10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from __________ to __________.

Commission File Number: 001-39565 

The Beauty Health Company

(Exact name of registrant as specified in its charter)

Delaware	85-1908962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2165 Spring Street Long Beach, CA 90806	(800) 603-4996
(Address of principal executive offices, including zip code)	Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	SKIN	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 5, 2022, there were 150,877,489 shares of Class A Common Stock, par value $0.0001 per share issued and outstanding.

THE BEAUTY HEALTH COMPANY

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

		Page
PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	43
SIGNATURES

2

PART I— FINANCIAL INFORMATION

Item 1. Financial Statements.

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for share amounts)

(Unaudited)

	June 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	820,970	$	901,886
Accounts receivable, net of allowances for doubtful accounts of $2,482 and $2,681 at June 30, 2022 and December 31, 2021, respectively	79,918		46,824
Prepaid expenses and other current assets	20,336		12,322
Income tax receivable	1,008		4,599
Inventories	73,526		35,261
Total current assets	995,758		1,000,892
Property and equipment, net	18,041		16,183
Right-of-use assets, net	15,791		14,992
Intangible assets, net	51,202		56,010
Goodwill	124,033		123,694
Deferred income tax assets, net	312		330
Other assets	9,823		6,705
TOTAL ASSETS	$	1,214,960	$	1,218,806
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	36,830	$	29,049
Accrued payroll-related expenses	27,786		28,662
Other accrued expenses	15,385		14,722
Lease liabilities, current	4,547		3,712
Income tax payable	2,510		292
Total current liabilities	87,058		76,437
Lease liabilities, non-current	13,116		12,781
Deferred income tax liabilities, net	3,844		3,561
Warrant liabilities	26,579		93,816
Convertible senior notes, net	732,028		729,914
TOTAL LIABILITIES	862,625		916,509
Commitments (Note 13)
Stockholders’ equity:
Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	16		16
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Additional paid-in capital	735,682		722,250
Accumulated other comprehensive income (loss)	(5,089)		(1,257)
Accumulated deficit	(378,274)		(418,712)
Total stockholders’ equity	352,335		302,297
LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,214,960	$	1,218,806

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

3

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except for share and per share amounts)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	103,536	$	66,508	$	178,951	$	114,050
Cost of sales	31,882		19,257		55,360		35,059
Gross profit	71,654		47,251		123,591		78,991
Operating expenses:
Selling and marketing	44,881		26,214		81,288		43,309
Research and development	2,601		2,988		4,831		4,440
General and administrative	27,585		44,402		53,846		55,213
Total operating expenses	75,067		73,604		139,965		102,962
Loss from operations	(3,413)		(26,353)		(16,374)		(23,971)
Other (income) expense:
Interest expense, net	3,217		2,060		6,617		7,759
Other (income) expense, net	(1,658)		4,307		(721)		4,314
Change in fair value of warrant liabilities	(15,185)		72,027		(67,237)		72,027
Change in fair value of earn-out shares liability	—		36,525		—		36,525
Foreign currency transaction loss (gain), net	2,206		(24)		1,838		232
Total other (income) expense	(11,420)		114,895		(59,503)		120,857
Income (loss) before provision for income taxes	8,007		(141,248)		43,129		(144,828)
Income tax expense (benefit)	76		(1,870)		2,691		(2,176)
Net income (loss)	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(3,687)		(276)		(3,832)		(281)
Comprehensive income (loss)	$	4,244	$	(139,654)	$	36,606	$	(142,933)
Net income (loss) per share
Basic	$	0.05	$	(1.52)	$	0.27	$	(2.24)
Diluted	$	(0.05)	$	(1.52)	$	(0.18)	$	(2.24)
Weighted average common shares outstanding
Basic	150,731,491		91,798,837		150,665,166		63,805,807
Diluted	151,719,451		91,798,837		152,274,394		63,805,807

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

4

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except for share amounts)

(Unaudited)

	Legacy Common Stock			Legacy Preferred Stock			Common Stock			Additional Paid-in Capital		Note Receivable from Stockholder		Accumulated other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, December 31, 2020	54,358	$	—	931	$	—	—	$	—	$	13,956	$	(554)	$	242	$	(43,604)	$	(29,960)
Retroactive application of recapitalization	(54,358)	—		(931)	—		35,501,743	4		(4)		—		—		—		—
Adjusted balance, beginning of period	—	—		—	—		35,501,743	4		13,952		(554)		242		(43,604)		(29,960)
Stock-based compensation	—	—		—	—		—	—		34		—		—		—		34
Net income (loss)	—	—		—	—		—	—		—		—		—		(3,274)		(3,274)
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(5)		—		(5)
BALANCE, March 31, 2021	—	$	—	—	$	—	35,501,743	$	4	$	13,986	$	(554)	$	237	$	(46,878)	$	(33,205)
Reverse recapitalization transaction, net	—	—		—	—		89,827,310	9		183,301		554		—		—		183,864
Issuance of Class A Common Stock in connection with business acquisition	—	—		—	—		110,726	—		1,557		—		—		—		1,557
Stock-based compensation	—	—		—	—		—	—		3,508		—		—		—		3,508
Net income (loss)	—	—		—	—		—	—		—		—		—		(139,378)		(139,378)
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(276)		—		(276)
BALANCE, June 30, 2021	—	$	—	—	$	—	125,439,779	$	13	$	202,352	$	—	$	(39)	$	(186,256)	$	16,070
BALANCE, December 31, 2021	—	$	—	—	$	—	150,598,047	$	16	$	722,250	$	—	$	(1,257)	$	(418,712)	$	302,297
Issuance of common stock for vesting of restricted stock units	—	—		—	—		5,184	—		—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		7,049		—		—		—		7,049
Net income (loss)	—	—		—	—		—	—		—		—		—		32,507		32,507
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(145)		—		(145)
BALANCE, March 31, 2022	—	$	—	—	$	—	150,603,231	$	16	$	729,299	$	—	$	(1,402)	$	(386,205)	$	341,708
Issuance of Class A Common Stock in connection with asset acquisition	—	—		—	—		28,733	—		500		—		—		—		500
Issuance of common stock pursuant to equity compensation plan	—	—		—	—		252,536	—		—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		6,378		—		—		—		6,378
Shares withheld for tax withholdings on vested stock awards	—	—		—	—		(29,475)	—		(495)		—		—		—		(495)
Net income (loss)	—	—		—	—		—	—		—		—		—		7,931		7,931
Foreign currency translation adjustment	—	—		—	—		—	—		—		—		(3,687)		—		(3,687)
BALANCE, June 30, 2022	—	$	—	—	$	—	150,855,025	$	16	$	735,682	$	—	$	(5,089)	$	(378,274)	$	352,335

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

5

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	40,438	$	(142,652)
Adjustments to reconcile net income (loss) to net cash from operating
Depreciation of property and equipment	3,268		1,418
Amortization of capitalized software	903		626
Provision for doubtful accounts	435		646
Non-cash lease expense	2,282		—
Amortization of intangible assets	6,468		5,229
Amortization of other assets	280		66
Amortization of deferred financing costs	—		2,806
Stock-based compensation	13,427		3,542
Loss on sale and disposal of assets	988		—
In-kind interest	—		4,130
Deferred income tax benefit	—		(3,471)
Change in fair value of earn-out shares liability	—		36,525
Change in fair value adjustment of warrant liabilities	(67,237)		72,027
Debt prepayment expense	—		2,014
Amortization of debt issuance costs	2,114		—
Changes in operating assets and liabilities:
Accounts receivable	(34,410)		(21,089)
Prepaid expense and other current assets	(9,374)		(1,562)
Income taxes receivable	4,165		333
Inventory	(39,234)		(229)
Other assets	(2,634)		730
Accounts payable	7,675		(2,369)
Accrued payroll and other expenses	385		9,047
Other long-term liabilities	—		(87)
Lease liabilities	(1,972)		—
Income taxes payable	2,227		382
Net cash used in operating activities	(69,806)		(31,938)
Cash flows used in investing activities:
Cash paid for business acquisitions, net of cash acquired	—		(4,920)
Cash paid for asset acquisition	(1,475)		—
Repayment of notes receivables from shareholders	—		781
Capital expenditures for intangible assets	(1,252)		(273)
Capital expenditures for property and equipment	(5,577)		(4,707)
Net cash used in investing activities	(8,304)		(9,119)
Cash flows from financing activities:
Payment of contingent consideration related to acquisitions	(2,763)		—
Proceeds from revolving facility	—		5,000
Repayment of revolving facility	—		(5,000)
Proceeds from Business Combination, net of transaction costs (See Note 3)	—		358,536
Repayment of term loan	—		(225,487)
Net cash (used in) provided by financing activities	(2,763)		133,049
Net (decrease) increase in cash and cash equivalents	(80,873)		91,992
Effect of foreign currency translation on cash	(43)		(11)
Cash and cash equivalents, beginning of period	901,886		9,486
Cash and cash equivalents, end of period	$	820,970	$	101,467

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

6

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2022		2021
Supplemental disclosures of cash flow information and non-cash investing and financing activities:
Cash paid for interest	$	5,130	$	10,249
Common stock issued for asset acquisition	500		—
Common stock issued for business acquisitions	—		1,557
Cash (received) paid for income taxes	(2,967)		96
Capital expenditures included in accounts payable	404		1,440
Change in deferred tax liability due to reverse recapitalization	—		90

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

7

THE BEAUTY HEALTH COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Description of Business

The Beauty Health Company, formerly known as Vesper Healthcare Acquisition Corp. (the “Company” or “BeautyHealth”), was incorporated in Delaware on July 8, 2020. The Company 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 (the “Closing Date”), the Company consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020 (the “Merger Agreement”), by and among Vesper Healthcare Acquisition Corp. (“Vesper”), 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”), 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 Company owns 100% of the outstanding common stock of HydraFacial and each share of common stock and preferred stock of HydraFacial has been 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, the Company owns 100% of the outstanding interests in Merger Sub II. In connection with the closing of the Business Combination (the “Closing”), the Company owns, directly or indirectly, 100% of the stock of HydraFacial and its subsidiaries and the stockholders of HydraFacial as of immediately prior to the effective time of the First Merger (the “HydraFacial Stockholders”) hold a portion of the Company’s Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”).

In connection with the Closing, the Company changed its name from “Vesper Healthcare Acquisition Corp.” to “The Beauty Health Company.” Following the Closing, on May 6, 2021, the Company’s Class A Common Stock and publicly traded warrants were listed on the Nasdaq Capital Market (“Nasdaq”) under the symbols, “SKIN” and “SKINW”, respectively. The transactions set forth in the Merger Agreement constitute a “Business Combination” as contemplated by Vesper’s Second Amended and Restated Certificate of Incorporation.

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company” refers to Vesper Healthcare Acquisition Corp. prior to the closing of the Business Combination and to the combined company and its subsidiaries following the Closing and “HydraFacial” refers to the business of LCP Edge Intermediate, Inc. and its subsidiaries prior to the Closing. References to “Vesper” refer to Vesper Healthcare Acquisition Corp. prior to the consummation of the Business Combination.

The Company is a category-creating beauty health company focused on bringing innovative products to market. The Company and its subsidiaries design, develop, manufacture, market, and sell a/esthetic technologies and products. The Company’s flagship brand, HydraFacial, is a non-invasive and approachable beauty health platform and ecosystem. HydraFacial uses a unique delivery system to cleanse, extract, and hydrate with their patented hydradermabrasion technology and serums that are made with nourishing ingredients.

The COVID-19 pandemic has had, and may continue to have adverse impacts on our business. As government authorities around the world continue to implement significant measures intended to control the spread of the virus and institute restrictions on commercial operations, while simultaneously implementing policies designed to reopen certain markets, we are working to ensure our compliance and maintain business continuity for essential operations. The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including the duration and scope of the pandemic; businesses and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability.

8

Note 2 – Summary of Significant Accounting Policies

Information regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.

New Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2021-08, Business Combinations (Topic 805), which primarily relates to the accounting for contract assets and contract liabilities from contracts with customers in a business combination. The standard will be effective for annual reporting periods beginning after December 31, 2022, including interim reporting periods within those periods, with early adoption permitted. We are currently evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

Note 3 – Business Combinations and Asset Acquisitions

Business Combination — Reverse Recapitalization

The closing of the Business Combination occurred on May 4, 2021. In connection with the Business Combination:

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

•Prior to the Business Combination, the Company issued an aggregate of 11,500,000 shares of the Company’s Class B Common Stock (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. All outstanding Founder Shares were automatically converted into shares of the Company’s Class A Common Stock on a one-for-one basis at the Closing and will continue to be subject to the transfer restrictions applicable to such shares of Founder Shares.

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

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

•The aggregate gross cash consideration received by the Company in connection with the Business Combination was $783 million, which consisted of proceeds of $350 million from the PIPE Investment, plus approximately $433 million of cash from the Company’s trust account that held the proceeds from the Company’s initial public offering (the “Trust Account”). The aggregate gross cash consideration received was reduced by $368 million, which consisted of cash payments made to the former shareholders of HydraFacial, and further reduced by an additional $57 million for the payment of direct transaction costs incurred by HydraFacial and the Company which were reflected as a reduction of proceeds. The Company used the net proceeds to repay all of its outstanding indebtedness at the Closing. The remainder of the consideration paid to the HydraFacial Stockholders consisted of 35,501,743 newly issued shares of Class A Common Stock (the “Stock Consideration”). The net cash received from the Business Combination was subject to a working capital adjustment of $0.9 million. The Company also issued 70,860 shares related to the working capital adjustment.

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

9

(in thousands)	Recapitalization
Cash in trust, net of redemptions	$	433,382
Cash — PIPE	350,000
Less: Cash paid out to Former Parent	(367,870)
Less: Transaction costs and advisory fees	(56,976)
Less: Cash paid out from net working capital adjustment related to acquisitions	(902)
Net Cash Received from Business Combination	$	357,634

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

	Number of Shares
Class A common stock outstanding prior to Business Combination	46,000,000
Less: Redemption of Vesper Class A Common Stock	(2,672,690)
Class A common stock of Vesper	43,327,310
Founder shares (Vesper Class B Common Stock)	11,500,000
PIPE Shares	35,000,000
Business Combination and PIPE shares	89,827,310
Legacy HydraFacial shares (1)	35,501,743
Working capital adjustment Class A Common Stock issued	70,860
Total Shares of Class A Common Stock after Business Combination	125,399,913

_______________

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

Distributor Acquisitions

On June 4, 2021, the Company acquired High Tech Laser, Australia Pty Ltd (“HTL”), a distributor of the Company’s products in Australia. On July 1, 2021, the Company acquired Wigmore Medical France (“Wigmore”), Ecomedic GmbH (“Ecomedic”) and Sistemas Dermatologicos Internacionales (“Sidermica”), distributors of the Company’s products in France, Germany and Mexico, respectively. Through these acquisitions, the Company plans to directly sell to the respective markets and improve services for its products. Cash paid for the four distributors totaled $23.7 million.

The Company applied the acquisition method of accounting and established a new basis of accounting on the dates of the respective acquisitions. The assets acquired by the Company are accordingly measured at their estimated fair values as of the acquisition date. The goodwill arising from the acquisitions consists largely of the business reputation of the acquired company in the marketplace and its assembled workforce. The goodwill is not deductible for income tax purposes.

The Company finalized the valuation of assets acquired and liabilities assumed for the distributor acquisitions as of June 30, 2022. The following table summarizes the consideration and fair values assigned to the assets acquired and liabilities

10

assumed at the dates of acquisition for the Wigmore, Ecomedic and Sidermica acquisitions and summarizes the HTL acquisition after measurement period adjustments.

(in thousands)	HTL		Wigmore (2)		Ecomedic (3)		Sidermica (4)
Consideration paid:
Cash, net of cash acquired	$	4,920	$	2,540	$	11,338	$	6,861
Class A Common Stock issued (1)	1,557		456		6,513		815
Trade receivables due from seller	1,027		2,336		1,679		1,581
Notes payable to seller	—		—		2,153		—
	$	7,504	$	5,332	$	21,683	$	9,257
Identifiable assets acquired and liabilities assumed
Accounts receivable	$	1,110	$	2,079	$	15	$	1,657
Non-compete agreement	100		60		588		100
Customer relationships	2,696		2,276		5,487		2,700
Inventory and other assets	354		341		1,262		454
Accounts payable	(45)		(456)		(772)		—
Deferred tax liabilities, net	(675)		(842)		(2,008)		—
Accrued and other liabilities	(802)		(317)		(340)		—
Total identifiable net assets	2,738		3,141		4,232		4,911
Goodwill	$	4,766	$	2,191	$	17,451	$	4,346

___________

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

(2)    During the fourth quarter of 2021, adjustments were made to the Wigmore valuation pertaining to contingent consideration and intangible assets. Goodwill was adjusted due to an increase of $0.3 million in contingent consideration and a decrease of $1.0 million in intangible assets. Contingent consideration payments for the Wigmore acquisition were paid during the three months ended March 31, 2022.

(3)    During the first quarter of 2022, adjustments were made to the Ecomedic valuation pertaining to acquisition date tax liability. Goodwill was adjusted due to an increase of $0.2 million to acquisition date tax liability.     

(4)    During the second quarter of 2022, adjustments were made to the Sidermica valuation pertaining to contingent consideration. Goodwill was adjusted due to an increase in contingent consideration of $1.98 million. Contingent consideration payments for the Sidermica acquisition were paid during the three months ended June 30, 2022.

Intangible assets acquired included customer relationships and non-compete agreements. The valuation of the acquired intangible asset was estimated by performing projections of discounted cash flows, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk. The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs). The weighted average amortization period of customer relationship was 5 years, while the non-compete agreements are amortized over 3 years.

The operating results of the distributor acquisitions from the dates of acquisitions through June 30, 2022 are included in the Condensed Consolidated Statements of Comprehensive Income (Loss). The operating results are not material to the consolidated financial statements, and, therefore, the Company has not presented pro forma results of operations for the distributor acquisitions.

Acquisition of The Personalized Beauty Company, Inc. (“Mxt”)

On April 12, 2022, the Company, through its indirect, wholly-owned subsidiary, Edge Systems Intermediate, LLC, acquired The Personalized Beauty Company, Inc., a Delaware corporation d.b.a. Mxt. Consideration paid in the aggregate was $1.5 million plus equity consideration of $0.5 million or 28,733 shares of the Company’s Class A Common Stock. Depending on the achievement of certain revenue milestones, the former Mxt shareholders are entitled to receive up to $30 million of earnout payments. The estimated fair value of the earnout was not material as of the acquisition date.

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The Company accounted for this transaction as an asset acquisition based on an evaluation of the U.S. GAAP guidance for business combinations and concluded that the Company acquired developed technology of $1.9 million and inventory of $0.1 million. The Company concluded that the developed technology acquired from Mxt comprised substantially all of the fair value of the gross assets acquired and that the assets acquired did not meet the definition of a business under the guidance for business combinations. The developed technology intangible asset is being amortized on a straight-line basis over 3 years and recorded in cost of sales.

Note 4 – Revenue Recognition

The Company has determined that each of its products is distinct and represents a separate performance obligation. The customer can benefit from each product on its own or together with other resources that are readily available to the customer. The products are separately identifiable from other promises in the contract. Control over the Company’s products generally transfers to the customer upon shipment of the products from the Company’s warehouse facility. Therefore, revenue associated with product purchases is recognized at a point in time upon shipment to the intended customer. Typical payment terms provide for the customer to pay within 30 to 120 days, however, we provide an option for qualified customers to pay for delivery systems over 12 monthly installments.

Disaggregated Revenue

The Company generates revenue through manufacturing and selling HydraFacial Delivery Systems (“Delivery Systems”). In conjunction with the sale of Delivery Systems, HydraFacial also sells its serum solutions and consumables (collectively “Consumables”). Consumables are sold solely and exclusively by HydraFacial and are available for purchase separately from the purchase of Delivery Systems. For both Delivery Systems and Consumables, revenue is recognized upon transfer of control to the customer, which generally takes place at the point of shipment.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net Sales
Delivery Systems	$	64,783	$	34,944	$	106,430	$	60,616
Consumables	38,753		31,564		72,521		53,434
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

See Note 17 for revenue disaggregated by geographical region.

Note 5 — Balance Sheet Components

Inventories consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Raw materials	$	19,008	$	12,024
Finished goods	54,518		23,237
Total inventories	$	73,526	$	35,261

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Accrued compensation	$	10,935	$	15,262
Accrued payroll taxes	2,448		922
Accrued benefits	3,976		3,022
Accrued sales commissions	10,427		9,456
Total accrued payroll-related expenses	$	27,786	$	28,662

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Other accrued expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Sales and VAT tax payables	$	5,840	$	5,817
Accrued interest	2,344		2,786
Contingent consideration	—		783
Note payable due seller	2,125		2,153
Royalty liabilities	1,024		1,074
Other	4,052		2,109
Total other accrued expenses	$	15,385	$	14,722

Note 6 — Leases

The Company does not own any real estate. The majority of the Company’s lease liability consists of the Company’s international office spaces and warehouses, all of which are classified as operating leases. The Company’s finance leases relate to leased equipment such as office and warehouse equipment. The finance lease balances are not material but are included in property and equipment, other accrued expenses, and other long-term liabilities of the Condensed Consolidated Balance Sheets. During the three months ended June 30, 2022 the Company entered into leases for a new experience center in Paris for a right-of-use asset and lease liability of $1.1 million and an office in Frankfurt for a right-of-use asset and lease liability of $1.6 million.

Note 7 — Fair Value Measurements

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. As of the Business Combination date, the Private Placement Warrants were valued using the Public Warrant Price, and was considered to be a Level 2 financial instrument as of that date. As of June 30, 2022, the value of the Private Placement Warrants was determined using their redemption value because these Private Placement Warrants are subject to redemption if the reference value of the common stock, as defined, is between $10.00 and $18.00 per share. The Private Placement Warrants are classified as a Level 2 financial instrument. There were no Public Warrants outstanding as of June 30, 2022. There were no valuation level transfers during the six months ended June 30, 2022.

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14

	Fair Value Measurements on a Recurring Basis
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	768,575	$	—	$	—	$	768,575
Liabilities
Warrant liability — Private Placement Warrants	—		26,579		—		26,579

Money Market Funds

The Company’s investment in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of June 30, 2022, the Company’s U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value.

Warrant Liabilities

The Public Warrants and Private Placement Warrants (collectively, the “Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities on the Company’s Condensed Consolidated Balance Sheets. The Warrants are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss). At June 30, 2022, the outstanding Private Placement Warrants was determined using their redemption value because these Warrants are subject to redemption if the reference value of the common stock, as defined, is between $10.00 and $18.00 per share. The Private Placement Warrants are classified as a Level 2 financial instruments as of June 30, 2022. There were no Public Warrants outstanding as of June 30, 2022.

On October 4, 2021, the Company issued a press release stating that it would redeem all of the Public Warrants that remained outstanding following 5:00 p.m. New York City time on November 3, 2021, for a redemption price of $0.10 per Public Warrant. All 16.2 million outstanding Public Warrants were either exercised for cash or on a cashless basis or were redeemed. These outstanding Public Warrants that were exercised comprised 15.3 million Public Warrants issued in connection with the Vesper initial public offering and an additional 0.9 million warrants that became Public Warrants due to the sale of Private Placement Warrants. Approximately 16.1 million Public Warrants were exercised for cash at an exercise price of $11.50 per share of Class A Common Stock, 74,104 Public Warrants were exercised on a cashless basis in exchange for an aggregate of 26,732 shares of Class A Common Stock, and 75,016 warrants were redeemed for $0.10 per warrant, in each case in accordance with the terms of the Warrant Agreement. In 2021, total cash proceeds generated from exercises of the Public Warrants were $185.4 million. In addition, 0.3 million Private Placement Warrants were exercised in 2021 for total cash proceeds of $3.0 million. As of June 30, 2022, the Company had approximately 7 million Private Placement Warrants outstanding.

