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Item 1. Business

2023-03-01 compared with 2022-03-01 · 233 added, 202 removed, 407 unchanged (52% of the section changed)

Company Overview

The Beauty Health Company is a global category-creating company focused on delivering beauty health experiences by reinventing our consumer’s relationship with their skin, their bodies and their self-confidence.

Our flagship brand, HydraFacial, created the category of hydradermabrasion by using a patented Vortex-Fusion Delivery System to cleanse, peel, exfoliate, extract, infuse, and hydrate the skin with proprietary solutions and serums.

HydraFacial provides a non-invasive and approachable experience with a powerful community of a/estheticians, consumers and partners, bridging medical skin correction to traditional over-the-counter beauty.

Our vision is to expand our platform and connected community of providers, consumers, brand partners, and retail partners to democratize and personalize beauty health solutions across ages, genders, skin tones, and skin types.

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

Our flagship brand, Hydrafacial, created the category of hydradermabrasion by using a patented Vortex-Fusion Delivery System (“Delivery System”) to cleanse, extract, and hydrate the skin with proprietary solutions and serums.

Hydrafacial provides a non-invasive and approachable skincare experience.

Together, with our powerful community of aestheticians, consumers and partners, we are personalizing skin care solutions for all ages, genders, skin tones, and skin types .

Growth Strategy in General

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Expand our footprint by selling innovative products and connected experiences to providers and consumers

Invest in our providers, especially the trusted a/esthetician, to help turn them into brand evangelists and advocates providing first-class experiences

Invest in our providers, especially the trusted aesthetician, to help turn them into brand evangelists and advocates providing first-class experiences

Nurture direct relationships with our consumers, building brand awareness and driving them to our trusted community

Build our global infrastructure and a connected technology platform to fuel growth and community engagement

Supercharge our platform with targeted acquisitions to complement our portfolio and spin our flywheel faster

Our strategy begins with developing a network of providers, consumers, brand partners, and retail partners to build a distribution platform for our innovative products and experiences.

Leverage our global infrastructure and a connected technology platform to fuel growth and community engagement

Supercharge our platform with targeted acquisitions to complement our portfolio

Our strategy begins with developing a network of providers, brand partners, and retail partners to build a distribution platform for our innovative products and experiences.

We intend to utilize our sales force to sell our offering, inviting providers and partners to become a part of our community.

We believe that each placement of our offering will grow the platform and increase the awareness of our company, ultimately building a recognizable and aspirational brand.

In this process, we will particularly focus on the trusted a/esthetician.

We believe that each placement of our offering will grow the platform and increase consumers’ awareness of us, ultimately building a recognizable and aspirational brand drawing in consumers.

In this process, we will particularly focus on the trusted aesthetician.

Historically, companies in the medical aesthetics industry focused on physicians, nurses, front-office staff, and business owners.

Notably absent from their focus was the a/esthetician, a highly influential provider who serves as a source of skincare information and recommendations for their clients and patients.

We recognized the opportunity to empower the a/esthetician and created programs to elevate their skills, knowledge, and confidence through a continued relationship so they feel supported.

As a result, we have open dialogue with our a/esthetician providers and receive valuable information on consumer preferences and behaviors they see in their practices.

These a/estheticians have since become our most influential ambassadors, driving awareness, recommending our products, and becoming a point of education for our consumers.

While they are not our employees or contractors, we believe they are an important competitive advantage, as a well-trained a/esthetician can provide consumers with a consistent, memorable, first-class experience no matter where a consumer accesses our products and experiences.

Notably absent from their focus was the aesthetician, a highly influential provider who serves as a source of skincare information and recommendations for their clients and patients.

We recognized the opportunity to empower the aesthetician and created programs to elevate their skills, knowledge, and confidence through a continued relationship so they feel supported.

As a result, we have open dialogue with our aesthetician providers and receive valuable information on consumer preferences and behaviors they see in their practices.

These aestheticians have since become our most influential ambassadors, driving awareness, recommending our products, and becoming a point of education for our consumers.

While they are not our employees or contractors, we believe they provide an important competitive advantage to us, as a well-trained aesthetician can provide consumers with a consistent, memorable, first-class experience no matter where a consumer accesses our products and experiences.

We believe that this in turn builds loyalty from the consumer to BeautyHealth.

A/estheticians are one part of our community that we recognized as powerful.

Aestheticians are one part of our community that we recognize as powerful.

We continue to focus on our other providers, including physicians, nurses, and other partners to build consumer awareness for our brands.

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In our view, investing our efforts in any part of our community drives utilization amongst consumers, resulting in a potent formula for growth.

Another focus area of our growth strategy will be nurturing our relationship with the consumer.

Another focus area of our growth strategy is nurturing our relationship with the consumer.

As the ultimate end user, the consumer is at the core of our efforts.

We have an experienced team who will meticulously curate the consumer journey, from lead generation that invites consumers to our community to the user experience of our offerings.

We employ a multi-pronged

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approach to consumer acquisition and engagement, including but not limited to marketing activation events, storytelling, gamification, and loyalty.

We believe driving increased consumer traffic to our network of providers, retailers, and brand partners will increase the utilization of our products and experiences, further cementing the compelling value proposition we offer to our partners and therefore driving increased purchases from them.

We believe our products and experiences are universal in their appeal across cultures, genders, skin tones, and skin types, making a compelling case for an international expansion.

We have an experienced team who meticulously curate the consumer journey, from lead generation that invites consumers to our community to the user experience of our offerings.

We employ a multi-pronged approach to consumer acquisition and engagement, including but not limited to agile marketing activation events, storytelling, gamification, and loyalty.

We believe driving increased consumer traffic to our network of providers, retailers, and brand

partners will increase the utilization of our products and experiences, further cementing the compelling value proposition we offer to our partners and thereby driving increased purchases from them.

We believe our products and experiences are universal in their appeal across cultures, genders, skin tones, and skin types, making a compelling case for our international expansion.

We believe there is significant opportunity in exporting our products and experiences to global markets and applying our strategy abroad to further increase the reach and influence of our platform.

Our offering is available in over 90 countries through either a direct commercial presence or distributors.

We have built or are building commercial infrastructure across the world, which should position ourselves to quickly adapt to and penetrate in 15 key markets.

We consistently evaluate the performance of markets where we sell through distributors and will convert select markets to direct when we believe it would be in the best interests of our platform.

We have global commercial infrastructure supporting our 16 direct markets across the world, which should position us to quickly adapt to and penetrate these key markets.

Lastly, we intend to supercharge our platform via targeted acquisitions, expanding the breadth of our platform with additional innovative products and experiences.

We believe the introduction of additional offerings will generate increased engagement among our community while further expanding it via the introduction of the acquired company’s established base of consumers.

We will take a disciplined approach to acquisitions, adhering to the below criteria in search for opportunities:

Differentiated product or service, which can generally be demonstrated with a high Net Promoter Score

Complementary to our existing platform and community, leveraging the trusted a/esthetician

Financially attractive profile via compelling revenue growth, recurring revenue characteristics, or profitability

We will take a disciplined approach to acquisitions, adhering to the below criteria in search for opportunities that:

Include a differentiated product or service, which can generally be demonstrated with a high Net Promoter Score, which is a customer loyalty and satisfaction measurement

Complement our existing platform and community, leveraging the aesthetician;

Provide a financially attractive profile via compelling revenue growth, recurring revenue characteristics, or profitability.

These criteria are not intended to be exhaustive.

Any evaluation relating to the merits of a particular acquisition may be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant.

