Business Combinations

6 Months Ended

Jun. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Business Combination - Reverse Recapitalization

The closing of the Business Combination occurred on May 4, 2021. In connection with the Business Combination:

Certain accredited investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors agreed to purchase 35,000,000 shares (the “PIPE Shares”) of the Company’s Class A Common Stock at a purchase price per share of $10.00 and an aggregate purchase price of $350,000,000 (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the Closing.

Prior to the Business Combination, the Company issued an aggregate of 11,500,000 shares of Class B common stock (the “Founder Shares”) to the Sponsor for an aggregate purchase price of $25,000 in cash. All outstanding Founder Shares were automatically converted into shares of Class A Common Stock on a one-for-one basis at the Closing and will continue to be subject to the transfer restrictions applicable to such shares of Founder Shares.

In connection with the Closing, holders of 2,672,690 shares of Class A Common Stock exercised their rights to redeem those shares for cash at an approximate price of $10.00 per share, for an aggregate of approximately $26,737,737, which was paid to such holders at Closing.

Immediately after giving effect to the Merger and the PIPE Investment, there were 125,329,053 shares of The Beauty Health Company Class A Common Stock outstanding.

The aggregate gross cash consideration received by the Company in connection with the Business Combination was $783 million, which consisted of proceeds of $350 million from the PIPE Investment, plus approximately $433 million of cash from the Company’s trust account that held the proceeds from the Company’s initial public offering (the “Trust Account”). The aggregate cash consideration received was reduced by $368 million of cash payments made to the former shareholders of HydraFacial, and reduced by $57 million for the payment of direct transaction costs incurred by HydraFacial and the Company which were reflected as a reduction of proceeds. The Company used the net proceeds to repay all of its outstanding indebtedness at the Closing. The remainder of the consideration paid to the HydraFacial Stockholders consisted of 35,501,743 newly issued shares of Class A Common Stock (the “Stock Consideration”). The net cash received from the Business Combination is subject to a net capital working adjustment.

The following table reconciles the elements of the Business Combination to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the six months ended June 30, 2021:


(in thousands)	Recapitalization
Cash in, trust net of redemptions	$	433,382
Cash - PIPE	350,000
Less: Cash paid out to Former Parent	(367,870)
Less: transaction costs and advisory fees	(56,976)
Net Cash Received from Business Combination	$	358,536

The number of shares of common stock issued immediately following the consummation of the Business Combination:


			Number of Shares
Class A common stock outstanding prior to Business Combination			46,000,000
Less: Redemption of Vesper Class A common stock			(2,672,690)
Class A common stock of Vesper			43,327,310
Vesper Founder shares			11,500,000
PIPE Shares			35,000,000
Business Combination and PIPE shares			89,827,310
Legacy HydraFacial shares (1)			35,501,743
Total Shares of Class A Common Stock Immediately after Business Combination			125,329,053

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(1) The number of Legacy HydraFacial shares was determined from the 54,358 shares of HydraFacial common stock outstanding immediately prior to the closing of the Business Combination multiplied by the Exchange Ratio of 653.109.

Acquisition of High Tech Laser

On June 4, 2021 the Company purchased substantially all assets of High Tech Laser, Australia Pty Ltd (“HTL”), a distributor in Australia. The fair value of the consideration transferred to the selling members was $4.9 million in cash consideration and $1.6 million of equity consideration consisting of 110,726 shares of the Company’s Class A Common Stock. The Company incurred certain costs related to this transaction that were not material.

The Company applied the acquisition method of accounting and established a new basis of accounting on the date of the acquisition. The assets acquired by the Company are accordingly measured at their estimated fair values.

The following table summarizes the consideration paid and estimated preliminary fair values assigned to the assets acquired and liabilities assumed at the date of acquisition:


(in thousands)
Consideration Paid:
Cash, net of cash acquired	$	4,920
Class A Common Stock issued	1,557
	$	6,477
Identifiable assets acquired and liabilities assumed
Accounts receivable	$	1,110
Non-compete agreement	100
Customer relationships	2,696
Inventory and other assets	354
Accounts payable	(1,072)
Deferred tax liabilities, net	(675)
Accrued and other liabilities	(802)
Total identifiable net assets	1,711
Goodwill	$	4,766

The primary purpose of the acquisition was to expand the Company’s operations in the Australia market. The goodwill arising from the acquisition consists largely of the business reputation of the acquired company in the marketplace and its assembled workforce. The goodwill is not deductible for income tax purposes.

Intangible assets consist of customer relationships with a weighted average amortization period of 5 years. The valuation of the acquired intangible asset was estimated by performing projections of discounted cash flows, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk. The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs). The unaudited pro forma financial information assuming these fiscal 2021 acquisitions had occurred as of the beginning of the fiscal year prior to the fiscal year of acquisition, as well as the revenue and earnings generated during the current fiscal year, were not material for disclosure purposes. The Company is currently in the process of finalizing the preliminary fair value allocation, and expects this to be completed prior to December 31, 2021.