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Note 8 – Property and Equipment, net

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

(in thousands)	Useful life (years)	June 30, 2022		December 31, 2021
Furniture and fixtures	2-7	$	4,891	$	4,074
Computers and equipment	3-5	4,975		4,010
Machinery and equipment	2-5	5,288		3,669
Autos and trucks	5	1,184		1,163
Tooling	5	1,837		1,389
Leasehold improvements	Shorter of remaining lease term or estimated useful life	10,438		5,086
Total property and equipment		28,613		19,391
Less: accumulated depreciation and amortization		(11,434)		(8,561)
Construction in progress		862		5,353
Property and equipment, net		$	18,041	$	16,183

Depreciation expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	591	$	321	$	1,005	$	626
General and administrative	861		407		1,536		792
Selling and marketing	400		—		727		—
Total depreciation expense	$	1,852	$	728	$	3,268	$	1,418

Note 9 – Goodwill and Intangible Assets, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of June 30, 2022 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,012	$	(3,781)	$	6,231	15
Non-compete agreement	758		(538)		220		3
Customer relationships	17,821		(5,607)		12,214		5-10
Developed technology	73,188		(49,610)		23,578		3-8
Patents	2,034		(355)		1,679		3-19
Capitalized software	11,154		(3,874)		7,280		3-5
Total intangible assets	$	114,967	$	(63,765)	$	51,202

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The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2021 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,048	$	(3,442)	$	6,606	15
Non-compete agreement	809		(139)		670		3
Customer relationships	18,625		(4,391)		14,234		5-10
Developed technology	70,900		(45,051)		25,849		8
Patents	2,050		(295)		1,755		3-19
Capitalized software	9,867		(2,971)		6,896		3-5
Total intangible assets	$	112,299	$	(56,289)	$	56,010

Amortization expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	2,378	$	2,233	$	4,619	$	4,464
General and administrative	796		466		1,498		968
Selling and marketing	619		235		1,254		423
Total amortization expense	$	3,793	$	2,934	$	7,371	$	5,855

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

	Six Months Ended June 30,
(in thousands)	2022		2021
Beginning balance	$	123,694	$	98,531
Measurement period adjustments	2,154		4,766
Foreign currency translation impact	(1,815)		(197)
Ending balance	$	124,033	$	103,100

The measurement period adjustments include a $0.2 million increase due to adjustment of acquisition date tax liability for Ecomedic and a $1.98 million increase due to contingent consideration paid to former owner of Sidermica during the six months ended June 30, 2022.

Note 10 – Long-term Debt

Credit Facility

On December 30, 2021, Edge Systems LLC, a California limited liability company (the “Borrower”) and an indirect wholly owned subsidiary of The Beauty Health Company, as borrower, entered into a Credit Agreement (the “Credit Agreement”) with Edge Systems Intermediate LLC, an indirect wholly owned subsidiary of the Company and the direct parent of the Borrower that holds the Company’s foreign and domestic operating entities, and The Hydrafacial Company Mexico Holdings, LLC, a direct wholly owned subsidiary of the Borrower that conducts the Mexican business operations , as guarantors (the “Guarantors” and, together with the Borrower, the “Loan Parties”), and JPMorgan Chase Bank, N.A., as administrative agent.

The Credit Agreement provides for a $50 million revolving credit facility with a maturity date of December 30, 2026. In addition, the Borrower has the ability from time to time to increase the revolving commitments or enter into one or more tranches of term loans up to an additional aggregate amount not to exceed $50 million, subject to receipt of lender commitments and certain conditions precedent. As of June 30, 2022 the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

Borrowings under the Credit Agreement are secured by certain collateral of the Loan Parties and are guaranteed by the Guarantors, each of whom will derive substantial benefit from the revolving credit facility. In specified circumstances, additional guarantors are required to be added. The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Borrower’s ability to incur indebtedness and certain liens, make certain investments,

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become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00. As of June 30, 2022 the Company was in compliance with all restricted and financial covenants.

The leverage ratio also determines pricing under the Credit Agreement. At the Borrower’s option, borrowings under the revolving credit facility accrue interest at a rate equal to either LIBOR or a specified base rate plus an applicable margin. The applicable margin is linked to the leverage ratio. The margins range from 2.00% to 2.50% per annum for LIBOR loans and 1.00% to 1.50% per annum for base rate loans. The revolving credit facility is subject to a commitment fee payable on the unused revolving credit facility commitments ranging from 0.25% to 0.35%, depending on the Borrower’s leverage ratio. As of June 30, 2022 the Company’s unused commitment rate was 0.25%. The Borrower is also required to pay certain fees to the administrative agent and letter of credit issuers under the revolving credit facility. During the term of the revolving credit facility, the Borrower may borrow, repay and re-borrow amounts available under the revolving credit facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $750 million in principal amount of its 1.25% Convertible Senior Notes due 2026 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchasers of the Notes, the Company granted the initial purchasers an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $100 million principal amount of Notes. The Notes issued on September 14, 2021 include the $100 million principal amount of Notes issued pursuant to the full exercise by the initial purchasers of such option.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The Notes accrue interest at a rate of 1.25% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The Notes mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before April 1, 2026, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 31.4859 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $31.76 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after October 6, 2024, and on or before the 40th scheduled trading day immediately before the maturity date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding notes unless at least $100.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. The redemption price will be a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

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If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to convert a Note upon the exercise of the conversion right with respect to such Note, subject to a three business-day cure period; (iv) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its subsidiaries with respect to indebtedness for money borrowed of at least $45,000,000; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $45,000,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished and (viii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 1.00% on the principal amount of the Notes.

The Notes were issued to the initial purchasers of such Notes in transactions not involving any public offering in reliance upon Section 4(a)(2) of the Securities Act. The Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act.

The total amount of debt issuance costs of $21.3 million was recorded as a reduction to “Convertible senior notes, net” in the Company’s Condensed Consolidated Balance Sheets and are being amortized as interest expense over the term of the Notes using the effective interest method. During the three and six months ended June 30, 2022, the Company recognized $1.1 million and $2.1 million in interest expense related to the amortization of the debt issuance costs related to the Notes, respectively. There was no such expense related to the Notes in the three and six months ended June 30, 2021.

The following is a summary of the Company’s Notes as of June 30, 2022:

							Fair Value
(in thousands)	Principal Amount		Unamortized Issuance Costs		Net Carrying Value		Amount		Level
1.25% Convertible Notes due 2026	$	750,000	$	17,972	$	732,028	$	602,250	Level 2

The Notes are carried at face value less the unamortized debt issuance costs on the Company’s Consolidated Balance Sheets. As of June 30, 2022, the estimated fair value of the Notes was approximately $602 million. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on June 30, 2022.

As of June 30, 2022, the remaining life of the Notes is approximately 4.3 years.

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Capped Call Transactions

On September 9, 2021, in connection with the pricing of the offering of Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with Bank of Montreal, Credit Suisse Capital LLC, Deutsche Bank AG, London Branch, Goldman Sachs & Co. LLC, JPMorgan Chase Bank, National Association, Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (the “Option Counterparties”). In addition, on September 10, 2021, in connection with the initial purchasers’ exercise of their option to purchase additional Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions,” and, together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties. The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $47.94, which represents a premium of 100% over the last reported sale price of the Company’s common stock on September 9, 2021. The cost of the Capped Call Transactions was approximately $90.2 million.

The Capped Call Transactions are separate transactions, each between the Company and the applicable Option Counterparty, and are not part of the terms of the Notes and do not affect any holder’s rights under the Notes or the Indenture. Holders of the Notes will not have any rights with respect to the Capped Call Transactions.

Business Combination

In connection with the Closing of the Business Combination, all of HydraFacial’s existing debt under its credit facilities were repaid and its credit facilities were extinguished. The related write-off of the deferred financing costs totaled $2.3 million and prepayment penalties totaled $2.0 million in 2021. Both are included in the Other expense (income), net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Deferred financing costs expense prior to the Closing of the Business Combination for the three and six months ended June 30, 2021 amounted to $0.1 million and $0.5 million and is included in Interest expense, net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Note 11 – Income Taxes

The income tax expense for the three months and six months ended June 30, 2022 is $0.1 million and $2.7 million, respectively

The income tax benefit for the three and six months ended June 30, 2021 is $1.9 million and $2.2 million, respectively.

The effective tax rate for the three and six months ended June 30, 2022 is 0.95% and 6.24%, which is lower than the federal statutory rate of 21.0% primarily due to the exclusion of book income from the revaluation of warrant liabilities and adjustments for various non-deductible expenses for officer’s compensation and meals and entertainment.

The effective tax rate for the three and six months ended June 30, 2021 is 1.32% and 1.50%, which is lower than the federal statutory rate of 21.0% primarily due to the increase in valuation allowance and non-deductible expense related to stock-based compensation and meals and entertainment.

The Company has established a valuation allowance against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized. In determining whether deferred tax assets are realizable, the Company considered numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize deferred tax assets.

Additionally, the Company applies ASC 740, the accounting standard governing uncertainty in income taxes that prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return. The Company has gross unrecognized tax benefits of $0.2 million and $0.1 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

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On March 11, 2021 the United States enacted the American Rescue Plan Act of 2021 (“American Rescue Plan”). The American Rescue Plan includes various income and payroll tax measures. The Company does not expect a material impact of the American Rescue Plan on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Note 12 – Equity-Based Compensation

Compensation expense attributable to net stock-based compensation was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	207		150		433		152
Selling and marketing	2,019		343		4,833		349
Research and development	277		33		387		33
General and administrative	3,875		2,982		7,774		3,008
Stock-based compensation expense	$	6,378	$	3,508	$	13,427	$	3,542

Restricted Stock Units (“RSUs”) and Performance-based restricted stock units (“PSUs”)

The following table summarizes the Company’s equity award activity for the six months ended June 30, 2022:

			Weighted Average Grant Date Fair Value
	RSUs	PSUs	RSUs		PSUs
Outstanding - January 1, 2022	380,775	975,000	$	25.88	$	11.39
Granted	2,501,324	1,488,770	13.82		10.02
Vested	(122,952)	—	24.27		—
Forfeited	(227,889)	(209,738)	15.76		14.30
Outstanding - June 30, 2022	2,531,258	2,254,032	14.95		10.22

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2022:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding - January 1, 2022	6,785,020	$	15.64
Granted	10,500	22.68
Exercised	—	—
Unvested Forfeited	(813,850)	17.78
Outstanding - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)
Options Exercisable	1,227,750	$	13.45	8.60	$	(727)
Options vested and expected to vest - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)

Note 13 – Commitments and Contingencies

From time to time the Company may be involved in claims, legal actions and governmental proceedings that arise from its business operations. As of June 30, 2022, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, that it believes would have a material adverse effect on its business, financial condition or results of operations.

Note 14 – Concentrations

As of June 30, 2022, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

As of December 31, 2021, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

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No single customer accounted for 10% or more of consolidated Net sales during the three and six months ended June 30, 2022 and June 30, 2021.

Note 15 – Related-Party Transactions

Registration Rights Agreement

In connection with the consummation of the Business Combination, on May 4, 2021, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with BLS Investor Group LLC and the HydraFacial Stockholders.

Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding share of Class A Common Stock or any other equity security (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor or the HydraFacial Stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 Founder Shares that were owned by the Sponsor and converted to shares of Class A Common Stock prior in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the HydraFacial Stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights.

The Registration Rights Agreement provides that the Company will, within 60 days after the consummation of the Business Combination, file with the SEC a shelf registration statement registering the resale of the shares of common stock held by the Restricted Stockholders and will use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 60 days following the filing deadline. The Company filed such registration statement on July 19, 2021 and it was declared effective by the SEC on July 26, 2021. The HydraFacial Stockholders are entitled to make up to an aggregate of two demands for registration, excluding short form demands, that the Company register shares of common stock held by these parties. In addition, the Restricted Stockholders have certain “piggy-back” registration rights. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Registration Rights Agreement. The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of common stock effected pursuant to the terms of the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, the Sponsor agreed to restrictions on the transfer of their securities issued in the Company’s initial public offering, which (i) in the case of the Founder Shares is one year after the completion of the Business Combination unless (A) the closing price of the common stock equals or exceeds $12.00 per share for 20 days out of any 30-trading-day period commencing at least 150 days following the Closing of the Business Combination or (B) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property, and (ii) in the case of the Private Placement Warrants and the respective Class A Common Stock underlying the Private Placement Warrants is 30 days after the completion of the Business Combination. The Sponsor and its permitted transferees will also be required, subject to the terms and conditions in the Registration Rights Agreement, not to transfer their Private Placement Warrants (as defined in the Registration Rights Agreement) or shares of common stock issuable upon the exercise thereof for 30 days following the Closing.

Investor Rights Agreement

In connection with the consummation of the Business Combination, on May 4, 2021, the Company and LCP Edge Holdco, LLC entered into that certain Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, LCP has the right to designate a number of directors for appointment or election to the Company’s board of directors as follows: (i) one director for so long as LCP holds at least 10% of the outstanding Class A Common Stock, (ii) two directors for so long as LCP holds at least 15% of the outstanding Class A Common Stock, and (iii) three directors for so long as LCP holds at least 40% of the outstanding Class A Common Stock. Pursuant to the Investor Rights Agreement, for so long as LCP holds at least 10% of the outstanding Class A Common Stock, LCP will be entitled to have at least one of its designees represented on the compensation committee and nominating committee and corporate governance committee of the Company’s board of directors.

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Amended and Restated Management Services Agreement

HydraFacial entered into a Management Services Agreement, dated December 1, 2016 with Linden Capital Partners III LP (“Linden Capital Partners III”) and DW Management Services, L.L.C. (“DW Management Services”) pursuant to which the parties receive quarterly monitoring fees of the greater of (a) $125,000 and (b) 1.25% of Last Twelve Months EBITDA multiplied by the quotient of (x) the aggregate capital invested by the investors of DW Healthcare Partners IV (B), L.P. (“DWHP Investors”) into LCP and/or its subsidiaries as of such date, divided by (y) the sum of (i) the aggregate capital invested by the DWHP Investors into LCP and/or its subsidiaries, plus (ii) the aggregate capital invested by Linden Capital Partners III into LCP and/or its subsidiaries as of the date of payment. In addition, the management services agreement provides for other fees in relation to services that may be provided in connection with equity and/or debt financing, acquisition of any other business, company, product line or enterprise, or divestiture of any division, business, and product or material assets. The fees vary between 1% and 2% of the related transaction amount. Linden Capital Partners III also received a transaction fee upon the consummation of the Business Combination.

In connection with the consummation of the Business Combination, on May 4, 2021, the Company, its subsidiary, Edge Systems LLC, and Linden Capital III LLC, the general partner of Linden Manager III LP (the “Linden Manager”) entered into an Amended and Restated Management Services Agreement (the “Linden Management Services Agreement”) pursuant to which the Linden Manager may continue to provide advisory services at the request of the Company related to mergers and acquisitions for one year following the Business Combination. As consideration for such services, the Company will pay a fee, equal to 1% of enterprise value of the target acquired, to the Linden Manager upon the consummation of any such transaction (the “1% Fee”). The Company has also agreed to reimburse Linden Manager for certain expenses in connection with such advisory services. However, pursuant to the Linden Management Services Agreement, the Company’s obligation to pay the 1% Pursuant to the terms of the agreement, the fee expired twelve months after the consummation of the Business Combination on May 4, 2022.

HydraFacial recorded approximately $0.1 million of charges related to management services fees for the six months ended June 30, 2021. There were no management fees during the three and six months ended June 30, 2022. These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss). In relation to the consummation of the Business Combination, $21.0 million in transaction fees was paid to the Former Parent. These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Miami Beach Office

The Company maintains an office in Miami Beach, Florida, whereby the Company, on a monthly basis, reimburses an entity owned by the Company’s Executive Chairman that makes such office available to the Company for its employees and affiliates. Expense for this property was not material for the six months ended June 30, 2022. No such expenses existed for the six months ended June 30, 2021.

Note 16 - Stockholders’ Deficit

Common Stock

The Company is authorized to issue 320,000,000 shares of Class A Common Stock, par value of $0.0001 per share. Holders of Class A Common Stock are entitled to one vote for each share. As of June 30, 2022 and December 31, 2021, there were 150,855,025 and 150,598,047, respectively, of Class A Common Stock issued and outstanding. The Class A Common Stock is entitled to one vote per share and all shares are outstanding. The Company has not declared or paid any dividends with respect to its Class A Common Stock.

In connection with the Business Combination on May 4, 2021, the Company issued 35,000,000 shares of Class A Common Stock to certain qualified institutional buyers and accredited investors that agreed to purchase such shares in connection with the Business Combination for aggregate consideration of $350 million. The Company also issued 35,501,743 shares of Class A Common Stock as partial compensation to the HydraFacial Stockholders for the Business Combination.

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Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

Note 17 - Segment Reporting

The Company manages its business on the basis of one operating segment and one reportable segment. As a result, the chief operating decision maker, who is the Chief Executive Officer, decides how to allocate resources and assess performance, reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocates resources and evaluates financial performance.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Americas	$	75,354	$	42,660	$	119,960	$	73,940
Asia-Pacific	10,386		12,440		23,287		21,231
Europe, the Middle East and Africa	17,796		11,408		35,704		18,879
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

As of June 30, 2022 and December 31, 2021 substantially all of the Company’s property, plant and equipment were held in the United States.

Note 18 – Net Income (Loss) Attributable to Common Shareholders

The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income (loss) available to common shareholders - basic	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Plus: Income on Private placement warrants	(15,185)		—		(67,237)		—
Net income (loss) available to common shareholders - diluted	$	(7,254)	$	(139,378)	$	(26,799)	$	(142,652)
Weighted average common shares outstanding - basic	150,731,491		91,798,837		150,665,166		63,805,807
Effect of dilutive shares:
Private placement warrants	987,960		—		1,609,228		—
Weighted average common shares outstanding - diluted	151,719,451		91,798,837		152,274,394		63,805,807
Basic net income (loss) per share:	$	0.05	$	(1.52)	$	0.27	$	(2.24)
Diluted net income (loss) per share	$	(0.05)	$	(1.52)	$	(0.18)	$	(2.24)

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Convertible Notes	23,614,425	—	23,614,425	—
RSUs	2,531,258	—	2,531,258	—
PSUs	2,254,032	129,231	2,254,032	64,972
Stock Options	5,981,670	4,769,062	5,981,670	2,411,280
Public and Private Warrants	—	15,450,549	—	7,767,956

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Note 19 – Subsequent Events

Other than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the accompanying notes.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report contains “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report, the words “estimates,” “projected,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes,” “seeks,” “may,” “will,” “should,” “future,” “propose” and variations of these words or similar expressions (or the negative versions of such words or expressions) are intended to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside The Beauty Health Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled Risk Factors of this filing.

Important factors, among others, that may affect actual results or outcomes include the inability to recognize the anticipated benefits of the Business Combination; costs related to the Business Combination; The Beauty Health Company’s availability of cash for debt service and exposure to risk of default under debt obligations; The Beauty Health Company’s ability to manage growth; The Beauty Health Company’s ability to execute its business plan; potential litigation involving The Beauty Health Company; changes in applicable laws or regulations; the possibility that The Beauty Health Company may be adversely affected by other economic, business, and/or competitive factors; and the impact of the continuing COVID-19 pandemic on our business. The Beauty Health Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 filed with the U.S. Securities and Exchange Commission (SEC) on May 10, 2022 and also with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 1, 2022.

Unless the context otherwise requires, references to “HydraFacial”, “we”, “us”, and “our” in this section are intended to mean the business and operations of The Beauty Health Company and its consolidated subsidiaries.

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.

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Factors Affecting Our Performance

Market Trends

HydraFacial is a pioneer in the attractive and growing beauty-health industry and there are several emerging market trends that we believe will play a key role in shaping the future of this industry. Recent growth in the skincare industry has been driven by an emphasis on skincare rather than cosmetics and HydraFacial is poised to capture a larger share of wallet from consumers. Further, HydraFacial’s market research conducted in 2019 demonstrated that consumers are increasingly willing to spend on high-end beauty health products. To the extent disposable income grows, we expect impacts of this trend to be amplified. We believe these favorable market trends will continue and strengthen going forward. However, we operate in the beauty health industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing product.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic has had, and may continue to have, adverse impacts on our business. Most markets have recently shown encouraging signs of emergence from the pandemic; however, sporadic containment measures and travel restrictions continue to impact volume trends in certain markets.

As previously reported, we have implemented several key measures in response to the COVID-19 pandemic which continue to be in place. We have also amplified our measures to address the potentially longer-lasting impacts of the COVID-19 pandemic, the intermittent lockdowns and possible economic uncertainty resulting from COVID-19 that continue in many markets. We anticipate the recovery to be non-linear until COVID-19 containment measures are discontinued across all regions and normal consumer traffic resumes on a consistent basis. We currently expect that any easing of containment measures and recovery of the impacted sectors of the economy will be gradual and uneven, as regions face resurgence of COVID-19 and related uncertainties, and the availability and widespread distribution of a safe and effective vaccine varies across regions. As a result, we anticipate that consumer spending habits and consumer confidence will continue to shift, causing future sales and volume trends to be non-linear.

Furthermore, the extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including the duration and scope of the pandemic; businesses and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability.

Demographics

HydraFacial benefits from a large, young and diverse customer base and the ability to serve a large percentage of the population given that HydraFacial’s patented technology addresses all skin, regardless of type, tone, age or gender. At the intersection of the medical and consumer retail markets, the large potential customer base should provide significant upside to drive top-line growth. HydraFacial over indexes with males, significantly increasing the Total Addressable Market (TAM) compared to its peers. Based on a survey we conducted in 2022, we believe HydraFacial resonates strongly with Gen Z and Millennials, with over 50% of our consumers being 37 years old or younger. Millennial and Gen Z consumers appear to be taking skincare more seriously and are willing to invest in treatments such as those offered by HydraFacial.

Marketing

Effective marketing is vital to our ability to drive growth. We plan to further our successful demand-generating activities through educational campaigns that focus on our brand, values, and quality, as well as enhancing our digitally integrated media campaigns.

Innovation

Our strategy involves innovating our current product offering while also diversifying into attractive adjacent categories where we can leverage our strengths, capabilities and community. We intend to maintain investment in research and development to stay at the forefront of cutting-edge technology.

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Technology

Our investments in technology enhance the HydraFacial experience for consumers while capturing valuable and leverageable data. As we expand our capabilities, we hope to enable the world’s largest skin health database. We believe this data will allow us to drive habituation by enhancing personalization, access, trend identification and consumer education.

Geographic Expansion

HydraFacial’s recent growth has been driven in part by our international strategy. 27% of HydraFacial’s total revenue during the second quarter of fiscal year 2022 came from outside the United States and Canada. Our diverse distribution channels create a significant opportunity within our existing retail and wholesale channels, as well as new locations abroad. We plan to expand our global footprint, building out our team and infrastructure for further penetration across Asia, Europe and Latin America.

Regulation

It remains unclear how governmental authorities, including the Food and Drug Administration (“FDA”) and foreign government authorities, will regulate the products that we sell, and in the case of the FDA, whether and when it will propose or implement new or additional regulations. Unforeseen regulatory obstacles or compliance costs may hinder our business in both the short and long-term as well.

Key Operational and Business Metrics

In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions. Amounts and percentages may not foot due to rounding.

