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The HydraFacial Company to merge with Vesper Healthcare Acquisition Corp. (ticker: VSPR)
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HydraFacial is a leading provider of 30-minute facial treatments around the world
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Enterprise value is approximately 4.9x 2022 sales, well below comps including Peloton, Lululemon
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HydraFacial equipment is offered in The Four Seasons, Mandarin Oriental, high-end spas
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Priced at roughly $200 per facial, making it accessible for a wide range of consumers
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Demand has returned swiftly after temporary COVID-related spa shutdowns
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52% annualized sales, 38% annualized Ebitda growth between 2016 and 2019
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Clint Carnell, HydraFacial CEO since 2016, was previously Head of Surgical for Bausch+ Lomb
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Vesper’s Brent Saunders, former Allergan CEO, to become HydraFacial Executive Chairman
As the newest generation reaches adulthood, the notion of “taking care of yourself” has taken on a meaning Baby Boomers might never have imagined. The good news: Investors of any age now have a smart way to profit from the behavioral shift.
Meet The HydraFacial Company, the leading provider of spa facial treatments which cost roughly $200 and provide clients in 87 countries with a coveted healthy glow. HydraFacial this week struck a deal to go public through a merger with Vesper Healthcare Acquisition Corp. (ticker: VSPR), a special purpose acquisition company or SPAC that raised cash to find a target. Investors who buy VSPR shares now will see them convert automatically to the newly-formed company once the deal is formally approved next year.
There are several reasons for investors to take a look at the stock now, beginning with its track record under the leadership of CEO Clint Carnell, former Head of Surgical for Bausch+ Lomb and at the helm of HydraFacial since 2016. Between 2016 and 2019, the company’s revenue clocked a 52% annualized growth rate – a pace more common among technology companies than those in the wellness and beauty space.
HydraFacial CEO Clint Carnell
Indeed, HydraFacial’s highly-regarded technology and relationships with aestheticians have helped it establish an emotional attachment to the brand. An apt comparison might be made to Peloton Interactive, Inc., whose enviable customer following and low churn rate have made it a Wall Street darling.
Like Peloton, HydraFacial gets a lot of love from customers. In 2019, HydraFacial boasted a Net Promoter Score (NPS) of 40, higher than Botox (a product of AbbVie Inc.’s Allergan), L’Oréal’s Lancôme, or Estée Lauder
The HydraFacial process itself, in addition to being affordable for middle-income consumers, is also fast, painless, and non-invasive. The 30-minute experience includes four stages (cleanse, extract, hydrate, and boost) with several options to customize such as anti-wrinkle or anti-acne boosters.
HydraFacial is in a sweet spot between two categories: At one extreme is skin correction, which can include lasers and fillers, and at the other is skin care, which usually entails creams and lotions. Consumers are drawn to results that are comparable to correction procedures with the price and convenience associated with normal care.
Generational shifts should also provide sustained tailwinds. Not only are Millennials reaching the age where skincare is important, they also prefer to spend money on experiences over products. After a treatment, some even share their routines on social media (including stunning images of the skin “waste” product). Countless influencers talk up HydraFacial on Instagram and YouTube without ever being paid.
In news that may come as a shock, males from the youngest cohort of adults today are just as likely to get a facial treatment as their female counterparts. That is a drastic shift from a few decades ago when only the likes of Bret Easton Ellis’s appearance-obsessed Patrick Bateman would venture into an Upper East Side spa after an afternoon of shopping at Barney’s New York.
The company also has survived COVID-19 stronger than ever. While many aestheticians had to shutter temporarily, HydraFacial doubled down by continuing to market its product. That paid off well as sales have roared back, giving aestheticians (2/3 of whom are also physicians such as plastic surgeons) themselves a deeper trust in HydraFacial.
And while people may meet in person less often, they still see each other’s faces in detail. The “Zoom Boom” has made men and women acutely aware of their skin as many are forced to endure daily videoconferences with clients and business associates – up close and personal.
The company also has expanded with direct-to-consumer offerings that don’t require an aesthetician at all. That should both attract new customers and introduce loyal facial fans to new categories such as skin serums.
HydraFacial’s equipment can be found everywhere from mom-and-pop spas to the most luxurious hotel destinations such as the Mandarin Oriental and The Four Seasons. The company’s largest customer is Sephora, a skincare mecca.
HydraFacial’s domestic targets look ambitious but are eminently achievable. HydraFacial believes it can reach 12% of the U.S. population, with customers at the low end getting one treatment per year and eight or more per year at the high end.
The international opportunity is also vast. HydraFacial is already very popular in countries like Japan, but has yet to break into many locations with growing middle classes.
That translates to rapid growth for the foreseeable future. HydraFacial expects revenue to rise 57% in 2021 and 38% in 2022, with profits also continuing to grow.
Turning to valuation, the stock is still attractive even after a rally to about $11 since the deal was announced. The shares trade at an enterprise value of 4.9 times 2022 estimated sales. Lululemon Athletica Inc. trades at 8.9 times 2022 sales, according to Sentieo, an AI-enabled research platform. Peloton, meanwhile, trades at 6.2 times.
Last but not least, Vesper is no ordinary SPAC. It is led by Brent Saunders, the former CEO of Allergan, which turned Botox into a cultural sensation. He will join HydraFacial as Executive Chairman.
These days, there are plenty of growth companies to choose from. But this is one investment that should age gracefully.
IPO Edge Contact:
John Jannarone
Twitter: @IPOEdge
Instagram: @IPOEdge
