SkinHealth Systems Inc. (SKIN) Earnings Call Transcript & Summary

Okay. And we are back at the 42nd Annual Goldman Sachs Healthcare Conference. My name is Amit Hazan. I'm the medical technology analyst at Goldman Sachs. And really excited for this next presentation. It's a newer company to the medical technology, medical esthetics space, by the name of Beauty Health. And might be a new company to all of you, but I think it's super exciting. The CEO and CFO are with us today. We have Clinton Carnell and Liyuan Woo. And Clint, let me turn it over to you for the presentation. And hopefully, we'll have time at the end, and we'll do some Q&A as well. Welcome to the conference.

Great. Thanks Amit. Thanks to Goldman Sachs team for hosting us. I'm Clint Carnell, CEO of Beauty Health. Our flagship brand, HydraFacial, we're excited to share with you. I have my CFO, Liyuan Woo, help drive the presentation and look forward to the Q&A. So Liyuan, we'll try to make this happen in 2 different locations. Thanks for driving. So disclaimers. This is myself, Liyuan. My background is coming through Johnson & Johnson, Bausch & Lomb, Gambro Healthcare, probably most notably came into the medical esthetics space through Solta Medical, which still has the Thermage Fraxel Clear + Brilliant brands owned by Bausch ironically. And I've been [ -- rose ] HydraFacial for about 5 years, brought in by the private equity firm in December of '16. I've run the company and to help take it public. We renamed it Beauty Health. I think that will become increasingly clear during the presentation. Really excited to share with you. And Liyuan, maybe you can share your background.

Yes, very briefly. Liyuan Woo, I joined the company the end of September. Actually coming with Deloitte, especially in M&A. And then with a few companies, bebe and Gymboree, and then followed by 2 category-creating companies, hyper growth, one is called SharkNinja, followed by The VOID, before I joined the company.