	Three Months Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2022		2021		2022		2021
Delivery Systems net sales	$	64.8	$	34.9	$	106.4	$	60.6
Consumables net sales	38.8		31.6		72.5		53.4
Total net sales	$	103.5	$	66.5	$	179.0	$	114.1
Gross profit	$	71.7	$	47.3	$	123.6	$	79.0
Gross margin	69.2%		71.0%		69.1%		69.3%
Net income (loss)	$	7.9	$	(139.4)	$	40.4	$	(142.7)
Adjusted net income (loss)	$	2.2	$	7.8	$	(6.3)	$	7.7
Adjusted EBITDA	$	12.6	$	11.4	$	14.9	$	18.4
Adjusted EBITDA margin	12.2%		17.1%		8.3%		16.1%
Adjusted gross profit	$	74.8	$	49.8	$	129.6	$	84.1
Adjusted gross margin	72.3%		74.9%		72.4%		73.8%

Adjusted Net Income (Loss), Adjusted EBITDA (Loss) and Adjusted EBITDA Margin

Adjusted net income (loss), adjusted EBITDA (loss) and adjusted EBITDA margin are key performance measures that our management uses to assess our operating performance. See the section titled “Non-GAAP Financial Measures—adjusted net income (loss), adjusted EBITDA (loss) and adjusted EBITDA margin” for information regarding our use of adjusted net income (loss) and adjusted EBITDA and reconciliations of adjusted net income (loss) and adjusted EBITDA to net loss.

Adjusted Gross Profit and Adjusted Gross Margin

We use adjusted gross profit and adjusted gross margin to measure our profitability and ability to scale and leverage the costs of our Delivery Systems and Consumables sales. See the section titled “Non-GAAP Financial Measures—adjusted gross profit and adjusted gross margin” for information regarding our use of adjusted gross profit and a reconciliation of adjusted gross profit to gross profit.

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Comparison of Three Months Ended June 30, 2022 to Three Months Ended June 30, 2021

The following tables set forth our consolidated results of operations in dollars and as a percentage of net sales for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data for the three and six months ended June 30, 2022 and June 30, 2021 have been derived from the condensed consolidated financial statements included elsewhere in this Form 10-Q. Amounts and percentages may not foot due to rounding.

	Three Months Ended June 30,
(in millions)	2022		% of Net Sales		2021		% of Net Sales
Net sales	$	103.5	100.0	%	$	66.5	100.0	%
Cost of sales	31.9		30.8	%	19.3		29.0
Gross profit	71.7		69.2	%	47.3		71.0
Operating expenses
Selling and marketing	44.9		43.3		26.2		39.4
Research and development	2.6		2.5		3.0		4.5
General and administrative	27.6		26.6		44.4		66.8
Total operating expenses	75.1		72.5		73.6		110.7
Income (loss) from operations	(3.4)		(3.3)		(26.4)		(39.6)
Other (income) expense, net	(11.4)		(11.0)		114.9		172.8
Income (loss) before provision for income tax	8.0		7.7		(141.2)		(212.4)
Income tax expense (benefit)	0.1		0.1		(1.9)		(2.8)
Net income (loss)	$	7.9	7.7	%	$	(139.4)	(209.6)	%

Net Sales

	Three Months Ended June 30,				Change
(in millions)	2022		2021		Amount		%
Net sales
Delivery Systems	$	64.8	$	34.9	$	29.9	85.4%
Consumables	38.8		31.6		7.2		22.8%
Total net sales	$	103.5	$	66.5	$	37.0	55.7%
Percentage of net sales
Delivery Systems	62.6%		52.5%
Consumables	37.4%		47.5%
Total	100.0%		100.0%

Total net sales for the three months ended June 30, 2022 increased $37.0 million, or 55.7%, compared to the three months ended June 30, 2021. Delivery System sales for the three months ended June 30, 2022 increased $29.9 million, or 85.4%, compared to the three months ended June 30, 2021. Delivery Systems units sold for the three months ended June 30, 2022 increased primarily due to the strong demand for the Company’s new Syndeo delivery system.

There were 2,738 Delivery Systems units sold for the three months ended June 30, 2022, of which 1,203 were trade-ups. Consumables sales for the three months ended June 30, 2022 increased $7.2 million, or 22.8%, compared to the three months ended June 30, 2021. The increase in Consumables sales was primarily attributable to increased placements of delivery systems and the adjoining consumption of consumables during the three months ended June 30, 2022.

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Cost of Sales, Gross Profit, and Gross Margin

	Three Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Cost of sales	$	31.9		$	19.3		$	12.6	65.6%
Gross profit	$	71.7		$	47.3		$	24.4	51.6%
Gross margin	69.2		%	71.0		%

Cost of sales increased $12.6 million driven by and in conjunction with increased sales volume in delivery systems and consumables. Gross margin decreased from 71.0% during the three months ended June 30, 2021 to 69.2% during the three months ended June 30, 2022 primarily due to the shift in sales mix of delivery systems from 53% to 63% of sales in the period including lower margin trade-up units, along with higher supply chain and logistics costs. The Company expects continued headwinds from global supply chain challenges and inflationary pressures to weigh on gross margin through 2022, specifically higher shipping costs, offset by fixed cost leverage from higher sales volumes coupled with pricing initiatives, and margin accretion related to the acquired distributor inventory.

Operating Expenses

Sales and Marketing

	Three Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Selling and marketing	$	44.9		$	26.2		$	18.7	71.2	%
As a percentage of net sales	43.3		%	39.4		%

Selling and marketing expense for the three months ended June 30, 2022 increased $18.7 million, or 71.2%, compared to the three months ended June 30, 2021. The overall increase as a percentage of net sales was driven by an increase in sales commissions of $3.3 million associated with higher revenue, an increase in personnel-related expenses of $5.8 million resulting from an increase in headcount, and an increase in stock-based compensation expense of $1.7 million. In addition, expenses related to training and travel expenses increased by $0.5 million due primarily to the launch of Syndeo and marketing spend increased by $5.3 million as we invested forward in Americas and EMEA in key tradeshows, GlowVolution and other marketing programs.

Research and Development

	Three Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Research and development	$	2.6		$	3.0		$	(0.4)	(13.0)	%
As a percentage of net sales	2.5		%	4.5		%

Research and development expense for the three months ended June 30, 2022 decreased $0.4 million, or 13.0%, compared to the three months ended June 30, 2021. The decrease was primarily due to the shifting of investments from outside consultants that were offset by increased investments in personnel of $1.2 million and additional investments into our data infrastructure.

General and Administrative

	Three Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
General and administrative	$	27.6		$	44.4		$	(16.8)	(37.9)	%
As a percentage of net sales	26.6		%	66.8		%

General and administrative expense for the three months ended June 30, 2022 decreased $16.8 million, or 37.9%, compared to the three months ended June 30, 2021. This decrease is primarily attributable to a decrease in transaction costs of $27.6 million related to the consummation of the Business Combination. The decrease in transaction costs were offset by an increase of $0.9 million in stock-based compensation, $3.0 million in personnel-related expenses, $3.1 million in recruiting & other professional fees, and $1.1 million in legal fees which includes expenses related to litigating and enforcing patent and trademark infringement claims against third parties.

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Other (Income) Expense, Net and Income Tax Provision

	Three Months Ended June 30,				Change
(in millions)	2022		2021		Amount		%
Other (income) expense, net	$	(11.4)	$	114.9	$	(126.3)	(109.9)	%
Income tax expense (benefit)	$	0.1	$	(1.9)	$	2.0	(104.1)	%

Other income, net was $11.4 million for the three months ended June 30, 2022 compared to other expense of $114.9 million for the three months ended June 30, 2021. The change was primarily driven by the changes in the fair values of our warrants and earn-out shares issued on July 15, 2021. During the three months ended June 30, 2022 the Company recognized other income of $15.2 million due to the change in the fair value of the warrant liabilities compared to an expense of $72.0 million for the three months ended June 30, 2021. In addition, during the three months ended June 30, 2021 the Company recognized a $36.5 million expense for the change in the fair value of the earn-out shares liability.

Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021

Amounts and percentages may not foot due to rounding

	Six Months Ended June 30,
(in millions)	2022		% of Net Sales		2021		% of Net Sales
Net sales	$	179.0	100.0	%	$	114.1	100.0	%
Cost of sales	55.4		30.9		35.1		30.7
Gross profit	123.6		69.1		79.0		69.3
Operating expenses
Selling and marketing	81.3		45.4		43.3		38.0
Research and development	4.8		2.7		4.4		3.9
General and administrative	53.8		30.1		55.2		48.4
Total operating expenses	140.0		78.2		103.0		90.3
Loss from operations	(16.4)		(9.1)		(24.0)		(21.0)
Other expense (income), net	(59.5)		(33.3)		120.9		106.0
Income (loss) before provision for income tax	43.1		24.1		(144.8)		(127.0)
Income tax expense (benefit)	2.7		1.5		(2.2)		(1.9)
Net income (loss)	$	40.4	22.6	%	$	(142.7)	(125.1)	%

Net Sales

	Six Months Ended June 30,				Change
(in millions)	2022		2021		Amount		%
Net sales
Delivery Systems	$	106.4	$	60.6	$	45.8	75.6%
Consumables	72.5		53.4		19.1		35.7%
Total net sales	$	179.0	$	114.1	$	64.9	56.9%
Percentage of net sales
Delivery Systems	59.5%		53.1%
Consumables	40.5%		46.9%
Total	100.0%		100.0%

Total net sales for the six months ended June 30, 2022 increased $64.9 million, or 56.9%, compared to the six months ended June 30, 2021. Delivery Systems sales for the six months ended June 30, 2022 increased $45.8 million, or 75.6%, compared to the six months ended June 30, 2021. Delivery Systems units sold for the six months ended June 30, 2021 increased primarily due to the strong demand for the Company’s new Syndeo delivery system. Consumables sales for the six months ended June 30, 2022 increased $19.1 million, or 35.7%, compared to the six months ended June 30, 2021. The increase in Consumables sales was primarily attributable to increased placements of delivery systems and the adjoining consumption of consumables during the six months ended June 30, 2022.

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Cost of Sales, Gross Profit, and Gross Margin

	Six Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Cost of sales	$	55.4		$	35.1		$	20.3	57.9%
Gross profit	$	123.6		$	79.0		$	44.6	56.5%
Gross margin	69.1		%	69.3		%

Cost of sales increased 57.9% driven by increased sales volume and a shift in the product mix to HydraFacial Delivery Systems. Gross margin decreased from 69.3% during the six months ended June 30, 2021 to 69.1% during the six months ended June 30, 2022, primarily due to the shift in sales mix of delivery systems from 53% to 59% of sales in the period including lower margin trade-up units, along with higher supply chain and logistics costs. The Company expects continued headwinds from global supply chain challenges and inflationary pressures to weigh on gross margin through 2022, specifically higher shipping costs, offset by fixed cost leverage from higher sales volumes coupled with pricing initiatives, margin accretion related to the acquired distributor inventory.

Selling and Marketing

	Six Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Selling and marketing	$	81.3		$	43.3		$	38.0	87.7	%
As a percentage of net sales	45.4		%	38.0		%

Selling and marketing expense for the six months ended June 30, 2022 increased $38.0 million, or 87.7%, compared to the six months ended June 30, 2021. Compared to the six months ended June 30, 2021 the year-over-year increase was due to an increase in sales commissions of $4.4 million, an increase in personnel-related expenses of $11.7 million, and an increase of stock-based compensation expense of $4.5 million, Personnel-related training and travel expenses increased by $5.0 million due to the launch of Syndeo and advertising/promotional spend increased by $7.7 million as we invested forward in Americas and EMEA in key tradeshows, GlowVolution and other marketing programs.

Research and Development

	Six Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
Research and development	$	4.8		$	4.4		$	0.4	8.8	%
As a percentage of net sales	2.7		%	3.9		%

Research and development expense for the six months ended June 30, 2022 increased $0.4 million, or 8.8%, compared to the six months ended June 30, 2021. The increase was primarily due to additional personnel-related expense in the research and development department which increased by $1.8 million year-over-year. There were additional investments into our data infrastructure which increased by $0.8 million, offset by a $2.4 million decrease in Syndeo research and development expenses.

General and Administrative

	Six Months Ended June 30,						Change
(in millions)	2022			2021			Amount		%
General and administrative	$	53.8		$	55.2		$	(1.4)	(2.5)	%
As a percentage of net sales	30.1		%	48.4		%

General and administrative expense for the six months ended June 30, 2022 decreased $1.4 million, or 2.5%, compared to the six months ended June 30, 2021. This decrease is primarily attributable to a decrease in transaction costs of $27.2 million related to the consummation of the Business Combination. The decrease in transaction costs were offset by an increase of $4.8 million in stock-based compensation, $6.2 million in personnel-related expenses, $5.2 million in recruiting & other professional fees, $2.9 million in legal fees, and $1.6 million in director and officer insurance.

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Other (Income) Expense, Net and Income Tax Provision

	Six Months Ended June 30,				Change
(in millions)	2022		2021		Amount		%
Other (income) expense, net	$	(59.5)	$	120.9	$	(180.4)	(149.2)	%
Income tax expense (benefit)	$	2.7	$	(2.2)	$	4.9	(223.7)	%

Other income, net, was $59.5 million for the six months ended June 30, 2022 compared to other expense of $120.9 million for the six months ended June 30, 2021. The change was primarily driven by the changes in the fair values of our warrant liabilities and earn-out share liabilities which were issued on July 15, 2021. During the six months ended June 30, 2022 the Company recognized other income of $67.2 million due to the change in the fair value of the warrant liabilities versus a $72.0 million expense for six months ended June 30, 2021. In addition, during the six months ended June 30, 2021 the Company recognized a $36.5 million expense for the change in the fair value of the earn-out shares liability.

Liquidity and Capital Resources

Our primary sources of capital have been funded by (i) cash flow from operating activities, (ii) net proceeds received from the consummation of the Business Combination, (iii) net proceeds received from the Notes (as defined below), and (iv) net proceeds received from the exercise of Public and Private Placement Warrants. As of June 30, 2022, we had cash and cash equivalents of approximately $821.0 million. A revolving credit facility of $50 million is also available as a source of capital although as of June 30, 2022, the revolving credit facility remains undrawn and there is no outstanding balance thereunder.

Our sources of liquidity and cash flows are used to fund ongoing operations, research and development projects for new products, services, and technologies, and provide ongoing support services for our providers and customers. Over the next year, we anticipate that we will use our liquidity and cash flows from our operations to fund our growth. In addition, as part of our business strategy, we occasionally evaluate potential acquisitions of businesses and products and technologies. Accordingly, a portion of our available cash may be used at any time for the acquisition of complementary products, services, or businesses. Such potential transactions may require substantial capital resources, which may require us to seek additional debt or equity financing. We cannot assure you that we will be able to successfully identify suitable acquisition candidates, complete acquisitions, integrate acquired businesses into our current operations, or expand into new markets. Furthermore, we cannot provide assurances that additional financing will be available to us in any required time frame and on commercially reasonable terms, if at all.

We expect capital expenditures of up to $20.0 million for the year ending December 31, 2022. Based on our sources of capital (including the cash consideration received from the consummation of the Business Combination and the cash received from the issuance of the Notes), management believes that we have sufficient liquidity to satisfy our anticipated working capital requirements for our ongoing operations and obligations for at least the next twelve months. However, we will continue to evaluate our capital expenditure needs based upon factors including but not limited to our rate of revenue growth, potential acquisitions, the timing and amount of spending on research and development, growth in sales and marketing activities, the timing of new product launches, timing and investments needed for international expansion, the continuing market acceptance of the Company’s products and services, expansion, and overall economic conditions.

If cash generated from operations is insufficient to satisfy our capital requirements, we may have to sell additional equity or debt securities or obtain expanded credit facilities to fund our operating expenses. The sale of additional equity would result in additional dilution to our stockholders. Also, the incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. In the event such additional capital is needed in the future, there can be no assurance that such capital will be available to us, or, if available, that it will be in amounts and on terms acceptable to us. If we cannot raise additional funds when we need or want them, our operations and prospects could be negatively affected. However, if cash flows from operations become insufficient to continue operations at the current level, and if no additional capital were obtained, then management would restructure the Company in a way to preserve our business while maintaining expenses within operating cash flows.

Credit Agreement

On December 30, 2021, HydraFacial LLC, a California limited liability company f.k.a. Edge Systems LLC (the “Borrower”) and an indirect wholly owned subsidiary of The Beauty Health Company, as borrower, entered into a Credit Agreement (the

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“Credit Agreement”) with Edge Systems Intermediate LLC, an indirect wholly owned subsidiary of the Company and the direct parent of the Borrower that holds the Company’s foreign and domestic operating entities, and The Hydrafacial Company Mexico Holdings, LLC, a direct wholly owned subsidiary of the Borrower that conducts the Mexican business operations, as guarantors (the “Guarantors” and, together with the Borrower, the “Loan Parties”), and JPMorgan Chase Bank, N.A., as administrative agent.

The Credit Agreement provides for a $50 million revolving credit facility with a maturity date of December 30, 2026. In addition, the Borrower has the ability from time to time to increase the revolving commitments or enter into one or more tranches of term loans up to an additional aggregate amount not to exceed $50 million, subject to receipt of lender commitments and certain conditions precedent. As of June 30, 2022, the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

Borrowings under the Credit Agreement are secured by certain collateral of the Loan Parties and are guaranteed by the Guarantors, each of whom will derive substantial benefit from the revolving credit facility. In specified circumstances, additional guarantors are required to be added. The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Borrower’s ability to incur indebtedness and certain liens, make certain investments, become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00.

The leverage ratio also determines pricing under the Credit Agreement. At the Borrower’s option, borrowings under the revolving credit facility accrue interest at a rate equal to either LIBOR or a specified base rate plus an applicable margin. The applicable margin is linked to the leverage ratio. The margins range from 2.00% to 2.50% per annum for LIBOR loans and 1.00% to 1.50% per annum for base rate loans. The revolving credit facility is subject to a commitment fee payable on the unused revolving credit facility commitments ranging from 0.25% to 0.35%, depending on the Borrower’s leverage ratio. As of June 30, 2022 the Company’s unused commitment rate was 0.25%. The Borrower is also required to pay certain fees to the administrative agent and letter of credit issuers under the revolving credit facility. During the term of the revolving credit facility, the Borrower may borrow, repay and re-borrow amounts available under the revolving credit facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

Convertible Senior Notes

On September 14, 2021, we issued $750 million aggregate principal amount of Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Notes were issued pursuant to, and are governed by, an indenture, dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. The Notes accrue interest at a rate of 1.25% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The Notes will mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before April 1, 2026, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We will settle conversions by paying or delivering, as applicable, cash, shares of our Class A Common Stock or a combination of cash and shares of our Class A Common Stock, at our election. The initial conversion rate is 31.4859 shares of Class A Common Stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $31.76 per share of Class A Common Stock. We used $90.2 million of the net proceeds from the sale of the Notes to fund the cost of entering into capped call transactions. The net proceeds from the issuance of the Notes were approximately $638.7 million, net of capped call transaction costs of $90.2 million and debt issuance costs totaling $21.3 million. See Note 10 - Debt, to the Notes to the Condensed Consolidated Financial Statements included elsewhere in this report.

Capped Call Transactions

Capped call transactions cover the aggregate number of shares of our Class A Common Stock that will initially underlie the Notes, and generally reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we may make in excess of the principal amount of the converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the capped call transactions. See Note 2 - Summary of Significant Accounting Policies, to the Notes to Consolidated Financial Statements included elsewhere in this report.

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Contractual Obligations and Other Commercial Commitments

As of June 30, 2022, our material contractual obligations is approximately $39.8 million in interest related to the Notes, the Notes of $750 million, and $17.7 million in lease obligations.

Known Trends or Uncertainties

We believe there are several emerging trends that may play a key role in shaping the future of the beauty health industry. Our market research demonstrated that consumers are increasingly willing to spend on high-end beauty health products. Some of the key industry trends identified by this market research are:

•Millennials/Gen Z aging: HydraFacial customers are young. We believe HydraFacial resonates strongly with Gen Z and Millennials, with over 50% of our consumers being 37 years old or younger. As the Millennial and Gen Z consumers age, they appear to be taking skincare more seriously and are willing to invest in premium experiences such as those offered by HydraFacial.

•Influencers and social media driving purchase decisions: Social media personalities are increasingly opining and having an effect on skin care, which has gained more prominence in the age of selfies.

•Growth in disposable income: As the global economy grows, consumers have more disposable income to spend on premium products.

•Shift in spend from makeup to skin care: There appears to be an increasing movement towards treating underlying skin to make it healthy and reveal it (i.e., “clean beauty”), as opposed to using products such as make-up to cover it. Clean beauty places an emphasis on unveiling fresh, naked skin as the star, as opposed to covering it up. The HydraFacial experience not only physically cleanses skin with vortex suction, exfoliation and extraction, and removal of debris, but it also actively infuses the skin with innovative, clean ingredients to nourish and hydrate the newly cleaned skin canvas.

•Growth in multi-brand and online retailers: Multi-brand retailers and digital native brands play an important role in captivating the consumer and pushing innovation.

•Consumers shopping across mass and premium brands: Consumers appear to be willing to shop across mass and premium brands in order to allocate more money towards trending categories and products that help make them look and feel better.

However, we operate in the beauty health industry, which is highly competitive and changes rapidly. Our operating results could be significantly affected by our ability to develop new products and find new distribution channels for new and existing products.

Furthermore, the majority of our customers are in the medical, (dermatologists and plastic surgeons), esthetician, and beauty retail industry. During economic downturns, we have seen consolidations in such industries. Also, the extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including the duration and scope of the pandemic; businesses and individuals' actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers' ability to pay for our products and services on an ongoing basis. As a result, our growth rate could be affected by consolidation and downsizing in the medical, esthetician, and beauty retail industry.

In addition, we expect continued headwinds from global supply chain challenges and inflationary pressures to weigh on gross margin in 2022, specifically higher shipping costs, offset by margin accretion related to the acquired distributor inventory and pricing initiatives aimed at improving our margins.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

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Cash Flows

The following table summarizes the activities from our statements of cash flows. Amounts may not foot due to rounding.

	Six Months Ended June 30,
(in millions)	2022		2021
Cash and cash equivalents at beginning of period	$	901.9	$	9.5
Operating activities:
Net income (loss)	40.4		(142.7)
Non-cash adjustments	(37.1)		125.6
Changes in working capital	(73.2)		(14.8)
Net cash flows (used in) provided by operating activities	(69.8)		(31.9)
Net cash flows (used in) provided by investing activities	(8.3)		(9.1)
Net cash flows (used in) provided by financing activities	(2.8)		133.0
Net change in cash and cash equivalents	(80.9)		92.0
Effect of foreign currency translation	—		—
Cash and cash equivalents at end of period	$	821.0	$	101.5

Operating Activities

Net cash used in operating activities of $69.8 million for the six months ended June 30, 2022 was primarily due to investment in inventory in relation to the launch of Syndeo Delivery Systems, combined with a corresponding shift in the average collection period of receivables related to increased payment plan participation on delivery systems globally, as well as continued investments globally in people and systems to fuel future growth. The net income of $40.4 million was driven by non-cash adjustments of $37.1 million, with the largest adjustment being the fair value adjustment to warrant liabilities. The decrease in working capital of $73.2 million was primarily due to the increase in accounts receivable of $34.4 million and the increase in inventory of $39.2 million .

Net cash used in operating activities of $31.9 million for the six months ended June 30, 2021 was primarily due to an increase in accounts receivable of $21.1 million. The net loss of $142.7 million was driven by non-cash adjustments of $125.6 million related to fair value adjustment of earn-out shares and warrant liabilities, and a decrease in working capital of $14.8 million.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2022 of $8.3 million was primarily related to $5.6 million in capital expenditures for property and equipment, $1.5 million in capital expenditures for the asset acquisition of Mxt and related developed technology, and $1.3 million in capitalized software.

Cash used in investing activities for the six months ended June 30, 2021 of $9.1 million was primarily related to capital expenditures of $4.7 million and distributor business acquisition expenditures of $4.9 million.

Financing Activities

There was $2.8 million used in financing activities for the six months ended June 30, 2022 related to the distributor acquisitions of Wigmore and Sidermica. The Company did not withdraw from the line of credit and there were no transactions related to the warrants during the six months ended June 30, 2022.

