This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Thank you for standing by. This is the conference operator, and welcome to the WaldenCast second quarter fiscal 2022 earnings call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Alison Malkin of ICR. Please go ahead.
spk02: Thank you, and welcome to the WaldenCast PLC second quarter and first half 2022 earnings call. With me today is Michelle Broussette, founder, chief executive officer, and chief financial officer. For today's call, Michelle will begin with a review of the WaldenCast mission and the advantages of our business model, followed by a review of our second quarter and first half financial performance, and then provide additional details regarding our growth strategy and highlight our ESG accomplishments. After the prepared remarks, the operator will open the call to take questions. 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 WaldenCast 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 filing 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.waldencast.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.waldencast.com. I will now turn the call over to Michel Brisset.
spk05: Thank you, Alison, and good morning, everyone. I am pleased to speak to you today and share a strong second quarter and first half performance with a period marking an important milestone for our company as we enter the public markets as Waldencast PLC. Before I discuss our results for those new to Waldencast, Let me first highlight our mission and why we chose to play in the beauty and wellness space and believe we're uniquely positioned to build a global best-in-class operating platform in this beautiful industry, a platform built for both speed, scale, and profitability. I started Walden Gas three years ago with my co-founder, Hin Septi, following a wonderful 25-year career running consumer brands at Procter & Gamble and most recently L'Oreal, where I was Group President of North America Consumer Division, and before that, CEO of the UK and Ireland. With Waldencast, we have reimagined the beauty company of the future, the home of high-growth, highly profitable brands that have a relevant and authentic connection to the consumers of today and tomorrow. A best-in-class beauty and wellness multi-brand platform that creates, acquires, accelerates, and scales the next generation of high-growth, purpose-driven brands. First, we're a beauty player. Why? Because beauty is the most beautiful of businesses and a business that we know extremely well. First, the category is underpinned by attractive growth drivers with always growing consumer desire for quality over price, increasing appetite for innovative and higher performance products, particularly in categories like skincare and makeup. The ever-continued emerging market expansion with a rise of middle classes in huge markets like China, India, Indonesia, and Brazil. Acceleration and continued adaptability to e-commerce and beauty tech, particularly by skincare and makeup consumers. And second, it has proven resilience through various economic cycles. And while certain categories can be impacted by cyclical trends, beauty overall remains consistent thanks to its multiple subcategories. Beauty is also a highly fragmented market that is ready for a change as evidenced by interesting characteristics that have emerged. First, it is a highly fragmented market with the top five players representing only 32% of the market. Second, this is not a winner-takes-all market. It's a market of expandable consumption where a company's ability to grow is only limited by its ability to innovate and present to consumers new and interesting offerings and connecting with them in meaningful and relevant ways. Third, this consumer specificity of the category, plus the rise of digital and more responsive asset-like business models, has driven the rise of compelling emerging players, independent or indie brands, that are driving growth and gaining market share. This explosion of new indie brands creates a clear opportunity to aggregate emerging brands under a new, modern, multi-brand platform to help them accelerate growth and scale globally. What we're creating with Waldencast is an incredibly powerful combination. First, Waldencast is a multi-brand platform built for growth and profitability, a house of brands built for speed and scale. It's a balanced portfolio, placing some of the most structurally attractive segments in beauty and allow us to mitigate the risk linked to single subcategory fluctuations. We have the expertise in managing and scaling beauty brands and businesses, which we intend to do while keeping an asset-light structure and agility to retain the market responsiveness and speed of entrepreneurial indie brands versus the slow, inflexible, and costly traditional structures. Importantly, our management incentives create a strong alignment to long-term value creation through operational and capital allocation excellence. Now, before I share with you our Q2 performance that completed an outstanding first half of Waldencast, let me ground us first in the strong performance of the market we play in. Beauty is, once again, the most beautiful of businesses. Looking at MPD's U.S. Selective Market Data, where we play with our portfolio of brands, the market grew at a strong 17.3% in the first half