Skincare company BeautyHealth (NASDAQ: SKIN) reported Q2 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 13.7% year on year to $78.2 million. Revenue guidance for the full year exceeded analysts’ estimates, but next quarter’s guidance of $67.5 million was less impressive, coming in 2% below expectations. Its GAAP profit of $0.03 per share was significantly above analysts’ consensus estimates.

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“Momentum continued to build in the second quarter, as BeautyHealth delivered another strong performance aligned with our strategic transformation goals,” said BeautyHealth CEO Marla Beck.

Company Overview

Operating in the emerging beauty health category, the appropriately named BeautyHealth (NASDAQ: SKIN) is a skincare company best known for its Hydrafacial product that cleanses and hydrates skin.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $310.1 million in revenue over the past 12 months, BeautyHealth is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, BeautyHealth’s revenue declined by 1.6% per year over the last three years, a tough starting point for our analysis.

This quarter, BeautyHealth’s revenue fell by 13.7% year on year to $78.2 million but beat Wall Street’s estimates by 4.6%. Company management is currently guiding for a 14.3% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 4.6% over the next 12 months, a deceleration versus the last three years. This projection is underwhelming and indicates its products will face some demand challenges.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

BeautyHealth has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.4%, subpar for a consumer staples business.

Taking a step back, an encouraging sign is that BeautyHealth’s margin expanded by 13.6 percentage points over the last year. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

BeautyHealth’s free cash flow clocked in at $10.75 million in Q2, equivalent to a 13.7% margin. This result was good as its margin was 9.2 percentage points higher than in the same quarter last year, building on its favorable historical trend.

Key Takeaways from BeautyHealth’s Q2 Results

We were impressed by how significantly BeautyHealth blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also excited it raised its full-year revenue and EBITDA guidance. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 18.7% to $1.90 immediately after reporting.

Sure, BeautyHealth had a solid quarter, but if we look at the bigger picture, is this stock a buy? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.