Hydrafacial – Our Flagship Brand

Our first BeautyHealth brand and the cornerstone of our portfolio is Hydrafacial.

Using a patented Vortex-Fusion Delivery System (“Delivery System”) to cleanse, peel, exfoliate, extract, infuse, and hydrate the skin with proprietary solutions and serums, HydraFacial created the category of hydradermabrasion.

As an experience appropriate for all ages, genders, and skin types, HydraFacial bridges the world of medical skin correction to traditional over-the-counter beauty.

Using our patented Delivery System to cleanse, extract, and hydrate the skin with proprietary solutions and serums, Hydrafacial created the category of hydradermabrasion.

As an experience appropriate for all ages, genders, skin types, and skin tones, Hydrafacial bridges the world of medical skin correction to traditional over-the-counter beauty.

As such, we employ an omnichannel strategy to place Delivery Systems where consumers live, work, and play, including medical offices, medispas, day spas, hotels, resorts, gyms, wellness centers, and other retail settings.

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Hydrafacial uses a razor / razor blade business model.

As the equipment that facilitates the HydraFacial experience, the Delivery System is the razor.

Delivery Systems are purchased by providers to offer HydraFacial experiences to their clients and patients.

The “Consumables” are the razor blades, which consist of single-use tips, solutions, and serums used during a HydraFacial experience.

The Delivery System, which facilitates the Hydrafacial treatment, is the razor.

Delivery Systems are purchased by providers to offer Hydrafacial to their clients and patients.

In conjunction with the sale of Delivery Systems, we also sell our serum solutions and consumables (collectively “Consumables”).

The Consumables are akin to the razor blades, consisting of single-use tips, solutions, and serums used during a Hydrafacial treatment.

Delivery Systems and Consumables can be bought together or separately.

Delivery Systems follow a traditional capital equipment cycle, with the Delivery System lasting providers for years.

Oftentimes, providers buy additional Delivery Systems to increase the number of HydraFacial experiences their business can provide at any given time.

Oftentimes, providers buy additional Delivery Systems to increase the number of Hydrafacial treatments their business can provide at any given time.

Consumables follow a recurring revenue model as they are purchased on a periodic basis by providers as they exhaust their supplies.

The expansion of the number of Delivery Systems providing experiences, or “install base,” increases the foundation for future recurring revenue by providing a platform for more experiences, driving higher Consumables sales.

Additionally, increasing the utilization of the install base will also contribute to higher Consumables revenue.

As we continue to grow and optimize our install base, we believe Consumables revenue will become a larger share of HydraFacial’s business.

HydraFacial operates through a direct sales force in 15 markets and is investing in building infrastructure for global expansion.

We believe HydraFacial has significant upside opportunities across the globe, particularly in China, Japan, Brazil, and South Korea.

These markets have a large and growing group of consumers searching for non-invasive beauty health experiences, and we aim to invest in initiatives that will increase consumer penetration in these countries.

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As we optimize our install base, we believe Consumables revenue will ultimately become a larger share of Hydrafacial’s business.

Hydrafacial operates through a direct sales force in 16 markets.

We believe Hydrafacial has significant upside opportunities across the globe, particularly in China, Japan, South Korea, and Europe.

These markets have a large and growing group of

consumers searching for non-invasive beauty health experiences, and we aim to invest in initiatives that will increase consumer penetration in these markets.

The Hydrafacial Experience

A HydraFacial experience is a noninvasive hydradermabrasion process utilizing a patented Delivery System to cleanse, peel, exfoliate, extract, infuse, and hydrate skin with proprietary solutions and serums.

We believe HydraFacial is accessible and appropriate for consumers across all genders, ages, and skin types.

The HydraFacial experience delivers fast and visible results through instantly gratifying glowing skin and a “gunkie” container that collects the dead skin cells and debris that have been exfoliated and extracted from the skin.

We believe the instant gratification provided by our HydraFacial experience generates high consumer and provider affinity for our brand.

A summary of the signature HydraFacial experience is set forth below.

In addition, consumers and providers can opt to personalize their HydraFacial experiences to target specific skin concerns or needs with the customization of a chemical peel, addition of serums, LED light therapy, and/or lymphatic drainage.

Furthermore, a HydraFacial experience can be extended from the face to the neck/decolletage, back, hands, and other parts of the body.

A Hydrafacial treatment is a noninvasive hydradermabrasion process utilizing a patented Delivery System to cleanse, extract, and hydrate skin with proprietary solutions and serums.

We believe Hydrafacial is accessible and appropriate for consumers across all genders, ages, skin types, and skin tones.

The Hydrafacial experience results in instantly gratifying glowing skin and a “gunkie” container that collects dead skin cells and debris that were extracted from the skin.

We believe the instant gratification provided by our Hydrafacial treatment generates high consumer and provider affinity for our brand.

A summary of the Hydrafacial treatment is set forth below.

In addition, consumers and providers can personalize their Hydrafacial treatments to target specific skin concerns or needs by adding customized chemical peels, various serums, LED light therapy, and/or lymphatic drainage.

Furthermore, a Hydrafacial treatment can be applied to the neck/decolletage, back, hands, or other parts of the body.

Hydrafacial Treatment Steps

Cleanse, Exfoliate, and Peel

Skin is cleansed through Vortex Fusion Technology, a specially designed tip, and a cleansing solution.

The outermost layer of skin is exfoliated with a customized peel which removes dead skin cells.

Extract and Hydrate

Extractions and removal of remaining debris is performed with Vortex Fusion Technology, a specialized tip, and proprietary solutions.

Infuse and Protect

Vortex Fusion Technology is paired with a specialized tip to deliver and infuse hyaluronic acid and antioxidants to the skin to nourish, hydrate, and protect.

The HydraFacial experience has generated a high Net Promoter Score (“NPS”) among consumers, a customer loyalty and satisfaction measurement assessed by asking customers how likely they are to recommend a certain product or service to others.

Based on a study performed by a major consulting firm on our behalf which surveyed over 1,000 HydraFacial users, HydraFacial received an NPS of 40, considered a best-in-class score as it is higher than the NPS for other skin care regimens reported as commonly used by HydraFacial users (between two and 25).

Among consumers, the Hydrafacial experience has generated a high Net Promoter Score (“NPS”), a customer loyalty and satisfaction measurement assessed by asking customers how likely they are to recommend a certain product or service to others.

Based on a study performed by a major consulting firm on our behalf, which surveyed over 1,000 Hydrafacial users, Hydrafacial received an NPS of 44, considered a best-in-class score as it is higher than the NPS for other skin care regimens that Hydrafacial users reported they also commonly used.

Hydrafacial Products

At the core of HydraFacial’s product offering is the Elite Tower, the current generation Delivery System, and its associated Consumables.

The Elite Tower Delivery System was first launched in 2016.

At the core of Hydrafacial’s product offering is Syndeo, the current generation Delivery System, and its associated Consumables.

We believe each Delivery System provides an attractive return on investment to providers with a short payback period to recoup the cost of the Delivery System.

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Our Consumables consist of single-use tips, solutions, and serums used to provide a HydraFacial experience.

Syndeo is the current generation Hydrafacial Delivery System that launched in the United States in March 2022.

The system is designed to elevate every part of the treatment and connects providers to consumers’ preferences to create more personalized experiences.

The hardware and software in the Syndeo Delivery System has been fully updated and includes Wi-Fi connectivity and radio frequency identification (“RFID”).

These technologies allow providers and us to collect data on Hydrafacial consumers to ultimately provide a better experience for them.

