A promising Q4 2023 earnings report had shares of The Beauty Health Company (SKIN) bouncing another 18% today and building out their year-to-date gain to more than 36%. Specifically, while net sales for the period of $96.8 million were down 1.3% from the prior year due to the expected softness of equipment sales in the Americas stemming from customer caution around its flagship Syndeo 3.0 machine and higher interest rates, this was still significantly better than the much greater 11.1% drop to $87.2 million projected by the Street thanks to continued steady growth in Americas consumables sales and strong device placement in the Asia-Pacific region. Together with a favorable shift in mix from distributor to direct sales, this also helped the company eke out $3.4 million in adjusted EBITDA versus the loss of $2.2 million feared by analysts.
As for the current year, the $77-83 million in net sales and loss of $6-9 million in adjusted EBITDA SKIN expects in Q1 fall short of their respective consensus estimates of $85.5 million and negative $2.3 million as the company is still in the process of regaining provider confidence in Syndeo 3.0 and is making greater investments in its systems, processes and training to implement stronger management of and controls around its supply chain and inventory in order to prevent further hiccups down the road.
But with SKIN already seeing Syndeo concerns beginning to subside, it expects device sales to pick up beyond the current quarter. Combined with the ongoing strength in demand it continues to enjoy for its consumables, the company believes net sales will be flat to up low-single digits from the $398.0 million achieved in 2023 for the full year, which is largely in line with consensus. And further boosted by its previously announced business transformation program, which remains on track to yield annual cost savings of $20 million starting this month and an additional $15 million beginning in June, SKIN thinks it can generate more than $40 million in adjusted EBITDA in 2024. This represents growth of at least 65% from the $24.3 million produced last year and is substantially higher than the $34.3 million average analysts’ forecast.
The Beauty Health Company (SKIN) is one of the stocks recommended in our market-beating investment newsletter, Forbes Investor. To discover more undervalued gems with significant upside like SKIN, try Forbes Investor for FREE.
What’s more, as the currently elevated level of spending on strengthening its controls fade, more of the initial cost savings from its business transformation program should fall down to the bottom line in the periods ahead. When you also factor in the roughly 8% decline in share count stemming from SKIN taking advantage of the beating its stock took following its Q3 2023 report in November to repurchase and retire $30.2 million worth of its shares during the latest quarter, SKIN appears well positioned to return to even stronger top and bottom-line growth in 2025 and beyond. As this continues to play out, I think the stock’s recent momentum can persist.
Julius Juenemann, CFA is the equity analyst and associate editor of the Forbes Special Situation Survey and Forbes Investor investment newsletters. The Beauty Health Company (SKIN) is a current recommendation in the Forbes Investor. To access this and the other stocks being recommended through the Forbes Investor, click here to subscribe.
Read the full article here
