What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-12 · 59 added, 169 removed, 143 unchanged (61% of the section changed)

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Cautionary Note Regarding Forward-Looking Statements

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

This Quarterly Report on Form 10-Q for the three months ended March 31, 2025 (the “Quarterly Report on Form 10-Q”) contains “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.

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

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Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled Risk Factors of this filing and our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2025 (the “Annual Report on Form 10-K”).

Important factors, among others, that may affect actual results or outcomes include the inability to recognize the anticipated benefits of the business combination consummated on May 4, 2021 pursuant to a certain Agreement and Plan of Merger entered into by and among the Company and other parties (the “Business Combination”);

Important factors, among others, that may affect actual results or outcomes include the inability to recognize the benefits of the business combination consummated on May 4, 2021 pursuant to a certain Agreement and Plan of Merger entered into by and among the Company and other parties (the “Business Combination”);

costs related to the Business Combination;

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Company Overview

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

The Beauty Health Company 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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Business and Macroeconomic Conditions

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

During the three months ended March 31, 2025 , we continued to execute against our plan to expand our footprint by selling and placing our patented hydradermabrasion delivery systems (“Delivery Systems”) worldwide, drive consumables, which consist of single-use tips, solutions, serums and other consumables used to provide a Hydrafacial treatment that cleanses, extracts, and hydrates the skin (collectively “Consumables”), invest in our community of providers, partners, and consumers, drive brand awareness, and optimize our global infrastructure.

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

• Disruptions in transportation and other supply chain related constraints, such as labor strife in the transportation industry;

• Global economic conditions, including inflation, recession, changes in foreign currency exchange rates, higher interest rates, and other changes in economic conditions;

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

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

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

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

As of September 30, 2024, the Syndeo Program is complete.

• The imposition of tariffs and/or trade restrictions may impact material costs and pricing;

• Disruptions in transportation and other supply chain related constraints, such as labor strife in the transportation industry;

• Issues related to older models of Syndeo and our actions to remediate such issues.

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

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Business and macroeconomic factors may also negatively impact, in the short-term or long-term, the global economy, the beauty health industry, our providers and their budgets with us, our business, the Company’s brand reputation, financial condition, and results of operations.

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

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

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

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

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

Amounts and percentages may not foot due to rounding.

Three Months Ended September 30,

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

Net sales $ 78.8 100.0 % $ 97.4 100.0 %

Cost of sales 38.2 48.4 110.0 112.9

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

Operating expenses

Selling and marketing 27.6 35.0 30.7 31.5

Research and development 1.1 1.4 1.8 1.9

General and administrative 33.4 42.4 37.0 38.0

Total operating expenses 62.2 78.9 69.5 71.4

Loss from operations (21.5) (27.3) (82.1) (84.3)

Interest expense 2.5 3.1 3.4 3.5

Interest income (4.9) (6.2) (6.8) (6.9)

Other income, net (0.1) (0.1) (4.9) (5.0)

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

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

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

Income tax expense 1.9 2.5 3.5 3.6

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

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

Delivery Systems

$ 27.6 $ 51.0 $ (23.4) (45.9) %

Consumables 51.2 46.4 4.8 10.4 %

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

Three Months Ended September 30,

Percentage of net sales 2024 2023

Delivery Systems 35.0% 52.4%

Consumables 65.0% 47.6%

Total 100.0% 100.0%

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

Delivery Systems net sales for the three months ended September 30, 2024 decreased $23.4 million , or 45.9% , compared to the three months ended September 30, 2023, with decreases across all regions.

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

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

Consumables net sales for the three months ended September 30, 2024 increased $4.8 million , or 10.4% , compared to the three months ended September 30, 2023.

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

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

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

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

Gross profit (loss)

$ 40.6 $ (12.6) $ 53.2 N/M

Gross margin 51.6 % (12.9) %

N/M - Not meaningful

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

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

Operating Expenses

Selling and Marketing

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

Selling and marketing $ 27.6 $ 30.7 $ (3.1) (10.1) %

As a percentage of net sales 35.0 % 31.5 %

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

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

Research and Development

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

Research and development $ 1.1 $ 1.8 $ (0.7) (39.7) %

As a percentage of net sales 1.4 % 1.9 %

Research and development expense for the three months ended September 30, 2024 decreased $0.7 million, or 39.7%, compared to the three months ended September 30, 2023.

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

General and Administrative

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

General and administrative $ 33.4 $ 37.0 $ (3.5) (9.6) %

As a percentage of net sales 42.4 % 38.0 %

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

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

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

Three Months Ended September 30, Change

(in millions) 2024 2023 Amount %

Interest income

$ (4.9) $ (6.8) $ 1.9 (27.8) %

Change in fair value of warrant liabilities

$ (0.4) $ (5.9) $ 5.4 (92.9) %

Other income, net

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

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

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

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

Comparison of Nine Months Ended September 30, 2024 to Nine Months Ended September 30, 2023

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

The Company evaluated its global distribution strategy to align its go-to-market strategy with in-market partner capabilities and market opportunity.