Great. And thanks for joining us, everyone. Slide, please, here -- there we are. So again, who are we? Let me set some context. These first 3 slides kind of queue up Beauty Health and actually the category we've created. We talk about deeply connecting you to the beauty health community where you live, work and play. There are 3 things that are unique about this company. It is a medical esthetics product. And we're in over 17,000 provider locations. And the majority of those are owned by physicians, dermatologists, plastic surgeons, other medical doctors. But what's interesting is, as opposed to going through that characteristic medical channel, we have increasingly become a consumer company. And what we've learned is that we see the business of skin health through the consumers' lens. Sephora is our largest customer in the world with over 500 doors. Plastic surgeons actually have the most multiple devices. And Caesars Palace, the spa there, has over 17 HydraFacials. And we're everywhere in between. So when you think about day spas or the spa at the Four Seasons, Ritz-Carlton, cruise ships, your medical spas, we meet the consumer where they are based on their age and what they're looking to accomplish. And that's really, really unique as I walk you through our story. Second is we are really hyper-focused on educating the person who actually does the treatment. And when you think about how many channels we're in, that could be complicated to service, right? Sephora, plastic surgeons, medical spas, what we've done is actually focused on the esthetician. She's the common person treating there. So most companies have overlooked her over the years. We decided to double down on her education. It turns out she's the most influential person with the consumer. And that's been really, really important. We actually launched HydraFacial CONNECT. It will be the largest beauty school and deployer of estheticians in the world. And then finally, a little unique is that we call ourselves an end company. So if you think about HydraFacial, it's an end company. It makes everything better than someone does, whether you're at Sephora and selling makeup, your makeup will go on better, whether you're a plastic surgeon preparing a patient for a facelift or a dermatologist just want a good, healthy skin or perhaps taking care of a teenager that has acne. Those are 3 things that are really unique as I walk you through the Beauty Health company. I'm asked what the TAM is, people get focused. I'm sure investors has never seen a TAM worth $1 billion. But literally, this is a situation where there's a lot of people on this earth. Most of them have skin and a bad skin, they should be getting the HydraFacial. So our growth strategy is very straightforward, get more delivery systems out there -- that's access points, raise consumer awareness and get people to get a HydraFacial because when they do, they tend to be very sticky and they tend to tell their friends. So it's a very straightforward growth strategy. It's definitely a global growth strategy. And I'll walk you through the nuance and why we will win. So how do we end up as a category creator? Because everybody knows about skin. People know about beauty. And we certainly know what health means, what is Beauty Health? If you think about historically how this category was created you had on the right side of this column here, skin care companies. That's lotions and potions in a bottle. Great companies, L'Oréal, Estée Lauder, Revlon, companies that sell very expensive products, but without a lot of clinical evidence that they actually work, but they're very good at talking to consumer. If you look at the left side, you have a lot of the companies that are considered medical esthetics companies. Allergan is the most notable. My current Chairman, Brent Saunders, was the former CEO of Allergan, the makers of BOTOX. And if you think about companies like Allergan, the various laser companies out there, filler companies, they talk about aging as almost a disease, and you've got to go to a doctor to get yourself fixed, whether it's wrinkles, whether you have loss of volume, you have age spots, whatever it may be. The unique thing about us HydraFacial is that we comfortably sit between skin correction and skin care. And if you think about it, we are the best thing for people to be approachable in medical esthetics. It's $150 to $200 treatment. It feels good, doesn't hurt, works right away and we show you the clinical evidence with your gunky, but it's really approachable. If you think about skin care, with very little efficacy, you can go in, in 3 steps and 30 minutes, literally get the best skin of your life. So it works the best in skin care. And we call that category we've created beauty health. It's the ability to meet the consumer where they are, where their needs are based on their age. My daughter is 20 years old. It's going to be 10 years before she's in the day spa, 15 to 20 years before she's in the med spa, and she may never be at the plastic surgeon's office. We need to guide her through that journey in her own personal skin health. So why force the consumer to go to a channel that they actually don't even want to go to until the time is right? And that's what's really unique about the HydraFacial brand. So what is it? Let's ground ourselves in the actual treatment. So on the left is our consumables. These are tips that are customized for your treatment. They either cleanse or they extract or they hydrate. And then we have a vortex of fusion tip, and that's really the principle around our IP. On the right is the pricing premise. It's roughly $200 on average. And we have these boosters that actually personalize the treatment. We like to think about HydraFacial as 3 steps, 30 minutes best skin of your life, that's not just a tagline. When you get the treatment, it feels great. Most people fall asleep. If there are men in this audience, it doesn't hurt. So that gets you in. Secondly, as you look at immediately when you sit up, you're literally glowing. And then the third is we show you this thing, it's called the gunky canister and the gunky canister actually shows you the [ crud ] that we pulled out of your skin, so you know that it works. And you can do that every couple of weeks. Typical consumer does this about once a quarter across the millions of treatments we do. And they do it as their skin care regimen because when you get a HydraFacial treatment, it makes everything else, BOTOX, fillers, lasers your makeup, just work that much better. So we democratize basic skin care and then we personalize it with these boosters. And we'll talk more about those partnerships like that. So we're in 2 really exciting growth categories. The first is skincare. I'm sure many of you know that we were hot going into the pandemic. The company actually has flattened and went through a really difficult time. But by June of last year, we actually showed signs of life. And we haven't just survived and been resilient during the pandemic, but we're actually [ wearing out ] pandemic because emphasis on self-care was strong going in. It increased as we looked at ourselves on Zoom for the last 16 months, as we're getting out meeting people, getting back to work and wanted to feel good about ourselves, HydraFacial