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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 March 31, 2023
☐ 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.) |
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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.
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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 May 5, 2023, there were 132,652,184 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 MARCH 31, 2023
TABLE OF CONTENTS
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PART I—FINANCIAL INFORMATION | |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
PART II—OTHER INFORMATION | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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THE BEAUTY HEALTH COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)
(Unaudited)
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| March 31, 2023 | | December 31, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 532,282 | | $ | 568,197 |
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Accounts receivable, net of allowances for estimated credit losses of $3,802 and $2,929 at March 31, 2023 and December 31, 2022, respectively | 70,795 | | 76,494 |
Inventories | 122,081 | | 109,656 |
Income tax receivable | 1,625 | | 1,280 |
Prepaid expenses and other current assets | 21,749 | | 26,331 |
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Total current assets | 748,532 | | 781,958 |
Property and equipment, net | 18,360 | | 18,184 |
Right-of-use assets, net | 15,590 | | 15,637 |
Intangible assets, net | 70,835 | | 46,386 |
Goodwill | 125,175 | | 124,593 |
Deferred income tax assets, net | 831 | | 815 |
Other assets | 15,630 | | 14,193 |
TOTAL ASSETS | $ | 994,953 | | $ | 1,001,766 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 34,330 | | $ | 30,335 |
Accrued payroll-related expenses | 18,722 | | 21,677 |
Other accrued expenses | 13,149 | | 15,183 |
Lease liabilities, current | 4,910 | | 4,958 |
Income tax payable | 1,219 | | 962 |
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Total current liabilities | 72,330 | | 73,115 |
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Lease liabilities, non-current | 12,267 | | 12,689 |
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Deferred income tax liabilities, net | 2,941 | | 2,011 |
Warrant liabilities | 24,550 | | 15,473 |
Convertible senior notes, net | 735,201 | | 734,143 |
TOTAL LIABILITIES | 847,289 | | 837,431 |
Commitments (Note 10) | | | |
Stockholders’ equity: | | | |
Class A Common Stock, $0.0001 par value; 320,000,000 shares authorized; 132,626,954 and 132,214,695 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively | 14 | | | 14 | |
| | | |
Additional paid-in capital | 555,046 | | | 550,320 | |
| | | |
Accumulated other comprehensive loss | (3,642) | | | (4,530) | |
Accumulated deficit | (403,754) | | | (381,469) | |
Total stockholders’ equity | 147,664 | | | 164,335 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 994,953 | | | $ | 1,001,766 | |
The accompanying notes are an integral part of these unaudited financial statements.
THE BEAUTY HEALTH COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except for share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Net sales | | | | | $ | 86,278 | | | $ | 75,415 | |
Cost of sales | | | | | 32,174 | | | 24,530 | |
Gross profit | | | | | 54,104 | | | 50,885 | |
Operating expenses: | | | | | | | |
Selling and marketing | | | | | 38,699 | | | 36,407 | |
Research and development | | | | | 2,336 | | | 2,230 | |
General and administrative | | | | | 30,379 | | | 26,261 | |
Total operating expenses | | | | | 71,414 | | | 64,898 | |
Loss from operations | | | | | (17,310) | | | (14,013) | |
Interest expense, net | | | | | 3,417 | | | 3,400 | |
Interest income | | | | | (4,315) | | | 3 | |
Other (income) expense, net | | | | | (418) | | | 934 | |
Change in fair value of warrant liabilities | | | | | 9,076 | | | (52,052) | |
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Foreign currency transaction loss (gain), net | | | | | 877 | | | (368) | |
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(Loss) income before provision for income taxes | | | | | (25,947) | | | 34,070 | |
Income tax (benefit) expense | | | | | (3,662) | | | 2,615 | |
Net (loss) income | | | | | $ | (22,285) | | | $ | 31,455 | |
Comprehensive (loss) income, net of tax: | | | | | | | |
Foreign currency translation adjustments | | | | | 888 | | | (145) | |
Comprehensive (loss) income | | | | | $ | (21,397) | | $ | 31,310 |
Net (loss) income per share | | | | | | | |
Basic | | | | | $ | (0.17) | | $ | 0.21 |
Diluted | | | | | $ | (0.17) | | $ | (0.13) |
Weighted average common shares outstanding | | | | | | | |
Basic | | | | | 132,420,762 | | | 150,598,105 | |
Diluted | | | | | 132,420,762 | | | 152,711,698 | |
The accompanying notes are an integral part of these unaudited financial statements.
