Risk Factors Update Summary

• Reduction in workforce from 1,034 to 881 employees, with a decrease in the U.S. workforce from 58,957 to 49,456.
• Capital expenditures for the year ending December 31, 2023, decreased from $34 million to $3 million.
• Material weakness identified in inventory operations requires additional personnel and process enhancements.
• Revenue increased significantly from $365.9 million in 2022 to $397.9 million in 2023.
• Addition of cybersecurity risk management details, including tools, monitoring, and governance structure.
• Addition of Syndeo 3.0 devices as a critical commercial product may materially harm operations.
• The Company recognized other income of $5 million, a decrease from $47 million, primarily related to payments received for the change in Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act.
• Inventory decreased from $109.7 million in 2022 to $91.3 million in 2023.
• Increase in share repurchase program authorization from $100 million to $200 million.
• Increase in the number of shares outstanding from 427,049 to 416,252.
• Lack of resources in inventory operations led to deficiencies in controls over inventory accounting.
• Share-based compensation increased significantly from $22,544 to $28,495, impacting operating expenses.
• Workforce reductions may lead to undesirable consequences and harm results of operations.
• Stock repurchase program authorized up to $100 million, repurchased 10.4 million shares for $30.2 million.
• In January 2024, the Company redeemed $75 million principal amount of its Notes at a weighted-average redemption price equal to 77% for $57.8 million.
• Inventory write-down rose from $5,144 to $18,272, affecting the company's financial health.
• Clawback policy amended to recover Erroneously Awarded Compensation, impacting current and former Officers.
• Introduction of new laws affecting esthetician providers could materially impact financial condition.
• Loss from operations increased significantly from $24 million to $130 million during the fiscal year.
• Material inventory write-down of $19.6 million due to obsolete Syndeo 1.0 and 2.0 builds.
• Liquidity decreased with cash and cash equivalents dropping from $568 million to $523 million.
• The Company accrued $21 million as of December 31, 2023, for the estimated cost of its Syndeo Program to upgrade or exchange customer Syndeo devices.
• Allowance for estimated credit losses increased from $2.9 million to $6.6 million in 2023.
• Syndeo 3.0 developed due to issues with Syndeo 1.0 and 2.0, resulting in $19.6 million inventory write-down.
• Increase in net sales by $105.8 million, primarily driven by Delivery Systems sales growth.
• Material weakness identified in internal control over financial reporting due to lack of resources.
• Change in the workforce demographics with a decrease in the percentage of salaried employees from 83% to 85%.
• Amortization of intangible assets increased from $14,852 to $20,907, impacting profitability.
• The Company discontinued the use of trade-up transactions starting in 2024, impacting revenue recognition for noncash consideration.
• The Company repurchased approximately 10.4 million shares for $30.2 million during the year ended December 31, 2023.
• Introduction of new regulatory requirements under the Modernization of Cosmetics Regulation Act of 2022.
• Gross margin decrease from 68.0% to 39.0% due to inventory write-downs and Syndeo Program charges.
• Increase in research and development expenses by $0.1 million, mainly due to higher compensation expenses.
• Change in the Chief Executive Officer with the appointment of Marla Beck as the Interim CEO.
• Fluctuations in operating results with an expected increase in operating losses and volatility due to market demand.
• Increase in general and administrative expenses by $7.3 million, driven by higher compensation and professional fees.