Olaplex Holdings, Inc.

Greetings and welcome to the Olaplex Holdings first quarter 2024 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Flaherty, Vice President, Investor Relations. Thank you. You may begin.

Thank you, and good morning. Joining me today are Amanda Baldwin, Chief Executive Officer, and Eric Tiziani, Chief Financial Officer. 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 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 filings the company makes with the Securities Exchange Commission that are available at www.scc.gov. and on the investor relations section of the company's website at ir.oaplex.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 financial measures should not be considered in isolation or to 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 financial measures 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. Additionally, during this call, management will refer to certain data points, estimates, and forecasts that are based on industry publications or other publicly available information, as well as our internal sources. The company has not independently verified the accuracy or completeness of the data contained in the industry publications and other publicly available information. Furthermore, this information involves assumptions and limitations, and your caution is not to give undue weight to these estimates. With that, I will now turn the call over to Amanda.

Thank you, Patrick. Good morning, everyone, and thank you for joining us. Today, we reported first quarter financial results representing a solid start to the year, while internally we've been making good progress on the business transformation plan we outlined in February. As discussed on our last earnings call, we view 2024 as a year aimed at delivering stabilization in the business, while we continue to prioritize the strategies that are designed to build a stronger foundation and put us on a trajectory to generate consistent sales and profit growth. While this journey will take some time, I am encouraged by the steps forward we are making and remain excited about the future of this business. We are intently focused on capitalizing on the power of the Olaplex brand with its unique qualities, its extraordinary technical foundation, and the differentiated science which delivers superior product performance It's innovative products that are sought after by a passionate global community of stylists and consumers and its advantage business model. At the same time, we are also taking actions that are designed to build and maintain the long-term health of the business, even if they have a negative short-term impact. As mentioned last quarter, we are limiting new distribution this year to allow for greater focus on our existing customers and current channels. as well as rationalizing some accounts where we find evidence that the distributors were the source of diverted product. Turning to the highlights for the first quarter, we reported net sales slightly above the high end of our guidance range, driven by earlier than expected timing of shipment in our specialty retail channel, and we reiterated our outlook for the year. Additionally, our brand health metrics among prestige haircare consumers showed continued industry-leading strength, consistent with previous quarters. According to our external brand tracker, Olaplex is ranked number one or number two for all of the top 18 most important premium hair care equities, which include Best for My Hair, Makes Hair Healthier, Recommended by a Stylist, and a brand I'm excited to talk about. We continue to be a category leader at scale, as Olaplex had four of the top five best-selling SKUs in prestige hair in the first quarter of 2024, per Cercana's retail tracking data of the U.S. hair market. and remained a top brand and key account across all three of our distribution channels. As it relates to our transformation, we are right on track with where we expected to be at this stage in our journey. Supported by a strong foundation, I feel confident about the future direction we are taking. Throughout each conversation I have had over more than four months since joining the company, our professional stylists and consumers, customers, and partners are highly engaged with our brand and our business. We're receiving very favorable feedback regarding the actions we are taking, and I'm optimistic that these conversations will culminate in future growth opportunities. All of this work is enabled by our passionate and talented team that's committed to executing against our priorities. On our last earnings call, we introduced three key strategic priorities for 2024, which include maximizing the impact of our sales, marketing, and education investments to generate demand, strengthening our capabilities and culture to support the future, and developing the long-term roadmap and future vision for OLPI. The first quarter included noteworthy accomplishments towards these goals on pace with the execution that we expected. Let me walk you through the progress we made on these initiatives. On our efforts to maximize the impact of our sales, marketing, and education investments to generate demand, our initial focus is providing seamless execution on implementing brand-building activities that drive awareness, conversion, and sell-through. Our goal is to sustain a more balanced, full-funnel marketing approach this year and remain focused on ROI and optimizing our spend for the best-performing channels and assets. At the core of this priority is returning to our stylist roots and recreating meaningful connections with our pros. Olaplex would not be the brand it is today without the trust and support of stylists, and we are committed to enabling and empowering their craft and helping them succeed and grow their businesses. We've increased the frequency of our participation at industry trade shows and sales events sponsored by our distributors and have established a greater