We expect to launch Syndeo in our EMEA and APAC markets in the first half of 2023.

In the meantime, we are selling our Elite Tower Delivery System, our previous Delivery System model that was first launched in 2016, in the EMEA and APAC markets.

Upon Syndeo’s launch in EMEA and APAC, we anticipate that we will no longer market our Elite Tower in our direct markets.

Our Consumables consist of single-use tips, solutions, and serums used to provide a Hydrafacial treatment.

The table below summarizes our Consumables product offering:

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Replenishment Frequency

Tips Patented, patterned caps placed on the handpiece of the Delivery System to create suction and deliver solutions and serums to the skin

Tips Patented, patterned caps placed on the handpiece of the Delivery System to create pneumatic suction and deliver solutions and serums to the skin

Minimum 3 single-use tips used per Hydrafacial experience

Solutions Proprietary formulations of ingredients delivered at different steps of the Hydrafacial experience 4 bottle SKUs required to provide a Hydrafacial experience;

the bottles provide for approximately 15 HydraFacial experiences

3 SKUs containing varying strength chemical peel treatments.

The provider chooses which strength to use during any experience, and each SKU lasts 1-2 HydraFacial experiences

Serums Optional add-on to the HydraFacial experience to target specific skin concerns.

Offering includes proprietary serums and serums co-developed via collaborations with various skincare brands.

1-2 experiences per vial

the bottles provide for approximately 15 treatments

3 SKUs contain varying strength chemical peel treatments.

The provider chooses which strength to use during treatment, and each SKU lasts 1-2 treatments.

Serums Optional add-on to target specific skin concerns.

Offering includes proprietary boosters co-developed via collaborations with various skincare brands.

1-2 treatments per serum vial

Product Development Pipeline

Syndeo is the next generation HydraFacial Delivery System that is expected to launch in the first half of 2022.

The system is designed to elevate every part of the treatment and connects providers to the consumer’s preferences to create a more personalized experience.

The hardware and software in the Syndeo Delivery System has been fully updated and includes Wi-Fi-enabled radio frequency identification (“RFID”).

This technology will allow providers and us to collect data on their clients to ultimately provide a better experience for them.

A key differentiating factor of the Hydrafacial treatment is how we partner with leading skincare brands to co-develop boosters, an optional add-on serum that tailors a Hydrafacial treatment based on a consumer’s skincare concerns.

We do not believe there is another beauty health offering in the market that features leading third-party skincare brands on its platform.

By leveraging the unique technologies of our partners, we believe our booster strategy allows us to innovate rapidly and cost effectively, staying current with dynamic skincare trends and gaining exposure to new consumers through our partner brands.

We currently offer a portfolio of approximately 20 boosters and intend to continue partnering with new brands internationally and locally to offer innovative and tailored booster products to our consumers.

Hydrafacial Nation App

A beta version of the HydraFacial Nation app launched in June 2021.

A beta version of the Hydrafacial Nation app launched in 2021.

The app is intended to allow consumers to learn about their skin health, discover which treatment options are right for them, and track their treatments over time.

If the consumer opts in, the app will pair with Syndeo, allowing providers to share treatment details with their clients and continue to build a 1:1 relationship outside of the treatment room.

If a consumer elects to do so, the app will pair the consumer with Syndeo, allowing providers to share treatment details with the consumer and continue to build a 1:1 relationship outside of the treatment room.

Keravive is a treatment for scalp health that includes an in-office component and a 30-day take home spray.

The treatment is designed to cleanse, exfoliate, and hydrate the scalp, leading to a healthier scalp and helping to promote healthier, thicker, and fuller-looking hair.

As a result of the COVID-19 pandemic, Keravive’s expansion into new markets is paused.

The treatment is designed to cleanse, exfoliate, and hydrate the scalp, which helps lead to a healthier scalp and promotes healthier, thicker, and fuller-looking hair.

We are evaluating the optimal re-launch strategy for Keravive and believe it will take time before sales of Keravive become a meaningful part of Hydrafacial’s business.

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First, we intend to expand our footprint by selling Delivery Systems and connected experiences to our community.

The Syndeo Delivery System represents a milestone for us in connecting our community, introducing a digital experience by collecting data to better understand

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consumer and provider behavior.

The Syndeo Delivery System represents a milestone for us in connecting our community, introducing a digital experience by collecting data to better understand consumer and provider behaviors.

With this data, we believe we will have meaningful opportunity to boost engagement and utilization via storytelling, branding, and gamification.

Second, we intend to invest in our providers as we enhance the overall consumer experience.

We also intend to employ unique activation and engagement programs that empower beauty health professionals to expand their knowledge of our products, experiences, industry, and marketing, which we believe would help turn our providers into brand evangelists and advocates that provide first-class experiences to consumers.

We also intend to employ unique activation and engagement programs that empower beauty health professionals to expand their knowledge of our products, experiences, industry, and marketing, which we believe will help turn our providers into brand evangelists and advocates that provide first-class experiences to consumers.

Third, we intend to nurture our relationship with consumers to help build awareness and drive them to our providers.

We will pursue high ROI investments within sales, marketing, and training to help catalyze our presence in B2C channels and expand our reach to consumers where they live, work and play.

We will continue to pursue high return on investment opportunities within sales, marketing, and training to help catalyze our presence in business to consumer channels and expand our reach to consumers where they live, work, and play.

These investments include a focus on growth marketing efforts to build campaigns in paid social, influencer and content marketing.

Lastly, we intend to build out our global infrastructure to support our growth ambitions and connected platform.

We believe these investments should create degrees of operating leverage we plan to capture to help accelerate our goal of profitability in the future.

We believe these investments should create degrees of operating leverage to accelerate our goal of increased profitability in the future.

Industry Overview

We are a pioneer and key player in the emerging category of beauty health, which represents the intersection of over-the-counter consumer beauty / wellness products with medical aesthetic / health products and procedures.

Historically, these categories were viewed separately, but they are part of a spectrum aimed at helping consumers look and feel better.

Historically, these categories were viewed separately, but they are part of a spectrum aimed at helping consumers look and feel their best.

The beauty / wellness industry sells widely accessible topicals, supplements, and digital tools.

However, it is a crowded and confusing space – the sheer volume of products can leave consumers overwhelmed by choice.

However, the market is a crowded and confusing space – the sheer volume of products can leave consumers overwhelmed by choice.

On the other end of the spectrum, medical aesthetics offers more corrective and invasive products and procedures such as injectables and energy-based treatments.

The high price tag and clinical setting of these treatments may serve as barriers to generating wider consumer demand.

We seek to position ourselves not as a substitute or competitor to either of these categories, but rather as the complimentary bridge spanning across the beauty health spectrum.

We believe the consumer who follows a beauty and wellness regimen with topicals or supplements may someday graduate to medical procedures, while the medical aesthetics patient is almost certainly a loyal consumer of beauty topical products.

We don’t believe our company has to be an “either/or” company (beauty or health/non-invasive or minimally invasive).

We seek to position ourselves not as a substitute for or competitor to either of these categories, but rather as the complimentary bridge linking the two categories.

We believe that the consumer who follows a beauty and wellness regimen with topicals or supplements may someday graduate to medical procedures, while the medical aesthetics patient is almost certainly a loyal consumer of beauty topical products.

We don’t believe we have to be an “either/or” company (beauty or health/non-invasive or minimally invasive).

Rather, we believe we are an “and” company.

We intend to gather insights to inform our strategy as the consumer travels through the worlds of beauty and health, whether it be at home or in a provider’s office, allowing us to tailor increasingly engaging experiences that ultimately generate revenue.

