III LP (the “Linden Manager”) entered into an Amended and Restated Management Services Agreement (the “Linden Management Services Agreement”) pursuant to which the Linden Manager may continue to provide advisory services at the request of the Company related to mergers and acquisitions for one year following the Business Combination.

As consideration for such services, the Company would pay a fee, equal to 1 % of enterprise value of the target acquired, to the Linden Manager upon the consummation of any such transaction (the “ 1 % Fee”).

The Company had also agreed to reimburse Linden Manager for certain expenses in connection with such advisory services.

However, pursuant to the Linden Management Services Agreement, the Company’s obligation to pay the 1 % Fee expired twelve months after the consummation of the Business Combination on May 4, 2022.

Hydrafacial recorded approximately $ 0.2 million of charges related to management services fees for the year ended December 31, 2021.

There were no management fees during the years ended December 31, 2022 and 2023.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

In relation to the consummation of the Business Combination, $ 21.0 million in transaction fees was paid to the Former Parent during the year ended December 31, 2021.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Note 16 — Stockholders’ Equity

The Company is authorized to issue 320,000,000 shares of Class A Common Stock, par value of $ 0.0001 per share.

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

As of December 31, 2023 and December 31, 2022, there were 122,899,002 and 132,214,695 , 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 .

In connection with the Business Combination on May 4, 2021, the Company issued 35,000,000 shares of Class A Common Stock to certain qualified institutional buyers and accredited investors that agreed to purchase such shares in connection with the Business Combination for aggregate consideration of $ 350 million.

The Company also issued 35,501,743 shares of Class A Common Stock as partial compensation to the Hydrafacial stockholders for the Business Combination.

Common Stock Repurchases

On September 12, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $ 100.0 million of the Company’s Class A Common Stock.

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.

Under the September 27, 2022 accelerated share repurchase agreement, the Company repurchased and retired 9.3 million shares for $ 100.0 million.

During the three months ended June 30, 2023, the Company paid $ 2.2 million as the final settlement of the November 9, 2022 accelerated share repurchase agreement, which was based upon the average daily volume weighted average price of the Company’s Class A Common Stock during the repurchase period, less an agreed upon discount.

The accelerated share repurchase agreements are accounted for as a repurchases and retirements of shares and as equity forward contracts indexed to the Company’s Class A Common Stock.

The equity forward contracts are classified as equity instruments under ASC 815-40, Contracts in Entity's Own Equity.

The par value of the initial shares received is recorded as a reduction to the Company’s Class A Common Stock and the excess of par value is recognized as a reduction to additional paid in capital.

The equity forward stock purchase contracts are classified as equity instruments and are recognized as a reduction to additional paid in capital.

Preferred Stock

At December 31, 2023 and December 31, 2022 , there were no shares of preferred stock issued or outstanding.

Note 17 — 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:

Year Ended December 31,

(in thousands, except share and per share amounts) 2023 2022 2021

Net (loss) income available to common stockholders - basic

Total operating expenses:

Personnel-related expenses

$ 131,134 $ 152,625 $ 146,748

Income on Private placement warrants — ( 78,343 ) —

Net loss available to common stockholders - diluted $ ( 100,116 ) $ ( 34,119 ) $ ( 378,764 )

Weighted average common shares outstanding - basic

Other segment expenses

118,936 133,405 127,872

Effect of dilutive shares:

Private placement warrants — 952,222 —

Weighted average common shares outstanding - diluted 131,680,605 148,506,312 102,114,949

Basic net (loss) income per share:

Total operating expenses

$ 250,070 $ 286,030 $ 274,620

Diluted net (loss) per share

Net sales disaggregated by major product line were as follows for the periods indicated:

Year Ended December 31,

(in thousands) 2024 2023 2022

Delivery Systems

$ 125,400 $ 206,630 $ 206,235

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive or requisite performance conditions were not met:

Consumables 208,894 191,361 159,641

Total net sales $ 334,294 $ 397,991 $ 365,876

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

Year Ended December 31,

(in thousands) 2024 2023 2022

Americas $ 216,993 $ 227,709 $ 243,243

45,668 82,193 54,306

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

RSUs 5,242,680 2,580,152 380,775

PSUs 1,306,558 2,500,126 975,000

Stock Options 3,732,420 5,601,770 6,785,020

In addition, the potential final settlement of shares related to the November 9, 2022 accelerated share repurchase agreement was excluded from the calculation of the weighted average diluted shares outstanding for the year ended December 31, 2022 as the effect would have been anti-dilutive.