is literally -- our tagline, our purpose is face life, face first. So no time more than present to take advantage of both participating and helping to create this really tremendous skin health movement. What's not as well-known is that we're also involved in health scalp -- excuse me, scalp health. And with Dr. Amy Taub, a world-leading dermatologist in Chicago, we helped develop a growth factor where we cleanse and we extract and essentially decongesting the hair follicles, and we help with hair thinning for both men and for women. And we're just launching that, really excited about it. These 2 categories give us a really broad band of growth for the future. So we have some fantastic macro trends. One is the death of retail is real. Some of our largest partners, Sephora, Clinique, many others, are looking to Amazon prove their business by creating experiential beauty. That's why Sephora is one of our largest accounts. It was just a -- really a pilot when I joined the company. And that brand and our brand work together like hand in glove. So it's really fantastic, creating experience for those millennial consumers inside of Sephora. There's no disposable income on the sidelines. We had this slide before the pandemic. Everyone knows there's trillions out there and consumers are looking to spend it. And I'm sure we're benefiting from that. And then there's growth in these channels. I'm often asked, what's growing faster, your doctor channel, your day spa channel or your beauty channel? Truth is it's too early to handicap that. They're just all growing. And skin health is one of the biggest macro trends I've seen in health care. We benefit by having a younger demographic, which means we're popular with social media influencers. We just launched the GLOWvolution, which is this really cool black semi, it's like a transform -- turned into 100 x 100 area. We take over a city for a week, and it's really fascinating to watch the social influence that we have with both our customers as well as our end consumers. And this is a really just naturally inclusive brand long before some of the movements that are so popular right now. This product is not biased against skin. So if more people of color, doesn't hurt some more men come in. And many times esthetic treatments were very expensive. So it limited the market and $150 to $200 is much more accessible for people of less means. So this really is the next-generation of beauty. It's all about less makeup and more natural skin and improving yourself through -- do something that's really important to cleanse, extract and hydrate your skin. So HydraFacial is an end company. I you look at the top category, people say, who are you taking away. If you're winning like this, somebody's got to be losing. 95% of consumers get something else in medical esthetics from noninvasive to invasive. In fact, 95% of those consumers get something else, including 2/3 actually get standard facial. So arguably, we take from standard facials because it's a better treatment, but we don't make people choose. We cut across generations. We can treat grandma, mom and the daughter because it works for all ages of skin type, across genders, across geographies. And we're participating in 3 really fun markets, beauty, esthetics and the spa services market. And people ask like how is that all working? It's just new business models. HydraFacial doesn't worry about the business model. If you're treating skin, you should have a HydraFacial in there. The Four Seasons is a very different experience than Equinox, but we just make sure that trainer is so well-trained that regardless of your business model, you have happy clients, patients, whatever you decide to call them. So this is the power of the nation. I'm supposed to describe it as a community because nation sounds like a marketing gimmick, but this is really the force multiplier for this company. And I want to talk about this for a minute because, as investors, you see the financial results we've had. The last 5 years, basically 50% top line, 40% bottom line CAGR. We were running at 25% EBITDA. We have a very nice razor-razorblade model. We have really nice NPS scores with our customer and their consumer. If you go to RealSelf, which is our Yelp, we're at a 99% Worth It rating. And this year, we just raised guidance to $200 million top line, $25 million EBITDA. That's a really nice P&L. But what's driving those numbers is something that's really unique and it's that initial tagline I gave you of connecting you to the Beauty Health network deeply. And by doing that, what we're doing is skin care is confusing. It still is to be in the business. So we simplify it, 3 steps, 30 minutes, the best skin of your life, and that clarifies for the provider, hey, I should get this. We train the esthetician. And when she is trained and passionate and walks the consumer through, the NPS score goes to the roof. And then we make sure that everybody in the ecosystem benefits. It's approachable from a price standpoint and works for the consumer. The provider has very good margins, over 80%, and we have a very nice P&L. So what we're doing as we move forward is investing in 3 areas: raising consumer awareness, we're doubling our marketing spend; investing in innovation, we're doubling that because we have a handheld device coming for the home market. We have a next-generation professional, and we're connecting all of that through WiFi connectivity and RFID. So we know what consumers are doing anywhere they are in the world. And then third, about 30% of our business is OUS. And we believe that markets at APAC and EMEA will actually be 3x to 4x larger than the domestic market, and we're nascent. We're really in early innings. So what's our master plan? So we -- master plan is very straightforward. We've been acting upon this for the last 5 years that I showed you those numbers earlier. We're going to continue to act upon this, and it's very straightforward. I describe this as high on execution, very low on complexity. So first, we're going to sell a lot of products. We sell around 4,000 delivery systems a year. ASP is just a little over $20,000. And then we produce $5,000 to $6,000 of recurring revenue. Each one of our systems is doing about 250 treatments a year. And it's very profitable. But we've been using that money and that EBITDA margin to invest in our skin care providers. Because as I mentioned, the NPS score goes up, they become fiercely loyal to us. And what they've now asked us is, hey, we have all these consumers that are benefiting from the treatment, but let's use that relationship to find the consumers and build a direct relationship. If you're selling to tens of thousands of doctors that limit your channel, when you're selling to billions of consumers that expand your channel, and that's why the most valuable companies in the world are directly engaged with the consumer, that's what we're doing now. And we're doing that because we are leveraging our technology. The 17,000 delivery systems, the millions of treatments per year. And we're connecting that technology wherever, whenever, and hopefully, forever with that consumer. So that once we have that customer acquisition, we can have that lifetime value that we all seek. And if we do that, we'll be the ultimate flywheel