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Many of our providers offer Hydrafacial treatments as a bundle with other procedures, such as injectables or energy-based treatments.

Manufacturing;

Sourcing and Material

The manufacturing of many of our products is outsourced to multiple contract manufacturers primarily in North America, Europe, and Asia.

However, the HydraFacial Delivery Systems are assembled in our Long Beach, California warehouse facility, where our quality assurance team monitors and ensures the integrity of the Delivery Systems being manufactured and conducts compliance audits.

We outsource the manufacturing of many of our products to multiple contract manufacturers that are primarily located in North America, Europe, and Asia.

However, the Hydrafacial Delivery Systems are assembled in our Long Beach, California manufacturing facility, where our quality assurance team monitors and ensures the integrity of the Delivery Systems we manufacture and conducts compliance audits.

In the future, we plan to localize the assembly of delivery systems in the regions in which we operate, beginning with in-region manufacturing for China.

The components and raw materials used in our products are sourced from a variety of component and raw material suppliers.

In order to provide products to customers on a timely, cost-effective basis, we review existing contract manufacturers and suppliers and evaluate new partners and suppliers periodically with the objectives of improving quality, increasing innovation, speed-to-market, supply sufficiency, and cost reduction.

To provide products to customers on a timely, cost-effective basis, we review existing contract manufacturers and suppliers and evaluate new partners and suppliers periodically with the objectives of improving quality, increasing innovation, accelerating speed-to-market, maintaining supply sufficiency, and reducing costs.

As we integrate acquired businesses, distributors, and/or brands, we will continually seek new ways to leverage our production and sourcing capabilities to improve our overall supply chain performance.

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We also purchase packaging components manufactured to our design specifications.

We collaborate with our suppliers and contract manufacturers to ensure they follow our established product design specifications, quality assurance programs, and manufacturing standards.

We collaborate with our suppliers and contract manufacturers to ensure that they follow our established product design specifications and quality assurance programs.

We also have our suppliers and contract manufacturers go through a vendor qualification and audit process to verify and ensure that they meet our manufacturing standards and expectations.

We ensure our partners have the requisite experience to produce our products and accessories and develop relationships with them to maintain access to the resources needed to scale.

To have control of supply and component pipelines, we own certain tooling and equipment required to manufacture our products.

In order to mitigate against the risks related to a single source of supply, we qualify alternative suppliers and manufacturers when possible and develop contingency plans for responding to disruptions, such as maintaining inventory of single source components or utilizing alternative freight lanes that can have cost implications.

While we have single supply relationships for certain of our key components, we try to mitigate related risks through various measures.

We qualify alternative suppliers and manufacturers when possible, maintain controls and methods to mitigate risk through buffer maintenance, implement dual and/or co-sourcing, if needed, and develop contingency plans for responding to disruptions, such as maintaining inventory of single source components or leverage alternative freight modes that can have cost implications.

However, given the current global supply and freight constraints driven by the COVID-19 pandemic, as well as natural disasters, we have faced, and may continue to face, challenges with various manufacturing related components and raw material shortages.

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We operate and distribute finished products from our leased distribution facilities in Long Beach, California.

We also have a network of fulfillment and distribution centers globally to support our international customers.

We also have a global network of fulfillment and distribution centers that supports our international customers.

We regularly evaluate our distribution infrastructure and consolidate or expand our distribution capacity as we believe appropriate for our operations and to meet anticipated needs.

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Research and Development

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In addition, these research and development personnel work to identify recent trends using market intelligence and consumer needs to bring products to market.

As our business continues to grow globally, and to satisfy the demand for locally relevant consumer products, we have increased our focus on innovation in South America, specifically, Brazil, and in Asia, particularly in China, Japan, and South Korea.

We have increased our focus on innovation in Europe and in Asia, particularly in China, Japan, and South Korea to both support our growth internationally and to satisfy the demand for locally-relevant consumer products.

Quality and Regulatory

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Push and Pull Marketing

Our ability to effectively market is critical to our operational success.

Our ability to effectively market our brand is critical to our operational success.

Our marketing spend is based on a targeted “push and pull” marketing model that engages with both providers and consumers.

On the “push” side, we intend to continue investing in training a/estheticians and other providers (as further explained below), creating a loyalty program, and supporting other ongoing engagements.

On the “push” side, we intend to continue investing in training aestheticians and other providers (as further explained below), creating a loyalty program, and supporting other ongoing engagements.

Over the last few years, we have focused on developing the marketing “pull” side by creating consumer demand, which is expected to be one of the key elements of growth to lead to an increase in recurring revenue from our customers.

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We believe transformational experiences are key to growing brand awareness.

We have focused on introducing our experience to highly targeted consumer growth markets around the world.

With aided brand awareness at 8%, we have focused on introducing our brand to highly targeted consumer growth markets around the world.

We intend to continue our marketing activation efforts by using digital and location-based engagement.

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We are also continuously innovating to increase our sales by elevating our digital presence, social media presence, and influencer marketing efforts all designed to build brand equity and consumer engagement.

Furthermore, we utilize different

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methods to customize the consumer experience, including using artificial intelligence-powered tools to provide personalized advice on selecting and using products.

We currently sell more than 60% of our Delivery Systems and Consumables into the professional medical channel.

Furthermore, we utilize different methods to customize the consumer experience, including using artificial intelligence-powered tools to provide personalized advice on selecting and using products.

The majority of our customers are providers within the professional medical industry (dermatologists, plastic surgeons, and medical spas), aesthetician, and beauty retail industry (spas, hotels, and other retailers).

We currently sell approximately 66% of our Delivery Systems and Consumables into the professional medical channel.

No individual customer accounted for 10% or more of our net sales in fiscal 2022.

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In 2022, revenue derived from markets outside the United States and Canada comprised approximately 34% of total revenue.

Going forward, we expect total revenue share from our global markets to increase as we continue to invest in expanding our global footprint in markets such as China, Japan, South Korea, and Brazil.

Going forward, we expect total revenue share from our global markets to increase as we continue to invest in expanding our global footprint in markets such as China, Japan, South Korea, and Europe.

Trademarks, Patents and Domain Names

We currently have 48 patents with 27 patents pending to protect HydraFacial’s technology and brand.

Our patent portfolio covers key aspects on certain products, systems and designs including several issued U.S.

As of December 31, 2022, we had 83 patents with 49 pending patent applications worldwide to protect Hydrafacial’s current and contemplated technology platform.

Our patent portfolio covers key aspects of certain products, systems, and designs, including several issued U.S.

patents directed to features of the Hydrafacial MD® liquid-based skin exfoliation system.

These issued patents include a patent, which will expire in 2026, directed to the manifold and console of the HydraFacial MD® system.

Another set of these issued patents, which will begin to expire in 2026, are directed to skin treatment tips used in the HydraFacial MD® system.

The portfolio includes issued U.S.

patents, which will begin to expire in 2026, directed to the manifold and console of the Hydrafacial MD® system and skin treatment tips used in the system.

We also own and have applied to register numerous trademarks and service marks in the United States and in other countries throughout the world.

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Seasonality and Quarterly Results

Our business is subject to moderate seasonal fluctuations, of which our fiscal third quarter and fourth quarters typically experience higher revenues and operating income in the United States.

However, the COVID-19 pandemic has had an impact on consumer behaviors resulting in changes in the seasonal fluctuations of our business.

Our business is subject to moderate seasonal fluctuations.

We typically experience the highest revenues and operating income in the fiscal fourth quarter and lowest revenues and operating income in the first fiscal quarter.

