The Beauty Health Company's Q3 2025 Earnings Call: Contradictions Emerge in Churn Strategies, Consumables Pricing, and Market Reception

Date of Call: November 6, 2025

Financials Results

• Revenue: $70.7M net sales in Q3, down 10.3% YOY (prior year $78.8M); device revenue $20.8M, down 24.6% YOY; consumables $49.8M, down 2.6% YOY (ex-China consumables would have increased modestly)
• Gross Margin: Adjusted gross margin 68%, down ~150 bps YOY; GAAP gross margin 64.6% (GAAP gross profit up 12.3% YOY to $45.6M)

Guidance:

• Raised full-year 2025 revenue low end to $293M–$300M and increased adjusted EBITDA guidance to $37M–$39M.
• Q4 2025 expected net sales $74.5M–$81.5M and adjusted EBITDA $6.9M–$8.9M.
• Management expects continued margin and adjusted EBITDA upside from cost discipline and improving device/composability trends.

Business Commentary:

* Revenue and Segment Performance: - The Beauty Health Company reported Q3 2025 total net sales of $70.7 million, down 10.3% year-over-year. - This decrease was primarily due to a decline in device sales, which decreased by 24.6% to $20.8 million, reflecting continued pressure globally, including the impact of the China business model transition.

• Consumables and Market Dynamics:
• Consumable revenues were $49.8 million, a decrease of 2.6% year-over-year, primarily due to the change in the China business model.

• Despite this, when excluding China, consumable sales would have increased modestly. The company saw a shift in consumable mix, moving from 65% of net sales in Q3 2024 to 71% this quarter.

• Operational Efficiency and Inventory:

• Inventory was held below $60 million, the lowest in three years, due to improved demand planning, forecasting, and production quality.
• Adjusted gross margins for Q3 were 68%, a decline of approximately 150 bps from Q3 2024, mainly due to lower average selling prices as distributors held a larger unit share of the overall equipment revenue year-over-year.

• Adjusted EBITDA and Financial Guidance:
• Adjusted EBITDA increased by 11% to $8.9 million, reflecting tight cost control and solid operational execution.
• The company raised its full-year 2025 revenue guidance to between $293 million and $300 million and adjusted EBITDA guidance to between $37 million and $39 million, reflecting confidence in its operational momentum.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management highlighted operational execution and margin gains: “we once again exceeded our initial expectations.” Adjusted EBITDA was $8.9M, up 11% YOY and margin improved ~240 bps to 12.6%. Company raised FY revenue guidance to $293M–$300M and adjusted EBITDA to $37M–$39M, signaling cautious optimism despite top-line pressure.

Q&A:

• Question from Oliver Chen (TD Cowen): Encouraging on the guidance. I would love your thoughts on what's happening in Americas and also the more cautious trends you cited in Americas, and how you weigh that against the guidance you gave? Also to help us compare and contrast a little bit about Americas relative to EMEA being flat.
  Response: Americas revenue was down 7% (devices -16.3%) but device declines are moderating versus earlier quarters; consumables are resilient (down ~2.7%) and boosters grew, while EMEA was flat with double-digit consumable growth and APAC weakness driven by China distributor transition.

• Question from Oliver Chen (TD Cowen): As you mentioned, the 4 focus areas, which ones were going to be more near term in terms of what you're seeing in your hypothesis and which ones may be longer term? And as you mentioned, the skin health technology ecosystem, how do you envision that? Or how would you frame that in terms of device platforms, digital diagnostics or partnerships as you think more broadly?
  Response: Near term: drive device placements and utilization, address provider financing and pricing (good/better/best) and improve commercial execution; longer term: invest in device and consumable innovation and build a broader skin-health ecosystem supported by clinical differentiation and provider education.

• Question from John-Paul Wollam (ROTH Capital Partners): As you kind of get your hands wrapped around the business a little bit more and get a better understanding, is there anything else you can share about the sort of international strategy and sort of where you feel makes the most sense to have direct versus distributor models?
  Response: Continue using a mix of distributor and direct approaches tailored by market economics; rely on distributor network for reach while investing in training and targeted commercial programs to grow penetration.

• Question from John-Paul Wollam (ROTH Capital Partners): I believe you took the pricing on the consumables side in July. Can you just talk about how the reception has been to that price increase and what it says about potential pricing power in the future on the consumables side?
  Response: The ~5% consumables price increase was well absorbed, ASPs increased and boosters have also pushed average ASP higher, indicating near-term pricing acceptance.

• Question from Susan Anderson (Canaccord Genuity): I'd love to hear maybe just kind of your thoughts on stabilizing the systems. I mean, it looks like they're already stabilizing, but what initiatives do you think you need to put in place to get those to grow again?
  Response: Devices are stabilizing (sold 875 units in Q3); focus is on improving lead conversion, easing financing constraints, and reinforcing commercial discipline to drive future device placements.