Net cash from financing activities of $133.0 million for the six months ended June 30, 2021 was primarily related to proceeds from the business combination of $358.5 million, net of debt repayments of $230.5 million.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity/deficit, revenue, expenses,

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and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

There has been no change to our critical accounting policies as included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Recent Accounting Pronouncements

See Note 2 of the notes to our Condensed Consolidated Financial Statements in the section titled “Summary of Significant Accounting Policies” in our Note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a discussion about new accounting pronouncements adopted and not yet adopted.

Non-GAAP Financial Measures

In addition to our results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), management utilizes certain non-GAAP performance measures, adjusted net income (loss), adjusted EBITDA (loss), adjusted EBITDA margin, adjusted gross profit, and adjusted gross margin, for purposes of evaluating our ongoing operations and for internal planning and forecasting purposes. We believe that these non-GAAP operating measures, when reviewed collectively with our GAAP financial information, provide useful supplemental information to investors in assessing our operating performance.

Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted net income (loss), adjusted EBITDA and adjusted EBITDA margin are key performance measures that we use to assess our operating performance. Because adjusted net income (loss), adjusted EBITDA and adjusted EBITDA margin facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

We also believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business. We expect adjusted EBITDA margin to increase over the long-term as we continue to scale our business and achieve greater operating leverage.

We calculate adjusted net income (loss) as net income (loss) adjusted to exclude: change in fair value of Public and Private Placement Warrants, change in fair value of earn-out shares liability, other expense (income), net; amortization expense; stock-based compensation expense; management fees incurred from our historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); restructuring costs (including those associated with COVID-19) and the aggregate adjustment for income taxes for the tax effect of the adjustments described above.

We calculate adjusted EBITDA as net income (loss) adjusted to exclude: change in fair value of Public and Private Placement Warrants, change in fair value of earn-out shares liability, other expense (income), net; interest expense; income tax benefit (expense); depreciation and amortization expense; stock-based compensation expense; foreign currency (gain) loss; management fees incurred from our historical private equity owners; one-time or non-recurring items such as transaction costs (including transactions costs with respect to the Business Combination); and restructuring costs (including those associated with COVID-19).

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The following table reconciles our net income (loss) to adjusted net income (loss) and adjusted EBITDA for the periods indicated:

	Three months ended June 30,				Six months ended June 30,
Unaudited (in thousands)	2022		2021		2022		2021
Net income (loss)	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Adjusted to exclude the following:
Change in FV of warrant liability	(15,185)		72,027		(67,237)		72,027
Change in FV of earn-out shares liability	—		36,525		—		36,525
Amortization expense	3,938		2,967		7,651		5,921
Stock-based compensation expense	6,378		3,508		13,427		3,542
Other (income) expense	(1,658)		4,307		(721)		4,314
Management fees (1)	—		82		—		209
Transaction related costs (2)	1,986		30,411		3,031		31,157
Other non-recurring and one-time fees (3)	1,897		50		3,852		137
Aggregate adjustment for income taxes	(3,097)		(2,671)		(6,723)		(3,434)
Adjusted net income (loss)	$	2,190	$	7,828	$	(6,282)	$	7,746
Depreciation expense	1,852		728		3,268		1,418
Interest expense	3,217		2,060		6,617		7,759
Foreign currency (gain) loss, net	2,206		(24)		1,838		232
Remaining benefit for income taxes	3,173		801		$	9,414	$	1,258
Adjusted EBITDA	$	12,638	$	11,393	$	14,855	$	18,413
Adjusted EBITDA margin	12.2%		17.1%		8.3%		16.1%

___________________

(1)    Represents quarterly management fees paid to the majority shareholder of HydraFacial based on a pre-determined formula. Following the Business Combination, these fees are no longer paid.

(2)    For the three months and six months ended June 30, 2022, such amounts primarily represent direct costs incurred in relation to potential acquisitions. For the three months and six months ended June 30, 2021, such amounts primarily represent direct costs incurred with the Business Combination and to prepare HydraFacial to be marketed for sale by HydraFacial’s shareholders in previous periods.

(3)    For the three months ended June 30, 2022, such costs primarily represent one-time severance costs due to a Company re-organization. For the six months ended June 30, 2022, such costs include the re-organization severance, other one-time personnel costs related to executive recruiting, executive severance, a one-time loss on fixed asset write-offs and a CEO sign-on bonus.

Adjusted Gross Profit and Adjusted Gross Margin

We use adjusted gross profit and adjusted gross margin to measure profitability and the ability to scale and leverage the costs of Delivery Systems and Consumables. The continued growth of Delivery Systems is expected to improve adjusted gross margin, as additional Delivery Systems sold will increase our recurring Consumables net sales, which has higher margins.

We believe adjusted gross profit and adjusted gross margin are useful measures to us and to our investors to assist in evaluating our operating performance because they provide consistency and direct comparability with past financial performance and between fiscal periods, as the metric eliminates the effects of amortization and depreciation and stock-based compensation expense, which are non-cash expenses that may fluctuate for reasons unrelated to overall continuing operating performance. Adjusted gross margin has been and will continue to be affected by a variety of factors, including the product mix, geographic mix, direct vs. indirect mix, the average selling price on Delivery Systems, and new product launches. We expect our adjusted gross margin to fluctuate over time depending on the factors described above.

The following table reconciles gross profit to adjusted gross profit for the periods indicated. Amounts and percentages may not foot due to rounding:

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	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net sales	$	103,536	$	66,508	$	178,951	$	114,050
Cost of sales	31,882		19,257		55,360		35,059
Gross profit	$	71,654	$	47,251	$	123,591	$	78,991
Gross margin	69.2%		71.0%		69.1%		69.3%
Adjusted to exclude the following:
Stock-based compensation expense included in cost of sales	$	207	$	—	$	433	$	—
Depreciation and amortization expense included in cost of sales	2,969		2,567		5,624		5,158
Adjusted gross profit	$	74,830	$	49,818	$	129,648	$	84,149
Adjusted gross margin	72.3%		74.9%		72.4%		73.8%

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We had cash and cash equivalents of approximately $821.0 million as of June 30, 2022. We do not enter into investments for trading or speculative purposes. We have not been exposed, nor do we anticipate being exposed to material risks due to changes in interest rates. A hypothetical 10% increase in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.

We are primarily potentially exposed to changes in short-term interest rates with respect to our cost of borrowing under our Credit Agreement, from which we have yet to draw on. Our debt obligations related to the Notes are long-term in nature with fixed interest rates. We monitor our cost of borrowing, taking into account our funding requirements, and our expectations for short-term rates in the future. A hypothetical 10% change in the interest rate on our Credit Agreement for all periods presented would not have a material impact on our consolidated financial statements.

Foreign Currency Risk

To date, all of our inventory purchases have been denominated in U.S. dollars. Our international sales are primarily denominated in foreign currencies and any unfavorable movement in the exchange rate between U.S. dollars and the currencies in which we conduct sales in foreign countries could have an adverse impact on our revenue. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates.

While we are not currently contractually obligated to pay increased costs due to changes in exchange rates, to the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margins. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the related costs do not constitute a significant portion of our total expenses.

Inflation Risk

Inflation has the potential to adversely affect our liquidity, business, financial condition, and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates, and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations, and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses that existed as of December 31, 2020 and continued to exist as of June 30, 2022, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective. This was accordingly disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, Form 10-K/A for the year ended December 31, 2020 and in our Definitive Proxy Statement filed on April 7, 2021.

Previously Identified Material Weaknesses in Internal Control over Financial Reporting

In connection with the audit of HydraFacial as of and for the year ended December 31, 2020, we previously identified material weaknesses in our internal control over financial reporting. The material weaknesses were related to segregation of duties, including the review and approval of journal entries, our lack of sufficient accounting resources and the lack of a formalized risk assessment process. These material weaknesses may not allow for us to have proper segregation of duties and the ability to close our books and records and report our results on a timely basis.

In response to the material weaknesses, management completed the following remediation actions:

•We established a formal risk assessment process to identify and evaluate risks relevant to financial reporting objectives

•We implemented segregation of duties around the approval of journal entries and accounting processes

•We implemented a training program addressing internal control over financial reporting, including educating control owners regarding the requirements of each control

We determined that the material weakness around lack of sufficient accounting resources continued to exist as of December 31, 2021. This material weakness may not allow for us to have proper segregation of duties and the ability to close our books and report our results on a timely basis.

We have begun the process of, and we are focused on, designing and implementing effective internal controls measures to improve our internal control over financial reporting and remediate the material weakness. Our efforts include a number of actions:

•We are actively recruiting additional personnel, in addition to engaging and utilizing third party consultants and specialists to supplement our internal resources and segregate key functions within our business processes, if appropriate;

•We are designing and implementing additional review procedures within our accounting and finance department to provide more robust and comprehensive internal controls over financial reporting that address the relative financial statement assertions and risks of material misstatement within our business processes;

•We are designing and implementing information technology and application controls in our financially significant systems to address our relative information processing objectives

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal controls over financial reporting and will continue to diligently review our internal control over financial reporting.

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Changes in Internal Control over Financial Reporting

Other than the remediation efforts described in this Item 4, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2022 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II— OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our material pending legal proceedings, see Note 13, Commitments and Contingencies, to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022 (the “Annual Report”) and Part II “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Q1 Quarterly Report”), which could materially affect our business, financial condition, or future results. The risks described in our Annual Report and Q1 Quarterly Report, as well as other risks and uncertainties, could materially and adversely affect our business, results of operations, and financial condition, which in turn could materially and adversely affect the trading price of shares of our Class A Common Stock. There have been no material updates or changes to the risk factors previously disclosed in our Annual Report and Q1 Quarterly Report; provided, however, additional risks not currently known or currently material to us may also harm our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On April 12, 2022, we issued an aggregate of 28,733 restricted shares of our Class A Common Stock to shareholders of Mxt on a pro rata basis as partial consideration of our acquisition of Mxt (the “Mxt Shares”). The Mxt Shares were valued at $17.40 per share, which was the price per share based on the average closing price of our Class A Common Stock for the thirty (30) trading days immediately preceding our acquisition of Mxt. For additional information about the Mxt transaction please see our description in Note 3, Business Combinations, to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The Mxt Shares were not registered under the Securities Act of 1933, as amended. However, the Mxt Shares were issued in reliance upon the exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Section 506 of Regulation D promulgated thereunder.

Except as set forth above, we did not sell any other unregistered equity securities during the period covered by this report that were not otherwise disclosed in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

The information included in this Item 5 is provided in lieu of filing such information on a Current Report on Form 8-K under Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers:

On August 3, 2022, the Company’s indirect, wholly-owned subsidiary, HydraFacial LLC, f.k.a. Edge Systems, LLC, and Indra Pamamull, the former President of APAC of the Company, entered into a Separation Agreement (the “Separation Agreement”) in connection with Ms. Pamamull’s transition out of the Company. The Separation Agreement is effective as of June 8, 2022 (the “Separation Date”).

Pursuant to the terms of the Separation Agreement, HydraFacial has agreed to (i) pay to Ms. Pamamull cash consideration of (a) $12,641 Singapore dollars, which represents the prorated monthly salary for the month of June up to the Separation Date, (b) $21,392 Singapore dollars, which represents the prorated, accrued and unutilized paid annual leave up to the Separation Date, (c) $278,100 Singapore dollars, which represents severance payment equivalent to six months’ salary, (d) $18,180 Singapore dollars, which represents the amounts owed had Ms. Pamamull taken part in the Central Provident Fund in

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Singapore, (e) an amount equal to Ms. Pamamull’s monthly base salary for up to six (6) months, or such shorter period thereof in the event that Ms. Pamamull commences paid employment with any other entity, and (f) an amount equal to the pro-rata target bonus up to the Separation Date, and (ii) continue Ms. Pamamull’s current health benefits for up to six (6) months after the Separation Date (collectively, the “Severance Payments”).

In consideration for the Severance Payments, Ms. Pamamull has agreed to customary general releases and waivers in favor of the Company and HydraFacial, and customary post-employment covenants with respect to confidential information of the Company and HydraFacial.

The foregoing description of the Separation Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Separation Agreement, a copy of which is attached hereto as Exhibit 10.3 and is incorporated herein by reference.

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Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

EXHIBIT INDEX
No.	Description of Exhibit	Form	File No.	Exhibit	Filing Date	Filed Herewith
2.1	Agreement and Plan of Merger, dated as of December 8, 2020, by and among Vesper Healthcare Acquisition Corp., Hydrate Merger Sub I, Inc., Hydrate Merger Sub II, LLC, LCP Edge Intermediate, Inc. and LCP Edge Holdco, LLC, in its capacity as the Stockholders’ Representative	8-K	001-39565	2.1	December 9, 2020
3.1	Second Amended and Restated Certificate of Incorporation of The Beauty Health Company	8-K	001-39565	3.1	May 10, 2021
3.2	Amended and Restated Bylaws of The Beauty Health Company	8-K	001-39565	3.2	May 10, 2021
4.1	Indenture, dated as of September 14, 2021, between The Beauty Health Company and U.S. Bank National Association, as trustee	8-K	001-39565	4.1	September 14, 2021
4.2	Form of certificate representing the 1.25% Convertible Senior Notes due 2026 (included as Exhibit A to Exhibit 4.1)	8-K	001-39565	4.2	September 14, 2021
10.1	Form of Confirmation for Capped Call Transactions	8-K	001-39565	10.1	September 14, 2021
10.2#	Retention Agreement, dated May 7, 2022, between Daniel Watson and The Beauty Health Company					X
10.3***	Separation Agreement, dated as of August 3, 2022, between Hyrdrafacial LLC and Indra Pamamull					X
31.1*	Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2*	Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS**	Inline XBRL Instance Document					X
101.SCH**	Inline XBRL Taxonomy Extension Schema Document					X
101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB**	Inline XBRL Taxonomy Extension Labels Linkbase Document					X
101.PRE**	Inline XBRL Taxonomy Extension Presentation Linkbase Document					X
104**	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments

_______________

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*    These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

**    The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

*** Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10)

#    Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE BEAUTY HEALTH COMPANY
Date:	August 9, 2022	By:	/s/ Andrew Stanleick
		Name:	Andrew Stanleick
		Title:	Chief Executive Officer
			(Principal Executive Officer)
Date:	August 9, 2022	By:	/s/ Liyuan Woo
		Name:	Liyuan Woo
		Title:	Chief Financial Officer
			(Principal Accounting Officer and Financial Officer)

EX-10.2

Exhibit 10.2

Date: May 5, 2022 Daniel Watson

Re: Retention Bonus Dear Dan:

As you know, The Beauty Health Company (the “Company”) desires to have you remain with the Company in your current role. We consider your continued service and dedication to the Company to be critical to our business success. To incentivize you to remain employed with the Company, we are pleased to offer you a retention bonus, as described in this letter agreement.

In recognition of your continued service with the Company through and until December 31, 2022 (the "Retention Period"), we are offering you a retention bonus in the amount of 371,196.54 less all applicable withholdings and deductions required by law (the "Retention Bonus").

You will be eligible to receive this Retention Bonus if all of the following eligibility criteria are satisfied:

1.Your performance has been satisfactory, as determined in the Company’s sole discretion, from the date of this agreement through the end of the Retention Period.

2.You are actively employed by the Company on the last day of the Retention Period.

3.You have not given notice of your intent to resign from employment on or before the last day of the Retention Period.

4.The Company has not given you notice of its intent to terminate your employment on or before the last day of the Retention Period; provided, however, that you will be eligible to receive a pro rata portion of the Retention Bonus if the Company gives you notice of its intent to terminate your employment other than for cause, as determined in the Company's sole discretion, on or before the last day of the Retention Period and you

satisfy all of the other eligibility criteria.

If you are eligible to receive the Retention Bonus, it will be paid to you in one lump sum cash payment within 30 days after the end of the Retention Period.

Your employment remains at-will, meaning that you and the Company] may terminate the employment relationship at any time, with or without cause, and with or without notice.

This letter agreement is intended to comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A") and shall be construed and administered in accordance with

Section 409A.

This letter agreement contains all of the understandings and representations between the Company, and you relating to the Retention Bonus and supersedes all prior and contemporaneous understandings, discussions, agreements, representations, and warranties, both written and oral, with respect to any retention bonus; provided, however, that this letter agreement shall not supersede any other agreements between the Company and you, and specifically your previous offer letter. All other agreements between the Company any you related to, without limitation, Arbitration, Severance, Trade Secrets, Proprietary Information, shall remain in full force and effect. This letter agreement may not be amended or modified unless in writing signed by both the Chief Human Resources Officer and you.

This letter agreement and all related documents, and all matters arising out of or relating to this letter agreement, whether sounding in contract, tort, or statute for all purposes shall be governed by and construed in accordance with the laws of the State of California, including its applicable choice of law statutes, without giving effect to any conflict of laws principles that would cause the laws of any other jurisdiction to apply.

Please sign and date this letter agreement and return the signed copy to Kellie Sears. We look forward to your continued employment with us.

Very truly yours,

The Beauty Health Company

By: /s/ Kellie Sears

Kellie Sears

Chief Human Resources Officer

Agreed to and accepted by:

/s/ Daniel Watson

Daniel Watson

EX-10.3

Exhibit 10.3

CERTAIN INFORMATION, IDENTIFIED BY [*****], HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL, AND (II) WOULD LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

SEPARATION AGREEMENT

This agreement (“Separation Agreement”) is entered into as of 3 August 2022 but shall be effective as of 8 June 2022 between:

(1)HydraFacial LLC (f/k/a Edge Systems, LLC), a company incorporated in the United States of America with its registered office at 2165 East Spring Street, Long Beach, CA 90806, USA (“HydraFacial”); and

(2)Indra Pamamull, a natural person with Passport/FIN No. [*****], residing at [*****] (“Employee”).

(each a “Party”, and collectively, the “Parties”)

Whereas:

(A)Pursuant to an employment agreement dated 4 August 2021 (“Employment Agreement”) entered into between the Employee and GoGlobal GEO Pte. Ltd., a company incorporated in Singapore with its registered office at [*****] (“GoGlobal GEO”), the Employee is employed by GoGlobal GEO for dedicated assignment as President of APAC for HydraFacial.

(B)Pursuant to Clause 16 of the Employment Agreement, either party to the Employment Agreement may terminate the employment without cause by giving at least 6 months’ notice in writing.

(C)GoGlobal GEO has delivered to the Employee written notice of termination of employment of June 8, 2022 (“Separation Notice”).

(D)HydraFacial agrees to provide the separation benefits set out in this Separation Agreement to Employee, provided the Employee complies with the terms set out in this Separation Agreement.

In consideration of the promises, covenants and agreements set forth in this Separation Agreement, and intending to be legally bound hereby, the Parties agree as follows:

1.GENERAL

1.1This Separation Agreement sets out the terms which have been agreed between the Parties concerning the termination of the Employee’s employment under the Employment Agreement. This Separation Agreement is to be read in conjunction with and does not supersede the Employment Agreement (including the annexures thereto). In the event of any inconsistency between the terms of this Separation Agreement and the terms of the Employment Agreement, the terms of this Separation Agreement shall prevail. Unless otherwise defined herein, capitalized terms used herein shall have the meaning ascribed in the Employment Agreement (or the relevant annexure thereto, as the case may be).

2.TERMINATION

2.1    The Employee’s employment will terminate on June 8, 2022 (the “Separation Date”). After the Separation Date, the Employee’s employment under the Employment Agreement will cease, and all of her contractual entitlements and any non-contractual benefits of employment will cease forthwith.

2.2    Employee agrees to sign the PEP Notification Form that Employer then will submit to the Ministry of Manpower

2.3    The Employee acknowledges that the termination of her employment shall be without prejudice to any right of action by HydraFacial in respect of any antecedent breach by the Employee of any of the terms and conditions of the Employment Agreement or this Separation Agreement or to claim for losses or damages arising from any contractual breaches, breaches of duty or other wrongdoing (including subsequent breaches of any continuing obligations which survive the

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termination of the Agreement) by the Employee which may subsequently come to the attention of HydraFacial.

3.PAYMENTS AND SEPARATION BENEFITS

3.1    Payments. As soon as reasonably practicable following the Separation Date, HydraFacial will direct GoGlobal GEO to arrange payment of the following sums to the Employee after full payment of assessed taxes, less any applicable statutory deductions/withholdings and any deductions for excess utilisation of annual leave or damage or loss of Company property (if applicable) and the Employee consents to such withholding of or deductions from any payments to be made to her:

(a)the sum of Singapore Dollars, Twelve Thousand, Six-Hundred and Forty One (SGD $12,641), representing the prorated monthly salary for the month of June being earned but unpaid of Employee’s basic salary (currently Singapore Dollars Forty Six Thousand Three Hundred Fifty (SGD $46,350) per month) (“Monthly Basic Salary”), pro-rated up to the Separation Date;

(b)the sum of Singapore Dollars, Twenty-One Thousand, Three-Hundred and Ninety-Two (SGD $21,392), being encashment of accrued and unutilised paid annual leave, pro-rated up to the Separation Date;

(c)reimbursement of out-of-pocket expense incurred in the normal course of work and duly supported by receipts, bills and vouchers, etc, as per Company policy, submitted in writing with the requisite supporting documents within three (3) days from the date hereof;

(d)the sum of Singapore Dollars Two Hundred Seventy Eight Thousand, One Hundred (SGD $278,100), being salary in lieu of six (6) months’ notice pursuant to Clause 16 of the Employment Agreement; and

(e)the sum of Singapore Dollars, Eighteen Thousand, One-Hundred and Eighty (SGD$18,180) being the sum to which Employee would have been entitled had she taken part in the Central Provident Fund in Singapore.

The Employee confirms that she has received full payment of the Annual Bonus for the fiscal year ending 31 December 2021 (pro-rated based on her start date) referenced at Clause 8 of the Employment Agreement.

3.2    Separation Benefits. Subject to: (i) the Employee’s entry into and continued compliance with the terms of this Separation Agreement; and (ii) the terms of the Hydrafacial Company Executive Severance Plan (Annex 4 of the Employment Agreement), HydraFacial will:

(a)make the following additional payments to the Employee:

(i)the Cash Salary Severance, that is, her Monthly Basic Salary (currently Singapore Dollars Forty Six Thousand Three Hundred Fifty (SGD $46,350) per month) per month), as severance pay, for six (6) months from the Separation Date or such shorter period in the event that the Employee commences paid employment with any other entity pursuant to Clause 4.5 (Impact of Subsequent Employment) of the Hydrafacial Company Executive Severance Plan (the “Separation Period”), paid in accordance with HydraFacial’s regular payroll practices;

(ii)the Pro-Rata Target Bonus, that is, an amount equal to her Pro-Rated Target Bonus, within seventy (70) days from the Separation Date; and

(b)continuation of current Heath Benefits at the current cost to the employee during the Separation Period,

(collectively, the “Separation Benefits”).

The Employee acknowledges and agrees that her receipt of the Separation Benefits is conditional on her executing this Separation Agreement and continued compliance with its terms at all times. The Employee further acknowledges and agrees that he is entitled to receive only that additional compensation listed in this Clause 4.2 (Separation Benefits) after the Separation Date, and that

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he will not be entitled to any other salary, bonus, payment, vacation or any other payments or benefits whosoever after the Separation Date

3.3    Deductions and Withholdings. All sums payable to the Employee shall be made after deduction of any applicable statutory deductions/withholdings as may be required in accordance with the applicable legislation in force from time to time.

3.4    No Further Payments or Benefits. The Employee understands, acknowledges, and agrees that these Separation Benefits exceed what the Employee is otherwise entitled under applicable law to receive on termination of employment, and that these benefits are being given as consideration in exchange for executing this Separation Agreement and the general release contained herein. The Employee further acknowledges that he is not entitled to any other payment or benefit not specifically referenced in this Separation Agreement. Nothing in this Separation Agreement shall be deemed or construed as an express or implied policy or practice of HydraFacial to provide these or other benefits to any individuals other than the Employee.