of influence in a really large market. So let me go through these pretty quickly. We have a very high NPS score. That was always really ruled by BOTOX. I think Brent, if he were on the line, would tell you that he looked at actually acquiring HydraFacial at the time when he was at Allergan. We couldn't get the deal done for a variety of reasons. But what brought us on his radar was that BOTOX has always been so successful because it works with a NPS score. Ours was the first he had seen to ever trump this in a medical treatment. And so we're going to continue to increase this NPS score and is part of the secret sauce behind what otherwise is a business. So what's our next generation technology? We have publicly stated, we have a next-generation technology coming the first half of next year. Today, we're very analogue. It's a beautiful piece of equipment. It's highly profitable, has a reproducible revenue stream. But tomorrow is really going to the digital universe. And one is it's a strikingly beautiful design. There's a lot of technology improvements. But this will take our HydraFacial Nation app, which is available on the Apple App Store connected to the professional device, connected to our handheld device. And that will allow us to really work with consumers to ensure they're getting great advice on skin care, that they're connected to a professional and that they have wonderful treatments at home so that everybody can actually understand what it's like to have a really good, healthy glowing skin. We're in 87 countries, we call it loved around the world. The U.S. and Canada make up about 70% of our revenues. We plan on being direct about 14 of those markets. And our international markets are really growing extremely fast. We are really not in China. We're just in Shanghai. And we've only been there for 2.5 years. It's our fastest growing market, highest ASP. We're really only in Tokyo. We're not -- we're entering Korea later this year. We're not in Brazil, one of the largest markets. And we've only entered France, Italy and Spain in the last 2.5 years. So really greenfields when we look at our international business. International strategy 5 years ago was 1 employee, living in Florida that fly over and get some orders. We are actually committing substantial resources to building out a headquarters in Europe, building a headquarters in China and ensuring that we've got the same global footprint across the world. This is our flywheel, probably most overused word of 2020 into 2021. But in our case, it's a competitive moat, but it also serves as the foundation for offense. We're really innovative. So we have differentiated product offerings. We believe in being engaged with our consumers. They want an experience, not just a transaction. We're passionate about our relationship with estheticians, and you'll see that if you go on social media. 80% of postings in social media are from our customers, and they do it for free. And we want to make sure everybody makes money in the ecosystem. If we do that, we keep growing delivery systems, make more people aware. When they get it, people tell their friends. It's a pretty straightforward business model. This leadership team is ready to take it to the next stage. I've been running the show. We've got 17 out of 18 quarters of predictably hitting and beating our forecast. We're out of the gates with our first 2 quarters. But I've got a really nice team behind me that makes things easy. Liyuan Woo is a fantastic partner as my CFO. And we have a combination of people coming from the traditional beauty background and the medical esthetics background because as a category creator, we both have to understand the consumer and the provider and put those 2 together. When we do, that's the force multiplier. We had a great growth profile. We've referenced that before. Guidance right now, it's $200 million top line. We did not raise guidance on EBITDA. This is a growth story. The next couple of years about investment. We can throttle back the spend and produce the type of earnings we had previously. But right now, we believe the most effective way to increase shareholder value and build this company is through investments in consumer awareness, innovation and global infrastructure. And so these are the 4 areas that we're spending money on. If we are -- if it's not in that category, we're not doing it. So if you're investing in this company, please know this is a growth story, but it's one that's profitable. Our delivery systems are almost the same margins as our serums. And so when I talk about global expansion, I talk about growth and category creation. It's not money-losing. It's profitable. But we're essentially, as a public company, able to strip the debt off the balance sheet, put some cash on, build out the international structure, create the marketing demand and go. We're supercharging this business. So with that, this is available on our website. If you go to our investor website. This is the semi I was talking about, but I encourage you to look at our social engagement. Next slide, please. HF Connect is our university. There's a certification program. This will be the largest school and deployer of estheticians in the world. This is an international business. If you go on social media right now, you'll see we just finished the experience center. It's a pop-up shop in Dubai, treated 1,200 consumers, have another couple of thousand on wait list. We did the same thing in London. We were just in Miami, the trucks head into Atlanta. What we do is we create social media engagement, 85% of the people that come to a pop-up shop have never had HydraFacial. And then we created activation in the physical marketplace to drive that consumer there. And our providers, catch this, come work those events for us for free. So that's an example of finding the consumer out there in the marketplace virtually, driving them to a physical activation the company is sponsoring and our actual providers, our customers engaging with the company. When we do that, it's just very magical. I'd really encourage you to follow us on social media to go to one of the activations in your town. So investment highlights in there, to finish this up. This is a category creator, we call it Beauty Health. Customer loyalty is incredibly important to us. We call them our partners. And I still, to this day, do the opening at most of our HFX, which is our training thing for our estheticians. It's a great platform. We have expressed that M&A is part of our core growth strategy. And we'll look thoughtfully about high NPS scores, leveraging our call point or our core competencies and things that would be accretive. But we've got a long way to go with the HydraFacial platform as the flagship for Beauty Health. There's a lot of levers of growth. It's a great economic profile with a lot of levers that we can still pull. The technology is very proprietary. Really, everyone else is an ankle biter, and you've got a management team that's really excited about creating shareholder value. And they're very approachable. I appreciate Amit and Phil and the Goldman team giving us this platform. So I think I finished 1 minute over, Amit, from what our master plan was. And I'll turn it back to you and thanks for drive and appreciate it.