presence at these events. We're expanding coverage of our internal field sales and education teams to engage with salons directly and ensure our team's close connection with the field teams of our partners. We're developing new educational materials, curriculum, and content to provide stylists with the knowledge and expertise about our science and technology. our consumer engagement team has placed increased focus on engaging and partnering with influencers and the pro stylist community deepening our relationship with this important group allows them to speak from an expert perspective about the benefits of olaplex to their highly engaged pro and consumer audiences one exciting marketing activation in the first quarter was our campaign highlighting our best-selling olaplex number seven bonding oil to celebrate olaplex number seven's position as the number one prestige hair oil in 2023 According to Circona data, the campaign introduced a new activation and creator-led marketing strategy. By inserting the brand into culturally relevant moments in compelling ways, we drove the brand awareness and generated a combined total of more than 3 billion earned media impressions, demonstrating our relevance as a brand and future potential in our marketing efforts. Looking ahead, we intend to further evolve our marketing messages and aim to better articulate the strength of Olaplex science and our commitment to professional stylists. To that end, in the coming months, we expect to launch a new campaign to enhance the positioning of our core SKUs and highlight the benefits of a complete Olaplex routine. We also plan to introduce activations that celebrate our pro community as we celebrate our own 10-year anniversary as a brand. Our second priority is to strengthen our capabilities and culture to support our future. This work is designed to improve the foundational infrastructure across our organization. This includes the ongoing implementation of our enhanced integrated business planning processes, created with the help of an external third-party expert to better improve forecasting and overall business performance management. Additionally, we created an internal centralized workstream overseeing marketing investments across channels for more strategic spending and optimization. We also opened a small office space in New York City, which will allow teams from all functional areas across our organization to come together and collaborate in an in-person setting. We believe this will further strengthen our corporate culture and allow us to build upon the speed and agility with which Olaplex has been able to operate. Importantly, we continue to forge ahead on our third priority of developing the long-term roadmap and future vision for Olaplex. This work is ongoing and includes a thorough assessment of our market opportunity, refining our brand identity, driving innovation, and leveraging our omni-channel business platform. We recently undertook an in-depth brand perception study embedded in category consumer and customer insights that confirmed the strong foundation for Olaplex and will act as a guide for the evolution of our brand identity, messaging, and design. Encouragingly, there's a strong base of consumer and stylist passion for our brand and enthusiasm for what we will do next. Certainly a solid foundation that I believe we can build off of. Additionally, we have formed a dedicated innovation team charged with accelerating our new product development. By leveraging existing executive leadership and bringing in new talent, we have created a more robust integrated development function to lead the ongoing creation of our new product pipeline. This team is also charged with developing enhanced commercialization strategies for new product launches in 2025 and beyond. Now as a brand with a proven global track record, we also continue to identify and see significant opportunities to expand our business around the world. Our new chief revenue officer and I spent extensive time with our key domestic and global partners to better understand our business and their strategies. We recently traveled to Europe to meet with our local team, international distributors, and customers to begin assessing the current structure and support needed for the future. I've also spoken in depth with our partners in Asia to assess our opportunity in this region and begin to develop a roadmap for the future. The feedback from these conversations was positive and insightful. I believe there is significant overlap in our goals and near-term opportunities to accelerate our partnerships. We believe we have an incredible opportunity to further develop our global brand as we focus on localized strategies that are designed to be appropriate for the unique customer and distribution channels across the world. With these components in mind, we continue with the work to establish a long-range strategic plan and financial framework for the future. In summary, we are pleased with the progress made during the first quarter. With our performance to date and the initiatives underway, we believe we are well positioned to achieve steady progress toward our goals for 2024. Before I turn it over, I would like to take a moment to recognize Eric, who has previously announced his stepping down as CFO, effective May 3rd, to pursue another opportunity. On behalf of the entire team at Olaplex, I would like to thank Eric for the leadership he has provided across the organization for nearly three years. It's been a pleasure to work with him through my onboarding these last few months, I wish him all the best in the future. We also welcome Paul Kostoras, who will serve as our interim CFO following Eric's departure. Paul is a financial executive with over 30 years of experience and who specializes in interim CFO assignments. We are fortunate to have Paul on our team, and we expect a smooth transition as we search for a permanent successor. And with that, I will now pass it over to Eric.