3.5    Taxes. The Employee shall be responsible for the proper declaration, filing and payment of income tax payable on her salary and any benefits, and shall indemnify HydraFacial for all payments, if any, made by HydraFacial to the Inland Revenue Authority of Singapore (“IRAS”) on account of the Employee’s income tax or any other applicable tax obligation. This provision does not oblige HydraFacial to make payments of any taxes on behalf of the Employee.

4.GENERAL WAIVER AND RELEASE

4.1    The Employee hereby irrevocably releases and forever discharges HydraFacial, each current, former and future Group Company, as well as any of their respective current and former insurers, directors, officers, agents, shareholders, employees, attorneys, predecessors, successors, assigns, representatives and/or any other person or body acting on behalf of, or connected with HydraFacial or any Group Company, past and present (the “Released Parties”) of and from claims and rights that the Employee has, had, or may have against the Released Parties, including but not limited to any and all claims, cross claims, damages, demands, liabilities, obligations, actions, causes, and causes of action of whatever kind or nature based on any cause, circumstance, fact, matter, thing, event, act, or failure to act whatsoever, whether arising at law or in equity, whether based on tort, contract, statutory, or common law principles, and whether known, unknown, foreseen, or unforeseen, but does not mean any of the Employee’s rights in this waiver and release, (including all damage, loss and injury not now known or anticipated but which may arise in the future and all effects and consequences thereof), however and wherever arising, which the Employee had, now has, or which the Employee, its heirs, administrators and assigns or any of them hereafter can, shall or may have in respect of the Employee’s employment under the Employment Agreement or the termination thereof (“Claims”).

4.2    The Employee covenants that he (and that he shall procure anyone acting on her behalf): (a) shall not sue any Released Party; (b) shall finally, fully and irrevocably waive and release, to the maximum extent permitted by law, all Claims against the Released Parties, including, without limitation, all such Claims: (i) arising out of statements, actions, or omissions of the Released Parties; (ii) for the payment of money, property, salary, wages, severance, options, bonuses, overtime, other compensation or amounts, compensatory damages, liquidated damages, punitive damages, costs, expenses, expense reimbursements, disbursements, attorneys’ fees, and benefits; (iii) for wrongful or constructive discharge, breach of express or implied contract, reinstatement of employment, or loss of office; and (iv) based on any applicable laws and/or regulations; and (c) not to make or continue any claim or take or continue any proceeding against the Released Parties in Singapore or elsewhere in the world, arising out of or in any way connected with the Employee’s employment under the Employment Agreement or the termination thereof.

4.3    The Employee acknowledges and agrees that this waiver and release shall ensure to the benefit of the Released Parties and shall be binding on the Employee and herdescendants, dependents, heirs, executors, administrators, assigns, and successors.

4.4    The Employee warrants and represents to HydraFacial and any Group Company that there are no circumstances of which the Employee is aware or of which the Employee ought reasonably to be aware which would amount to a repudiatory breach by the Employee of any express or implied term of the Employment Agreement which would have given rise to the right to terminate the

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Employment without notice or payment in lieu of notice and any payment to the Employee pursuant to Clause 4 is conditional upon this being true at all times.

4.5    For the purposes of this Separation Agreement, “Group Company” means any holding company or parent undertaking of HydraFacial or any subsidiaries or subsidiary undertakings of HydraFacial or of any such holding company or parent undertaking; a company shall be deemed to be a Group Company for the purposes of this Separation Agreement. All references in this Separation Agreement to HydraFacial or Group Company shall include any successor in title or assignee of HydraFacial or any Group Company.

5.COMPANY PROPERTY AND APPOINTMENTS

5.1    On the Separation Date, the Employee shall: (a) return to HydraFacial all books, documents, papers, data (including any copies or extracts and whether in printed or electronic format), materials, software, lap-top, mobile phone, credit cards, keys, security passes and any other property belonging to HydraFacial or any Group Company or their respective clients or suppliers which are or which come under his/her possession or control; provide HydraFacial with full details of any current passwords the Employee uses in respect of any computer equipment used by HydraFacial or any Group Company; (c) irrevocably delete from any personal computer in the Employee’s possession all and any confidential information relating to HydraFacial; and (d) provide a written confirmation to HydraFacial that this has been done and that no copies of any property of HydraFacial of whatever nature have been retained in the Employee’s possession or control.

5.2    The Employee shall immediately deliver to HydraFacial duly signed written resignations from: (a) her appointments as a director of the board of directors of HydraFacial and of any Group Company; and (ii) her appointments in any other offices or positions that she was appointed to pursuant to or in connection with her employment with HydraFacial, together with any other documents reasonably necessary to effect such resignations, each case in form satisfactory to HydraFacial.

6.CONTINUING OBLIGATIONS

6.1    The Employee shall comply with her continuing obligations under the Employment Agreement (including the annexures thereto), including but not limited to: Clause 14 (Confidentiality), Clause 15 (Intellectual Property Right) read with the Proprietary Information and Inventions Assignment Agreement (Annex 3) and Clause 17 (Non-solicitation), which shall, where applicable, survive the termination of the Employment Agreement and continue to bind him/her notwithstanding termination of his/her employment under the Employment Agreement.

6.2    The Employee expressly acknowledges that by reason of her employment and position with HydraFacial, he has been given access to confidential information concerning the business affairs of HydraFacial and the Group Companies, including but limited to marketing lists, lists of customers, business partners, marketing plans, strategic business projections and plans, creative materials and similar confidential or proprietary materials or information. The Employee agrees that he shall not disclose, use, or induce or assist in the use or disclosure of any such confidential information, or anything related thereto, nor to ever use such information for any business with which Employee is affiliated, or for any competitor of HydraFacial, without the prior express written consent of HydraFacial. The Employee may disclose confidential information only if it is required to do so in compliance with the law, an order of court, or the rules or regulations of any relevant regulatory or administrative authority with jurisdiction over the Parties, provided always that the Employee shall: (a) give HydraFacial reasonable notice prior to the impending disclosure so that HydraFacial may have the opportunity to seek a protective order and/or waive the duty of non-disclosure; (b) restrict any disclosure of confidential information to such minimal extent as is necessary for such compliance; and (c) use its best endeavours to ensure that any person who receives the confidential information keeps such confidential information confidential and does not use it except for the purpose for which the disclosure is made.

6.3    The Employee further agrees that that she shall keep the terms, amount, and fact of this Separation Agreement completely confidential, and that she shall not hereafter disclose any information concerning this Separation Agreement to anyone; provided, however, that she may make such disclosure to her professional advisors (e.g. attorneys, accountants, auditors, and tax preparers) strictly on a need to know basis, all of whom will be informed of and have agreed in writing to be bound by this confidentiality clause.

4

6.4    The Employee acknowledges that during the Separation Period, HydraFacial may make reasonable, minimal requests for information related to her duties and work product arising in the period prior to the Separation Date and agrees to cooperate with any such requests without expectation nor entitlement to any further compensation or consideration.

6.5.    The Employee shall not at any time hereafter represent himself still to be connected to HydraFacial or any Group Company, whether as an employee, director or otherwise.

6.6    The Employee (or anyone on her behalf) has not and will not (either directly or indirectly) make or otherwise communicate any disparaging or derogatory comments whether in writing or by spoken word and whether or not they are considered by the Employee to be true, concerning the Released Parties (including but not limited to any on line diary or website which relates to HydraFacial or any Group Company or their employees or directors, or shareholders, commonly referred to as “blogging”). For the purposes of this Separation Agreement, “disparaging or “derogatory” means any action or deed which may or does in any way adversely affect a Released Party’s reputation or good standing, or of its business, including but not limited to conduct, comments, statements or communications that discredits, belittles, defames or is untrue or misleading and is made to negatively influence, tends to negatively influence or negatively influences or prejudices the reputation, business or image of any Released Party.

6.7    The Employee acknowledges and agrees that a violation of the foregoing at any time, would be treated as a material breach of this Separation Agreement, entitling HydraFacial to cease any additional payments and immediately to seek recovery of any consideration already paid to the Employee herein without affecting the enforceability of the releases provided herein by the Employee.

6.8    For the avoidance of doubt, this Separation Agreement is without prejudice to the right of HydraFacial to claim for losses or damages arising from any contractual breaches, breaches of duty or other wrongdoing (including subsequent breaches of any continuing obligations which survive the termination of the Employment Agreement) by the Employee which may subsequently come to the attention of HydraFacial.

7.GENERAL TERMS

7.1    This Separation Agreement together with any of the documents referred to in it sets out the entire agreement between the Parties and supersedes all previous agreements and arrangements (if any), whether oral, or in writing regarding the Employee’s employment or separation.

7.2    The Employee agrees to execute, do and procure all other persons if any to execute and do all such further deeds, assurances, acts and things as may be reasonably required so that the full effect may be given to the terms and conditions of this Separation Agreement.

7.3    Any and all amendments or modifications to this Separation Agreement must be written and signed by the authorised representative(s) of the Parties.

7.4    This Separation Agreement shall benefit and be binding on the Parties and their respective successors and permitted assigns. HydraFacial may at its absolute discretion freely assign or transfer any or all of its rights and obligations under this Separation Agreement. The Employee may not assign or transfer all or any part of its rights and obligations under this Separation Agreement except with the prior written consent of HydraFacial.

7.5    Any failure to exercise or delay in the exercise of any right or remedy vested in a Party under or pursuant to this Separation Agreement shall not constitute a waiver of such right or remedy or a waiver of any other right or remedy and no single or partial exercise of any right or remedy shall prevent any further exercise of such right or remedy or the exercise of any other right or remedy available.

7.6    If any provision is for any reason determined by a court or arbitral tribunal to be invalid or unenforceable, the remaining provisions shall not be affected, impaired, or invalidated, and remain in full force and effect with such modifications as may be necessary to make them valid and effective.

7.7    The Employee recognizes that in the event of breach by the Employee of any provision of this Separation Agreement, HydraFacial may suffer irreparable damages, and that monetary damages

5

may not compensate HydraFacial for its loss. Accordingly, in addition to all other remedies available to HydraFacial at law or in equity, upon a showing by HydraFacial that the Employee has violated or is about to violate the terms of this Separation Agreement, the Employee irrevocably consents to the entry by a court of competent jurisdiction of an injunction or declaratory judgment enforcing the terms of this Separation Agreement, including without limitation preventing disclosure or further disclosure by him of confidential information.

7.8    Nothing in this Separation Agreement (including the payment of any sum of money) shall be construed as an admission by HydraFacial of any wrongdoing, liability or noncompliance with any applicable law or regulation.

7.9    A person who is not a party to this Separation Agreement may not enforce any terms hereof under the Contracts (Rights of Third Parties) Act 2001.

7.10    This Separation Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument.

7.11    This Separation Agreement shall be governed and construed in accordance with the laws of the Republic of Singapore. The Parties agree to submit to the exclusive jurisdiction of the courts of Singapore as regards any claim or matter arising under this Separation Agreement.

7.12    The Employee confirms that she has had an opportunity to obtain independent legal advice on the effect of this Separation Agreement and that he has read and fully understands all the terms of this Separation Agreement which she signs of her own volition.

[Signature page follows.]

6

Signature page to the Separation Agreement

Executed by the Parties on the date first above-written.

Signed for and on behalf of HydraFacial LLC /s/ Kellie Sears	Signed by /s/ Indra Pamamull
Kellie Sears Chief Human Resources Officer	Indra Pamamull

7

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew Stanleick, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Beauty Health Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.[Paragraph intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)]

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 9, 2022
		/s/ Andrew Stanleick
		Andrew Stanleick
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Liyuan Woo, certify that:

1.I have reviewed this quarterly report on Form 10-Q of The Beauty Health Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.[Paragraph intentionally omitted pursuant to Exchange Act Rules 13a-14(a) and 15d-15(a)]

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 9, 2022
		/s/ Liyuan Woo
		Liyuan Woo
		Chief Financial Officer
		(Principal Accounting and Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Beauty Health Company (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Andrew Stanleick, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date:	August 9, 2022
		/s/ Andrew Stanleick
		Andrew Stanleick
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO SECTION 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Beauty Health Company (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), I, Liyuan Woo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by §906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date:	August 9, 2022
		/s/ Liyuan Woo
		Liyuan Woo
		Chief Financial Officer
		(Principal Accounting and Financial Officer)

XML

Cover - shares	6 Months Ended
	Jun. 30, 2022	Aug. 05, 2022
Cover [Abstract]
Document Type	10-Q
Document Period End Date	Jun. 30, 2022
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-39565
Entity Registrant Name	The Beauty Health Company
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	85-1908962
Entity Address, Address Line One	2165 Spring Street
Entity Address, City or Town	Long Beach
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90806
City Area Code	800
Local Phone Number	603-4996
Title of 12(b) Security	Class A Common Stock, par value $0.0001 per share
Trading Symbol	SKIN
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		150,877,489
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Central Index Key	0001818093

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 820,970	$ 901,886
Accounts receivable, net of allowances for doubtful accounts of $2,482 and $2,681 at June 30, 2022 and December 31, 2021, respectively	79,918	46,824
Prepaid expenses and other current assets	20,336	12,322
Income tax receivable	1,008	4,599
Inventories	73,526	35,261
Total current assets	995,758	1,000,892
Property and equipment, net	18,041	16,183
Right-of-use assets, net	15,791	14,992
Intangible assets, net	51,202	56,010
Goodwill	124,033	123,694
Deferred income tax assets, net	312	330
Other assets	9,823	6,705
TOTAL ASSETS	1,214,960	1,218,806
Current liabilities:
Accounts payable	36,830	29,049
Accrued payroll-related expenses	27,786	28,662
Other accrued expenses	15,385	14,722
Lease liabilities, current	4,547	3,712
Income tax payable	2,510	292
Total current liabilities	87,058	76,437
Lease liabilities, non-current	13,116	12,781
Deferred income tax liabilities, net	3,844	3,561
Warrant liabilities	26,579	93,816
Convertible senior notes, net	732,028	729,914
TOTAL LIABILITIES	862,625	916,509
Commitments (Note 13)
Stockholders’ equity:
Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	16	16
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021	0	0
Additional paid-in capital	735,682	722,250
Accumulated other comprehensive income (loss)	(5,089)	(1,257)
Accumulated deficit	(378,274)	(418,712)
Total stockholders’ equity	352,335	302,297
LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 1,214,960	$ 1,218,806

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowances for doubtful accounts	$ 2,482	$ 2,681
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	320,000,000	320,000,000
Common stock, shares issued (in shares)	150,855,025	150,598,047
Common stock, shares outstanding (in shares)	150,855,025	150,598,047
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Net sales	$ 103,536	$ 66,508	$ 178,951	$ 114,050
Cost of sales	31,882	19,257	55,360	35,059
Gross profit	71,654	47,251	123,591	78,991
Operating expenses:
Selling and marketing	44,881	26,214	81,288	43,309
Research and development	2,601	2,988	4,831	4,440
General and administrative	27,585	44,402	53,846	55,213
Total operating expenses	75,067	73,604	139,965	102,962
Loss from operations	(3,413)	(26,353)	(16,374)	(23,971)
Other (income) expense:
Interest expense, net	3,217	2,060	6,617	7,759
Other (income) expense, net	(1,658)	4,307	(721)	4,314
Change in fair value of warrant liabilities	(15,185)	72,027	(67,237)	72,027
Change in fair value of earn-out shares liability	0	36,525	0	36,525
Foreign currency transaction loss (gain), net	2,206	(24)	1,838	232
Total other (income) expense	(11,420)	114,895	(59,503)	120,857
Income (loss) before provision for income taxes	8,007	(141,248)	43,129	(144,828)
Income tax expense (benefit)	76	(1,870)	2,691	(2,176)
Net income (loss)	7,931	(139,378)	40,438	(142,652)
Comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(3,687)	(276)	(3,832)	(281)
Comprehensive income (loss)	$ 4,244	$ (139,654)	$ 36,606	$ (142,933)
Net income (loss) per share
Basic (in dollars per share)	$ 0.05	$ (1.52)	$ 0.27	$ (2.24)
Diluted (in dollars per share)	$ (0.05)	$ (1.52)	$ (0.18)	$ (2.24)
Weighted average common shares outstanding
Basic (in shares)	150,731,491	91,798,837	150,665,166	63,805,807
Diluted (in shares)	151,719,451	91,798,837	152,274,394	63,805,807

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) - USD ($) $ in Thousands	Total	Previously reported	Retroactive application of recapitalization	Legacy Common Stock	Legacy Common Stock Previously reported	Legacy Common Stock Retroactive application of recapitalization	Legacy Preferred Stock	Legacy Preferred Stock Previously reported	Legacy Preferred Stock Retroactive application of recapitalization	Common Stock	Common Stock Previously reported	Common Stock Retroactive application of recapitalization	Additional Paid-in Capital	Additional Paid-in Capital Previously reported	Additional Paid-in Capital Retroactive application of recapitalization	Note Receivable from Stockholder	Note Receivable from Stockholder Previously reported	Note Receivable from Stockholder Retroactive application of recapitalization	Accumulated other Comprehensive Income (Loss)	Accumulated other Comprehensive Income (Loss) Previously reported	Accumulated other Comprehensive Income (Loss) Retroactive application of recapitalization	Accumulated Deficit	Accumulated Deficit Previously reported	Accumulated Deficit Retroactive application of recapitalization
Beginning balance (in shares) at Dec. 31, 2020				0	54,358	(54,358)	0	931	(931)	35,501,743	0	35,501,743
Beginning balance at Dec. 31, 2020	$ (29,960)	$ (29,960)	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 4	$ 0	$ 4	$ 13,952	$ 13,956	$ (4)	$ (554)	$ (554)	$ 0	$ 242	$ 242	$ 0	$ (43,604)	$ (43,604)	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	34												34
Net income (loss)	(3,274)																					(3,274)
Foreign currency translation adjustments	(5)																		(5)
Ending balance (in shares) at Mar. 31, 2021										35,501,743
Ending balance at Mar. 31, 2021	(33,205)									$ 4			13,986			(554)			237			(46,878)
Beginning balance (in shares) at Dec. 31, 2020				0	54,358	(54,358)	0	931	(931)	35,501,743	0	35,501,743
Beginning balance at Dec. 31, 2020	(29,960)	$ (29,960)	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0	$ 4	$ 0	$ 4	13,952	$ 13,956	$ (4)	(554)	$ (554)	$ 0	242	$ 242	$ 0	(43,604)	$ (43,604)	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	(142,652)
Foreign currency translation adjustments	(281)
Ending balance (in shares) at Jun. 30, 2021										125,439,779
Ending balance at Jun. 30, 2021	16,070									$ 13			202,352			0			(39)			(186,256)
Beginning balance (in shares) at Mar. 31, 2021										35,501,743
Beginning balance at Mar. 31, 2021	(33,205)									$ 4			13,986			(554)			237			(46,878)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reverse recapitalization transaction, net (in shares)										89,827,310
Reverse recapitalization transaction, net	183,864									$ 9			183,301			554			0			0
Issuance of Class A Common Stock in connection with business acquisition (in shares)										110,726
Issuance of Class A Common Stock in connection with business acquisition	1,557												1,557
Stock-based compensation	3,508												3,508
Net income (loss)	(139,378)																					(139,378)
Foreign currency translation adjustments	(276)																		(276)
Ending balance (in shares) at Jun. 30, 2021										125,439,779
Ending balance at Jun. 30, 2021	16,070									$ 13			202,352			0			(39)			(186,256)
Beginning balance (in shares) at Dec. 31, 2021										150,598,047
Beginning balance at Dec. 31, 2021	302,297									$ 16			722,250			0			(1,257)			(418,712)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for vesting of restricted stock units (in shares)										5,184
Stock-based compensation	7,049												7,049
Net income (loss)	32,507																					32,507
Foreign currency translation adjustments	(145)																		(145)
Ending balance (in shares) at Mar. 31, 2022										150,603,231
Ending balance at Mar. 31, 2022	341,708									$ 16			729,299			0			(1,402)			(386,205)
Beginning balance (in shares) at Dec. 31, 2021										150,598,047
Beginning balance at Dec. 31, 2021	302,297									$ 16			722,250			0			(1,257)			(418,712)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	40,438
Foreign currency translation adjustments	(3,832)
Ending balance (in shares) at Jun. 30, 2022										150,855,025
Ending balance at Jun. 30, 2022	352,335									$ 16			735,682			0			(5,089)			(378,274)
Beginning balance (in shares) at Mar. 31, 2022										150,603,231
Beginning balance at Mar. 31, 2022	341,708									$ 16			729,299			0			(1,402)			(386,205)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of Class A Common Stock in connection with business acquisition (in shares)										28,733
Issuance of Class A Common Stock in connection with business acquisition	500												500
Issuance of common stock pursuant to equity compensation plan (in shares)										252,536
Stock-based compensation	6,378												6,378
Shares withheld for tax withholdings on vested stock awards (in shares)										(29,475)
Shares withheld for tax withholdings on vested stock awards	(495)												(495)
Net income (loss)	7,931																					7,931
Foreign currency translation adjustments	(3,687)																		(3,687)
Ending balance (in shares) at Jun. 30, 2022										150,855,025
Ending balance at Jun. 30, 2022	$ 352,335									$ 16			$ 735,682			$ 0			$ (5,089)			$ (378,274)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities:
Net income (loss)	$ 40,438	$ (142,652)
Adjustments to reconcile net income (loss) to net cash from operating
Depreciation of property and equipment	3,268	1,418
Amortization of capitalized software	903	626
Provision for doubtful accounts	435	646
Non-cash lease expense	2,282	0
Amortization of intangible assets	6,468	5,229
Amortization of other assets	280	66
Amortization of deferred financing costs	0	2,806
Stock-based compensation	13,427	3,542
Loss on sale and disposal of assets	988	0
In-kind interest	0	4,130
Deferred income tax benefit	0	(3,471)
Change in fair value of earn-out shares liability	0	36,525
Change in fair value adjustment of warrant liabilities	(67,237)	72,027
Debt prepayment expense	0	2,014
Amortization of debt issuance costs	2,114	0
Changes in operating assets and liabilities:
Accounts receivable	(34,410)	(21,089)
Prepaid expense and other current assets	(9,374)	(1,562)
Income taxes receivable	4,165	333
Inventory	(39,234)	(229)
Other assets	(2,634)	730
Accounts payable	7,675	(2,369)
Accrued payroll and other expenses	385	9,047
Other long-term liabilities	0	(87)
Lease liabilities	(1,972)	0
Income taxes payable	2,227	382
Net cash used in operating activities	(69,806)	(31,938)
Cash flows used in investing activities:
Cash paid for business acquisitions, net of cash acquired	0	(4,920)
Cash paid for asset acquisition	(1,475)	0
Repayment of notes receivables from shareholders	0	781
Capital expenditures for intangible assets	(1,252)	(273)
Capital expenditures for property and equipment	(5,577)	(4,707)
Net cash used in investing activities	(8,304)	(9,119)
Cash flows from financing activities:
Payment of contingent consideration related to acquisitions	(2,763)	0
Proceeds from revolving facility	0	5,000
Repayment of revolving facility	0	(5,000)
Proceeds from Business Combination, net of transaction costs (See Note 3)	0	358,536
Repayment of term loan	0	(225,487)
Net cash (used in) provided by financing activities	(2,763)	133,049
Net (decrease) increase in cash and cash equivalents	(80,873)	91,992
Effect of foreign currency translation on cash	(43)	(11)
Cash and cash equivalents, beginning of period	901,886	9,486
Cash and cash equivalents, end of period	820,970	101,467
Supplemental disclosures of cash flow information and non-cash investing and financing activities:
Cash paid for interest	5,130	10,249
Common stock issued for asset acquisition	500	0
Common stock issued for business acquisitions	0	1,557
Cash (received) paid for income taxes	(2,967)	96
Capital expenditures included in accounts payable	404	1,440
Change in deferred tax liability due to reverse recapitalization	$ 0	$ 90

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Description of Business

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

The Beauty Health Company, formerly known as Vesper Healthcare Acquisition Corp. (the “Company” or “BeautyHealth”), was incorporated in Delaware on July 8, 2020. The Company 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 (the “Closing Date”), the Company consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020 (the “Merger Agreement”), by and among Vesper Healthcare Acquisition Corp. (“Vesper”), 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”), 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 Company owns 100% of the outstanding common stock of HydraFacial and each share of common stock and preferred stock of HydraFacial has been 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, the Company owns 100% of the outstanding interests in Merger Sub II. In connection with the closing of the Business Combination (the “Closing”), the Company owns, directly or indirectly, 100% of the stock of HydraFacial and its subsidiaries and the stockholders of HydraFacial as of immediately prior to the effective time of the First Merger (the “HydraFacial Stockholders”) hold a portion of the Company’s Class A Common Stock, par value $0.0001 per share (the “Class A Common Stock”).