Yes. Thanks, Clint. Thanks to both of you. And that's -- it's another skill we can add to the company is we don't have too many that added that finish on time. So thank you for that. But I thought what we could do is just kind of dive into some of the specifics around what you talked about. Some of this can be just reiterating some of the things you said. But one of the things we've been doing at the conference is just -- first of all, just getting the COVID piece out of the way. That's still front and center, as you might imagine, for institutional investors, just the big variable in the model still. So I'm not sure what you're able to say, but are you able to talk a little bit to the recovery and give some color around the trends that you all are seeing?

Yes. Yes. Well, first, I'll give a little history, so your investors become familiar maybe with our grit. Because I think a lot of us needed that during COVID shutdown. So we were in a very competitive PE transaction last March and nearing completion when the world stops [indiscernible]. And we went from literally $25 million in revenue coming into March of 2020 to minus $1 million in April. Now I've never sold minus revenue, but somehow that showed up. And we had to furlough about 85% of the employees, and we had to fight for our lives. We had a very skinny balance sheet at the time. My investors put money behind us, gave us another breath. And we did some very great things. We popped up a mass business that we still have on our consumer site, made it a really clever copper. We helped a local company with the ventilators, and we actually manned phones for telemedicine for consumers that thought they had COVID and were in crisis mode trying to find a doctor. So that's kind of the DNA as we fought for our lives. What was interesting by May and June, we started to see our APAC region coming back because it had been hardest hit and earliest. And we started to see what we call green shoots. And we started to prepare the company to go public, I guess, about September when I was recruiting Liyuan. And we were back at almost full throttle in September of 2020. And then Q4 was a little tough. So we really started measuring, with Liyuan's expertise, the correlation of shutdowns by the government and the strength of HydraFacial as an underlying brand. And what we found, and as you can see from our Q1 numbers, not only did we survive but we're thriving, coming out of the pandemic. And as the world continues to open up, we just continue to strengthen. So some of our largest customers still are just opening. Sephora is not opening until next month. Equinox lifetime just coming on board, all the casino, spas, the hotel spas. So if you like what our numbers were in Q1, I think your investors will appreciate how strong this business is coming out of the pandemic. By the way, we never -- I had the luxury of shutting down because we were fighting for our lives. So we're in fighting shape and ready to enter the world on our front foot.