New product and service introductions can also impact net sales, cost of sales, and operating expenses.

The timing of product and service introductions can also impact the Company’s net sales to its distribution channels as these channels are filled with new inventory following a product launch, and channel inventory of an older or similar product often declines as the launch of a newer product approaches.

Net sales can also be affected when consumers and distributors anticipate a product introduction.

Additionally, the COVID-19 pandemic has had an impact on consumer behaviors worldwide resulting in changes in the seasonal fluctuations of our business, especially in China since the second fiscal quarter of 2022.

Furthermore, as our business outside of the United States grows, seasonal fluctuations may smooth out.

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Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a premarket notification submitted under Section 510(k) of the FDCA, or approval of a premarket approval application (“PMA”).

Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation (“ QSR ”), facility registration and product listing, reporting of adverse

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medical events, and truthful and non-misleading labeling, advertising, and promotional materials.

facility registration and product listing;

reporting of adverse medical events;

and truthful and non-misleading labeling, advertising, and promotional materials.

Class II devices are subject to the FDA’s General Controls, and Special Controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device.

These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents.

While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device.

These Special Controls can include performance standards, post-market surveillance, patient registries and recommendations set forth in FDA guidance documents.

While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification application under Section 510(k) of the FDCA before engaging in commercial distribution for the device.

The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

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510(k) Clearance Marketing Pathway

To obtain 510(k) clearance, we must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a legally marketed predicate device.

A predicate device is a legally marketed device that is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process.

The FDA’s 510(k) clearance process usually takes from three to twelve months, but may take longer.

To obtain 510(k) clearance, the sponsor must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to, including that it is as safe and as effective as, a legally marketed predicate device.

A predicate device is a legally marketed device that was legally marketed prior to May 28, 1976 (pre-amendments device), a device which has been reclassified from Class III to Class II or I, a device which has been found to be substantially equivalent through the 510(k) process, or a device that was granted marketing authorization via the De Novo classification process under section 513(f)(2) of the FDCA and not exempt from premarket notification requirements.

Once submitted, the FDA’s 510(k) clearance process usually takes from three to twelve months, but may take longer.

The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

In addition, FDA collects user fees for certain medical device submissions and annual fees and for medical device establishments.

For fiscal year 2022, the standard user fee for a 510(k) premarket notification submission is $12,745.

In addition, FDA collects user fees for certain medical device submissions and annual fees for medical device establishments.

For fiscal year 2023, the standard user fee for a 510(k) premarket notification submission is $19,125, with the fee being $4,781 for small businesses.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device.

If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device.

The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo” process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, PMA approval.

The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination.

If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the applicant may resubmit another 510(k) clearance application with new data, request a risk-based classification determination for the device in accordance with the De Novo process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device, request reclassification through reclassification petitions pursuant to 21 U.S.C.

§ 360c, or submit a PMA application.

After a device receives the 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or different intended use, will require a new 510(k) clearance or, depending on the modification, a PMA approval.

The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA application in the first instance, but the FDA may review such decision and may disagree with a manufacturer’s determination.

If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until such marketing authorization has been granted.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties.

Also, in these circumstances, the manufacturer may be subject to significant regulatory fines, penalties, or other regulatory actions from the FDA.

Over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.

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Among other things, the FDA announced that it planned to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates.

These proposals included plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

These proposals included

plans to potentially sunset certain older devices that were used as predicates under the 510(k) clearance pathway, and to potentially publish a list of devices that have been cleared on the basis of demonstrated substantial equivalence to predicate devices that are more than 10 years old.

These proposals have not yet been finalized or adopted, although the FDA may work with Congress to implement such proposals through legislation.

More recently, in September 2019, the FDA issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

The FDA has developed and maintains a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that

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identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

PMA Approval Pathway

The FDA has developed and maintains a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as the testing methods recommended in the guidance documents, where feasible.

Class III devices require PMA approval before they can be marketed, although some pre-amendment Class III devices for which FDA has not yet required a PMA are cleared through the 510(k) process.

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Clinical trials are almost always required to support a PMA and are sometimes required to support a 510(k) submission.

All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“ IDE ”), regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption (“ IDE ”) regulations that govern investigational device labeling and prohibit promotion of the investigational device while specifying an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.

If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the

device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

If the device under evaluation does not present a significant risk to human health, then the device sponsor is not required to submit an IDE application to the FDA before initiating human clinical trials, but must still comply with abbreviated IDE requirements when conducting such trials.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted;

used in supporting or sustaining human life;

substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health;

or otherwise presents a potential for serious risk to a subject.

An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the company that the investigation may not begin.

If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.

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If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit the clinical trial to proceed under a conditional approval.

Regardless of the degree of risk presented by the medical device, clinical studies must be approved by, and conducted under the oversight of, an Institutional Review Board (“IRB”), for each clinical site.

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If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and complying with labeling and record-keeping requirements.

In some cases, an IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.

or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and complying with the prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.

The clinical investigators in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.

Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

After a trial begins, the sponsor, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Post-market Regulation

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• requirements related to promotional activities;

• clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of certain modifications to PMA-approved devices;

• clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a new or different intended use of a cleared device, or approval of certain modifications to PMA-approved devices;

• medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

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As a manufacturer, we are subject to periodic scheduled and unscheduled inspections by the FDA.

Failure to maintain compliance with the QSR requirements could result in the shut-down of, or restrictions on, manufacturing operations and the recall or seizure of marketed products.

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clearance or approval, or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

Failure to maintain compliance with the QSR requirements could result in adverse inspection or audit reports such as Form 483 Notices of Inspectional Observations;

the shut-down of, or restrictions on, manufacturing operations;

recall, market withdrawal, or seizure of marketed products;

or other enforcement actions by the FDA or other regulatory agencies.

The discovery of previously unknown problems with any marketed products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or approval, or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

The FDA has broad regulatory compliance and enforcement powers.

If the FDA determines that a manufacturer has failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:

• warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

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• operating restrictions or partial suspension or total shutdown of production;

• refusing or delaying requests for 510(k) clearance or PMA approvals of new products or modified products;

• refusing or delaying requests for 510(k) clearance or PMA approvals of new or modified products;

• withdrawing 510(k) clearances or PMA approvals that have already been granted;

• refusal to permit importation of the manufacturer’s products through import detention or refusals, or import alerts;

• refusal to grant export approvals for our products;

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Regulation of Cosmetics

The FDCA defines cosmetics as articles or components of articles intended for application to the human body to cleanse, beautify, promote attractiveness, or alter the appearance, with the exception of soap.

The FDCA defines cosmetics as articles or components of articles intended for application to the human body to cleanse, beautify, promote attractiveness, or alter the appearance.

The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations.

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FDA regulations also prohibit or otherwise restrict the use of certain types of ingredients in cosmetic products.

In addition, the FDA requires that cosmetic labeling and claims be truthful and not misleading.

Moreover, cosmetics may not be marketed or labeled for their use in treating, preventing, mitigating, or curing disease or other conditions or in affecting the structure or function of the body, as such claims would render the products to be a drug and subject to regulation as a drug.

In addition, the FDA requires that cosmetic labeling and claims be truthful and not misleading, and cosmetics may not be marketed or labeled for use in treating, preventing, mitigating, or curing disease or other conditions or in affecting the structure or function of the body because such claims would render the products to be a drug and subject to regulation as a drug.

The FDA has issued warning letters to cosmetic companies alleging improper drug claims regarding their cosmetic products, including, for example, product claims regarding hair growth or preventing hair loss.