In connection with the Closing, the Company changed its name from “Vesper Healthcare Acquisition Corp.” to “The Beauty Health Company.” Following the Closing, on May 6, 2021, the Company’s Class A Common Stock and publicly traded warrants were listed on the Nasdaq Capital Market (“Nasdaq”) under the symbols, “SKIN” and “SKINW”, respectively. The transactions set forth in the Merger Agreement constitute a “Business Combination” as contemplated by Vesper’s Second Amended and Restated Certificate of Incorporation.

Unless the context otherwise requires, in this Quarterly Report on Form 10-Q, the “Company” refers to Vesper Healthcare Acquisition Corp. prior to the closing of the Business Combination and to the combined company and its subsidiaries following the Closing and “HydraFacial” refers to the business of LCP Edge Intermediate, Inc. and its subsidiaries prior to the Closing. References to “Vesper” refer to Vesper Healthcare Acquisition Corp. prior to the consummation of the Business Combination.

The Company is a category-creating beauty health company focused on bringing innovative products to market. The Company and its subsidiaries design, develop, manufacture, market, and sell a/esthetic technologies and products. The Company’s flagship brand, HydraFacial, is a non-invasive and approachable beauty health platform and ecosystem. HydraFacial uses a unique delivery system to cleanse, extract, and hydrate with their patented hydradermabrasion technology and serums that are made with nourishing ingredients.

The COVID-19 pandemic has had, and may continue to have adverse impacts on our business. As government authorities around the world continue to implement significant measures intended to control the spread of the virus and institute restrictions on commercial operations, while simultaneously implementing policies designed to reopen certain markets, we are working to ensure our compliance and maintain business continuity for essential operations. The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous factors we cannot reliably predict, including the duration and scope of the pandemic; businesses and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting PoliciesInformation regarding the Company’s significant accounting policies is contained in Note 2, “Summary of Significant Accounting Policies”, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2022.

New Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2021-08, Business Combinations (Topic 805), which primarily relates to the accounting for contract assets and contract liabilities from contracts with customers in a business combination. The standard will be effective for annual reporting periods beginning after December 31, 2022, including interim reporting periods within those periods, with early adoption permitted. We are currently evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

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Business Combinations and Asset Acquisitions

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combinations and Asset Acquisitions

Business Combinations and Asset Acquisitions

Business Combination — Reverse Recapitalization

The closing of the Business Combination occurred on May 4, 2021. In connection with the Business Combination:

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

•Prior to the Business Combination, the Company issued an aggregate of 11,500,000 shares of the Company’s Class B Common Stock (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. All outstanding Founder Shares were automatically converted into shares of the Company’s Class A Common Stock on a one-for-one basis at the Closing and will continue to be subject to the transfer restrictions applicable to such shares of Founder Shares.

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

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

•The aggregate gross cash consideration received by the Company in connection with the Business Combination was $783 million, which consisted of proceeds of $350 million from the PIPE Investment, plus approximately $433 million of cash from the Company’s trust account that held the proceeds from the Company’s initial public offering (the “Trust Account”). The aggregate gross cash consideration received was reduced by $368 million, which consisted of cash payments made to the former shareholders of HydraFacial, and further reduced by an additional $57 million for the payment of direct transaction costs incurred by HydraFacial and the Company which were reflected as a reduction of proceeds. The Company used the net proceeds to repay all of its outstanding indebtedness at the Closing. The remainder of the consideration paid to the HydraFacial Stockholders consisted of 35,501,743 newly issued shares of Class A Common Stock (the “Stock Consideration”). The net cash received from the Business Combination was subject to a working capital adjustment of $0.9 million. The Company also issued 70,860 shares related to the working capital adjustment.

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

(in thousands)	Recapitalization
Cash in trust, net of redemptions	$	433,382
Cash — PIPE	350,000
Less: Cash paid out to Former Parent	(367,870)
Less: Transaction costs and advisory fees	(56,976)
Less: Cash paid out from net working capital adjustment related to acquisitions	(902)
Net Cash Received from Business Combination	$	357,634

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

	Number of Shares
Class A common stock outstanding prior to Business Combination	46,000,000
Less: Redemption of Vesper Class A Common Stock	(2,672,690)
Class A common stock of Vesper	43,327,310
Founder shares (Vesper Class B Common Stock)	11,500,000
PIPE Shares	35,000,000
Business Combination and PIPE shares	89,827,310
Legacy HydraFacial shares (1)	35,501,743
Working capital adjustment Class A Common Stock issued	70,860
Total Shares of Class A Common Stock after Business Combination	125,399,913

_______________

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

Distributor Acquisitions

On June 4, 2021, the Company acquired High Tech Laser, Australia Pty Ltd (“HTL”), a distributor of the Company’s products in Australia. On July 1, 2021, the Company acquired Wigmore Medical France (“Wigmore”), Ecomedic GmbH (“Ecomedic”) and Sistemas Dermatologicos Internacionales (“Sidermica”), distributors of the Company’s products in France, Germany and Mexico, respectively. Through these acquisitions, the Company plans to directly sell to the respective markets and improve services for its products. Cash paid for the four distributors totaled $23.7 million.

The Company applied the acquisition method of accounting and established a new basis of accounting on the dates of the respective acquisitions. The assets acquired by the Company are accordingly measured at their estimated fair values as of the acquisition date. The goodwill arising from the acquisitions consists largely of the business reputation of the acquired company in the marketplace and its assembled workforce. The goodwill is not deductible for income tax purposes.

The Company finalized the valuation of assets acquired and liabilities assumed for the distributor acquisitions as of June 30, 2022. The following table summarizes the consideration and fair values assigned to the assets acquired and liabilities

assumed at the dates of acquisition for the Wigmore, Ecomedic and Sidermica acquisitions and summarizes the HTL acquisition after measurement period adjustments.

(in thousands)	HTL		Wigmore (2)		Ecomedic (3)		Sidermica (4)
Consideration paid:
Cash, net of cash acquired	$	4,920	$	2,540	$	11,338	$	6,861
Class A Common Stock issued (1)	1,557		456		6,513		815
Trade receivables due from seller	1,027		2,336		1,679		1,581
Notes payable to seller	—		—		2,153		—
	$	7,504	$	5,332	$	21,683	$	9,257
Identifiable assets acquired and liabilities assumed
Accounts receivable	$	1,110	$	2,079	$	15	$	1,657
Non-compete agreement	100		60		588		100
Customer relationships	2,696		2,276		5,487		2,700
Inventory and other assets	354		341		1,262		454
Accounts payable	(45)		(456)		(772)		—
Deferred tax liabilities, net	(675)		(842)		(2,008)		—
Accrued and other liabilities	(802)		(317)		(340)		—
Total identifiable net assets	2,738		3,141		4,232		4,911
Goodwill	$	4,766	$	2,191	$	17,451	$	4,346

___________

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

(2)    During the fourth quarter of 2021, adjustments were made to the Wigmore valuation pertaining to contingent consideration and intangible assets. Goodwill was adjusted due to an increase of $0.3 million in contingent consideration and a decrease of $1.0 million in intangible assets. Contingent consideration payments for the Wigmore acquisition were paid during the three months ended March 31, 2022.

(3)    During the first quarter of 2022, adjustments were made to the Ecomedic valuation pertaining to acquisition date tax liability. Goodwill was adjusted due to an increase of $0.2 million to acquisition date tax liability.     

(4)    During the second quarter of 2022, adjustments were made to the Sidermica valuation pertaining to contingent consideration. Goodwill was adjusted due to an increase in contingent consideration of $1.98 million. Contingent consideration payments for the Sidermica acquisition were paid during the three months ended June 30, 2022.

Intangible assets acquired included customer relationships and non-compete agreements. The valuation of the acquired intangible asset was estimated by performing projections of discounted cash flows, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk. The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs). The weighted average amortization period of customer relationship was 5 years, while the non-compete agreements are amortized over 3 years.

The operating results of the distributor acquisitions from the dates of acquisitions through June 30, 2022 are included in the Condensed Consolidated Statements of Comprehensive Income (Loss). The operating results are not material to the consolidated financial statements, and, therefore, the Company has not presented pro forma results of operations for the distributor acquisitions.

Acquisition of The Personalized Beauty Company, Inc. (“Mxt”)

On April 12, 2022, the Company, through its indirect, wholly-owned subsidiary, Edge Systems Intermediate, LLC, acquired The Personalized Beauty Company, Inc., a Delaware corporation d.b.a. Mxt. Consideration paid in the aggregate was $1.5 million plus equity consideration of $0.5 million or 28,733 shares of the Company’s Class A Common Stock. Depending on the achievement of certain revenue milestones, the former Mxt shareholders are entitled to receive up to $30 million of earnout payments. The estimated fair value of the earnout was not material as of the acquisition date.

The Company accounted for this transaction as an asset acquisition based on an evaluation of the U.S. GAAP guidance for business combinations and concluded that the Company acquired developed technology of $1.9 million and inventory of $0.1 million. The Company concluded that the developed technology acquired from Mxt comprised substantially all of the fair value of the gross assets acquired and that the assets acquired did not meet the definition of a business under the guidance for business combinations. The developed technology intangible asset is being amortized on a straight-line basis over 3 years and recorded in cost of sales.

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Revenue Recognition

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The Company has determined that each of its products is distinct and represents a separate performance obligation. The customer can benefit from each product on its own or together with other resources that are readily available to the customer. The products are separately identifiable from other promises in the contract. Control over the Company’s products generally transfers to the customer upon shipment of the products from the Company’s warehouse facility. Therefore, revenue associated with product purchases is recognized at a point in time upon shipment to the intended customer. Typical payment terms provide for the customer to pay within 30 to 120 days, however, we provide an option for qualified customers to pay for delivery systems over 12 monthly installments.

Disaggregated Revenue

The Company generates revenue through manufacturing and selling HydraFacial Delivery Systems (“Delivery Systems”). In conjunction with the sale of Delivery Systems, HydraFacial also sells its serum solutions and consumables (collectively “Consumables”). Consumables are sold solely and exclusively by HydraFacial and are available for purchase separately from the purchase of Delivery Systems. For both Delivery Systems and Consumables, revenue is recognized upon transfer of control to the customer, which generally takes place at the point of shipment.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net Sales
Delivery Systems	$	64,783	$	34,944	$	106,430	$	60,616
Consumables	38,753		31,564		72,521		53,434
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

See Note 17 for revenue disaggregated by geographical region.

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Balance Sheet Components

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Balance Sheet Components

Balance Sheet Components

Inventories consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Raw materials	$	19,008	$	12,024
Finished goods	54,518		23,237
Total inventories	$	73,526	$	35,261

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Accrued compensation	$	10,935	$	15,262
Accrued payroll taxes	2,448		922
Accrued benefits	3,976		3,022
Accrued sales commissions	10,427		9,456
Total accrued payroll-related expenses	$	27,786	$	28,662

Other accrued expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Sales and VAT tax payables	$	5,840	$	5,817
Accrued interest	2,344		2,786
Contingent consideration	—		783
Note payable due seller	2,125		2,153
Royalty liabilities	1,024		1,074
Other	4,052		2,109
Total other accrued expenses	$	15,385	$	14,722

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Leases	6 Months Ended
	Jun. 30, 2022
Leases [Abstract]
Leases	Leases The Company does not own any real estate. The majority of the Company’s lease liability consists of the Company’s international office spaces and warehouses, all of which are classified as operating leases. The Company’s finance leases relate to leased equipment such as office and warehouse equipment. The finance lease balances are not material but are included in property and equipment, other accrued expenses, and other long-term liabilities of the Condensed Consolidated Balance Sheets. During the three months ended June 30, 2022 the Company entered into leases for a new experience center in Paris for a right-of-use asset and lease liability of $1.1 million and an office in Frankfurt for a right-of-use asset and lease liability of $1.6 million.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. As of the Business Combination date, the Private Placement Warrants were valued using the Public Warrant Price, and was considered to be a Level 2 financial instrument as of that date. As of June 30, 2022, the value of the Private Placement Warrants was determined using their redemption value because these Private Placement Warrants are subject to redemption if the reference value of the common stock, as defined, is between $10.00 and $18.00 per share. The Private Placement Warrants are classified as a Level 2 financial instrument. There were no Public Warrants outstanding as of June 30, 2022. There were no valuation level transfers during the six months ended June 30, 2022.

	Fair Value Measurements on a Recurring Basis
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	768,575	$	—	$	—	$	768,575
Liabilities
Warrant liability — Private Placement Warrants	—		26,579		—		26,579

Money Market Funds

The Company’s investment in money market funds that are classified as cash equivalents hold underlying investments with a weighted average maturity of 90 days or less and are recognized at fair value. The valuations of these securities are based on quoted prices in active markets for identical assets, when available, or pricing models whereby all significant inputs are observable or can be derived from or corroborated by observable market data. The Company reviews security pricing and assesses liquidity on a quarterly basis. As of June 30, 2022, the Company’s U.S. portfolio had no material exposure to money market funds with a fluctuating net asset value.

Warrant Liabilities

The Public Warrants and Private Placement Warrants (collectively, the “Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities on the Company’s Condensed Consolidated Balance Sheets. The Warrants are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss). At June 30, 2022, the outstanding Private Placement Warrants was determined using their redemption value because these Warrants are subject to redemption if the reference value of the common stock, as defined, is between $10.00 and $18.00 per share. The Private Placement Warrants are classified as a Level 2 financial instruments as of June 30, 2022. There were no Public Warrants outstanding as of June 30, 2022.

On October 4, 2021, the Company issued a press release stating that it would redeem all of the Public Warrants that remained outstanding following 5:00 p.m. New York City time on November 3, 2021, for a redemption price of $0.10 per Public Warrant. All 16.2 million outstanding Public Warrants were either exercised for cash or on a cashless basis or were redeemed. These outstanding Public Warrants that were exercised comprised 15.3 million Public Warrants issued in connection with the Vesper initial public offering and an additional 0.9 million warrants that became Public Warrants due to the sale of Private Placement Warrants. Approximately 16.1 million Public Warrants were exercised for cash at an exercise price of $11.50 per share of Class A Common Stock, 74,104 Public Warrants were exercised on a cashless basis in exchange for an aggregate of 26,732 shares of Class A Common Stock, and 75,016 warrants were redeemed for $0.10 per warrant, in each case in accordance with the terms of the Warrant Agreement. In 2021, total cash proceeds generated from exercises of the Public Warrants were $185.4 million. In addition, 0.3 million Private Placement Warrants were exercised in 2021 for total cash proceeds of $3.0 million. As of June 30, 2022, the Company had approximately 7 million Private Placement Warrants outstanding.

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Property and Equipment, net

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

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

(in thousands)	Useful life (years)	June 30, 2022		December 31, 2021
Furniture and fixtures	2-7	$	4,891	$	4,074
Computers and equipment	3-5	4,975		4,010
Machinery and equipment	2-5	5,288		3,669
Autos and trucks	5	1,184		1,163
Tooling	5	1,837		1,389
Leasehold improvements	Shorter of remaining lease term or estimated useful life	10,438		5,086
Total property and equipment		28,613		19,391
Less: accumulated depreciation and amortization		(11,434)		(8,561)
Construction in progress		862		5,353
Property and equipment, net		$	18,041	$	16,183

Depreciation expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	591	$	321	$	1,005	$	626
General and administrative	861		407		1,536		792
Selling and marketing	400		—		727		—
Total depreciation expense	$	1,852	$	728	$	3,268	$	1,418

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Goodwill and Intangible Assets, net

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, net

Goodwill and Intangible Assets, net The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of June 30, 2022 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,012	$	(3,781)	$	6,231	15
Non-compete agreement	758		(538)		220		3
Customer relationships	17,821		(5,607)		12,214		5-10
Developed technology	73,188		(49,610)		23,578		3-8
Patents	2,034		(355)		1,679		3-19
Capitalized software	11,154		(3,874)		7,280		3-5
Total intangible assets	$	114,967	$	(63,765)	$	51,202

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2021 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,048	$	(3,442)	$	6,606	15
Non-compete agreement	809		(139)		670		3
Customer relationships	18,625		(4,391)		14,234		5-10
Developed technology	70,900		(45,051)		25,849		8
Patents	2,050		(295)		1,755		3-19
Capitalized software	9,867		(2,971)		6,896		3-5
Total intangible assets	$	112,299	$	(56,289)	$	56,010

Amortization expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	2,378	$	2,233	$	4,619	$	4,464
General and administrative	796		466		1,498		968
Selling and marketing	619		235		1,254		423
Total amortization expense	$	3,793	$	2,934	$	7,371	$	5,855

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

	Six Months Ended June 30,
(in thousands)	2022		2021
Beginning balance	$	123,694	$	98,531
Measurement period adjustments	2,154		4,766
Foreign currency translation impact	(1,815)		(197)
Ending balance	$	124,033	$	103,100

The measurement period adjustments include a $0.2 million increase due to adjustment of acquisition date tax liability for Ecomedic and a $1.98 million increase due to contingent consideration paid to former owner of Sidermica during the six months ended June 30, 2022.

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Long-term Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Long-term Debt

Long-term Debt

Credit Facility

On December 30, 2021, Edge Systems LLC, a California limited liability company (the “Borrower”) and an indirect wholly owned subsidiary of The Beauty Health Company, as borrower, entered into a Credit Agreement (the “Credit Agreement”) with Edge Systems Intermediate LLC, an indirect wholly owned subsidiary of the Company and the direct parent of the Borrower that holds the Company’s foreign and domestic operating entities, and The Hydrafacial Company Mexico Holdings, LLC, a direct wholly owned subsidiary of the Borrower that conducts the Mexican business operations , as guarantors (the “Guarantors” and, together with the Borrower, the “Loan Parties”), and JPMorgan Chase Bank, N.A., as administrative agent.

The Credit Agreement provides for a $50 million revolving credit facility with a maturity date of December 30, 2026. In addition, the Borrower has the ability from time to time to increase the revolving commitments or enter into one or more tranches of term loans up to an additional aggregate amount not to exceed $50 million, subject to receipt of lender commitments and certain conditions precedent. As of June 30, 2022 the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

Borrowings under the Credit Agreement are secured by certain collateral of the Loan Parties and are guaranteed by the Guarantors, each of whom will derive substantial benefit from the revolving credit facility. In specified circumstances, additional guarantors are required to be added. The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Borrower’s ability to incur indebtedness and certain liens, make certain investments,

become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00. As of June 30, 2022 the Company was in compliance with all restricted and financial covenants.

The leverage ratio also determines pricing under the Credit Agreement. At the Borrower’s option, borrowings under the revolving credit facility accrue interest at a rate equal to either LIBOR or a specified base rate plus an applicable margin. The applicable margin is linked to the leverage ratio. The margins range from 2.00% to 2.50% per annum for LIBOR loans and 1.00% to 1.50% per annum for base rate loans. The revolving credit facility is subject to a commitment fee payable on the unused revolving credit facility commitments ranging from 0.25% to 0.35%, depending on the Borrower’s leverage ratio. As of June 30, 2022 the Company’s unused commitment rate was 0.25%. The Borrower is also required to pay certain fees to the administrative agent and letter of credit issuers under the revolving credit facility. During the term of the revolving credit facility, the Borrower may borrow, repay and re-borrow amounts available under the revolving credit facility, subject to voluntary reductions of the swing line, letter of credit and revolving credit commitments.

Convertible Senior Notes

On September 14, 2021, the Company issued an aggregate of $750 million in principal amount of its 1.25% Convertible Senior Notes due 2026 (the “Notes”). The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of September 14, 2021, between the Company and U.S. Bank National Association, as trustee. Pursuant to the purchase agreement between the Company and the initial purchasers of the Notes, the Company granted the initial purchasers an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes were first issued, up to an additional $100 million principal amount of Notes. The Notes issued on September 14, 2021 include the $100 million principal amount of Notes issued pursuant to the full exercise by the initial purchasers of such option.

The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.

The Notes accrue interest at a rate of 1.25% per annum, payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022. The Notes mature on October 1, 2026, unless earlier repurchased, redeemed or converted. Before April 1, 2026, noteholders have the right to convert their Notes only upon the occurrence of certain events. From and after April 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The initial conversion rate is 31.4859 shares of common stock per $1,000 principal amount of Notes, which represents an initial conversion price of approximately $31.76 per share of common stock. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

The Notes are redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after October 6, 2024, and on or before the 40th scheduled trading day immediately before the maturity date, but only if certain liquidity conditions are satisfied and the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding notes unless at least $100.0 million aggregate principal amount of notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice. The redemption price will be a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to a 30-day cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company’s failure to convert a Note upon the exercise of the conversion right with respect to such Note, subject to a three business-day cure period; (iv) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given in accordance with the Indenture; (vi) certain defaults by the Company or any of its subsidiaries with respect to indebtedness for money borrowed of at least $45,000,000; (vii) the rendering of certain judgments against the Company or any of its significant subsidiaries for the payment of at least $45,000,000, where such judgments are not discharged or stayed within 60 days after the date on which the right to appeal has expired or on which all rights to appeal have been extinguished and (viii) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its significant subsidiaries.

If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding, by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding to become due and payable immediately. However, notwithstanding the foregoing, the Company may elect, at its option, that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 180 days at a specified rate per annum not exceeding 1.00% on the principal amount of the Notes.

The Notes were issued to the initial purchasers of such Notes in transactions not involving any public offering in reliance upon Section 4(a)(2) of the Securities Act. The Notes were resold by the initial purchasers to persons whom the initial purchasers reasonably believe are “qualified institutional buyers,” as defined in, and in accordance with, Rule 144A under the Securities Act.

The total amount of debt issuance costs of $21.3 million was recorded as a reduction to “Convertible senior notes, net” in the Company’s Condensed Consolidated Balance Sheets and are being amortized as interest expense over the term of the Notes using the effective interest method. During the three and six months ended June 30, 2022, the Company recognized $1.1 million and $2.1 million in interest expense related to the amortization of the debt issuance costs related to the Notes, respectively. There was no such expense related to the Notes in the three and six months ended June 30, 2021.

The following is a summary of the Company’s Notes as of June 30, 2022:

							Fair Value
(in thousands)	Principal Amount		Unamortized Issuance Costs		Net Carrying Value		Amount		Level
1.25% Convertible Notes due 2026	$	750,000	$	17,972	$	732,028	$	602,250	Level 2

The Notes are carried at face value less the unamortized debt issuance costs on the Company’s Consolidated Balance Sheets. As of June 30, 2022, the estimated fair value of the Notes was approximately $602 million. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on June 30, 2022.

As of June 30, 2022, the remaining life of the Notes is approximately 4.3 years.

