Olaplex Holdings, Inc.

Good day, ladies and gentlemen, and welcome to Olaplex, Inc.' 's third quarter earnings conference call. At this time, all participant lines are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will be given at that time. To ask a question, you will need to press star, then 1 on your telephone. As a reminder, this conference call is being recorded. If anyone should require operator assistance, please press star, then 0. I would now like to hand the conference over to Alison Malkin of ICR. Please go ahead.

Thank you, and welcome to the Olaplex Third Quarter Fiscal Year 2021 Earnings Call. With me today are Dewey Wong, Chief Executive Officer, and Eric Tiziani, Chief Financial Officer. For today's call, Dewey will begin with a review of Olaplex's mission and strategy and highlight our third quarter performance. Then Eric will provide additional details regarding the company's financial performance and introduce the company's outlook for 2021. Following these prepared remarks, the operator will open the call to take the questions you have for Dewey and Eric today. Before we start, I would like to remind you that management will make certain statements which are forward-looking, including statements about the outlook of Olaplex's business and other matters referenced in the company's earnings release issued today. Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in or implied by such statements. Additional information regarding these factors appears under the heading Cautionary Note Regarding Forward-Looking Statements in the company's earnings release and in the company's filings that it makes with the Securities and Exchange Commission that are available at www.sec.gov and on the Investor Relations section of the company's website at ir.olopax.com. The forward-looking statements on this call speak only as of the original date of this call, and we undertake no obligation to update or revise any of these statements. Also, during this call, management will discuss certain non-GAAP financial measures, which management believes can be useful in evaluating the company's performance. The presentation of non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to the most directly comparable GAAP measures in the company's earnings release. A live broadcast of this call is also available on the investor relations section of the company's website at ir.olaplex.com. I will now turn the call over to Dewey Wong.

Thank you, Alison, and good morning, everyone. I am delighted to speak to you today and share our strong third quarter performance. And the quarter also marked an important milestone for our company as we completed our initial public offering. Before I discuss our results for those new to Olaplex, let me first highlight who Olaplex is. why we believe we have been successful, and why we believe we are positioned to continue to be disruptors in the global hair care and beauty industry. Olaplex is an innovative, science-enabled, technology-driven beauty company with unique competitive advantages. We were founded with a mandate to deliver effective, patent-protected, and proven performance in the categories where we compete. We believe every person deserves to have healthy, beautiful hair, and our commitment is to deliver results that are visible from the very first application. Studies have shown that 91% of women do something to damage their hair daily. But with consistent and regular use of Olaplex products, consumers will have stronger, healthier looking hair. With our patent-protected technology, our consumers of all diverse hair types will see shine, hydration, less frizz, more body and bounce because their hair is repaired, strengthened, and protected from that very first application. Today, we have 11 key products, eight for take-home use and three exclusive for use by professional stylists, which are sold in three channels, professional, specialty retail, and direct to consumer. We believe we have been successful because our products are able to deliver visible results. We believe consumers who purchase at least one Olaplex product on average have purchased over three and a half other products from our product suite in the last 12 months. We are focused on innovation, with a strong pipeline of products under development. We have over 100 patents in our patent portfolio and patent protection in numerous countries around the world. These patents not only cover what we now sell, but also what we expect to sell in the future. We are supported by a highly engaged community of over 250,000 professional stylists on our private Facebook group. Our Instagram community alone comprise of our committed trade partners and loyal growing consumer base with 2.2 million followers, which we believe makes us the number one prestige haircare brand on social media. We have a synergistic omni-channel mix where each channel is mutually reinforcing across professional, retail, and direct-to-consumer. and all experienced strong growth in the third quarter of 58%, 128%, and 87% respectively. Our business is global, with more than 40% of sales outside the U.S. in fiscal year 2020, and for the nine months ended September 30, 2021. We operate in a growing category with a large addressable market, Per Euromonitor, the global total addressable market for hair care is 77 billion. And within that 10, prestige hair care is the fastest growing segment. In addition to hair, we have patents for applications of our technology in skincare, which has $140 billion 10. We believe all of this positions Olaplex for consistent, strong growth at robust margins that we believe are amongst the best in our industry. Now turning to our third quarter results. Net sales rose 81%, driven by broad-based strength for our Olaplex regimen across our omni-channel distribution, from professional to specialty retail to direct to consumer. This growth comes on top of already a very strong growth in the third quarter of last year. Our margins remain strong in this third quarter of 2021, including gross profit margin of 78.9%, adjusted gross profit margin of 79.9%, and adjusted net income rose 62.6% to 74.4 million dollars. with adjusted EBITDA increasing 63.3% to deliver an adjusted EBITDA margin of 66.1%. Our adjusted EBITDA margin in this year's third quarter includes investments to support future growth, which Eric will review in more detail shortly. In addition, the quarter included progress against our growth initiative with increased sales productivity, new product innovation, and growth from new distribution and international expansion. Sales growth was led by increased productivity in existing distribution across our professional, specialty retail, and direct-to-consumer channels. We have launched three new highly incremental products this year, two for take-home use, and one exclusive to the professional channel. In the third quarter, we launched 4P, our first toning shampoo. We are very excited about this product, which uses our exclusive multi-patented technology to hydrate, strengthen, soften, and neutralize brassiness for brighter blondes, highlights, grays, and platinum strands. Third quarter sales also benefited from first half introductions of the four-in-one intense moisture mask ProRx treatment, a new professional back bar reparative treatment designed to moisturize and smooth hair while adding shine and body in just 10 minutes. And number eight, our first born intense moisture hair mask. We expanded our distribution adding shelf space in Sephora with an increase in Olaplex to six linear square feet from three in the majority of their US locations as of the end of the quarter. And Olaplex was part of Sephora's rollout into Kohl's with 200 locations through October. In October, we entered Alter Salons with our professional offering as their exclusive bond builder in salon services. Overall, I am extremely proud of our passionate and dedicated team that contributed to our strong performance this quarter and believe we are well positioned to continue our success for the benefit of all Olaplex stakeholders. As we look ahead, we remain excited about our business prospects and expect our positive momentum to continue in the near and long term. We believe we can expand our loyal base of Olaplex users globally and continue to launch incremental non-cannibalizing new products supported by a robust innovation pipeline that is focused on solving real consumer problems. And now I would like to turn the call over to Eric to review our financial results and guidance in more detail.