The Company expects to transition sales in the China market to a distributor partner during the second quarter of 2025, and as a result, the Company intends to discontinue its direct sales presence in China.

During the three months ended March 31, 2025, the Company recognized approximately $3 million and $1 million, respectively, of severance and restructuring and other non-cash charges associated with these actions.

The change in go-to-market strategy is expected to be accretive to the Company’s long-term profitability, as reductions in operating spend are partially offset by a reduction to revenue.

Comparison of Three Months Ended March 31, 2025 to Three Months Ended March 31, 2024

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

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

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

The results of operations data for the three months ended March 31, 2025 and March 31, 2024, have been derived from the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Amounts and percentages may not foot due to rounding.

Nine Months Ended September 30,

Three Months Ended March 31,

(in millions) 2025 % of Net Sales 2024 % of Net Sales

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Change in fair value of warrant liabilities (0.3) (0.5) 1.5 1.8

Foreign currency transaction loss, net 0.2 0.1 0.7 0.2

Foreign currency transaction (gain) loss, net (1.9) (2.7) 1.3 1.6

Loss before provision for income taxes (9.2) (13.2) (1.3) (1.6)

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Net loss $ (10.1) (14.5) % $ (0.7) (0.8) %

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

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Total net sales $ 69.6 $ 81.4 $ (11.8) (14.5) %

Nine Months Ended September 30,

Three Months Ended March 31,

Percentage of net sales 2025 2024

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Total 100.0% 100.0%

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

Delivery System net sales for the nine months ended September 30, 2024 decreased $63.4 million , or 39.1% , compared to the nine months ended September 30, 2023, with decreases across all regions.

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

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

Consumables net sales for the nine months ended September 30, 2024 increased $13.0 million , or 9.3% , compared to the nine months ended September 30, 2023.

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

Total net sales for the three months ended March 31, 2025 decreased $11.8 million, or 14.5%, compared to the three months ended March 31, 2024.

Delivery Systems net sales for the three months ended March 31, 2025 decreased $15.6 million, or 43.5%, compared to the three months ended March 31, 2024, with decreases across all regions.

Delivery Systems net sales were negatively impacted globally by unfavorable macroeconomic and credit conditions.

Consumables net sales for the three months ended March 31, 2025 increased $3.7 million, or 8.2%, compared to the three months ended March 31, 2024.

The increase in Consumables net sales was primarily attributable to increased placements of Delivery Systems and the adjoining consumption of Consumables during the three months ended March 31, 2025.

Cost of Sales, Gross Profit, and Gross Margin

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

Cost of sales $ 21.0 $ 33.0 $ (12.0) (36.4)%

Gross profit $ 130.0 $ 109.4 $ 20.5 18.8%

$ 48.6 $ 48.4 $ 0.2 0.5%

Gross margin 69.8 % 59.4 %

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

Cost of sales for the nine months ended September 30, 2024 include $22.7 million of inventory charges for discontinued, excess, obsolete inventory, including the write-down of Delivery System inventory to its net realizable value and the write-off of excess raw materials.

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

Cost of sales for the three months ended March 31, 2025 decreased $12.0 million, compared to the three months ended March 31, 2024 primarily due to lower net sales and inventory related charges.

Gross margin increased to 69.8% for the three months ended March 31, 2025 from 59.4% for the three months ended March 31, 2024 primarily due to lower inventory related charges and favorable mix shift towards consumable net sales, partially offset by lower average selling price of equipment net sales.

Operating Expenses

Selling and Marketing

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

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As a percentage of net sales 37.4 % 41.4 %

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

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

Selling and marketing expense for the three months ended March 31, 2025 decreased $7.6 million, or 22.7%, compared to the three months ended March 31, 2024.

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

Research and Development

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

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As a percentage of net sales 1.4 % 3.4 %

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

Research and development expense for the three months ended March 31, 2025 decreased $1.8 million, or 64.4%, compared to the three months ended March 31, 2024.

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

General and Administrative

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

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As a percentage of net sales 48.2 % 35.5 %

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

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

General and administrative expense for the three months ended March 31, 2025 increased $4.7 million, or 16.3%, compared to the three months ended March 31, 2024.

The increase is primarily driven by higher legal fees and severance and restructuring expense, partially offset by lower personnel-related expenses, including share-based compensation expense and bad debt recoveries.