Capped Call Transactions

On September 9, 2021, in connection with the pricing of the offering of Notes, the Company entered into privately negotiated capped call transactions (the “Base Capped Call Transactions”) with Bank of Montreal, Credit Suisse Capital LLC, Deutsche Bank AG, London Branch, Goldman Sachs & Co. LLC, JPMorgan Chase Bank, National Association, Mizuho Markets Americas LLC and Wells Fargo Bank, National Association (the “Option Counterparties”). In addition, on September 10, 2021, in connection with the initial purchasers’ exercise of their option to purchase additional Notes, the Company entered into additional capped call transactions (the “Additional Capped Call Transactions,” and, together with the Base Capped Call Transactions, the “Capped Call Transactions”) with each of the Option Counterparties. The Capped Call Transactions cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the Notes, and are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The cap price of the Capped Call Transactions is initially $47.94, which represents a premium of 100% over the last reported sale price of the Company’s common stock on September 9, 2021. The cost of the Capped Call Transactions was approximately $90.2 million.

The Capped Call Transactions are separate transactions, each between the Company and the applicable Option Counterparty, and are not part of the terms of the Notes and do not affect any holder’s rights under the Notes or the Indenture. Holders of the Notes will not have any rights with respect to the Capped Call Transactions.

Business Combination

In connection with the Closing of the Business Combination, all of HydraFacial’s existing debt under its credit facilities were repaid and its credit facilities were extinguished. The related write-off of the deferred financing costs totaled $2.3 million and prepayment penalties totaled $2.0 million in 2021. Both are included in the Other expense (income), net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Deferred financing costs expense prior to the Closing of the Business Combination for the three and six months ended June 30, 2021 amounted to $0.1 million and $0.5 million and is included in Interest expense, net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

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Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax expense for the three months and six months ended June 30, 2022 is $0.1 million and $2.7 million, respectively

The income tax benefit for the three and six months ended June 30, 2021 is $1.9 million and $2.2 million, respectively.

The effective tax rate for the three and six months ended June 30, 2022 is 0.95% and 6.24%, which is lower than the federal statutory rate of 21.0% primarily due to the exclusion of book income from the revaluation of warrant liabilities and adjustments for various non-deductible expenses for officer’s compensation and meals and entertainment.

The effective tax rate for the three and six months ended June 30, 2021 is 1.32% and 1.50%, which is lower than the federal statutory rate of 21.0% primarily due to the increase in valuation allowance and non-deductible expense related to stock-based compensation and meals and entertainment.

The Company has established a valuation allowance against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized. In determining whether deferred tax assets are realizable, the Company considered numerous factors including historical profitability, the amount of future taxable income and the existence of taxable temporary differences that can be used to realize deferred tax assets.

Additionally, the Company applies ASC 740, the accounting standard governing uncertainty in income taxes that prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return. The Company has gross unrecognized tax benefits of $0.2 million and $0.1 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

On March 11, 2021 the United States enacted the American Rescue Plan Act of 2021 (“American Rescue Plan”). The American Rescue Plan includes various income and payroll tax measures. The Company does not expect a material impact of the American Rescue Plan on the Company’s Condensed Consolidated Financial Statements and related disclosures.

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Equity-Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Equity-Based Compensation

Equity-Based Compensation

Compensation expense attributable to net stock-based compensation was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	207		150		433		152
Selling and marketing	2,019		343		4,833		349
Research and development	277		33		387		33
General and administrative	3,875		2,982		7,774		3,008
Stock-based compensation expense	$	6,378	$	3,508	$	13,427	$	3,542

Restricted Stock Units (“RSUs”) and Performance-based restricted stock units (“PSUs”)

The following table summarizes the Company’s equity award activity for the six months ended June 30, 2022:

			Weighted Average Grant Date Fair Value
	RSUs	PSUs	RSUs		PSUs
Outstanding - January 1, 2022	380,775	975,000	$	25.88	$	11.39
Granted	2,501,324	1,488,770	13.82		10.02
Vested	(122,952)	—	24.27		—
Forfeited	(227,889)	(209,738)	15.76		14.30
Outstanding - June 30, 2022	2,531,258	2,254,032	14.95		10.22

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2022:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding - January 1, 2022	6,785,020	$	15.64
Granted	10,500	22.68
Exercised	—	—
Unvested Forfeited	(813,850)	17.78
Outstanding - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)
Options Exercisable	1,227,750	$	13.45	8.60	$	(727)
Options vested and expected to vest - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)

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Commitments and Contingencies	6 Months Ended
	Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and ContingenciesFrom time to time the Company may be involved in claims, legal actions and governmental proceedings that arise from its business operations. As of June 30, 2022, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, that it believes would have a material adverse effect on its business, financial condition or results of operations.

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Concentrations

6 Months Ended

Jun. 30, 2022

Risks and Uncertainties [Abstract]

Concentrations

Concentrations

As of June 30, 2022, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

As of December 31, 2021, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

No single customer accounted for 10% or more of consolidated Net sales during the three and six months ended June 30, 2022 and June 30, 2021.

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Related-Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

Investor Rights Agreement

In connection with the consummation of the Business Combination, on May 4, 2021, the Company and LCP Edge Holdco, LLC entered into that certain Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, LCP has the right to designate a number of directors for appointment or election to the Company’s board of directors as follows: (i) one director for so long as LCP holds at least 10% of the outstanding Class A Common Stock, (ii) two directors for so long as LCP holds at least 15% of the outstanding Class A Common Stock, and (iii) three directors for so long as LCP holds at least 40% of the outstanding Class A Common Stock. Pursuant to the Investor Rights Agreement, for so long as LCP holds at least 10% of the outstanding Class A Common Stock, LCP will be entitled to have at least one of its designees represented on the compensation committee and nominating committee and corporate governance committee of the Company’s board of directors.

Miami Beach Office

The Company maintains an office in Miami Beach, Florida, whereby the Company, on a monthly basis, reimburses an entity owned by the Company’s Executive Chairman that makes such office available to the Company for its employees and affiliates. Expense for this property was not material for the six months ended June 30, 2022. No such expenses existed for the six months ended June 30, 2021.

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Stockholders’ Deficit

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Stockholders’ Deficit

Stockholders’ Deficit

Common Stock

The Company is authorized to issue 320,000,000 shares of Class A Common Stock, par value of $0.0001 per share. Holders of Class A Common Stock are entitled to one vote for each share. As of June 30, 2022 and December 31, 2021, there were 150,855,025 and 150,598,047, respectively, of Class A Common Stock issued and outstanding. The Class A Common Stock is entitled to one vote per share and all shares are outstanding. The Company has not declared or paid any dividends with respect to its Class A Common Stock.

In connection with the Business Combination on May 4, 2021, the Company issued 35,000,000 shares of Class A Common Stock to certain qualified institutional buyers and accredited investors that agreed to purchase such shares in connection with the Business Combination for aggregate consideration of $350 million. The Company also issued 35,501,743 shares of Class A Common Stock as partial compensation to the HydraFacial Stockholders for the Business Combination.

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. At June 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.

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Segment Reporting

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company manages its business on the basis of one operating segment and one reportable segment. As a result, the chief operating decision maker, who is the Chief Executive Officer, decides how to allocate resources and assess performance, reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocates resources and evaluates financial performance.

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Americas	$	75,354	$	42,660	$	119,960	$	73,940
Asia-Pacific	10,386		12,440		23,287		21,231
Europe, the Middle East and Africa	17,796		11,408		35,704		18,879
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

As of June 30, 2022 and December 31, 2021 substantially all of the Company’s property, plant and equipment were held in the United States.

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Net Income (Loss) Attributable to Common Shareholders

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Net Income (Loss) Attributable to Common Shareholders

Net Income (Loss) Attributable to Common Shareholders

The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income (loss) available to common shareholders - basic	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Plus: Income on Private placement warrants	(15,185)		—		(67,237)		—
Net income (loss) available to common shareholders - diluted	$	(7,254)	$	(139,378)	$	(26,799)	$	(142,652)
Weighted average common shares outstanding - basic	150,731,491		91,798,837		150,665,166		63,805,807
Effect of dilutive shares:
Private placement warrants	987,960		—		1,609,228		—
Weighted average common shares outstanding - diluted	151,719,451		91,798,837		152,274,394		63,805,807
Basic net income (loss) per share:	$	0.05	$	(1.52)	$	0.27	$	(2.24)
Diluted net income (loss) per share	$	(0.05)	$	(1.52)	$	(0.18)	$	(2.24)

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Convertible Notes	23,614,425	—	23,614,425	—
RSUs	2,531,258	—	2,531,258	—
PSUs	2,254,032	129,231	2,254,032	64,972
Stock Options	5,981,670	4,769,062	5,981,670	2,411,280
Public and Private Warrants	—	15,450,549	—	7,767,956

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Subsequent Events	6 Months Ended
	Jun. 30, 2022
Subsequent Events [Abstract]
Subsequent Events	Subsequent EventsOther than as disclosed elsewhere, no subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the accompanying notes.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

New Accounting Pronouncements Not Yet Adopted

New Accounting Pronouncements Not Yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2021-08, Business Combinations (Topic 805), which primarily relates to the accounting for contract assets and contract liabilities from contracts with customers in a business combination. The standard will be effective for annual reporting periods beginning after December 31, 2022, including interim reporting periods within those periods, with early adoption permitted. We are currently evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

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Business Combinations and Asset Acquisitions (Tables)

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Schedule of reverse recapitalization

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

(in thousands)	Recapitalization
Cash in trust, net of redemptions	$	433,382
Cash — PIPE	350,000
Less: Cash paid out to Former Parent	(367,870)
Less: Transaction costs and advisory fees	(56,976)
Less: Cash paid out from net working capital adjustment related to acquisitions	(902)
Net Cash Received from Business Combination	$	357,634

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

	Number of Shares
Class A common stock outstanding prior to Business Combination	46,000,000
Less: Redemption of Vesper Class A Common Stock	(2,672,690)
Class A common stock of Vesper	43,327,310
Founder shares (Vesper Class B Common Stock)	11,500,000
PIPE Shares	35,000,000
Business Combination and PIPE shares	89,827,310
Legacy HydraFacial shares (1)	35,501,743
Working capital adjustment Class A Common Stock issued	70,860
Total Shares of Class A Common Stock after Business Combination	125,399,913

_______________

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

Summary of assets acquired at fair value

The following table summarizes the consideration and fair values assigned to the assets acquired and liabilities

assumed at the dates of acquisition for the Wigmore, Ecomedic and Sidermica acquisitions and summarizes the HTL acquisition after measurement period adjustments.

(in thousands)	HTL		Wigmore (2)		Ecomedic (3)		Sidermica (4)
Consideration paid:
Cash, net of cash acquired	$	4,920	$	2,540	$	11,338	$	6,861
Class A Common Stock issued (1)	1,557		456		6,513		815
Trade receivables due from seller	1,027		2,336		1,679		1,581
Notes payable to seller	—		—		2,153		—
	$	7,504	$	5,332	$	21,683	$	9,257
Identifiable assets acquired and liabilities assumed
Accounts receivable	$	1,110	$	2,079	$	15	$	1,657
Non-compete agreement	100		60		588		100
Customer relationships	2,696		2,276		5,487		2,700
Inventory and other assets	354		341		1,262		454
Accounts payable	(45)		(456)		(772)		—
Deferred tax liabilities, net	(675)		(842)		(2,008)		—
Accrued and other liabilities	(802)		(317)		(340)		—
Total identifiable net assets	2,738		3,141		4,232		4,911
Goodwill	$	4,766	$	2,191	$	17,451	$	4,346

___________

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

(2)    During the fourth quarter of 2021, adjustments were made to the Wigmore valuation pertaining to contingent consideration and intangible assets. Goodwill was adjusted due to an increase of $0.3 million in contingent consideration and a decrease of $1.0 million in intangible assets. Contingent consideration payments for the Wigmore acquisition were paid during the three months ended March 31, 2022.

(3)    During the first quarter of 2022, adjustments were made to the Ecomedic valuation pertaining to acquisition date tax liability. Goodwill was adjusted due to an increase of $0.2 million to acquisition date tax liability.     

(4)    During the second quarter of 2022, adjustments were made to the Sidermica valuation pertaining to contingent consideration. Goodwill was adjusted due to an increase in contingent consideration of $1.98 million. Contingent consideration payments for the Sidermica acquisition were paid during the three months ended June 30, 2022.

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Net Sales
Delivery Systems	$	64,783	$	34,944	$	106,430	$	60,616
Consumables	38,753		31,564		72,521		53,434
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Schedule of inventory

Inventories consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Raw materials	$	19,008	$	12,024
Finished goods	54,518		23,237
Total inventories	$	73,526	$	35,261

Schedule of accrued payroll-related expenses

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Accrued compensation	$	10,935	$	15,262
Accrued payroll taxes	2,448		922
Accrued benefits	3,976		3,022
Accrued sales commissions	10,427		9,456
Total accrued payroll-related expenses	$	27,786	$	28,662

Schedule of accrued expenses

Other accrued expenses consist of the following as of the periods indicated:

(in thousands)	June 30, 2022		December 31, 2021
Sales and VAT tax payables	$	5,840	$	5,817
Accrued interest	2,344		2,786
Contingent consideration	—		783
Note payable due seller	2,125		2,153
Royalty liabilities	1,024		1,074
Other	4,052		2,109
Total other accrued expenses	$	15,385	$	14,722

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on recurring basis

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. As of the Business Combination date, the Private Placement Warrants were valued using the Public Warrant Price, and was considered to be a Level 2 financial instrument as of that date. As of June 30, 2022, the value of the Private Placement Warrants was determined using their redemption value because these Private Placement Warrants are subject to redemption if the reference value of the common stock, as defined, is between $10.00 and $18.00 per share. The Private Placement Warrants are classified as a Level 2 financial instrument. There were no Public Warrants outstanding as of June 30, 2022. There were no valuation level transfers during the six months ended June 30, 2022.

	Fair Value Measurements on a Recurring Basis
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents:
Money market funds	$	768,575	$	—	$	—	$	768,575
Liabilities
Warrant liability — Private Placement Warrants	—		26,579		—		26,579

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Property and Equipment, net (Tables)

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

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

(in thousands)	Useful life (years)	June 30, 2022		December 31, 2021
Furniture and fixtures	2-7	$	4,891	$	4,074
Computers and equipment	3-5	4,975		4,010
Machinery and equipment	2-5	5,288		3,669
Autos and trucks	5	1,184		1,163
Tooling	5	1,837		1,389
Leasehold improvements	Shorter of remaining lease term or estimated useful life	10,438		5,086
Total property and equipment		28,613		19,391
Less: accumulated depreciation and amortization		(11,434)		(8,561)
Construction in progress		862		5,353
Property and equipment, net		$	18,041	$	16,183

Depreciation expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	591	$	321	$	1,005	$	626
General and administrative	861		407		1,536		792
Selling and marketing	400		—		727		—
Total depreciation expense	$	1,852	$	728	$	3,268	$	1,418

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Goodwill and Intangible Assets, net (Tables)

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of June 30, 2022 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,012	$	(3,781)	$	6,231	15
Non-compete agreement	758		(538)		220		3
Customer relationships	17,821		(5,607)		12,214		5-10
Developed technology	73,188		(49,610)		23,578		3-8
Patents	2,034		(355)		1,679		3-19
Capitalized software	11,154		(3,874)		7,280		3-5
Total intangible assets	$	114,967	$	(63,765)	$	51,202

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of December 31, 2021 were as follows:

(in thousands)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Estimated Useful Life (Years)
Trademarks	$	10,048	$	(3,442)	$	6,606	15
Non-compete agreement	809		(139)		670		3
Customer relationships	18,625		(4,391)		14,234		5-10
Developed technology	70,900		(45,051)		25,849		8
Patents	2,050		(295)		1,755		3-19
Capitalized software	9,867		(2,971)		6,896		3-5
Total intangible assets	$	112,299	$	(56,289)	$	56,010

Schedule of intangible assets amortization expense

Amortization expense was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	$	2,378	$	2,233	$	4,619	$	4,464
General and administrative	796		466		1,498		968
Selling and marketing	619		235		1,254		423
Total amortization expense	$	3,793	$	2,934	$	7,371	$	5,855

Schedule of goodwill

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

	Six Months Ended June 30,
(in thousands)	2022		2021
Beginning balance	$	123,694	$	98,531
Measurement period adjustments	2,154		4,766
Foreign currency translation impact	(1,815)		(197)
Ending balance	$	124,033	$	103,100

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Long-term Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of long-term debt

The following is a summary of the Company’s Notes as of June 30, 2022:

							Fair Value
(in thousands)	Principal Amount		Unamortized Issuance Costs		Net Carrying Value		Amount		Level
1.25% Convertible Notes due 2026	$	750,000	$	17,972	$	732,028	$	602,250	Level 2

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Equity-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of share based compensation

Compensation expense attributable to net stock-based compensation was as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Cost of sales	207		150		433		152
Selling and marketing	2,019		343		4,833		349
Research and development	277		33		387		33
General and administrative	3,875		2,982		7,774		3,008
Stock-based compensation expense	$	6,378	$	3,508	$	13,427	$	3,542

Schedule of unvested share activity

The following table summarizes the Company’s equity award activity for the six months ended June 30, 2022:

			Weighted Average Grant Date Fair Value
	RSUs	PSUs	RSUs		PSUs
Outstanding - January 1, 2022	380,775	975,000	$	25.88	$	11.39
Granted	2,501,324	1,488,770	13.82		10.02
Vested	(122,952)	—	24.27		—
Forfeited	(227,889)	(209,738)	15.76		14.30
Outstanding - June 30, 2022	2,531,258	2,254,032	14.95		10.22

Schedule of stock option activity

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2022:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding - January 1, 2022	6,785,020	$	15.64
Granted	10,500	22.68
Exercised	—	—
Unvested Forfeited	(813,850)	17.78
Outstanding - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)
Options Exercisable	1,227,750	$	13.45	8.60	$	(727)
Options vested and expected to vest - June 30, 2022	5,981,670	$	15.36	8.89	$	(14,967)

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Summary of net sales by geographic region

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Americas	$	75,354	$	42,660	$	119,960	$	73,940
Asia-Pacific	10,386		12,440		23,287		21,231
Europe, the Middle East and Africa	17,796		11,408		35,704		18,879
Total net sales	$	103,536	$	66,508	$	178,951	$	114,050

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Net Income (Loss) Attributable to Common Shareholders (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Schedule of basic and diluted earnings per share

The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share amounts)	2022		2021		2022		2021
Net income (loss) available to common shareholders - basic	$	7,931	$	(139,378)	$	40,438	$	(142,652)
Plus: Income on Private placement warrants	(15,185)		—		(67,237)		—
Net income (loss) available to common shareholders - diluted	$	(7,254)	$	(139,378)	$	(26,799)	$	(142,652)
Weighted average common shares outstanding - basic	150,731,491		91,798,837		150,665,166		63,805,807
Effect of dilutive shares:
Private placement warrants	987,960		—		1,609,228		—
Weighted average common shares outstanding - diluted	151,719,451		91,798,837		152,274,394		63,805,807
Basic net income (loss) per share:	$	0.05	$	(1.52)	$	0.27	$	(2.24)
Diluted net income (loss) per share	$	(0.05)	$	(1.52)	$	(0.18)	$	(2.24)

Schedule of antidilutive securities excluded from earnings per share computation

The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

	Three Months Ended June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Convertible Notes	23,614,425	—	23,614,425	—
RSUs	2,531,258	—	2,531,258	—
PSUs	2,254,032	129,231	2,254,032	64,972
Stock Options	5,981,670	4,769,062	5,981,670	2,411,280
Public and Private Warrants	—	15,450,549	—	7,767,956

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Description of Business (Details) - $ / shares	Jun. 30, 2022	Dec. 31, 2021	May 04, 2021	May 03, 2021
Business Acquisition [Line Items]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001		$ 0.0001
HydraFacial
Business Acquisition [Line Items]
Reverse recapitalization, ownership percentage			100.00%
Hydrate Merger Sub I, Inc.
Business Acquisition [Line Items]
Reverse recapitalization, ownership percentage			100.00%
Hydrate Merger Sub II, LLC
Business Acquisition [Line Items]
Reverse recapitalization, ownership percentage			100.00%

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Business Combinations and Asset Acquisitions- Narrative (Details) $ / shares in Units, $ in Thousands				1 Months Ended	6 Months Ended		12 Months Ended
	Apr. 12, 2022 USD ($) shares	May 04, 2021 USD ($) $ / shares shares	May 03, 2021 USD ($) shares	Jul. 01, 2021 USD ($)	Jun. 30, 2022 USD ($) shares	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) shares
Business Acquisition [Line Items]
Consideration received on transaction		$ 350,000
Common stock, conversion ratio			1
Common stock, shares issued (in shares) | shares					150,855,025		150,598,047
Common stock, shares outstanding (in shares) | shares		125,399,913	54,358		150,855,025		150,598,047
Gross consideration received		$ 783,000
Cash acquired from trust account		433,000					$ 433,382
Cash consideration paid to stockholders		368,000					367,870
Payment of transaction costs		$ 57,000					56,976
Legacy HydraFacial shares (in shares) | shares		35,501,743
Cash paid out for WC Adjustment		$ 900					$ 902
Working capital adjustment Class A Common Stock issued (in shares) | shares		70,860
Cash paid for business acquisitions, net of cash acquired					$ 0	$ 4,920
Cash paid for asset acquisition					$ 1,475	$ 0
Mxt
Business Acquisition [Line Items]
Weighted average amortization period	3 years
Cash paid for asset acquisition	$ 1,500
Asset acquisition, equity consideration	$ 500
Asset acquisition, equity consideration (in shares) | shares	28,733
Asset acquisition, contingent consideration (up to)	$ 30,000
Intangible assets acquired	1,900
Inventory acquired	$ 100
Class A common stock
Business Acquisition [Line Items]
Consideration received on transaction (in shares) | shares		35,000,000
Stock purchase price (in dollars per share) | $ / shares		$ 10.00
Consideration received on transaction		$ 350,000
Stock redeemed (in shares) | shares		2,672,690
Stock redeemed, price (in dollars per share) | $ / shares		$ 10.00
Stock redeemed, value		$ 26,700
Common stock, shares issued (in shares) | shares		125,329,053
Common stock, shares outstanding (in shares) | shares		125,329,053
Legacy HydraFacial shares (in shares) | shares		35,501,743
Class B Common Stock
Business Acquisition [Line Items]
Consideration received on transaction (in shares) | shares			11,500,000
Consideration received on transaction			$ 25
HTL, Wigmore, Ecomedic and Sidermica acquisitions
Business Acquisition [Line Items]
Cash paid for business acquisitions, net of cash acquired				$ 23,700
HTL, Wigmore, Ecomedic and Sidermica acquisitions | Customer relationships
Business Acquisition [Line Items]
Weighted average amortization period					5 years
HTL, Wigmore, Ecomedic and Sidermica acquisitions | Non-compete agreement
Business Acquisition [Line Items]
Weighted average amortization period					3 years

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Business Combinations and Asset Acquisitions - Schedule of reverse recapitalization consideration (Details) - USD ($) $ in Thousands		12 Months Ended
	May 04, 2021	Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]
Cash in trust, net of redemptions	$ 433,000	$ 433,382
Cash — PIPE		350,000
Less: Cash paid out to Former Parent	(368,000)	(367,870)
Less: Transaction costs and advisory fees	(57,000)	(56,976)
Less: Cash paid out from net working capital adjustment related to acquisitions	$ (900)	(902)
Net Cash Received from Business Combination		$ 357,634

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Business Combinations and Asset Acquisitions - Schedule of reverse recapitalization shares issued (Details)	May 04, 2021 shares	May 03, 2021 shares	Jun. 30, 2022 shares	Dec. 31, 2021 shares
Reverse Recapitalization [Line Items]
Common stock, shares outstanding (in shares)	125,399,913	54,358	150,855,025	150,598,047
PIPE Shares	35,000,000
Business Combination and PIPE shares	89,827,310
Legacy HydraFacial shares (in shares)	35,501,743
Working capital adjustment Class A Common Stock issued (in shares)	70,860
Recapitalization exchange ratio (in shares)	653.109
Common shareholders
Reverse Recapitalization [Line Items]
Business combination shares (in shares)	43,327,310
Vesper Founders
Reverse Recapitalization [Line Items]
Business combination shares (in shares)	11,500,000
Vesper
Reverse Recapitalization [Line Items]
Common stock, shares outstanding (in shares)		46,000,000
Less: Redemption of Vesper Class A common stock (in shares)		(2,672,690)