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In the United States, the FDA has not promulgated regulations establishing GMPs for cosmetics.

However, FDA’s draft guidance on cosmetic GMPs, most recently updated in June 2013, provides recommendations related to process documentation, recordkeeping, building and facility design, equipment maintenance and personnel, and compliance with these recommendations can reduce the risk that FDA finds such products have been rendered adulterated or misbranded in violation of applicable law.

FDA also recommends that manufacturers maintain product complaint and recall files and voluntarily report adverse events to the agency.

However, Congress enacted the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”) on December 29, 2022 that requires FDA to promulgate regulations relating to GMPs for cosmetics.

The effective date for most of the MoCRA provisions is December 29, 2023.

Specifically with regard to GMPs for cosmetics, FDA is required to promulgate the proposed rules by December 29, 2024, and final regulations by December 29, 2025.

Subsequently, compliance with such GMP requirements will become mandatory for

manufacturers of cosmetic products.

Until then, FDA’s existing draft guidance on cosmetic GMPs, most recently updated in June 2013 and other guidance such as the FDA’s Good Manufacturing Practice (GMP) Guidelines/Inspection Checklist from February 2022, will continue to provide guidance and recommendations related to process documentation, recordkeeping, building and facility design, and equipment maintenance and personnel.

Compliance with these recommendations can reduce the risk that products will be adulterated or misbranded in violation of the FDCA and its regulations.

In addition to GMP requirements, MoCRA will bring on additional changes and updates to FDA’s cosmetics regulations.

For example, cosmetic manufacturing and processing facilities will be required to be registered with FDA, and any products that are marketed after MoCRA’s effective date will need to be listed with FDA.

Adulterated or misbranded cosmetic products will be subject to recalls that are mandated by FDA, similar to medical devices.

In addition, a responsible person will be required to report any serious adverse events that result from the use of a cosmetic product manufactured, packaged, or distributed by the person, and the records relating to each adverse event report will be required to be kept for six years.

Additionally, cosmetic labels will need to identify the responsible person for the purpose of serious adverse event reporting, and cosmetic labels will also need to identify fragrance allergens.

The provisions relating to labels become effective on December 29, 2024.

The FDA also recommends that manufacturers maintain product complaint and recall files and voluntarily report adverse events to the agency.

The FDA monitors compliance of cosmetic products through market surveillance and inspection of cosmetic manufacturers and distributors to ensure that the products are not manufactured under unsanitary conditions, or labeled in a false or misleading manner.

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The European Union, (“EU”), has adopted specific directives and regulations regulating the design, manufacture, clinical investigation, conformity assessment, labeling and adverse event reporting for medical devices.

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Until May 25, 2021, medical devices were regulated by Council Directive 93/42/EEC (the “EU Medical Devices Directive) which has been repealed and replaced by Regulation (EU) No 2017/745 (the “EU Medical Devices Regulation”).

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To demonstrate compliance with the essential requirements laid down in Annex I to the EU Medical Devices Directive, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the

essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.

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Medical Devices Regulation

The regulatory landscape related to medical devices in the EU recently evolved.

The regulatory landscape related to medical devices in the EU has now evolved.

On April 5, 2017, the EU Medical Devices Regulation was adopted with the aim of ensuring better protection of public health and patient safety.

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• establishes explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

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• establishes explicit provisions on importers’ and distributors’ obligations and responsibilities;

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• strengthens rules for the assessment of certain high-risk devices, such as implants, which may have to undergo a clinical evaluation consultation procedure by experts before they are placed on the market.

Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2025, provided that the requirements of the transitional provisions are fulfilled.

Devices lawfully placed on the market pursuant to the EU Medical Devices Directive prior to May 26, 2021 may generally continue to be made available on the market or put into service until May 26, 2024 under transitional provisions with a further ‘sell-off’ deadline by May 26, 2025, provided that the requirements of the transitional provisions are fulfilled.

In particular, the certificate in question must still be valid.

However, even in this case, manufacturers must comply with a number of new or reinforced requirements set forth in the EU Medical Devices Regulation, in particular the obligations described below.

On January 6, 2023, the European Commission proposed a draft regulation to extend the transition periods under the EU Medical Devices Regulation for certain devices and thus extending the validity of the CE certificates that were issued under the EU Medical Devices Directive.

The Commission also proposes to delete the ‘sell-off’ deadline.

The draft amending regulation is subject to the accelerated adoption procedure of the European Parliament and Council.

The EU Medical Devices Regulation requires that before placing a device, other than a custom-made device, on the market, manufacturers (as well as other economic operators such as authorized representatives and importers) must register by submitting identification information to the electronic system (Eudamed), unless they have already registered.

The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the person or persons responsible for regulatory compliance.

The information to be submitted by manufacturers (and authorized representatives) also includes the name, address and contact details of the

person or persons responsible for regulatory compliance.

The new Regulation also requires that before placing a device, other than a custom-made device, on the market, manufacturers must assign a unique identifier to the device and provide it along with other core data to the unique device identifier (“UDI”) database.

These new requirements aim at ensuring better identification and traceability of the devices.

Each device – and as applicable, each package – will have a UDI composed of two parts:

a device identifier (“UDI DI”) specific to a device, and a production identifier (“UDI PI”) to identify the unit producing the device.

Manufacturers are also notably responsible for entering the necessary data on Eudamed, which includes the UDI database, and for keeping it up to date.

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For similar serious incidents that occur with the same device or device type and for which the root cause has been identified or a FSCA implemented or where the incidents are common and well documented, manufacturers may provide periodic summary reports instead of individual serious incident reports.

The advertising and promotion of medical devices is subject to some general principles set forth in EU legislation.

The advertising and promotion of medical devices is subject to some general principles set forth in EU legislation as well as in national legislation of the EU Member States and industry codes of conduct.

According to the EU Medical Devices Regulation, only devices that are CE-marked may be marketed and advertised in the EU in accordance with their intended purpose.

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Specific requirements are defined at a national level.

EU member states’ laws related to the advertising and promotion of medical

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devices, which vary between jurisdictions, may limit or restrict the advertising and promotion of products to the general public and may impose limitations on promotional activities with healthcare professionals.

EU member states’ laws related to the advertising and promotion of medical devices, which vary between jurisdictions, may limit or restrict the advertising and promotion of products to the general public and may impose limitations on promotional activities with healthcare professionals.

Many EU member states have adopted specific anti-gift statutes that further limit commercial practices for medical devices, in particular vis-à-vis healthcare professionals and organizations.

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Since January 1, 2021, the Medicines and Healthcare Products Regulatory Agency (“MHRA”), has become the sovereign regulatory authority responsible for Great Britain (i.e.

England, Wales and Scotland) medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol.

Following the end of the Brexit transitional period on January 1, 2021, new regulations require medical devices to be registered with the MHRA (but manufacturers were given a grace period of four to 12 months to comply with the new registration process) before being placed on Great Britain market.

England, Wales and Scotland) medical device market according to the requirements provided in the UK Medical Devices Regulations 2002 (SI 2002 No 618, as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern Ireland Protocol.

registration process) before being placed on Great Britain market.

The MHRA only registers devices where the manufacturer or their United Kingdom (“UK”) Responsible Person has a registered place of business in the UK.

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An MHRA public consultation was opened until end of November 2021 on the post-Brexit regulatory framework for medical devices and diagnostics.

MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical Devices Directive, the EU AIMD and the EU In Vitro Diagnostic Medical Devices Directive 98/79/EC), in particular to create a new access pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform in vitro diagnostic medical devices regulation, and foster sustainability through the reuse and remanufacture of medical devices.

In June 2022, the UK government published its response to the consultation regarding the new UK medical device regulatory framework which seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical Devices Directive, the EU AIMD and the EU In Vitro Diagnostic Medical Devices Directive 98/79/EC), in particular to create a new access pathways to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform in vitro diagnostic medical devices regulation, and foster sustainability through the reuse and remanufacture of medical devices.

The regime is expected to come into force in July 2024, coinciding with the end of the acceptance period for EU CE marks in Great Britain, subject to appropriate transitional arrangements.

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Over the years, the EU cosmetics legal regime has been adopted by many countries around the world.

Under the EU Cosmetics Regulation, a “cosmetic product” is defined as “any substance or mixture intended to be placed in contact with the external parts of the human body (epidermis, hair system, nails, lips and external genital organs) or with the teeth and the mucous membranes of the oral cavity with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance, protecting them, keeping them in good condition or correcting body odors.” Consequently, a

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product is considered to be a cosmetic if it is presented as protecting the skin, maintaining the skin in good condition or improving the appearance of the skin, provided that it is not a medicinal product due to its composition or intended use.

Under the EU Cosmetics Regulation, a product is considered to be a cosmetic if it is presented as protecting the skin, maintaining the skin in good condition or improving the appearance of the skin, provided that it is not a medicinal product due to its composition or intended use.

By contrast, a substance or mixture intended to be ingested, inhaled, injected or implanted into the human body shall not be considered a cosmetic product, nor shall a product (i) the composition of which is such that it has a significant action on the body through a pharmacological, immunological or metabolic action;

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Following the end of a transition period, since January 1, 2021, the UK operates under a distinct regulatory regime, and the aforementioned EU laws now only apply to the UK in respect of Northern Ireland (as laid out in the Protocol on Ireland and Northern Ireland).

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As a consequence, from January 1, 2021, Schedule 34 of the Product Safety and Metrology etc.

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Presently, we do not anticipate such compliance will have a material effect on capital expenditures, earnings, or our competitive position with respect to any of our operations.

Information Technology

Information technology supports all aspects of our business, including our products, product development, marketing, sales, order processing, production, distribution, and finance.

We continue to maintain and enhance our information technology systems in alignment with our long-term strategy.

An increasing portion of our global information technology infrastructure is cloud-based.

This allows for a more scalable platform to support current and future requirements and improves our agility and flexibility to respond to the demands of our business by leveraging more advanced technologies.

We recognize that technology presents opportunities for competitive advantage, and we continue to invest in new capabilities and the use of emerging technologies across various aspects of our business.

During fiscal 2022, we continued to respond to shifting employee, provider, and consumer behaviors driven by the COVID-19 pandemic, which included new, hybrid ways of working for our office-based employees.

We invested in hardware, software, education and support structures to create engaging and collaborative work environments across our facilities, in both virtual and hybrid settings.

We also continued to

invest in new marketing and provider and consumer engagement capabilities globally with a focus on innovative digital experiences across our omnichannel landscape.

Our strategy over the next few years includes continuing to build a strong and secure technology infrastructure to adapt to evolving business dynamics, which includes the expansion of our omnichannel capabilities, modernizing and upgrading our existing facilities to be powered by technology, and the utilization of data-driven analytics to optimize our supply and demand planning.

Data Privacy and Security

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These values are reflective of our commitment to Environmental, Social, and Governance (“ESG”) matters and are fundamentally embedded in our operations and culture.

We believe effectively prioritizing and managing our ESG topics will create long-term value for our stakeholders, including our providers, consumers, suppliers, and partners, which in turn will create long-term value for our shareholders.

We also believe that transparently disclosing the goals and relevant metrics related to our ESG topics will allow our stakeholders to be informed about our progress.

Data Privacy and Security

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We value consumer privacy and have implemented certain policies and procedures that are designed to protect the data we collect.

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In recognition of the importance of data protection to our operations, including cybersecurity, we have certain measures in places that are designed to safeguard the security, confidentiality, and privacy of our systems and information assets.

We endorse and respect the goals and principles of the United Nations Universal Declaration of Human Rights (“UDHR”) and the International Labor Organization (“ILO”) Declaration on Fundamental Principles and Rights at Work.

We endorse and respect the goals and principles of the United Nations (“UN”) Universal Declaration of Human Rights and the International Labor Organization Declaration on Fundamental Principles and Rights at Work.

This includes everyone’s right to life and liberty, the protection of law, and freedom from slavery and torture – within our operations and business relationships.

We also seek to apply relevant sections of the UN Guiding Principles on Business and Human Rights.

While government authorities have the primary responsibility for protecting human rights, we believe we have a responsibility to respect the human, cultural, and legal rights of individuals and communities, and to avoid adverse human rights impacts through our own activities.

This includes the fair treatment and meaningful involvement of all people, regardless of race, ethnicity, color, gender, gender identity, national origin, religion, sexual orientation or income level.

While government authorities have the primary responsibility for protecting human rights, we believe we have a duty to respect the human, cultural, and legal rights of individuals and communities, and to avoid adverse human rights impacts through our own activities.

This responsibility includes the fair treatment and meaningful involvement of all people, regardless of race, ethnicity, color, gender, gender identity, national origin, religion, sexual orientation or income level.

In addition, we adhere to and comply with all local and national regulations in our operating areas and aim to respect the rights of all people within our spheres of influence.

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Our Code of Business Conduct and Ethics and related policies prohibit workplace harassment, violence or discrimination.

These policies apply to employee recruitment, training, development, compensation, performance management and benefits at our company.

These policies apply to our employee recruitment, training, development, compensation, performance management and benefits at the Company.

We also identify and proactively engage with stakeholders within or adjacent to our operations regarding potential risks, including human rights risks, and our response plans.

Additionally, we’re committed to ensuring that slavery, human trafficking, and other human rights violations don’t exist in our supply chain or in any part of our business.

Additionally, we are committed to ensuring that slavery, human trafficking, and other human rights violations do not exist in our supply chain or in any part of our business.

Environmental Matters

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• Foster clear, ethical behaviors and conduct to create an atmosphere of respect, trust, cooperation, and collaboration throughout the Company and our activities;

• Provide clear and well-defined procedures by which employees can easily obtain information, ask questions, and, if necessary, report any suspected violations of any of our business ethics policies

• Provide clear and well-defined procedures by which our employees can easily obtain information, ask questions, and, if necessary, report any suspected violations of any of our business ethics policies.

In addition to abiding by all applicable laws, all management and employees are required to comply fully with our Code of Business Conduct and Ethics which sets forth the Company’s values, business culture, and practices.

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A copy of our Code of Business Conduct and Ethics may be found on our website:

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Corporate Governance

We are committed to ensuring strong corporate governance practices on behalf of our shareholders and other stakeholders.

We believe strong corporate governance provides the foundation for financial integrity and shareholder confidence.

Our Board of Directors is responsible for the oversight of risks facing the Company, and our management is responsible for the day-to-day management of risk.

The Board of Directors, as a whole, directly oversees our strategic and business risk, including risks related to financial reporting, compensation practices, ESG, and product developments.

More information about our corporate governance features (including information about our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee) can be found in our Part III, Item 10 (Directors, Executive Officers and Corporate Governance) on this Annual Report on Form 10-K.

We are committed to ensuring strong corporate governance practices on behalf of our stockholders and other stakeholders.