THE BEAUTY HEALTH COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except for share amounts)
(Unaudited)
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| | | | | Common Stock | | Additional Paid-in Capital | | | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’Equity (Deficit) |
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BALANCE, December 31, 2021 | | | | | | | | | 150,598,047 | | | $ | 16 | | | $ | 722,250 | | | | | $ | (1,257) | | | $ | (422,975) | | | $ | 298,034 | |
Net income | | | | | | | | | — | | | — | | | — | | | | | — | | | 31,455 | | | 31,455 | |
Issuance of Common Stock pursuant to equity compensation plan | | | | | | | | | 5,184 | | | — | | | — | | | | | — | | | — | | | — | |
Share-based compensation | | | | | | | | | — | | | — | | | 7,049 | | | | | — | | | — | | | 7,049 | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | | | (145) | | | — | | | (145) | |
BALANCE, March 31, 2022 | | | | | | | | | 150,603,231 | | | $ | 16 | | | $ | 729,299 | | | | | $ | (1,402) | | | $ | (391,520) | | | $ | 336,393 | |
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BALANCE, December 31, 2022 | | | | | | | | | 132,214,695 | | | $ | 14 | | | $ | 550,320 | | | | | $ | (4,530) | | | $ | (381,469) | | | $ | 164,335 | |
Net loss | | | | | | | | | — | | | — | | | — | | | | | — | | | (22,285) | | | (22,285) | |
Issuance of Common Stock pursuant to equity compensation plan | | | | | | | | | 473,049 | | | — | | | — | | | | | — | | | — | | | — | |
Shares withheld for tax withholdings on vested stock awards | | | | | | | | | (170,415) | | | — | | | (2,195) | | | | | — | | | — | | | (2,195) | |
Issuance of Common Stock relating to employee stock purchase plan | | | | | | | | | — | | | — | | | 2,034 | | | | | — | | | — | | | 2,034 | |
Share-based compensation | | | | | | | | | — | | | — | | | 3,577 | | | | | — | | | — | | | 3,577 | |
Common Stock relating to asset acquisition | | | | | | | | | 109,625 | | | — | | | 1,310 | | | | | — | | | — | | | 1,310 | |
Foreign currency translation adjustment | | | | | | | | | — | | | — | | | — | | | | | 888 | | | — | | | 888 | |
BALANCE, March 31, 2023 | | | | | | | | | 132,626,954 | | | $ | 14 | | | $ | 555,046 | | | | | $ | (3,642) | | | $ | (403,754) | | | $ | 147,664 | |
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The accompanying notes are an integral part of these unaudited financial statements.
THE BEAUTY HEALTH COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 | |
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Cash flows from operating activities: | | | | |
Net (loss) income | $ | (22,285) | | | $ | 31,455 | | |
Adjustments to reconcile net (loss) income to net cash from operating activities | | | | |
Depreciation of property and equipment | 1,834 | | | 1,416 | | |
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Provision for estimated credit losses | 1,093 | | | 229 | | |
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Amortization of intangible assets | 3,874 | | | 3,578 | | |
Amortization of other assets | 548 | | | 135 | | |
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Amortization of debt issuance costs | 1,058 | | | 1,057 | | |
Inventory write-down | 3,337 | | | 668 | | |
Share-based compensation | 3,577 | | | 7,049 | | |
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Deferred income taxes | (279) | | | — | | |
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Change in fair value adjustment of warrant liabilities | 9,076 | | | (52,052) | | |
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Other, net | 1,511 | | | 1,516 | | |
Changes in operating assets and liabilities: | | | | |
Accounts receivable | 4,793 | | | (14,152) | | |
Inventories | (15,771) | | | (11,491) | | |
Prepaid expenses, other current assets, and income tax receivable | (203) | | | 1,290 | | |
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Accounts payable, accrued expenses, and income tax payable | (3,085) | | | (6,639) | | |
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Other, net | (2,088) | | | (2,530) | | |
Net cash used in operating activities | (13,010) | | | (38,471) | | |
Cash flows used in investing activities: | | | | |
Cash paid for intangible assets | (2,450) | | | (276) | | |
Cash paid for property and equipment | (2,319) | | | (3,149) | | |
Cash paid for asset acquisitions | (16,915) | | | — | | |
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Net cash used in investing activities | (21,684) | | | (3,425) | | |
Cash flows from financing activities: | | | | |
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Payment of tax withholdings on vested stock awards | (2,195) | | | — | | |
Payment of contingent consideration related to acquisitions | — | | | (783) | | |
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Net cash used in financing activities | (2,195) | | | (783) | | |
Net decrease in cash and cash equivalents | (36,889) | | | (42,679) | | |
Effect of foreign currency translation on cash | 974 | | | 30 | | |
Cash and cash equivalents, beginning of period | 568,197 | | | 901,886 | | |
Cash and cash equivalents, end of period | $ | 532,282 | | | $ | 859,237 | | |
THE BEAUTY HEALTH COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Description of Business
The Beauty Health Company (the “Company”) is a global category-creating company delivering skin health experiences that help consumers reinvent their relationship with their skin, bodies and self-confidence. The Company and its subsidiaries design, develop, manufacture, market, and sell a/esthetic technologies and products. The Company’s brands are pioneers: Hydrafacial in hydradermabrasion; SkinStylus in microneedling; and Keravive in scalp health. Together, with its powerful community of estheticians, partners and consumers, the Company is personalizing skin health for all ages, genders, skin tones, and skin types.
Historical Information
The Company (f.k.a. Vesper Healthcare Acquisition Corp.) was incorporated in the State of Delaware on July 8, 2020. On May 4, 2021, we consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated December 8, 2020, by and among Vesper Healthcare Acquisition Corp. (“Vesper Healthcare”), Hydrate Merger Sub I, Inc. (“Merger Sub I”), Hydrate Merger Sub II, LLC (“Merger Sub II”), LCP Edge Intermediate, Inc., the indirect parent of HydraFacial LLC, f.k.a. Edge Systems LLC (“Hydrafacial”), and LCP Edge Holdco, LLC (“LCP,” or “Former Parent,” and, in its capacity as the stockholders’ representative, the “Stockholders’ Representative”) (the “Merger Agreement”), which provided for: (a) the merger of Merger Sub I with and into Hydrafacial, with Hydrafacial continuing as the surviving corporation (the “First Merger”), and (b) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Hydrafacial with and into Merger Sub II, with Merger Sub II continuing as the surviving entity (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). As a result of the First Merger, the Company owns 100% of the outstanding common stock of Hydrafacial and each share of common stock and preferred stock of Hydrafacial was cancelled and converted into the right to receive a portion of the consideration payable in connection with the Mergers. As a result of the Second Merger, the Company owns 100% of the outstanding interests in Merger Sub II. In connection with the closing of the Business Combination, the Company owns, directly or indirectly, 100% of the stock of Hydrafacial and its subsidiaries and the stockholders of Hydrafacial as of immediately prior to the effective time of the First Merger (the “Hydrafacial Stockholders”) hold a portion of the Company’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”).
Basis of Presentation
The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented.
These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in, or presented as exhibits to, the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Subsequent to the issuance of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the Company identified prior period misstatements related to the elimination of intercompany profit in inventory. Although the Company concluded that these misstatements were not material, either individually or in the aggregate, the Company elected to revise its previously issued consolidated financial statements to correct for these misstatements.
Due to these misstatements which impacted the fiscal years 2020 to 2022, as of December 31, 2022, inventory was overstated by $6.8 million and accumulated deficit was understated by $7.1 million. For the three months ended March 31, 2022, cost of goods sold was understated by $1.1 million.
The revision of the previously issued unaudited consolidated financial statements is presented in the accompanying unaudited consolidated financial statements and related disclosures. For further detail, refer to Note 15 - Revision for Immaterial Misstatements.
Certain prior period amounts have been reclassified to conform to the current period presentation.
Note 2 – Revenue
The Company generates revenue through manufacturing and selling Hydrafacial Delivery Systems (“Delivery Systems”) that cleanses, extracts, and hydrates the skin. In conjunction with the sale of Delivery Systems, the Company also sells its related serums, solutions, tips, and consumables (collectively, “Consumables”). Original Consumables are sold solely and exclusively by the Company (and from authorized retailers) 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 manages its business on the basis of one operating segment and one reportable segment. As a result, the chief operating decision maker, who is the Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.
The Company’s revenue disaggregated by major product line consists of the following for the periods indicated:
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(in thousands) | | | | | 2023 | | 2022 | | |
Net Sales | | | | | | | | | |
Delivery Systems | | | | | $ | 45,353 | | | $ | 41,647 | | | |
Consumables | | | | | 40,925 | | | 33,768 | | | |
Total net sales | | | | | $ | 86,278 | | | $ | 75,415 | | | |
Net sales by geographic region were as follows for the periods indicated:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(in thousands) | | | | | 2023 | | 2022 | | |
Americas | | | | | $ | 52,978 | | | $ | 44,606 | | | |
Asia-Pacific | | | | | 13,620 | | | 12,901 | | | |
Europe, the Middle East and Africa | | | | | 19,680 | | | 17,908 | | | |
Total net sales | | | | | $ | 86,278 | | | $ | 75,415 | | | |
Note 3 — Balance Sheet Components
Inventories consist of the following as of the periods indicated:
| | | | | | | | | | | |
(in thousands) | March 31, 2023 | | December 31, 2022 |
Raw materials | $ | 40,032 | | | $ | 38,373 | |
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Finished goods | 82,049 | | | 71,283 | |
Total inventories | $ | 122,081 | | | $ | 109,656 | |
Accrued payroll-related expenses include the following as of the periods indicated:
| | | | | | | | | | | |
(in thousands) | March 31, 2023 | | December 31, 2022 |
Accrued compensation | $ | 4,000 | | | $ | 4,154 | |
Accrued payroll taxes | 2,027 | | | 1,357 | |
Accrued benefits | 4,869 | | | 5,643 | |
Accrued sales commissions | 7,826 | | | 10,523 | |
Total accrued payroll-related expenses | $ | 18,722 | | | $ | 21,677 | |
Other accrued expenses include the following as of the periods indicated:
| | | | | | | | | | | |
(in thousands) | March 31, 2023 | | December 31, 2022 |
Sales and VAT tax payables | $ | 5,101 | | | $ | 4,904 | |
Royalty liabilities | 3,543 | | | 2,348 | |
Accrued interest | — | | | 2,344 | |
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Note payable due seller | — | | | 1,819 | |
Other | 4,505 | | | 3,768 | |
Total other accrued expenses | $ | 13,149 | | | $ | 15,183 | |
Note 4 — Fair Value Measurements
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
The three levels of the fair value hierarchy are as follows:
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.
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| | As of March 31, 2023 |
(in thousands) | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Money market funds | | $ | 475,326 | | | $ | — | | | $ | — | | | $ | 475,326 | |
Liabilities | | | | | | | | |
| | | | | | | | |
Warrant liability — Private Placement Warrants | | $ | — | | | $ | 24,550 | | | $ | — | | | $ | 24,550 | |
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| | As of December 31, 2022 |
(in thousands) | | Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Money market funds | | $ | 513,009 | | | $ | — | | | $ | — | | | $ | 513,009 | |
Liabilities | | | | | | | | |
| | | | | | | | |
Warrant liability — Private Placement Warrants | | $ | — | | | $ | — | | | $ | 15,473 | | | $ | 15,473 | |
In October 2020, in connection with the consummation of Vesper Healthcare’s initial public offering, the Company issued 9,333,333 warrants to purchase shares of the Company’s Class A Common Stock at $11.50 per share (the “Private Placement Warrants”), to BLS Investor Group LLC. As of March 31, 2023 and December 31, 2022, the Company had approximately 7 million Private Placement Warrants outstanding. As of March 31, 2023, the fair value of the Private Placement Warrants was determined using their redemption value because the warrants are subject to redemption if the reference value of the Company’s Class A Common Stock, as defined, is between $10.00 and $18.00 per share. As of December 31, 2022, the fair value of the Private Placement Warrants was determined using a Monte Carlo simulation.
Note 5 – Property and Equipment, net
Property and equipment consist of the following as of the periods indicated:
| | | | | | | | | | | | | | | | | |
(in thousands) | Useful life (years) | | March 31, 2023 | | December 31, 2022 |
Furniture and fixtures | 2-7 | | $ | 5,914 | | $ | 5,364 | |
Computers and equipment | 3-5 | | 5,190 | | 4,901 | |
Machinery and equipment | 2-5 | | 7,435 | | 6,427 | |
Autos and trucks | 5 | | 174 | | 161 | |
Tooling | 5 | | 582 | | 638 | |
Leasehold improvements | Shorter of remaining lease term or estimated useful life | | 12,596 | | 11,812 | |
Total property and equipment | | | 31,891 | | 29,303 | |
Less: accumulated depreciation and amortization | | | (14,199) | | | (12,494) | |
Construction in progress | | | 668 | | 1,375 | |
Property and equipment, net | | | $ | 18,360 | | $ | 18,184 |
Note 6 – Goodwill and Intangible Assets, net
The gross carrying amount and accumulated amortization of the Company’s intangible assets as of March 31, 2023 were as follows: | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Estimated Useful Life (Years) |
Developed technology | $ | 92,616 | | | $ | (56,828) | | $ | 35,788 | | | 3-10 |
Customer relationships | 18,425 | | | (8,563) | | 9,862 | | | 5-10 |
Trademarks | 11,395 | | | (4,289) | | 7,106 | | | 15 |
Capitalized software | 12,285 | | | (2,022) | | 10,263 | | | 3-5 |
Non-compete agreement | 5,861 | | | (470) | | 5,391 | | | 3 |
Patents | 2,832 | | | (407) | | 2,425 | | | 3-19 |
Total intangible assets | $ | 143,414 | | | $ | (72,579) | | $ | 70,835 | | | |
The gross carrying amount and accumulated amortization of the Company’s intangible assets as of December 31, 2022 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | Gross Carrying Value | | Accumulated Amortization | | Net Carrying Value | | Estimated Useful Life (Years) | | |
Developed technology | $ | 73,188 | | | $ | (54,422) | | $ | 18,766 | | | 3-8 | | |
Customer relationships | 18,089 | | | (7,602) | | 10,487 | | | 5-10 | | |
Trademarks | 10,907 | | | (4,119) | | 6,788 | | | 15 | | |
Capitalized software | 9,620 | | | (1,507) | | 8,113 | | | 3-5 | | |
Non-compete agreement | 776 | | | (395) | | 381 | | | 3 | | |
Patents | 2,226 | | | (375) | | 1,851 | | | 3-19 | | |
Total intangible assets | $ | 114,806 | | | $ | (68,420) | | | $ | 46,386 | | | | | |
The changes in the carrying value of goodwill for the three months ended March 31, 2023 are as follows:
| | | | | | | | | |
(in thousands) | | | | | |
December 31, 2022 | $ | 124,593 | | | | | |
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Foreign currency translation impact | 582 | | | | | |
March 31, 2023 | $ | 125,175 | | | | | |
In February 2023, the Company acquired all of the outstanding shares of Esthetic Medical Inc. in exchange for (i) a cash payment of $11.8 million and (ii) 109,625 shares of Class A Common Stock of the Company ($1.3 million). In addition, the seller is entitled to receive up to an additional $3.2 million in contingent consideration based upon the achievement of certain conditions defined in the purchase agreement, of which $1.9 million was considered probable as of the acquisition date. Applicable tax guidance was used to apply the simultaneous equation method to incrementally assign $4.6 million to the book value of the intangible asset in excess of the purchase price. The Company accounted for this transaction as an asset acquisition and allocated substantially all of the purchase price and the tax basis difference totaling $19.9 million to intangible assets, primarily related to developed technology.
In addition, in March 2023, the Company acquired assets from Anacapa Aesthetics LLC and recognized approximately $5 million of intangible assets, primarily related to non-compete agreements.
Note 7 – Long-term Debt
Amended and Restated Credit Facility
On November 14, 2022, the Company, as successor by assumption to Hydrafacial (formerly known as Edge Systems LLC), a California limited liability company, entered into an Amended and Restated Credit Agreement (as it may be further amended, restated, supplemented or modified from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (the “Administrative Agent”). The Credit Agreement provides for a $50 million revolving credit facility with a maturity date of November 14, 2027. In addition, the Company 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 March 31, 2023, the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.
The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Company’s ability to incur indebtedness and certain liens, make certain investments, become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain certain 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 March 31, 2023, the Company was in compliance with all restricted and financial covenants of the Credit Agreement.
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 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 following is a summary of the Company’s Notes as of March 31, 2023:
| | | | | | | | | | | | | | | | | | | |
| | | | | | | |
(in thousands) | March 31, 2023 | | December 31, 2022 | | | | | | |
1.25% Convertible Notes due 2026 | $ | 750,000 | | | $ | 750,000 | | | | | | | |
Unamortized Issuance Costs | (14,799) | | (15,857) | | | | | | |
Net Carrying Value | $ | 735,201 | | | $ | 734,143 | | | | | | | |
As of March 31, 2023 and December 31, 2022, the estimated fair value of the Notes was approximately $624 million and $567 million, respectively. The estimated fair value of the Notes was determined based on the actual bid price of the Notes on March 31, 2023 and December 31, 2022 and are classified as Level 2 within the fair value hierarchy.
