Olaplex Holdings, Inc.

Good morning and welcome to Olaplex Inc's first quarter earnings conference call. My name is Brandon and I'll be your operator for today. At this time, all participants were in a listen-only mode. Later, we will conduct a question and answer session during which you may dial 01. If you have a question, please note it is 01, not star 1. As a reminder, this conference is being recorded. I will now turn the call over to Ellison Milken. Ellison, you may begin.

Thank you, and welcome to the OLAPLEX First Quarter Fiscal Year 2022 Earnings Call. With me today are Jue Wang, Chief Executive Officer, and Eric Tiziani, Chief Financial Officer. For today's call, Jue will begin with a review of our first quarter performance and highlight the progress we made on our strategic initiatives. Then, Eric will provide additional details regarding our first quarter performance and fiscal 2022 outlook. Following the prepared remarks, the operator will open the call to take the questions you have for us today. Before we start, I would like to remind you that management will make certain statements today 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 risk and uncertainties that could cause actual results to differ materially from those projected in or implied by such statement. 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.olaplex.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, which is accompanied by a slide presentation, is available on the Investor Relations section of the company's website at ir.olaplex.com. Please take a moment to log on to the website to view the slides that go along with management's prepared remarks. I will now turn the call over to Jue Wang.

Thank you, Alison, and good morning, everyone. I am delighted to speak to you today. As you can see from our press release, the first quarter marked an excellent start to the year with strong results that were aligned with our goals. With our fiscal year 2022 guidance of 36% net sales growth and 35% adjusted net income growth at the midpoint of our range, we expect to deliver top-tier industry sales growth and profit margins. We are proud that our business outlook has only become more favorable since the time of our IPO last year. This reflects the resilience of our disruptive business model rooted in science-based beauty, the strength and health of our brand, and the sustained positive impact of our competitive advantages. As a pioneer in the skinification of hair, Olaplex continues to lead the market with efficacious, pattern-protected products backed by sign, and we attribute our ongoing strength to our ability to improve hair health from the very first use. We have earned both industry and consumer awards for number one selling products across the prestige hair care segments in which we compete. We have an expansive, growing community of professional stylists who advocate and educate consumers about the benefits of Olaplex and who we speak to every day. And all of these achievements come when we are still at the very early stages of our business in the fastest growth category in beauty. You have heard me say this before. And it bears reminding, we believe we have only just scratched the surface of our beauty journey. Because hair bonds are hair agnostic, I want to emphasize that repairing, strengthening, and protecting hair bonds is foundational for all hair types and for everyone. Olaplex's product assortment includes shampoo, conditioner, hair treatments, and styling products that are designed to repair hair bonds, which are damaged on a daily basis, whether from brushing and blow drying, chemical treatments including, but not limited to coloring, bleaching, straightening, highlights, and digital perms, or the environment. This proven treatment gives us the platform to introduce new products and expand our end users in haircare to target overall hair health. The global premium haircare category has performed well during prior economic cycles. Even in the current environment that has seen macro headwinds from inflationary pressures, we have continued to see strong growth momentum. For MPD, the U.S. retail beauty category grew 19% in Q1 of 2022 versus Q1 of 2021, and prestige hair care grew 32%, proving once again how resilient beauty is. According to MPD's tracking of U.S. prestige hair products, Olaplex was the number one selling prestige hair brand in the U.S. in Q1 of 2022. And Olaplex had seven out of the top 10 best-selling Prestige hair products in that period. Olaplex number five, our Bond Maintenance Conditioner ranked first. Olaplex number three, our Hair Perfector Treatment ranked second. And Olaplex number four, our Bond Maintenance Shampoo ranked third. We also consider our nimble organization and asset-light flexible operations model as enablers that allow us to adapt quickly. Our top-notch supply chain team has helped us to navigate the difficult global supply chain environment to avoid supply disruption, partially mitigate cost inflation, and continue meeting demand with healthy levels of inventory. With ample white space for growth through building brand awareness, expanding