• Question from Susan Anderson (Canaccord Genuity): I guess to add one follow-up on the consumables front. I guess, just curious your thoughts around -- I guess, I think Marla was creating some products not just necessarily for treatment such as boosters, but also for use maybe during treatment or for purchase in private spa. I guess just curious on your thoughts around the consumables area and kind of where you're going to be focused at.
  Response: Company has paused the skin-care consumer initiative to preserve capital and focus on core clinically differentiated recurring consumables and provider partnerships where it has competitive advantage.

• Question from Lillian Moffett (Raymond James): I'm wondering if you could talk through the trends you're seeing in different channels? And then also any color on what you're seeing from an end consumer standpoint and whether you've noticed any incremental weakness as macros remain pretty choppy?
  Response: Medical channel (majority med spas) remains largest; plastic surgeons slower; boosters show high attachment rates and are a bright spot, but overall utilization is pressured — management is prioritizing provider education and sales outreach to boost utilization.

• Question from K. Gong (JPMorgan Chase): When I think about the outlook for 2026, how should I think about how you're going to prioritize top line growth versus profitability and diving deeper into existing accounts and focusing more on consumables versus trying to drive a reacceleration in delivery systems?
  Response: Management will pursue both but prioritize top-line growth (device placements and consumable recurring revenue) while retaining cost discipline; expect operating leverage if macro and device momentum improve.

• Question from Joseph Federico (Stifel): Revenue expectations came up by $4 million at the midpoint and EBITDA came up by $7 million. Can you walk us through the moving parts as to why there's so much more drop-through on the incremental sales? Is the gross margin outperformance sustainable?
  Response: Q3 outperformed prior guide which drove raise; Q4 gross margin will seasonally moderate due to promotions and OpEx may rise ~$2–3M (commissions/marketing); confidence in continued improvement rests on easing device pressure and success of pricing/bundling and sales initiatives.

• Question from Joseph Federico (Stifel): Churn in the quarter was just under 2%, up versus prior periods. How are the planned actions to moderate churn progressing? Are you starting to see moderation in 4Q to date?
  Response: Churn (~1.8%) is higher mainly due to financially stressed, low-volume providers and staffing/closure issues; company is proactively reengaging these accounts with support and training aiming to return churn to historical levels over the coming quarters.

Contradiction Point 1

Churn and Provider Engagement

It involves the company's approach to addressing churn and provider engagement, which are critical for maintaining and growing the installed base, affecting revenue and customer experience.

Can you provide an update on churn and the progress of those actions? Are you seeing a moderation in churn in Q4 to date? - Joseph Federico

2025Q3: Churn is higher due to financial pressures on low-volume providers. The focus is on reactivation and improved training to address this issue. Efforts are expected to bring churn numbers back to historical levels over the next quarters. - Pedro Malha(CEO)

Why was installed base growth lower than expected this quarter, suggesting many sales were upgrades, replacements, or churn compared to prior quarters? - K. Gong

2025Q2: We are looking at both medical and nonmedical providers, and it is not concentrated in any one area. We have a comprehensive plan to address churn. We have a targeted direct outreach to those customers. We have plans to reengage with them. - Michael P. Monahan(CFO)

Contradiction Point 2

Consumables Growth and Pricing Strategy

It involves the company's outlook on consumables growth and pricing strategy, which are key drivers of recurring revenue and profitability.

Did you implement a price increase on consumables in July? Can you discuss the reception to that increase and its implications for future pricing power in consumables? - John-Paul Wollam

2025Q3: The price increase was well-received, with consumables ASP up due to the price increase and high booster attachment rates. The market has shown the ability to accept price increases, boding well for future pricing power. - Pedro Malha(CEO)

When was the consumables price increase implemented? How have aestheticians responded, and what's your view on demand elasticity? Does this address tariff pressures, or are additional productivity/offsetting measures needed? - Olivia Tong

2025Q2: The price increase partially offsets tariffs, but we're still projecting $4 million in additional tariff-related expenses for the back half of the year. - Michael P. Monahan(CFO)

Contradiction Point 3

Pricing Strategy and Consumable Performance

It involves discrepancies in the company's pricing strategy and the perceived market reception of price increases, which could impact financial forecasts and investor perceptions.

How was the July consumables price increase received, and what does it indicate about future pricing power on the consumables side? - John-Paul Wollam (ROTH Capital Partners, LLC, Research Division)

2025Q3: The price increase was well-received, with consumables ASP up due to the price increase and high booster attachment rates. The market has shown the ability to accept price increases, boding well for future pricing power. - Pedro Malha(CEO)

Is Q1's gross margin the new run rate? What is the expected impact of tariffs in 2026? - Jonathan Block (Stifel)

2025Q1: Although pricing was unfavorably impacted by transactional discounts and promotional activity in Q1, particularly in APAC, mix was favorable to gross margin. In Q2, we expect the average selling price of our devices to decline nearly 20% year-over-year due to lower-priced equipment introduced in Q2 and related promotional activity. - Michael Monahan(CFO)