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”). 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”). 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 $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.
Note 8– Income Taxes
Income tax benefit for the three months ended March 31, 2023 was $3.7 million. Income tax expense for the three months ended March 31, 2022 was $2.6 million.
The effective tax rate for the three months ended March 31, 2023 is 14.1% , which is lower than the federal statutory rate of 21.0%, primarily due to the exclusion from taxable income 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 months ended March 31, 2022 was 7.7% , which is lower than the federal statutory rate of 21.0%, primarily due to forecasted losses adjusted by various non-deductible expenses primarily from the revaluation of warrant liabilities, limitation of officer’s compensation, and meals and entertainment.
The Company has established a valuation allowance in the U.S. and Singapore 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 addressing the accounting for 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 $0.9 million and $0.1 million for the three months ended March 31, 2023 and March 31, 2022, respectively.
The Inflation Reduction Act, signed into law on August 16, 2022, provides tax incentives for certain industries and imposes a 15% minimum tax on the book income of certain large corporations and a 1% excise tax on stock buybacks. The Company may be subject to the new excise tax on certain stock buybacks that occur after December 31, 2022. The Company does not anticipate a material impact from the Inflation Reduction Act on the Company's condensed consolidated financial statements.
Note 9 – Share-Based Payments
The Company has various stock compensation plans, which are more fully described in Part II, Item 8 "Financial Statements and Supplementary Data—Note 13 to the Consolidated Financial Statements—Equity-Based Compensation" in the Company’s 2022 Annual Report on Form 10-K. Under the Beauty Health Company 2021 Incentive Award Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other stock or cash-based awards to eligible service providers. Additionally, the Company maintains the Employee Stock Purchase Plan for employees located in the United States, whereby eligible employees can have up to 10% of their earnings withheld, subject to certain maximums, to be used to purchase shares of the Company’s Class A Common Stock at certain purchase dates.
Share-based compensation expense, which is primarily recorded within selling and marketing and general and administrative expenses, was as follows for the periods indicated:
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(in thousands) | | | | | 2023 | | 2022 | | |
Stock options | | | | | $ | 1,257 | | | $ | 3,219 | | | |
Restricted stock units | | | | | 3,416 | | | 2,515 | | | |
Performance-based restricted stock units | | | | | (1,194) | | | 1,201 | | | |
Employee stock purchase plan | | | | | 98 | | | 114 | | | |
| | | | | $ | 3,577 | | | $ | 7,049 | | | |
As of March 31, 2023, total unrecognized compensation expense related to unvested share-based compensation totaled $75.1 million and is expected to be recognized over a weighted-average period of 2.27 years.
Note 10 – Commitments and Contingencies
Ageless
On October 21, 2020, Hydrafacial filed a complaint against Ageless Serums LLC (“Ageless”) in the United States District Court for the Central District of California, Western Division, captioned Edge Systems LLC v. Ageless Serums LLC, Case No. 2:20-cv-09669-FMO-PVC (the “California Case”), for contributory trademark infringement, false designation of origin, induced breach of contract, tortious interference with contractual relations, and unfair competition. In the complaint, Hydrafacial alleges that Ageless is selling its serums to Hydrafacial customers and intentionally encourgaging those customers to market treatments performed by such customers as “Hydrafacial Treatments,” in violation of the customers’ license agreements with Hydrafacial and that Ageless is improperly marketing its products for use as part of the Hydrafacial treatment. Hydrafacial is seeking monetary damages and injunctive relief. Additionally, on December 22, 2020, Hydrafacial filed a complaint against Ageless in the United States District Court for the Southern District of Texas, Houston Division, captioned Edge Systems LLC v. Ageless Serums LLC, Case No. 4:20-cv 04335 (“the Texas Case”), alleging infringement of six of Hydrafacial’s patents. Hydrafacial is seeking monetary damages and injunctive relief. Ageless ultimately answered and asserted counterclaims in both actions. On May 5, 2022, Ageless filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Houston Bankruptcy Court”), and the California Case and Texas Case were stayed. On September 7, 2022, Hydrafacial filed a proof of claim, asserting a $12.7 million general unsecured claim for damages arising from claims alleged in the California Case and Texas Case. On January 4, 2023, Hydrafacial filed an Objection to the Confirmation of Debtor’s Subchapter V Plan of Reorganization and Brief in Support. On March 8, 2023, the parties engaged in mediation discussions in an attempt to settle the claims alleged in the California Case and Texas Case. During the mediation, the parties reached a tentative settlement agreement of all claims. However, the terms and
conditions of the tentative settlement agreement are still being negotiated between the parties, and any such settlement must be approved by the Houston Bankruptcy Court.