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

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

(in millions) 2025 2024 Amount %

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Change in fair value of warrant liabilities

$ (3.0) $ (8.4) $ 5.4 (64.2) %

$ (0.3) $ 1.5 $ (1.8) N/M

Other income, net

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N/M - Not meaningful

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

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

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

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

Interest income for the three months ended March 31, 2025 decreased $2.3 million, compared to the three months ended March 31, 2024, primarily due to lower average invested balances during the three months ended March 31, 2025.

During the three months ended March 31, 2025, the Company recognized expense of $0.3 million related to the change in the fair value of the warrant liabilities as compared to income of $1.5 million for the three months ended March 31, 2024, driven primarily by the fluctuation of the price of the Company’s Class A common stock (the “Class A Common Stock”).

Other income, net for the three months ended March 31, 2024 included $16.1 million net gain related to the repurchase of the 1.25% Convertible Senior Notes due October 1, 2026 (the “Notes”).

Liquidity and Capital Resources

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

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

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

As of March 31, 2025, we had cash, cash equivalents, and restricted cash of $373.0 million.

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

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

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

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

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

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

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

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $750.0 million in principal amount of its Notes.

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

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

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

Capped Call Transactions

On September 9, 2021, in connection with the pricing of the offering of Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with the Bank of Montreal, Credit Suisse Capital LLC, Deutsche Bank AG, London Branch, Goldman Sachs & Co.

LLC, JPMorgan Chase Bank, National Association, Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (collectively, the “Option Counterparties”).

In addition, on September 10, 2021, in connection with the initial purchasers’ exercise of their option to purchase additional Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions”, and together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties.

The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s Class A Common Stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s Class A Common Stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions.

The cap price of the Capped Call Transactions is initially $47.94, which represents a premium of 100% over the last reported sale price of the Company’s Class A Common Stock on September 9, 2021.

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

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.

Amended and Restated Credit Agreement

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

(the “Administrative Agent”).

The Credit Agreement 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.

Known Tren ds or Uncertainties

During the three months ended March 31, 2024, the Company repurchased $75.0 million principal amount of the Notes for $57.8 million.

During the year ended December 31, 2024, the Company repurchased $192.3 million principal amount of the Notes for $156.1 million.

During the three months ended March 31, 2025, there were no repurchases related to the Notes.

Known Trends or Uncertainties

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

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

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

In addition, we continue to face macroeconomic challenges such as the possibility of recession or financial market instability, and the impact of any governmental actions on the economy, such as tariffs and/or trade restrictions.

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

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

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

Macroeconomic challenges and credit conditions have negatively impacted our revenues in 2025.

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

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

Discontinuation of Trade-up Program in 2024

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

During the nine months ended September 30, 2023 and the year ended December 31, 2023, the Company recognized approximately $12 million and $17 million, respectively, of revenue based on the estimated fair value of such Delivery Systems.

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

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

Amounts may not foot due to rounding.

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions) 2025 2024

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Changes in working capital 2.9 (26.0)

Net cash (used for) provided by operating activities (0.3) 26.9

Net cash provided by (used for) operating activities 3.0 (16.9)

Net cash used for investing activities (1.1) (1.8)

1 unchanged sentence

Net change in cash, cash equivalents, and restricted cash

(163.8) (8.5)

Effect of foreign currency translation 1.4 (1.1)

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Operating Activities

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

The change in cash used for operating activities was primarily related to higher working capital usage and changes in net loss and non-cash adjustments.

The current year net loss and non-cash adjustments include a net gain of $33.4 million related to the repurchase of the Company’s Notes.

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

Net cash provided by operating activities for the three months ended March 31, 2025 was $3.0 million, as compared to net cash used for operating activities of $16.9 million for the three months ended March 31, 2024.

The change in cash provided by operating activities was primarily related to lower working capital usage and changes in net loss and non-cash adjustments.

The prior year net loss and non-cash adjustments include the gain on the repurchase of the Company’s Notes and the prior year changes in working capital includes the impact of the Syndeo Program.

Investing Activities

Net cash used for investing activities for the nine months ended September 30, 2024 was $5.9 million, as compared to $29.3 million for the nine months ended September 30, 2023 .

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

and Anacapa Aesthetics LLC for $18.5 million.

Net cash used for investing activities for the three months ended March 31, 2025 was $1.1 million, as compared to $1.8 million for the three months ended March 31, 2024.

The change in cash used for investing activities was due to lower capital expenditures during the three months ended March 31, 2025.

Financing Activities

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

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

Net cash used for financing activities for the three months ended March 31, 2025 was $0.3 million, as compared to $58.6 million for the three months ended March 31, 2024.

The change in cash used for financing activities was primarily related to prior year’s repurchase of $75.0 million principal amount of the Company’s Notes at a weighted average price equal to 77% for $57.8 million.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis