SKIN - 4 REASONS WHY THE BEAUTY HEALTH COMPANY IS GLOWING
The Beauty Health Company (NASDAQ: SKIN) is a global category-creating company delivering beauty health experiences that help consumers reinvent their relationship with their skin, bodies, and self-confidence. Their flagship brand, HydraFacial, created the category of hydradermabrasion by using a patented vortex-fusion delivery system to cleanse, extract, and hydrate the skin with proprietary solutions and serums.
The Company
The Beauty Health Company, formerly known as Vesper Healthcare Acquisition Corp. was incorporated in Delaware on July 8, 2020. Vesper Healthcare Acquisition Corp. was originally formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On May 4, 2021, Vesper Healthcare Acquisition Corp. completed the previously announced business combination with Edge Systems LLC d/b/a The HydraFacial Company. In connection with the business combination, Vesper Healthcare changed its name to The Beauty Health Company, and LCP Edge Intermediate, Inc., the indirect parent of HydraFacial, became an indirect subsidiary of BeautyHealth.
Today, the Company’s vision is to expand their 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. Currently, their flagship brand HydraFacial is available in more than 90 countries with an install base of nearly 25,000 delivery systems providing millions of experiences to consumers each year.
The Beauty Health Company (NASDAQ: SKIN)
Market Cap: $1.51B; Current Share Price: $10.55
Data by YCharts
Spectacular Revenue Growth
For Q3 FY22 ended September 30, 2022, the Company reported net sales of $88.8 million that beat expectations for the seventh consecutive quarter, despite the macroeconomic environment. At the same time, it delivered EBITDA of $16.5 million on $0.1 million of GAAP net income.
Overall, the Company demonstrated +30% YoY net sales growth along with +174bps YoY gross margin improvement to 69.3% and +355bps YoY adjusted gross margin improvement to 75.1%.
Region wise, the Company delivered double-digit net sales growth – in America, the figure stood at $58.4 million, +30% YoY, driven by solid demand for Syndeo. In the APAC region, $15.1 million, +44% YoY, driven by strong performance during re-opening windows in China, partly offset by foreign currency weakness. In EMEA, $15.3 million, +21% YoY driven by strength in provider and consumer demand, partly offset by foreign currency weakness and no contribution from Russia in Q3 FY22.
Delivery systems sold year-to-date (6,447) had already eclipsed 2021’s record total year sales (6,191), while global install base stood at 24,473 systems as of September 30, 2022.
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The Company increased its FY22 net sales guidance and expects net sales in the range of $360.0 million to $365.0 million, up from the previous outlook of $340.0 million to $350.0 million, reflecting management’s confidence in the business as the Company executes against its growth plan. The Company also expanded its 2022 outlook for adjusted EBITDA from the prior target of $50.0 million to a range of $45.0 million to $50.0 million, reflecting the continued investment in global expansion, and as a result of changing macroeconomic pressures, including foreign currency exchange headwinds and market closures and restrictions as a result of China’s zero COVID policy.
Going forward, it is expected that The Beauty Health Company will continue to deliver robust revenue growth on the back of increasing customer demand for its unique product portfolio and customized treatment options.
Innovative and Patented Product Portfolio
The cornerstone of the Company’s portfolio is HydraFacial. Using a patented Vortex-Fusion 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.
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. The Company believes the instant gratification provided by the HydraFacial experience generates high consumer and provider affinity for the brand.
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.
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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 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).
The Company has a few more products in its development pipeline.
Overall, the Company has 48 patents with 27 patents pending to protect HydraFacial’s technology and brand. Their patent portfolio covers key aspects on certain products, systems and designs including several issued U.S. patents directed to features of the HydraFacial MD® liquid-based skin exfoliation system.
A well-liked and appreciated product portfolio, along with an exciting development pipeline seem to promise a bright future for the Company.
High Growth Industry
The Company places Delivery Systems where consumers live, work, and play, including medical offices, medispas, day spas, hotels, resorts, gyms, wellness centers, and other retail settings. It operates in an industry with immense growth potential, and the management anticipates continuing to expand the types of channels where Delivery Systems are sold.
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As far as demography is concerned, in the U.S., the Company serves the upper middle class and resilient consumer with an average household income of around $94k – high incomes mean that the target consumer is less susceptible to economic downturns. The age of the average consumer is in the 30s – young consumers indicate high Long-Term-Value potential.
More than 20% of customers are male. Given that the global men’s grooming market is expected to reach $81.2bn by 2024, the Company seems well poised to take advantage of this upcoming opportunity.
Additionally, skincare specialist jobs are expected to grow more than 29% by 2030, outpacing job growth in other categories. The Company has a cultivated aesthetician community that provides edge to capture growth in this area.
Internationally, HydraFacial operates through a direct sales force in 15 markets and is investing in building infrastructure for global expansion. The Company believes 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 the Company aims to invest in initiatives that will increase consumer penetration in these countries.
The Company has created a growth plan for the next three years where they plan to expand the international business segment. In fact, this area is expected to contribute more than 50% of total revenues by 2025.
Increasing Brand Awareness
This is an important part of the company’s growth strategy. In an effort to improve competitiveness through differentiated branding, the Company has partnered with leading peers to expand the Hydrafacial booster portfolio.
For example, The Beauty Health Company has an active R&D pipeline of boosters co-created with Dr. Dennis Gross, Glytone and a breakthrough exosome booster, among others.
However, the most successful partnership so far has been the Hydrafacial x JLO Beauty Booster drove record consumer attention and presale sellout on the first day.
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The Beauty Health Company invests vigorously in marketing and branding efforts due to which consumer interest in the Company has continued to grow. In fact, in Q3 FY22, YTD Earned Media Value (EMV) stood at $9mm – it had already surpassed FY21 by +15%.
On the other hand, the worldwide Google Search Trends showed +13% growth in Q3 FY22, YoY.
The Company continues to innovate to increase sales by elevating digital presence, social media presence, and influencer marketing efforts all designed to build brand equity and consumer engagement. The management believes that transformational experiences are key to growing brand awareness, and hence have focused on introducing their experience to highly targeted consumer growth markets around the world.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://www.beautyhealth.com/static-files/019251fd-0555-4d85-999c-02a0cfa057c9
https://www.beautyhealth.com/static-files/7f071e80-f279-4b5e-96ab-c8da46db782f
https://www.sec.gov/ix?doc=/Archives/edgar/data/1818093/000181809322000169/skin-20220930.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1818093/000181809322000046/skin-20211231.htm