Yes. That's a nice little recap. And I think it would be -- it would make sense for us to get into the delivery system and consumables in a little bit more detail to give investors a sense of the business model. But before I get there, one of the things that stands out with you, as you described, is that you have these various channels. You're managing your spend and your focus across a whole bunch of different channels. That's hard to do for a large company, let alone a small and growing one. So how do you manage that between these different key channels that you have in your business today?

Yes, it's a great question. And I think I'd mentioned during one of our calls. First, I screwed it up 4 or 5 times. You're looking at this as an experienced CEO, thinking, wow, these channels must be managed differently. And the truth is I had overthought it. If you think about the commonality of the day spa, the med spa, the plastics, the derm, these spas, the common thread there is the esthetician. And I overthought it thinking that their business models needed to be divided up sold too differently, trained differently, marketed differently. The truth is they're the same. And the owner figures out their business model, experience, pricing, how many staff members, physical environment, but just focusing on esthetician allows us to have a real simple sales force. We have a delivery system sales force. They're measured on productivity and then we have what we call business development managers and they're managed based upon the account ratio. And then we have our training facilities around the world that allow our customers to get to us for training. So with all those channels, it's pretty simple. And if anything, we have leverage as we continue to scale. So marketing is not different. Sales support is not different. And we just focus on that esthetician as the common thread.

Okay. And that makes sense. So let's talk a little bit about the delivery systems. And first, I think, just to give people a little bit more color on the model, I don't know how much you're able to say about, roughly speaking, the price per delivery system. I know you're able to say probably a little more about your installed base, you mentioned and how you think about growing that installed base going forward. Let's start there, and then we kind of get into a couple of other items.

Sure. Sure. So on a blended basis and for modeling purposes, a little over $20,000 for the delivery system. Typically, if you were to buy one in the U.S., it would be somewhere around $27,000 to $30,000. But we do have distributors out there where we lose some of the price because it's a transfer price. We also have upgrades in there. So for modeling purpose, just a little over $20,000. If for some reason, you're an investor that owns a med spa, we're going to charge you $30,000. So on a blended basis, that's what it is. And then each consumable is usually a combination of tips and serums. So as not to confuse people, just on average, we get about $25 to $30 per treatment as part of the consumable. And our customers charge somewhere around $200. So margins in excess of 80% for the customer.

Okay. Okay. So a difficult payback period that -- as you market these for your systems today?

Yes. On a -- look, a successful med spa or plastic, a derm, they can pay it off on a night, introducing and selling memberships. But on average, across our blended group, it's about 4 months. So a very quick payback.

Okay. And how often is it that you get either upfront purchases of more than one system or the purchase of a second or a third system by an existing customer. Is that a meaningful part of your overall sales?

It's increasingly becoming one. So across our installed base, 12% of our customers have multiple systems. And our top tier, 40% due. And then it just depends on who the account is. I just had one of the newest Vegas spas, and I saw it show up. And they bought 4 at one time. So we'll get a hotel or a spa that's familiar with it, maybe do 3 or 4. And then we're increasingly getting some of these large chains or a Sephora. Sephora, even when they're closed down and said, "Hey, we're closed down, but we need 250 more perk by HydraFacial". So I would say, on the most part, we're selling onesies, twosies, but increasingly, we have large partners that pleasantly surprises with larger orders.

Okay. Okay. Is there a replacement cycle here? Is that a part of the story?

Yes, they get beat up. I mean, they're technically marked for 7 years end of life but usually just start looking at all raggedy. If you're using those daily and you're in a treatment room, after about 3, 4 years, you need a new one just because it's bad, it looks bad if you're a med spa focused on esthetics, and you've got a crappy looking system. We're going to be pretty, I would say, aggressive on our upgrades and our trade-in trade outs when we come out with the next-generation system because it's going to be like a '75 Ford fill in the blank compared to a Tesla. And so we really want to get people in the newest brand when we launch that first half of next year.

Okay. So let's move over to the consumables side, the treatment side, and you've mentioned this, but in terms of just thinking about the treatments per system, maybe we can talk -- I don't know how much color you're able to add about the different channels. Do you see different levels of treatment per system depending on the channel or how that works or what you see in your sales that would be super helpful?