Hydrafacial plans to continue a vigorous pursuit of its claims against Ageless in the event the parties cannot consummate a definitive settlement agreement of all claims and/or the Houston Bankruptcy Court does not approve such definitive settlement agreement.
Cartessa
On December 14, 2020, Hydrafacial filed a complaint against Cartessa Aesthetics, LLC (“Cartessa”) in the United States District Court for the Eastern District of New York (the “New York Court”), captioned Edge Systems LLC v. Cartessa Aesthetics, LLC, Case No. 1:20-cv-6082, for patent infringement arising from Cartessa’s sale of a delivery system that allegedly infringes five of Hydrafacial’s patents on its device. As of the date of this report, the parties are awaiting the New York Court’s decision on motions for summary judgment, after which, the New York Court will set a trial date, if necessary.
Hydrafacial is seeking money damages and injunctive relief, and plans to vigorously pursue its claims against Cartessa.
Note 11 – 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 (the “Sponsor”) and the Hydrafacial stockholders.
Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding shares of Class A Common Stock or any other equity securities (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor or the Hydrafacial stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 shares of Class B Common Sotck (the “Founder Shares”) that were owned by the Sponsor and converted into shares of Class A Common Stock in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the Hydrafacial stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of 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 Securities and Exchange Commission (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 securities issued to it 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 (“LCP”) 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.
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% Fee expired twelve months after the consummation of the Business Combination on May 4, 2022.
Hydrafacial recorded approximately $0.2 million of charges related to management services fees for the three months ended March 31, 2022. There were no management fees during the three months ended March 31, 2023. 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 maintained an office in Miami Beach, Florida (the “Miami Beach Office”), whereby the Company, on a monthly basis, reimbursed an entity owned by the Company’s Chairman that makes such office available to the Company for its employees and affiliates. Expense for this property was not material for the three months ended March 31, 2023. No such expenses existed for the three months ended March 31, 2022.
As of March 2023, the Company no longer maintains the Miami Beach Office.
Note 12 - Stockholders’ Equity
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 March 31, 2023 and December 31, 2022, there were 132,626,954 and 132,214,695, respectively, of Class A Common Stock issued and outstanding. The Company has not declared or paid any dividends with respect to its Class A Common Stock.
Common Stock Repurchases
On September 26, 2022, the Company’s board of directors approved a common stock repurchase program pursuant to which the Company may repurchase up to $200 million of its outstanding shares of Class A Common Stock. Under the share repurchase program, repurchases can be made from time to time using a variety of methods, which may include open market purchases, privately negotiated transactions, or accelerated share repurchase programs.
The Company entered into two accelerated share repurchase agreements on September 27, 2022 and November 9, 2022, respectively, with a financial institution to repurchase a total of $200 million of Class A Common Stock. Under the September 27, 2022 accelerated share repurchase agreement, the Company repurchased approximately 9.3 million shares for $100 million. Under the November 9, 2022 accelerated share repurchase agreement, the Company made a payment of $100 million and received initial deliveries of approximately 9.5 million shares, which represented 80% of the payment amount divided by the Company’s closing stock price on that date. During the second quarter of 2023, the Company paid approximately $2.2 million as the final settlement of the November 9, 2022 accelerated share repurchase agreement, which was based upon the average daily volume weighted average price of the Company’s Class A Common Stock during the repurchase period, less an agreed upon discount.
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. As of March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
Note 13 – Net (Loss) Income Attributable to Common Stockholders
The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
(in thousands, except share and per share amounts) | | | | | 2023 | | 2022 | | |
Net (loss) income available to common stockholders - basic | | | | | $ | (22,285) | | | $ | 31,455 | | | |
Less: Income on Private Placement Warrants | | | | | — | | | (52,052) | | | |
Net loss available to common stockholders - diluted | | | | | $ | (22,285) | | | $ | (20,597) | | | |
| | | | | | | | | |
Weighted average common shares outstanding - basic | | | | | 132,420,762 | | | 150,598,105 | | | |
Effect of dilutive shares: | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Private Placement Warrants | | | | | — | | | 2,113,593 | | | |
Weighted average common shares outstanding - diluted | | | | | 132,420,762 | | | 152,711,698 | | | |
| | | | | | | | | |
Basic net (loss) income per share: | | | | | $ | (0.17) | | | $ | 0.21 | | | |
Diluted net (loss) income per share | | | | | $ | (0.17) | | | $ | (0.13) | | | |
For the three months ended March 31, 2023 and 2022, all outstanding shares related to share-based awards and convertible notes were excluded from the calculation of diluted net loss per common share because their effect would be antidilutive. For the three months ended March 31, 2023, Private Placement Warrants were excluded from the calculation of diluted net loss per common share because their effect would be antidilutive.