For the years ended December 31, 2023 and 2021, income and shares related to the Private Placement Warrants were excluded from the calculation of diluted net loss per common share because their effect would be antidilutive.

Note 18 — Restructuring Charges

Syndeo Program

Europe, the Middle East and Africa

71,633 88,089 68,327

Total net sales $ 334,294 $ 397,991 $ 365,876

No single customer accounted for 10% or more of consolidated net sales during the years ended December 31, 2024, 2023, and 2022.

No single customer accounted for 10% or more of the Company’s accounts receivable balance as December 31, 2024 and 2023.

Long-lived assets, which includes property and equipment, net and right-of-use assets, net, by geographic region were as follows for the periods indicated:

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

$ 13,285 $ 13,937

United Kingdom 2,066 4,174

Germany 1,595 2,312

China 1,406 3,398

Rest of World 1,216 2,525

Total long-lived assets $ 19,568 $ 26,346

Note 17 — Syndeo Program

The Company launched Syndeo in March 2022, the first new Delivery System model in five years.

3 unchanged sentences

In July 2023 the Company developed Syndeo 3.0 and has noted a significant improvement in user experience and a substantial decline in initial return rates, primarily due to hardware and software enhancements that automate and force effective rinse cycles and manifold cleaning with an air blast procedure that reduce build-up and clogging as well as improvements in the connector to the handpiece to facilitate user cleaning.

During the third quarter of 2023, the Company announced its Syndeo Enhancement Program (the “Syndeo Program”) to upgrade devices to Syndeo 3.0 build standards via field service.

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

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

During the third quarter of 2023, the Company announced announced its Syndeo Enhancement Program (the “Syndeo Program”) to upgrade devices to Syndeo 3.0 build standards via field service.

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;

or (ii) a replacement Syndeo 3.0 device for their existing device.

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

The Company anticipates that the vast majority of its customers will elect to request a replacement Syndeo 3.0 device.

With respect to Syndeo devices, as a result of the decision to market and sell Syndeo 3.0 devices exclusively, the Company has designated all Syndeo 1.0 and 2.0 builds on-hand as obsolete, resulting in an inventory write-down in cost of sales of $ 19.6 million during the year ended December 31, 2023.

The following table summarizes the Syndeo Program charges and usage:

(in thousands)

Year Ended December 31, 2023

Program charges

Program usage

Ending balance

Syndeo inventory write-down and Syndeo Program charges were recognized in cost of sales for the year ended December 31, 2023.

Business Transformation Program and Other Restructuring Actions

The Company has recognized restructuring charges of $ 7.2 million primarily related to reductions in workforce and consulting expenses for the year ended December 31, 2023 for the first phase of the Company’s business transformation plan and other restructuring actions.

Outstanding liabilities for consulting expenses was $ 2.4 million as of the year ended December 31, 2023.

Outstanding liabilities for employee reductions in force were immaterial as of the year ended December 31, 2023.

In the second phase (“Phase 2”), of the Business Transformation Program, the Company expects cost savings to be driven by optimizing manufacturing operations and reduced operating spend.

While the Company believes there are long-term savings to be achieved, as of the date of the issuance of these financial statements, Phase 2 of the restructuring program is not finalized, and the Company is re-evaluating the expected timing and savings.

Note 19 — Revision for Immaterial Misstatements

As disclosed in Note 1 – Description of Business, subsequent to the issuance of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, during the six months ended June 30, 2023, the Company identified misstatements related to the elimination of intercompany balances and right of return assets.

The revision to the accompanying Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), and Consolidated Statements of Cash Flows and related disclosures in Note 5 – Balance Sheet Components and Note 17 – Net Income (Loss) Attributable to Common Stockholders are detailed in the tables below.

As of December 31, 2021, accumulated deficit was understated by $ 4.3 million, and as such, previously reported stockholders’ equity of $ 302.3 million was revised to $ 298.0 million.

There were no other changes to the consolidated statements of stockholders’ equity that have not otherwise been reflected in the Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss) as detailed in the tables below.