Yes. It's a great question. I'll tell you when I was diligence-ing, I had the same question 5 years ago. And I was in Newport Beach, and I went to a medical arts building and the salesperson says to me said, we're going to go here because you can find out everything you need to know. What he means, just there's a med spa on the first floor, there's a dermatologist on the second floor and there's a plastic surgeon on the third floor. And so when I went to the med spa and I talked to the owner there, they said, "Hey, this is our bread and butter. This thing is a workhorse. And it makes -- it brings people in and they do other stuff". Like, Okay. So we go to the next floor. I talk to the dermatologist said, look, I tell people, I never touch the thing. But if you want me working on your skin, you got to get on a membership. Otherwise, I'm not going to be your dermatologist. Okay, that's pretty interesting. And then I talk to the plastic surgeon, he goes I don't know what that thing does, go talk to my patient coordinator, and she's -- and I go and talk to her, she goes, she doesn't know what it does. I just tell them, look, you just bought a Ferrari from the guy with your facelift. Would you put cheap fuel on that? Let's get you on a regimen so that you can keep your face looking good like it does now. So that's probably the best qualitative example I can give you of how people use it in their practice. If you're going to Equinox or Life Time Fitness, it's probably like, I did my work out. I'm on my way as a Goldman analyst. I'm going to get my smoothie. I'm going to get my HydraFacial because I'm at a conference today. So our customers really use it in a different way. But it's the same 3 steps, 30 minutes. It just depends upon what type of experience they surround it with.

I'm going to leave the Goldman analyst commentary aside. I can go too many places, dark places, dark places with that.

I like Goldman Analyst.

So let's talk a little bit about the specifics involved. You mentioned some of these, but there's a base tip. There's an extraction tip. There are boosters. There's care advice. Can you talk a little bit more specifically to each of those and how they kind of make up that ASP that you discuss when you think about kind of per treatment cost and maybe what opportunities are to upsell beyond the average?

Yes. So years ago, we decided, hey, how do we personalize these treatments because little I knew the CEOs, these skin care companies, they already had great brands, great ingredients, they were known for these. So the first one we started out with CEO, Dr. Zein Obagi, he may be known to some of your folks there. And it basically was a way to increase our reputation with our ingredients because we weren't great at them. The way to think about those ingredients, right now, it's mid- to low teens in terms of penetration of each treatment. We want to drive that up because of booster, what we call them, can be another $40 to $75 for us. So pretty meaningful on our revenue, and we'll start to guide as we learn what total penetration we can do. Why those boosters are important is once we get the basic treatment, it's important to personalize. So like I'm a 51 year old CEO, which means I fly too much, drink too much, don't [indiscernible], right? I get a little red. And so I use a booster that actually temps down the inflammation for me. You may get like my son who has acne and maybe the basic cleanliness and then a product that maybe helps with the acne, right, to keep the sebaceous glands less oily. So that's the type of boosters. Everybody knows once they get basic skin that their individual needs are different. And so that's how we try to fill those out, much like Keurig does with coffee. People forget that used to be coffee is made by the office manager, and it was either good or crappy. But it was one kind. And now you go in. If you're a Starbucks lover, a Peet's or a Dunkin' Donuts, God forbid, you get your own specialized coffee and everybody's happy and our boosters work the same way.

Okay. Okay. I did notice that you mentioned that you had partners here. Is that something worth calling out?

Yes. I think it gives us a bigger megaphone, right, as our partners are all trying to distinguish their brands. And also some of them have some really meaningful following. So like the last couple of boosters, we just launched Dr. Murad, one of the best-known scientists. They're owned by Unilever. He got on and we ended up like 500 followers that night and he did a broadcast for us. Dr. Paul Nassif, [ friend of you or his family ] or you may watch Botched. He's the good plastic surgeon that fixes the bad plastic surgery, and he has a skin care line we've launched. And Paul and I just did a TV shoot together. That's the kind of partnerships we have. And each one is a little unique. We also have ones that are specific to kind of like Four Seasons type of spas. So the idea is that educating consumers on good, healthy skin and helping them have brand engagement. If you think about all those other companies, reps and marketing groups are also talking about HydraFacial is kind of the epicenter or cornerstone of good healthy skin. So it's kind of a win-win for all of us.

Okay. I want to move on to competition for a second. You talked about a lot of ankle biters. It just doesn't seem like anybody is doing this. I think it'd be really important for people to understand the moat here. Why is it that I can't go into my garage and basically develop a system that's similar? How difficult would it be to try to emulate what you're doing?

