SKIN Q1 Earnings Call: Consumables Growth, Equipment Headwinds, and Tariff Impact Shape Outlook

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a day ago

Skincare company BeautyHealth (NASDAQ:SKIN) reported revenue ahead of Wall Street's expectations in Q1 CY2025, but sales fell by 14.5% year on year to $69.58 million. On the other hand, next quarter's revenue guidance of $73.5 million was less impressive, coming in 2.9% below analysts' estimates. Its GAAP loss of $0.08 per share was 37.6% above analysts' consensus estimates.
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Revenue: $69.58 million vs analyst estimates of $63.34 million (14.5% year-on-year decline, 9.9% beat)
EPS (GAAP): -$0.08 vs analyst estimates of -$0.13 (37.6% beat)
Adjusted EBITDA: $7.3 million vs analyst estimates of -$5.54 million (10.5% margin, significant beat)
The company reconfirmed its revenue guidance for the full year of $285 million at the midpoint
EBITDA guidance for the full year is $20 million at the midpoint, above analyst estimates of $11.98 million
Operating Margin: -17.3%, up from -20.9% in the same quarter last year
Market Capitalization: $201.6 million
BeautyHealth's first quarter performance was shaped by continued growth in consumables and improvements in gross margin, despite a double-digit decline in overall sales. CEO Marla Beck emphasized that consumables now represent over 70% of revenue, driven by robust demand for Hydrafacial's signature treatments among medical aesthetics providers. The company highlighted that sales of new boosters, particularly the Hydralock HA, have helped practices attract more consumers, while operational changes—such as consolidating production in the U.S.—have yielded cost efficiencies and reduced tariff exposure. Management cited ongoing macroeconomic pressures affecting equipment sales, with global device sales down sharply year over year. The team also pointed to enhanced inventory management and cost discipline as key contributors to improved profitability during the quarter.
Looking ahead, BeautyHealth's guidance reflects both opportunities and risks as the company executes its transformation strategy. Management plans to accelerate innovation with new product launches, including the hydrophilic booster and back bar skincare products, while investing in provider partnerships and targeted marketing. CFO Mike Monahan noted that the company's outlook factors in ongoing macroeconomic uncertainty and the impact of tariffs, especially in the APAC region. Beck stated, 'We are confident that as we continue to execute, we will drive long-term shareholder value,' but also acknowledged that equipment sales are expected to remain under pressure and that tariffs could offset typical margin seasonality. Management remains focused on balancing operational discipline with investments aimed at sustaining long-term growth.
Management attributed first quarter results to consumables-driven revenue, operational efficiencies, and a shift in sales strategy, while ongoing macro and tariff pressures affected equipment demand and regional performance.
Consumables growth offsets equipment weakness: BeautyHealth saw strong performance in consumables, which increased over 8% year-over-year and now account for the majority of revenue. This was driven by steady demand for signature Hydrafacial treatments and the successful launch of new boosters, such as Hydralock HA, which management described as a 'traffic driver' for practices.
Device sales remain challenged: Global device sales declined significantly as macroeconomic uncertainty continued to limit capital spending by providers. Management cited a 43.5% drop in this segment and addressed this by expanding lower-priced equipment options with its 'good, better, best' device strategy, helping to broaden provider access despite a tough market.
Operational changes reduce tariff risk: The company completed consolidation of production to the U.S. in the prior quarter, reducing exposure to import tariffs and enhancing supply chain efficiency. CFO Mike Monahan explained that this strategic move, along with targeted inventory placement, has helped mitigate some cost pressures, though $5 million in tariff costs are still expected for the year.
Regional headwinds, especially in APAC: Sales in the APAC region were impacted by changes in China's go-to-market model and ongoing tariff-related challenges. Management described the transition to a distributor model as well underway, aiming to preserve market access and simplify operations, but acknowledged that these changes contributed to the revenue decline in the region.
Cost management and margin improvement: BeautyHealth's gross margin benefited from a favorable mix shift toward consumables, disciplined demand planning, and lower excess inventory charges. Selling and marketing expenses were reduced, primarily through lower personnel and event costs, supporting the improvement in adjusted EBITDA and operating margin compared to last year.
BeautyHealth expects growth to be driven by product innovation, evolving go-to-market strategies, and efforts to offset tariff-related cost pressures, while remaining cautious on macroeconomic headwinds.
Product innovation pipeline: Management believes that upcoming launches—such as the hydrophilic booster featuring the proprietary PEP9 complex, new treatment tips for expanded services, and the back bar skincare line—will help drive incremental revenue from existing providers and attract new customers. These products are designed to address core consumer concerns like aging and provide additional options for in-practice upsell.
Strategic market adaptations: The transition to a distributor model in China, refined sales structure, and flexible device pricing are expected to help stabilize regional performance and capture demand once the macro environment recovers. However, management noted that near-term growth in capital equipment is not anticipated, and that consumables will continue to lead revenue contributions.
Tariff and cost management challenges: The company anticipates $5 million in incremental tariff costs in 2025, which are expected to impact margins, particularly in the second half of the year. Management is considering options—including potential cost pass-throughs to providers—but acknowledged that the tariff situation remains fluid and could affect profitability beyond 2025 if not mitigated.
In the coming quarters, the StockStory team will be closely tracking (1) the rollout and early adoption rates of new booster and skincare products, (2) progress on the transition to a distributor model in China and its impact on regional sales, and (3) the company's ability to manage tariff-related cost pressures while maintaining margin discipline. Execution on commercial initiatives to drive provider engagement and consumer awareness will also be critical to sustaining momentum.
BeautyHealth currently trades at a forward EV-to-EBITDA ratio of 12.5×. Should you double down or take your chips? The answer lies in our full research report (it's free).
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