the product portfolio, and reaching new consumers in both the U.S. and internationally, we believe we are just getting started towards our long-term ambition for growth. Now, turning to an overview of our first quarter results. Net sales increased by 58% from the 2021 first quarter. Once again, our top-line growth was broad-based across product, channel, and geography, reaffirming our mutually reinforcing synergistic omni-channel models. and adjusted EBITDA increased 47% with an adjusted EBITDA margin of 68%. This strong industry-leading result continues to be driven by our key competitive advantages. First, at the heart of it all, our science-based, patent-protected products that really work. Our products are designed to make our customers' hair healthier from the first use. And this is foundational to our success. We created the hair bonding category and offer a multi-step regimen for treating, maintaining, and protecting hair health. In the first quarter, we continued to see broad-based growth across our portfolio of 12 products. which include three treatment products exclusive to the Pro channel, and now nine products for take-home use, which are sold across our three channels. These are powerhouse products in each of their respective sub-segments. Let me share a good example of this from our professional channel, where according to the 2021 US Client Pro Survey, Based on point-of-sale data for salon sales of retail products, Olaplex had the top five best-selling hair care products sold at salons in the United States. In addition, according to Klein, in 2021, Olaplex had the number one shampoo, number one conditioner, number one styling product, and number one and number two treatment products by revenue. In addition, based on our quarterly independent brand health tracking, we saw that our brand strength held stable or improved in Q1 of 2022 versus Q4 of 2021 across all KPIs tracked, including awareness, funnel conversion, where we have best-in-class conversion rate versus other brands tracked, future purchase intent, and brand equity. Second, our growth is driven by our powerful innovation platform. Over the years, we have established a proven track record of highly successful new product launches. In March, we launched number nine, bond protector, nourishing, live-in hair serum, which is another good example of our innovation leadership. Our BIS amino technology and first anti-aging formula is a weightless, silicone-free serum which acts as a shield from pollution and heat damage for 48 hours and is effective on all hair types and textures. Number 9 provides powerful antioxidant red algae with proven skincare ingredients applied to hair care and nourishes, hydrates, and protects with hyaluronic acid and panthenol. Further, it possesses a proprietary pollution prevention index measurement, PPI for short, and gives consumers proven transformative results with the first use. Shine. manageability, and moisturization. It also offers the professional stylist, physician, and artistry control of their client's styling and blowout as it has body, waist, and current memory retention properties. We are proud to see No. 9 exceeding our expectations at Sephora U.S. Number nine was the top 15 SKU for BSG for the entire month of March, even though it was only on the shelf for three days of that month. And in April at BSG, it was the top three selling SKU for the month. On social media, number nine has created a strong buzz that has led to increased engagement and increased user-generated content that demonstrate hair retention before and after use. The success of No. 9 and of all of our products reinforces our innovation track record. You have also seen our recent announcement of our AI virtual humans. Research shows that consumers want to see themselves reflected in a brand to feel connected and engaged. At Olaplex, we believe that our new team member reflects a synthesis of us that demonstrates our most authentic selves and mirrors the community we serve. As unique as we are as individuals, we are united by Olaplex. This once again shows our commitment that we lean in on technology to bring our community closer together. Next, We have a highly engaged community of stylists and consumers. Our professionals are our bedrock, and we will continue to innovate with and for them. The continuous feedback loop we have with them ensures we both stay highly engaged and connected. This is evidenced by the category leading engagement that we see from our community on social media. For example, since our initial presence on TikTok in 2020, our average engagement has grown from 650,000 views per day and 20 million views per month in our first 18 months to 2 million views per day and 60 million views per month in the last eight months, representing a tripling. of engagement with TikTok users. We continue to rank as the number one prestige haircare brand on Instagram with 2.3 million followers. And hashtag Olaplex now has 13.5 million posts, up from 12.3 million posts during our IPO in September 2021. And as reported by Tribe Dynamics, we were once again the number one earned media value brand in quarter