Year Ended December 31, 2021

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

Cost of sales $ 78,259 $ 3,289 $ 81,548

Gross profit $ 181,827 $ ( 3,289 ) $ 178,538

Loss from operations $ ( 36,639 ) $ ( 3,289 ) $ ( 39,928 )

Loss before provision for income taxes $ ( 377,350 ) $ ( 3,289 ) $ ( 380,639 )

Income tax benefit $ ( 2,242 ) $ 367 $ ( 1,875 )

Net loss $ ( 375,108 ) $ ( 3,656 ) $ ( 378,764 )

Comprehensive loss $ ( 376,607 ) $ ( 3,656 ) $ ( 380,263 )

Net loss per share - Basic $ ( 3.67 ) $ ( 0.04 ) $ ( 3.71 )

Net loss per share - Diluted $ ( 3.67 ) $ ( 0.04 ) $ ( 3.71 )

Year Ended December 31, 2021

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

Net loss $ ( 375,108 ) $ ( 3,656 ) $ ( 378,764 )

Change in operating assets and liabilities:

Inventories $ ( 10,577 ) $ 3,289 $ ( 7,288 )

Prepaid expenses and other current assets $ ( 5,434 ) 367 $ ( 5,067 )

As of December 31, 2022

Consolidated Balance Sheet (in thousands)

As Previously Reported Adjustment As Revised

Inventories $ 116,430 $ ( 6,774 ) $ 109,656

Prepaid expenses and other current assets $ 26,698 $ 950 $ 27,648

Total current assets $ 789,099 $ ( 5,824 ) $ 783,275

TOTAL ASSETS $ 1,008,907 $ ( 5,824 ) $ 1,003,083

Accounts payable $ 30,335 $ ( 1,868 ) $ 28,467

Income tax payable $ 962 $ 467 $ 1,429

Total current liabilities $ 73,115 $ ( 1,401 ) $ 71,714

TOTAL LIABILITIES $ 837,431 $ ( 1,401 ) $ 836,030

Accumulated deficit $ ( 374,328 ) $ ( 4,423 ) $ ( 378,751 )

Total stockholders' equity $ 171,476 $ ( 4,423 ) $ 167,053

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,008,907 $ ( 5,824 ) $ 1,003,083

Year Ended December 31, 2022

Consolidated Statement of Comprehensive Income (Loss) (in thousands) As Previously Reported Adjustment As Revised

Cost of sales $ 115,536 $ 1,561 $ 117,097

Gross profit $ 250,340 $ ( 1,561 ) $ 248,779

Loss from operations $ ( 24,280 ) $ ( 1,561 ) $ ( 25,841 )

Foreign currency transaction loss, net $ 3,164 $ ( 1,868 ) $ 1,296

Income before provision for income taxes $ 45,032 $ 307 $ 45,339

Income tax expense $ 648 $ 467 $ 1,115

Net income $ 44,384 $ ( 160 ) $ 44,224

Comprehensive income $ 41,111 $ ( 160 ) $ 40,951

Year Ended December 31, 2022

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

Net income $ 44,384 $ ( 160 ) $ 44,224

Change in operating assets and liabilities:

Inventories $ ( 87,241 ) $ 2,878 $ ( 84,363 )

Prepaid expenses and other current assets $ ( 16,401 ) $ ( 1,317 ) $ ( 17,718 )

Accounts payable $ 1,606 $ ( 1,868 ) $ ( 262 )

Income taxes payable $ 198 $ 467 $ 665

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.

The Company incurred costs of $ 45.6 million during the year ended December 31, 2023, associated with the costs to upgrade, replace, and remediate Syndeo 1.0 or 2.0 devices.

As of December 31, 2024, the Syndeo Program is complete.

The following table summarizes the Syndeo Program charges and usage (in thousands):

Program liability as of December 31, 2022 $ —

Charges 45,638

Program liability as of December 31, 2023 $ 21,009

Usage ( 21,009 )

Program liability as of December 31, 2024 $ —

With respect to Syndeo devices, as a result of the decision to market and sell Syndeo 3.0 devices exclusively, the Company designated all Syndeo 1.0 and 2.0 builds on-hand as obsolete, resulting in an inventory write-down of $ 19.6 million during the year ended December 31, 2023.

Syndeo Program charges and Syndeo inventory write-down were recognized in cost of sales for the year ended December 31, 2023.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data