Yes. Look, competition is always a real threat. We talk tongue in cheek, but actually seriously our competition is awareness, right? We need more people to be aware of this because when they're aware of it and they get a HydraFacial, they stick and they tell their friends. So awareness really is our competition. We have created the category. We probably make up 75% to 80% of it. And I'm sure many of your investors are sophisticated and know that the category creator typically has the most of the valuation, of the pie and everybody else takes on scraps. So we take the word but also the actions of category creator very seriously. So you'll look at us, talk about Lululemon, Peloton and Netflix. Brands like YETI, where they drill up this passionate brand following. That's what inspires us. Brands that engage with their customers, with their partners, and that's probably the ultimate moat. We call that the HydraFacial nation. And in our case, it's real, and if you do channel checks, I think you'll find that to be the case. There's no guarantee, but we've done a couple of things. One is we have a very large installed base. People will pay $25,000 for those. We're making their people treating in those facilities, professionals that drive great satisfaction, make all the other products better, and it's profitable for everybody. So as long as we keep executing in that healthy ecosystem build, that's a pretty strong moat. But then we don't rest on our laurels. We've got a home device coming in Q4. We've got a next-generation professional device first half of next year. We just launched the HydraFacial Nation App. I encourage your listeners to download, analyze your skin and helps you understand skin health. But then we have business innovation. These pop-up shops in Dubai and London and the GLOWvolution truck in Miami and Atlanta. And then thirdly is, from a marketing standpoint, we punch well above our weight. My oldest markets here, I think, is 31 years old because they're savvy on social media. That's where our customer is. And we bring him and her to our physical activations and magic happens. And then finally, we're going to build out the global infrastructure with our profit so that we're ready to embrace the growth that's coming. So we're accelerator. This is a growth story. And I would say that it is an execution story. We've got a demonstrated track record of success, but we wake up every day a little bit of neurotic, insecure overachievers. So you'll find a pretty frenetic pace with this company because we believe category creation is real. It's a big market. We feel like we can own it. And we think we can create a lot of shareholder value along the way.

Yes. Go ahead, Phil.

With just a few minutes left, maybe this one will go towards Liyuan. You talked a little bit about the quarter and I think, much more importantly, the decision to raise guidance after 1Q kind of speaks to your philosophy of guidance. Maybe you can talk about philosophy guidance more broadly, visibility you have from maybe a systems backlog standpoint and future growth prospects. And then one more follow-up on the P&L after we do that.

Sure, Phil. As you recall, we actually gave our guidance back in November initially. This is where we guided to $181 million. Back then, there were a lot of murkiness when it comes to COVID. So obviously, once we see Q1, which was quite interesting, right, because if you recall, Q4 December and also January, February, the COVID trend was still very murky in the U.S. Europe was actually worse. APAC is probably the only one that truly was up. But based on the experience and the strong quarter we had for Q1 we were able to update our guidance. The assumption is still there could be noise from COVID for Q2, but we're assuming Q3, Q4 sort of come back to business as usual. Overall, to Clint's point, from an investment philosophy's point of view, we're being profitable, historically generating 25% EBITDA under private equity ownership. Given this is a growth story, it's all about top line. We are investing into the 3 areas, right, marketing, R&D and international infrastructure. It's going to be heavy lifting, especially 2021, 2022. We also talked about, it's always been asset light. But this year, EBITDA-wise, CapEx-wise, we're going to spend up to $15 million. Suffice to say, in terms of providing guidance, Clint had mentioned, we have pretty good muscle build in terms of predictability on both the [ razor blade ] side. So the team has been able to beat the number internally historically. But given we're a new public company, we wanted to be very thoughtful as we provide guidance.

Okay. That's great. I think I'll turn it to Amit to close.

Yes. We're unfortunately out of time. I think we could have gone on for another 20. It's a super interesting story, and we're really excited about your growth prospects and what you've been able to do, especially in this difficult time. So it's really nice to be speaking with you, and we look forward to many great things from you. And hopefully, you'll be back, and we'll be able to do this live next year in California where we're supposed to be for this conference. So I hope you'll come to that. Thank you so much and best of luck to you.

Thanks, Amit. A pleasure.

Thank you. Bye, guys.

Thank you.