one of 2022. This shows how highly connected and engaged our community is and our ability to continue to recruit new content creators to our social media platforms. Our next key competitive advantage is our synergistic omnichannel sales models. Our three channels, professional, DTC, and specialty retail, are mutually reinforcing and synergistic, with each channel able to drive growth for the other. This harmony is an advantage given the noteworthy and individual merits of each channel to our overall success. Our reinforcing omni-channel synergies allow end consumers to find our products wherever, whenever, and however they wanted to, especially as COVID restrictions are lifted with consumers returning to in-person shopping while still leaning in on DTC for convenience. In Q1, we continued to see broad-based growth across this channel, aligned with the expectations we discussed, during our last call. In specialty retail, following our success at Ulta Inn Salon, the first quarter marked our entry into Ulta Beauty across their more than 1,300 retail locations and at Ulta.com. I am pleased to share that through Q1, Olaplex has consistently been a top performing hair care brand at Ulta Beauty. continuing to outperform our and Ulta Beauty's expectations. This success has already led us to being recognized by Ulta as their 2021 launch of the year, which we were able to achieve despite only entering Ulta salons in October 2021 and all stores and online in January of 2022. Olaplex continues to lead as Sephora's number one prestige hair care brand. We will continue to expand our points of distribution with Sephora as the retailer opens in additional cold locations within the U.S. and expand their hair care offering in stores across Europe. In March, Sephora Europe rolled out its new hair care display with Olaplex, as an anchor brand in all of those locations. We have also officially launched across 126 stores in Douglas Germany, quickly becoming the number two hair care brand in Douglas Germany and look forward to increasing awareness and affinity for Olaplex with their prestige customer base. In professional, we had our biggest month ever in March at BSG. And we continue to be the best selling partner brand at Salon Century. Over 4,000 salon professionals have opted into our loyalty program since October of 2021. And we continue to build our brand in key international markets where Olaplex is our distributor's number one hair care brand in markets such as the UK and Italy. In direct-to-consumer, we continue to grow across pure-play e-commerce retailers and through an expansion of our footprint of Olaplex.com, where we are now in the UK, Australia, Italy, and Spain, as well as France, where we launched in April. Once more, we also continue to capitalize on what we believe is a significant long-term opportunity for growth in China through our cross-border relationship with Timor Global. Recent data indicates that we achieved the number seven ranked overall hair care brand on Timor Global cross-border in 2021, and that ranking increased by 284 spots compared to the previous year. Last but not Not least, our focused, disciplined, and purpose-driven organization remains one of our greatest strengths. To this end, this year, we have hired two key C-suite executives, Charlotte Watson, Chief Marketing Officer, and John Duffy, joined as General Counsel. We have also made additional key hires, such as Christy Bell-Humor, as our SVP Accounting and Principal Accounting Officer, and I would also like to recognize Emily Gersel as our SVP of Strategy in our Transformation Team. We are excited to fill this important role with such high-caliber executives. We are also advancing our ESG efforts by partnering with EcoVadis to further incorporate environmental stewardship and human rights into our vendor selection and supply chain processes. As maintaining proper ESG standards across our supplier base is meaningful to our business, our reputation, and to the impact that we have on the planet and its people. In addition, we are also identifying providers who can assist us in evaluating our plastic consumption and help us evaluate a path to reach plastic neutrality certification on our plastic packaging. In summary, we remain excited about our business and continue to expect fiscal 2022 to represent another year of excellent sales and earnings results and significant accomplishments toward our goals. We believe the year will see us continue to capitalize on our opportunities to further grow brand awareness, expand our product portfolio, improve our productivity at existing points of distribution, and broaden our distribution to new geography and trade partners. With a strong track record, a successful operating model, and a talented team, I believe we are in an enviable position to continue to execute our expansion strategy and bring more efficacious science-based innovation to market that solves real hair problems. I look forward to continuing to share our performance as the year unfolds. And now I would like to turn the call over to Eric to review our financial results in greater detail and discuss our guidance.