Note 14 – New Accounting Pronouncements
Recent accounting pronouncements pending adoption not discussed in this Form 10-Q are either not applicable to the Company or are not expected to have a material impact on the Company.
Note 15 – Revision for Immaterial Misstatements
As disclosed in Note 1 – Description of Business, during the three months ended March 31, 2023, subsequent to the issuance of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, the Company identified misstatements related to the elimination of intercompany profit in inventory. Although the Company concluded that these misstatements were not material, either individually or in the aggregate, the Company elected to revise its previously issued consolidated financial statements to correct for these misstatements. The revision to the accompanying unaudited consolidated balance sheets, consolidated statements of comprehensive income (loss), and consolidated statements of cash flows and related disclosures in Note 3 - Balance Sheet Components and Note 13 – Net (Loss) Income Attributable to Common Stockholders are detailed in the tables below. As of December 31, 2021, accumulated deficit was understated by $4.3 million, and as such, previously reported stockholders’ equity of $302.3 million was revised to $298.0 million. There were no other changes to the consolidated statements of stockholders’ equity that have not otherwise been reflected in the consolidated balance sheets and consolidated statements of comprehensive income (loss) as detailed in the tables below.
| | | | | | | | | | | | | | | | | |
| As of December 31, 2022 |
Condensed Consolidated Balance Sheet (in thousands) | As Previously Reported | | Adjustment | | As Revised |
Prepaid expenses and other current assets | $ | 26,698 | | | $ | (367) | | | $ | 26,331 | |
Inventories | $ | 116,430 | | | $ | (6,774) | | | $ | 109,656 | |
Total current assets | $ | 789,099 | | | $ | (7,141) | | | $ | 781,958 | |
TOTAL ASSETS | $ | 1,008,907 | | | $ | (7,141) | | | $ | 1,001,766 | |
Accumulated deficit | $ | (374,328) | | | $ | (7,141) | | | $ | (381,469) | |
Total stockholders’ equity | $ | 171,476 | | | $ | (7,141) | | | $ | 164,335 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,008,907 | | | $ | (7,141) | | | $ | 1,001,766 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
Condensed Consolidated Statement of Comprehensive Income (Loss) (in thousands) | As Previously Reported | | Adjustment | | As Revised |
Cost of sales | $ | 23,478 | | | $ | 1,052 | | | $ | 24,530 | |
Gross profit | $ | 51,937 | | | $ | (1,052) | | | $ | 50,885 | |
Loss from operations | $ | (12,961) | | | $ | (1,052) | | | $ | (14,013) | |
Income before provision for income taxes | $ | 35,122 | | | $ | (1,052) | | | $ | 34,070 | |
| | | | | |
Net income | $ | 32,507 | | | $ | (1,052) | | | $ | 31,455 | |
| | | | | |
Comprehensive Income | $ | 32,362 | | | $ | (1,052) | | | $ | 31,310 | |
Net income per share - Basic | $ | 0.22 | | | $ | (0.01) | | | $ | 0.21 | |
| | | | | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
Condensed Consolidated Statement of Cash Flows (in thousands) | As Previously Reported | | Adjustment | | As Revised |
Net income | $ | 32,507 | | | $ | (1,052) | | | $ | 31,455 | |
Changes in operating assets and liabilities: | | | | | |
Inventory | $ | (12,543) | | | $ | 1,052 | | | $ | (11,491) | |
| | | | | |
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 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 and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 1, 2023.
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 Company’s availability of cash for debt service and exposure to risk of default under debt obligations; the Company’s ability to manage growth; the Company’s ability to execute its business plan; potential litigation involving the Company; changes in applicable laws or regulations; the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and the impact of the continuing COVID-19 pandemic or any future pandemics, epidemics or infectious disease outbreaks on our business. The 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 discus