We believe strong corporate governance provides the foundation for financial integrity and stockholder confidence.

Directors is responsible for the oversight of risks facing the Company, and our management is responsible for the day-to-day management of risk.

Our Board of Directors, as a whole, directly oversees our strategic and business risk, including risks related to financial reporting, compensation practices, ESG, and product developments.

In addition, the charters for our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee may be found in the “Investor Relations” section of our website:

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We have built a team of industry professionals focused on beauty health.

As of December 31, 2021, we employed approximately 704 employees, of whom approximately 76% of such employees were salaried, with the remainder being compensated on an hourly basis.

As of December 31, 2022, we employed approximately 1,034 employees, of whom approximately 83% were salaried, with the remainder being compensated on an hourly basis.

Set forth below is the geographic makeup of our workforce:

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Hiring, retaining, and developing the best talent globally is key to our success in sustaining long-term growth.

We employ targeted marketing practices through our careers website, which personalizes the user’s experience based on jobseeker location and searching behavior.

We employ targeted marketing practices through our careers website, which personalizes a user’s experience based on jobseeker location and searching behavior.

Jobseekers can also apply for roles from anywhere using any device.

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Our investments include providing programs to ensure our employees are equipped with the right skillsets and knowledge, as well as providing opportunities to transfer to other functions or regions through short-term and long-term assignments.

For instance, we provide our employees with a week-long training program that informs and educates our employees about our business model, marketing strategies, and other related topics about our business operations.

We believe these programs and opportunities create a pipeline of talent and leadership with a sense of shared ownership necessary to drive and deliver on our long-term strategy.

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For instance, we provide our employees with a 3-5 day training program that informs and educates our employees about our business model, marketing strategies, and other related topics about our business operations.

We believe these programs and opportunities create a pipeline of talent and leadership among our employees, while fostering a sense of shared ownership necessary to drive and deliver on our long-term strategy.

To enhance our culture and measure our human capital objectives, we regularly engage with our employees.

We provide several mechanisms for our employees to provide their feedback, including direct discussions with managers, employee surveys, interactive townhall meetings, and team offsite meetings.

Key topics covered during employee engagement include diversity and equity, learning and development, work-life structure, and employee benefits.

We provide several mechanisms for our employees to provide their feedback, including direct discussions with managers, employee surveys, interactive town hall meetings, and team offsite meetings.

Based on our review of employee feedback, we develop action plans and implement them to enhance employee satisfaction and to ensure alignment with our overall human capital strategy.

Workplace Practices and Policies

The Company is an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.

Diversity and Inclusion

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We firmly believe an inclusive work environment is essential for a successful and thriving business and enables us to better understand our consumers, drive innovation, and stimulate creativity.

We recognize the importance of all types of diversity at a leadership level and throughout our organization.

Our objective in creating an environment of diversity and inclusion is to enhance our ability to attract and retain the best talent globally and promote a sense of belonging.

We recognize the importance of all types of diversity at leadership levels and throughout our organization.

Our objective in creating an environment of inclusion is to enhance our ability to attract and retain the best talent globally and promote a sense of belonging.

We continuously encourage a culture of fairness, equal access to opportunities, including positions of leadership, and transparency in employment matters.

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Compensation and Benefits

Consistent with our core values, we take care of our employees by offering competitive compensation and comprehensive benefits programs in order to attract, motivate, and retain world-class talent.

We continuously make wage investments to ensure our compensation packages reflect the evolving circumstances across our markets.

For instance, in addition to base pay (which is based on specific circumstances, including role and experience, geographic location and performance), we offer annual cash incentive awards and equity awards for employees at certain job grades.

In addition, our employees can take advantage of a range of benefits in addition to our standard medical/dental/vision insurance, which includes healthcare and wellness programs, a 401(k) match, participation in our Employee Stock Purchase Plan, monthly HydraFacial experiences, parental leave, meals, gym membership, discount tickets, and pet insurance.

Consistent with our core values, our “Total Rewards” programs take care of our employees by offering competitive compensation and flexible, comprehensive benefits programs designed to attract, motivate, and retain world-class talent.

We continuously review and ensure our compensation packages are competitive across all of the markets in which we operate.

For instance, in addition to base pay (which is based on specific circumstances, including role and experience, geographic location, and performance), we offer annual cash performance-based incentives and equity-based long-term incentive awards for eligible employees.

Our robust benefit programs, which vary by country, include basic and supplemental health and insurance benefits, health savings and flexible spending accounts, access to a personal health advocate, family leave, life and disability insurance, employee assistance programs, physical, mental and financial wellbeing programs, a U.S.

employee stock purchase plan, retirement savings plans, and pet insurance, to name a few.

Workplace Health and Safety

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We continually strive to improve processes across field safety training, incident training, and professional investigations.

Throughout the COVID-19 pandemic, we implemented health and safety protocols and modified our business practices to protect our employees.

Throughout the height of the COVID-19 pandemic, we implemented health and safety protocols and modified our business practices to protect our employees.

After our original plan was disseminated to our employees, additional updates from management have included the most up-to-date information from the U.S.

Department of State, Center for Disease Control (“CDC”) and World Health Organization (“WHO”), and we have, at all times, encouraged employees to keep management informed of the need for any additional support.

Our health and safety protocols specify several CDC-recommended measures to mitigate the spread of

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COVID-19 in the workplace, including requirements that masks be worn in the office, the importance of social and physical distancing and frequent handwashing, and that employees are to remain home if feeling unwell and self-quarantine following any possible exposure to the virus.

Our health and safety protocols specify several CDC-recommended measures to mitigate the spread of COVID-19 in the workplace, the importance of social and physical distancing and frequent handwashing, and that employees are to remain home if feeling unwell and self-quarantine following any possible exposure to

In addition to these measures, we have increased sanitation procedures and updated our travel policy to ensure the safety of those employees who have resumed working in the office and those who travel for business.

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The Beauty Health Company (f.k.a.

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

On May 4, 2021, we completed a Business Combination which resulted in the acquisition of The HydraFacial Company.

Further information on the Business Combination is incorporated herein by reference.

On May 6, 2021, we began trading under the ticker symbol “SKIN” on The Nasdaq Capital Market LLC.

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.

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

(“Merger Sub I”), Hydrate Merger Sub II, LLC (“Merger Sub II”), LCP Edge Intermediate, Inc., the indirect parent of Edge Systems LLC d/b/a The Hydrafacial Company (“Hydrafacial”), and LCP Edge Holdco, LLC (“LCP,” or “Former Parent,” and, in its capacity as the stockholders’ representative, the “Stockholders’ Representative”) (the “Merger Agreement”), which provided for:

(a) the merger of Merger Sub I with and into Hydrafacial, with Hydrafacial continuing as the surviving corporation (the “First Merger”), and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Hydrafacial with and into Merger Sub II, with Merger Sub II continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”).

As a result of the First Merger, the registrant owns 100% of the outstanding common stock of Hydrafacial and each share of common stock and preferred stock of Hydrafacial was cancelled and converted into the right to receive a portion of the consideration payable in connection with the Mergers.

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

In connection with the closing of the Business Combination, we own, 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 our Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”).

On May 6, 2021, we began trading under the ticker symbol “SKIN” on Nasdaq.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, are available on our website free of charge at http://beautyhealth.com under “Financials—SEC Filings,” as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available on our website free of charge at http://beautyhealth.com under “Financials—SEC Filings,” as soon as reasonably practicable after we electronically file such reports with, or furnish those reports to, the Securities and Exchange Commission.

The content of our website is not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission.

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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 1. Business