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Business Combinations and Asset Acquisitions - Summary of assets acquired at fair value (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2020
Consideration paid:
Cash, net of cash acquired		$ 0	$ 4,920
Identifiable assets acquired and liabilities assumed
Goodwill	$ 123,694	124,033	103,100	$ 98,531
Measurement period adjustments		2,154	$ 4,766
HTL
Consideration paid:
Cash, net of cash acquired		4,920
Class A Common Stock issued		1,557
Trade receivables due from seller		1,027
Notes payable to seller		0
Total consideration		7,504
Identifiable assets acquired and liabilities assumed
Accounts receivable		1,110
Inventory and other assets		354
Accounts payable		(45)
Deferred tax liabilities, net		(675)
Accrued and other liabilities		(802)
Total identifiable net assets		2,738
Goodwill		$ 4,766
Equity consideration (in shares)		110,726
HTL | Non-compete agreement
Identifiable assets acquired and liabilities assumed
Intangible assets		$ 100
HTL | Customer relationships
Identifiable assets acquired and liabilities assumed
Intangible assets		2,696
Wigmore
Consideration paid:
Cash, net of cash acquired		2,540
Class A Common Stock issued		456
Trade receivables due from seller		2,336
Notes payable to seller		0
Total consideration		5,332
Identifiable assets acquired and liabilities assumed
Accounts receivable		2,079
Inventory and other assets		341
Accounts payable		(456)
Deferred tax liabilities, net		(842)
Accrued and other liabilities		(317)
Total identifiable net assets		3,141
Goodwill		$ 2,191
Equity consideration (in shares)		28,157
Contingent consideration	300
Decrease to intangible assets	$ 1,000
Wigmore | Non-compete agreement
Identifiable assets acquired and liabilities assumed
Intangible assets		$ 60
Wigmore | Customer relationships
Identifiable assets acquired and liabilities assumed
Intangible assets		2,276
Ecomedic (3)
Consideration paid:
Cash, net of cash acquired		11,338
Class A Common Stock issued		6,513
Trade receivables due from seller		1,679
Notes payable to seller		2,153
Total consideration		21,683
Identifiable assets acquired and liabilities assumed
Accounts receivable		15
Inventory and other assets		1,262
Accounts payable		(772)
Deferred tax liabilities, net		(2,008)
Accrued and other liabilities		(340)
Total identifiable net assets		4,232
Goodwill		$ 17,451
Equity consideration (in shares)		401,021
Measurement period adjustments		$ 200
Ecomedic (3) | Non-compete agreement
Identifiable assets acquired and liabilities assumed
Intangible assets		588
Ecomedic (3) | Customer relationships
Identifiable assets acquired and liabilities assumed
Intangible assets		5,487
Sidermica
Consideration paid:
Cash, net of cash acquired		6,861
Class A Common Stock issued		815
Trade receivables due from seller		1,581
Notes payable to seller		0
Total consideration		9,257
Identifiable assets acquired and liabilities assumed
Accounts receivable		1,657
Inventory and other assets		454
Accounts payable		0
Deferred tax liabilities, net		0
Accrued and other liabilities		0
Total identifiable net assets		4,911
Goodwill		$ 4,346
Equity consideration (in shares)		50,195
Measurement period adjustments		$ 1,980
Sidermica | Non-compete agreement
Identifiable assets acquired and liabilities assumed
Intangible assets		100
Sidermica | Customer relationships
Identifiable assets acquired and liabilities assumed
Intangible assets		$ 2,700

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Net sales	$ 103,536	$ 66,508	$ 178,951	$ 114,050
Delivery Systems
Disaggregation of Revenue [Line Items]
Net sales	64,783	34,944	106,430	60,616
Consumables
Disaggregation of Revenue [Line Items]
Net sales	$ 38,753	$ 31,564	$ 72,521	$ 53,434

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Balance Sheet Components - Schedule of inventory (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Raw materials	$ 19,008	$ 12,024
Finished goods	54,518	23,237
Total inventories	$ 73,526	$ 35,261

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Balance Sheet Components - Schedule of accrued payroll-related expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Accrued compensation	$ 10,935	$ 15,262
Accrued payroll taxes	2,448	922
Accrued benefits	3,976	3,022
Accrued sales commissions	10,427	9,456
Total accrued payroll-related expenses	$ 27,786	$ 28,662

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Balance Sheet Components - Schedule of accrued expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Sales and VAT tax payables	$ 5,840	$ 5,817
Accrued interest	2,344	2,786
Contingent consideration	0	783
Note payable due seller	2,125	2,153
Royalty liabilities	1,024	1,074
Other	4,052	2,109
Total other accrued expenses	$ 15,385	$ 14,722

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Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Lessee, Lease, Description [Line Items]
Right-of-use assets, net	$ 15,791	$ 14,992
Experience center
Lessee, Lease, Description [Line Items]
Right-of-use assets, net	1,100
Operating lease liability	1,100
Office
Lessee, Lease, Description [Line Items]
Right-of-use assets, net	1,600
Operating lease liability	$ 1,600

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Fair Value Measurements - Narrative (Details) $ / shares in Units, $ in Millions	Nov. 03, 2021 USD ($) $ / shares shares	May 04, 2021 shares	Jun. 30, 2022 shares
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Stock issued upon conversion (in shares)		11,500,000
Minimum | Level 2 | Exercise price | Monte Carlo simulation
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, measurement input			10.00
Maximum | Level 2 | Exercise price | Monte Carlo simulation
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant, measurement input			18.00
Public warrants
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrants outstanding (in shares)			0
Warrant redemption price (in dollars per share) | $ / shares	$ 0.10
Warrants exercised (in shares)	16,200,000
Warrants exercised, cash (in shares)	16,100,000
Warrants, exercise price (in dollars per share) | $ / shares	$ 11.50
Warrants exercised, cashless basis (in shares)	74,104
Stock issued upon conversion (in shares)	26,732
Warrants redeemed (in shares)	75,016
Proceeds from exercise of warrants | $	$ 185.4
Public warrants, initial public offer
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrants exercised (in shares)	15,300,000
Public warrants, converted from private warrant sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrants exercised (in shares)	900,000
Private placement warrants
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrants outstanding (in shares)			7,000,000
Warrants exercised (in shares)	300,000
Proceeds from exercise of warrants | $	$ 3.0

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Fair Value Measurements - Schedule of assets and liabilities measured at fair value on recurring basis (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Liabilities
Warrant liabilities	$ 26,579	$ 93,816
Recurring | Money market funds
Assets
Money market funds	768,575
Recurring | Private placement warrants
Liabilities
Warrant liabilities	26,579
Level 1 | Recurring | Money market funds
Assets
Money market funds	768,575
Level 1 | Recurring | Private placement warrants
Liabilities
Warrant liabilities	0
Level 2 | Recurring | Money market funds
Assets
Money market funds	0
Level 2 | Recurring | Private placement warrants
Liabilities
Warrant liabilities	26,579
Level 3 | Recurring | Money market funds
Assets
Money market funds	0
Level 3 | Recurring | Private placement warrants
Liabilities
Warrant liabilities	$ 0

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Property and Equipment, net (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation and amortization	$ (11,434)		$ (11,434)		$ (8,561)
Property and equipment, net	18,041		18,041		16,183
Depreciation of property and equipment	1,852	$ 728	3,268	$ 1,418
Cost of sales
Property, Plant and Equipment [Line Items]
Depreciation of property and equipment	591	321	1,005	626
General and administrative
Property, Plant and Equipment [Line Items]
Depreciation of property and equipment	861	407	1,536	792
Selling and marketing
Property, Plant and Equipment [Line Items]
Depreciation of property and equipment	400	$ 0	727	$ 0
Depreciable property and equipment
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	28,613		28,613		19,391
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	4,891		$ 4,891		4,074
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
Useful life (years)			2 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
Useful life (years)			7 years
Computers and equipment
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	4,975		$ 4,975		4,010
Computers and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life (years)			3 years
Computers and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life (years)			5 years
Machinery and equipment
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	5,288		$ 5,288		3,669
Machinery and equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life (years)			2 years
Machinery and equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life (years)			5 years
Autos and trucks
Property, Plant and Equipment [Line Items]
Useful life (years)			5 years
Plant and equipment, including finance lease, gross	1,184		$ 1,184		1,163
Tooling
Property, Plant and Equipment [Line Items]
Useful life (years)			5 years
Plant and equipment, including finance lease, gross	1,837		$ 1,837		1,389
Leasehold improvements
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	10,438		10,438		5,086
Construction in progress
Property, Plant and Equipment [Line Items]
Plant and equipment, including finance lease, gross	$ 862		$ 862		$ 5,353

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Goodwill and Intangible Assets, net - Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	$ 114,967		$ 114,967		$ 112,299
Accumulated Amortization	(63,765)		(63,765)		(56,289)
Net Carrying Value	51,202		51,202		56,010
Amortization expense	3,793	$ 2,934	7,371	$ 5,855
Cost of sales
Finite-Lived Intangible Assets [Line Items]
Amortization expense	2,378	2,233	4,619	4,464
Selling and marketing
Finite-Lived Intangible Assets [Line Items]
Amortization expense	796	466	1,498	968
General and administrative
Finite-Lived Intangible Assets [Line Items]
Amortization expense	619	$ 235	1,254	$ 423
Trademarks
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	10,012		10,012		10,048
Accumulated Amortization	(3,781)		(3,781)		(3,442)
Net Carrying Value	6,231		$ 6,231		$ 6,606
Estimated Useful Life (Years)			15 years		15 years
Non-compete agreement
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	758		$ 758		$ 809
Accumulated Amortization	(538)		(538)		(139)
Net Carrying Value	220		$ 220		$ 670
Estimated Useful Life (Years)			3 years		3 years
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	17,821		$ 17,821		$ 18,625
Accumulated Amortization	(5,607)		(5,607)		(4,391)
Net Carrying Value	12,214		$ 12,214		$ 14,234
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			5 years		5 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			10 years		10 years
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	73,188		$ 73,188		$ 70,900
Accumulated Amortization	(49,610)		(49,610)		(45,051)
Net Carrying Value	23,578		$ 23,578		$ 25,849
Estimated Useful Life (Years)					8 years
Developed technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			3 years
Developed technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			8 years
Patents
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	2,034		$ 2,034		$ 2,050
Accumulated Amortization	(355)		(355)		(295)
Net Carrying Value	1,679		$ 1,679		$ 1,755
Patents | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			3 years		3 years
Patents | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			19 years		19 years
Capitalized software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Value	11,154		$ 11,154		$ 9,867
Accumulated Amortization	(3,874)		(3,874)		(2,971)
Net Carrying Value	$ 7,280		$ 7,280		$ 6,896
Capitalized software | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			3 years		3 years
Capitalized software | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated Useful Life (Years)			5 years		5 years

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Goodwill and Intangible Assets, net - Goodwill (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Goodwill [Roll Forward]
Beginning balance	$ 123,694	$ 98,531
Measurement period adjustments	2,154	4,766
Foreign currency translation impact	(1,815)	(197)
Ending balance	$ 124,033	$ 103,100

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Goodwill and Intangible Assets, net - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Finite-Lived Intangible Assets [Line Items]
Increase in goodwill	$ 2,154	$ 4,766
Ecomedic (3)
Finite-Lived Intangible Assets [Line Items]
Increase in goodwill	$ 200

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Long-term Debt - Narrative (Details)				1 Months Ended	3 Months Ended		4 Months Ended	6 Months Ended		12 Months Ended
	Dec. 30, 2021 USD ($)	Sep. 14, 2021 USD ($) segment $ / shares	Sep. 09, 2021 USD ($) $ / shares	May 04, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	May 04, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Debt Instrument [Line Items]
Event of default, default interest rate, maximum		1.00%
Amortization of debt issuance costs								$ 2,114,000	$ 0
Write off of deferred finance costs										$ 2,300,000
Debt prepayment cost										$ 2,000,000
Amortization of deferred financing costs				$ 100,000			$ 500,000	0	2,806,000
Call option
Debt Instrument [Line Items]
Initial cap price (in dollars per share) | $ / shares			$ 47.94
Premium over sales price			100.00%
Cost of capped call transactions			$ 90,200,000
1.25% Convertible Senior Notes Due 2026 | Convertible debt
Debt Instrument [Line Items]
Long-term debt					$ 732,028,000			$ 732,028,000
Face amount		$ 750,000,000
Stated interest rate		1.25%			1.25%			1.25%
Accordion feature, settlement period		13 days
Accordion feature, increase limit		$ 100,000,000
Conversion ratio		0.0314859
Conversion price (in dollars per share) | $ / shares		$ 31.76
Convertible, threshold percentage of stock price trigger		130.00%
Convertible, threshold trading days | segment		20
Convertible, threshold consecutive trading days | segment		30
Convertible, minimum aggregate principal outstanding		$ 100,000,000
Event of default, cure period, interest payments		30 days
Event of default, cure period		60 days
Event of default, indebtedness threshold amount		$ 45,000,000
Event of default, minimum percent of aggregate outstanding principal due		25.00%
Event of default, default interest rate period		180 days
Debt issuance costs		$ 21,300,000
Amortization of debt issuance costs					$ 1,100,000	$ 0		$ 2,100,000	$ 0
Debt term								4 years 3 months 18 days
1.25% Convertible Senior Notes Due 2026 | Convertible debt | Level 2
Debt Instrument [Line Items]
Convertible Debt, Fair Value Disclosures					602,250,000			$ 602,250,000
Credit Agreement Due 2026 | Line of credit | Revolving credit facility
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 50,000,000
Line of credit, accordion feature	$ 50,000,000
Long-term debt					$ 0			$ 0
Leverage ratio, maximum	3.00
Fixed charge coverage ratio, minimum	1.15
Unused commitment fee percentage								0.25%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Minimum
Debt Instrument [Line Items]
Unused commitment fee percentage	0.25%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Minimum | LIBOR | Variable rate one
Debt Instrument [Line Items]
Basis spread on variable rate	2.00%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Minimum | Base rate | Variable rate two
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Maximum
Debt Instrument [Line Items]
Unused commitment fee percentage	0.35%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Maximum | LIBOR | Variable rate one
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
Credit Agreement Due 2026 | Line of credit | Revolving credit facility | Maximum | Base rate | Variable rate two
Debt Instrument [Line Items]
Basis spread on variable rate	1.50%

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Long-term Debt - Schedule of long-term debt (Details) - Convertible debt - 1.25% Convertible Senior Notes Due 2026 - USD ($) $ in Thousands	Jun. 30, 2022	Sep. 14, 2021
Debt Instrument [Line Items]
Stated interest rate	1.25%	1.25%
Principal Amount	$ 750,000
Unamortized Issuance Costs	17,972
Net Carrying Value	732,028
Level 2
Debt Instrument [Line Items]
Fair value of debt	$ 602,250

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 76	$ (1,870)	$ 2,691	$ (2,176)
Effective tax rate (as a percent)	0.95%	1.32%	6.24%	1.50%
Gross unrecognized tax benefits	$ 200	$ 100	$ 200	$ 100

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Equity Based Compensation - Summary of share based compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 6,378	$ 3,508	$ 13,427	$ 3,542
Cost of sales
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	207	150	433	152
Selling and marketing
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	2,019	343	4,833	349
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	277	33	387	33
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 3,875	$ 2,982	$ 7,774	$ 3,008

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Equity Based Compensation - Schedule of unvested share activity (Details)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
RSUs
Shares
Outstanding, beginning balance (in shares) | shares	380,775
Granted (in shares) | shares	2,501,324
Vested (in shares) | shares	(122,952)
Forfeited (in shares) | shares	(227,889)
Outstanding, ending balance (in shares) | shares	2,531,258
Weighted Average Grant Date Fair Value
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 25.88
Granted (in dollars per share) | $ / shares	13.82
Vested (in dollars per share) | $ / shares	24.27
Forfeited (in dollars per share) | $ / shares	15.76
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 14.95
PSUs
Shares
Outstanding, beginning balance (in shares) | shares	975,000
Granted (in shares) | shares	1,488,770
Vested (in shares) | shares	0
Forfeited (in shares) | shares	(209,738)
Outstanding, ending balance (in shares) | shares	2,254,032
Weighted Average Grant Date Fair Value
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 11.39
Granted (in dollars per share) | $ / shares	10.02
Vested (in dollars per share) | $ / shares	0
Forfeited (in dollars per share) | $ / shares	14.30
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 10.22

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Equity-Based Compensation - Schedule of stock option activity (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Number of Options
Outstanding, beginning balance (in shares) | shares	6,785,020
Granted (in shares) | shares	10,500
Exercised (in shares) | shares	0
Unvested forfeited (in shares) | shares	(813,850)
Outstanding, ending balance (in shares) | shares	5,981,670
Options exercisable (in shares) | shares	1,227,750
Options vested and expected to vest (in shares) | shares	5,981,670
Weighted Average Exercise Price
Outstanding, beginning balance (in dollars per share) | $ / shares	$ 15.64
Granted (in dollars per share) | $ / shares	22.68
Exercised (in dollars per share) | $ / shares	0
Unvested forfeited (in dollars per share) | $ / shares	17.78
Outstanding, ending balance (in dollars per share) | $ / shares	15.36
Options exercisable (in dollars per share) | $ / shares	13.45
Options vested and expected to vest (in dollars per share) | $ / shares	$ 15.36
Weighted Average Remaining Contractual Term and Aggregate Intrinsic Value
Options outstanding, weighted average remaining contractual term	8 years 10 months 20 days
Options exercisable, weighted average remaining contractual term	8 years 7 months 6 days
Options vested and expected to vest, weighted average remaining contractual term	8 years 10 months 20 days
Options outstanding, aggregate intrinsic value | $	$ (14,967)
Options exercisable, aggregate intrinsic value | $	(727)
Options vested and expected to vest, aggregate intrinsic value | $	$ (14,967)

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Related-Party Transactions (Details)			3 Months Ended	6 Months Ended		12 Months Ended
	May 04, 2021 USD ($) tradingDay $ / shares shares	Dec. 01, 2016 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Dec. 31, 2021 USD ($)
Related Party Transaction [Line Items]
Stock issued upon conversion (in shares) | shares	11,500,000
Payment of transaction costs	$ 57,000,000					$ 56,976,000
Private placement warrants
Related Party Transaction [Line Items]
Reverse recapitalization, contingent consideration, earnout period	30 days
Financial and management advisory services | Affiliated entity
Related Party Transaction [Line Items]
Monitoring fee, quarterly amount		$ 125,000
Monitoring fee, percentage of preceding 12-month EBITDA		1.25%
Transaction rate	1.00%
Related party, agreement term	1 year
Related party, expiration period	12 months
Transaction amount			$ 0	$ 0	$ 100,000
Payment of transaction costs				21,000,000
Financial and management advisory services | Minimum | Affiliated entity
Related Party Transaction [Line Items]
Transaction rate		1.00%
Financial and management advisory services | Maximum | Affiliated entity
Related Party Transaction [Line Items]
Transaction rate		2.00%
Miami Beach Office reimbursement expense | Affiliated entity
Related Party Transaction [Line Items]
Transaction amount				$ 0	$ 0
LCP
Related Party Transaction [Line Items]
Reverse recapitalization, threshold percentage to designate one director	10.00%
Reverse recapitalization, threshold percentage to designate two directors	15.00%
Reverse recapitalization, threshold percentage to designate three directors	40.00%
Reverse recapitalization, threshold percentage to designate one director on board	10.00%
Vesper Founders
Related Party Transaction [Line Items]
Reverse recapitalization, contingent consideration, earnout period	1 year
Reverse recapitalization, contingent consideration, stock price trigger (in dollars per share) | $ / shares	$ 12.00
Reverse recapitalization, contingent consideration, threshold days | tradingDay	20
Reverse recapitalization, contingent consideration, consecutive threshold days | tradingDay	30
Reverse recapitalization, contingent consideration, commencement period	150 days

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Stockholders’ Deficit (Details) $ / shares in Units, $ in Millions	May 04, 2021 USD ($) shares	Jun. 30, 2022 vote $ / shares shares	Dec. 31, 2021 $ / shares shares	May 03, 2021 $ / shares shares
Class of Stock [Line Items]
Common stock, shares authorized (in shares)		320,000,000	320,000,000
Common stock, par value (in dollars per share) | $ / shares		$ 0.0001	$ 0.0001	$ 0.0001
Common stock, number of votes | vote		1
Common stock, shares issued (in shares)		150,855,025	150,598,047
Common stock, shares outstanding (in shares)	125,399,913	150,855,025	150,598,047	54,358
Consideration received on transaction | $	$ 350.0
Legacy HydraFacial shares (in shares)	35,501,743
Preferred stock, shares authorized (in shares)		1,000,000	1,000,000
Preferred stock, par value (in dollars per share) | $ / shares		$ 0.0001	$ 0.0001
Preferred stock, shares issued (in shares)		0	0
Preferred stock, shares outstanding (in shares)		0	0
Class A common stock
Class of Stock [Line Items]
Common stock, shares issued (in shares)	125,329,053
Common stock, shares outstanding (in shares)	125,329,053
Consideration received on transaction (in shares)	35,000,000
Consideration received on transaction | $	$ 350.0
Legacy HydraFacial shares (in shares)	35,501,743

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Segment Reporting (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) segment	Jun. 30, 2021 USD ($)
Disaggregation of Revenue [Line Items]
Number of operating segments | segment			1
Number of reportable segments | segment			1
Net sales	$ 103,536	$ 66,508	$ 178,951	$ 114,050
Americas
Disaggregation of Revenue [Line Items]
Net sales	75,354	42,660	119,960	73,940
Asia-Pacific
Disaggregation of Revenue [Line Items]
Net sales	10,386	12,440	23,287	21,231
Europe, the Middle East and Africa
Disaggregation of Revenue [Line Items]
Net sales	$ 17,796	$ 11,408	$ 35,704	$ 18,879

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Net Income (Loss) Attributable to Common Shareholders - Schedule of basic and diluted earnings per share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Earnings Per Share [Abstract]
Net income (loss) available to common shareholders - basic	$ 7,931	$ (139,378)	$ 40,438	$ (142,652)
Plus: Income on Private placement warrants	(15,185)	0	(67,237)	0
Net income (loss) available to common shareholders - diluted	$ (7,254)	$ (139,378)	$ (26,799)	$ (142,652)
Weighted average common shares outstanding - basic (in shares)	150,731,491	91,798,837	150,665,166	63,805,807
Effect of dilutive shares:
Private placement warrants (in shares)	987,960	0	1,609,228	0
Weighted average common shares outstanding - diluted (in shares)	151,719,451	91,798,837	152,274,394	63,805,807
Basic net income (loss) per share (in dollars per share)	$ 0.05	$ (1.52)	$ 0.27	$ (2.24)
Diluted net income (loss) per share (in dollars per share)	$ (0.05)	$ (1.52)	$ (0.18)	$ (2.24)

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Net Income (Loss) Attributable to Common Shareholders - Schedule of antidilutive securities excluded from earnings per share computation (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Convertible Notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded (in shares)	23,614,425	0	23,614,425	0
RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded (in shares)	2,531,258	0	2,531,258	0
PSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded (in shares)	2,254,032	129,231	2,254,032	64,972
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded (in shares)	5,981,670,000	4,769,062,000	5,981,670,000	2,411,280,000
Public and Private Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded (in shares)	0	15,450,549	0	7,767,956