of 2022. slowed down slightly due to a stronger 2021 base, but it's still very dynamic at 15.9% despite the challenging global context. Swimming on to makeup, the category has bounced back strongly post-pandemic, growing ahead of the category at 20%. In the first half, maintaining a strong 18.5% on Q2. This growth has been fueled by the reopening after the pandemic with consumers returning to their previous makeup habits, with 70% of them going back to similar routines or stating that they are wearing even more makeup. Similarly, skincare is still performing strongly at plus 11.6% on the first half, on top of the momentum the category has had during the last few years and accelerating in Q2 to plus 12.3%. Constantly fueled by premiumization and the rise of the skintellectual consumer, be starting more and more potent and performing products. Our starting point to the world-class journey are Obagi Skincare and Milk Makeup. We have two brands that play in the most attractive segments of their individual categories. Physicians dispense dermocosmetic skincare and premium makeup and that are outperforming their individual categories. Two real brands with a proven ability to connect and build authentic communities within their target audiences. and important to the world in God's vision, complementary brands with business models, channels, and consumer needs. Obagi Skincare is a crown jewel of the physician-dispensed skincare market. It is perceived by physicians and practitioners as the number one brand in the skin health space, participating in the most interesting, attractive, fastest-growing area of skincare. Obagi has exciting growth opportunities both within the existing business model and new levers, and is also a highly profitable business with high gross margins and bottom line profitability. Obagi brings to our platform robust financial operational expertise and a scheme biology know-how to benefit our wider portfolio now and in the future. Milk Makeup is a cult Gen Z brand with an incredible organic following through a diverse and inclusive community known for its cultural relevance and iconic products. Milk makeup brings to market unique, high-performance, easy-to-use products that are also vegan, clean, and cruelty-free. Its core values are community, self-expression, and inclusion. Milk makeup is already the number two clean makeup brand at Sephora, a category that is the fastest-growing part of the makeup market. But our goal is to drive milk makeup to, over time, become the top global beauty brand of the next generation. As I said, this is just the beginning of our journey. With these two brands, we're laying the foundation of what, over time, will be a company that will span all beauty categories, geographies, price points, and business models to become a global best-in-class beauty and wellness company. Now, let's look at our quarter and first half 2022 results. For Q2, the combined results of a virgin milk were very strong. On a pro forma basis, Net sales amounted to $77.1 million, a growth of 23.8% versus the same period a year ago, with a strong gross margin progression at 580 basis points to reach 75.1%. Adjusted EBITDA margin growing 310 basis points to 28.4%. It is important to know that at Waldencast, we manage the company on an annual basis, and quarter results should not be extrapolated to full-year results. Now for the front-half performance. On a pro forma basis, net sales amounted to $138.2 million, a growth of 24.6%. Gross margin improved by 294 basis points to reach 73.8%, and adjusted EBITDA grew 28.2% versus a year ago, reaching 23.5%. This performance was driven by Obagi's continued growth in core U.S. physician channel through deeper door and skew penetration on both core and innovation and building new successes in wider footprints internationally and on direct-to-consumer. It will make up impressive overperformance of the market, driven by increased awareness hallowing on base business, breakthrough NPD launches and door expansion, as well as substantial gross margin progress. The 5% growth over performance of 2021 versus our original projections at the time of the transaction announcement, plus the strong performance in the front half, give us a strong confidence to reaffirm our 2022 full-year projections at net sales of $256 million, gross margin at 74%, and adjusted EBITDA at approximately $15 million after incremental combined central public company costs. In the following slide, we provide the capitalization table at the current time. We have a total diluted shares of standards of approximately 112.7 million shares, as well as approximately 29.5 million warrants. Most of the sellers, founders, and management shares have a one-year lockup, with a small portion of seller shares with a six-month lockup. This diluted share count excludes approximately 16.1 million shares from management equity performance-based awards not yet allocated. The company has a total financing line available of $225 million, composed of a $175 million return loan and a $50 million revolver. On a performer basis, the company has net debt of approximately $142 million. Importantly, our shareholder base is solid. and provides a strong alignment and stability for the company with Obagi and Milk shareholders owning at transaction close approximately 45.9% and Waldeca's founders and sponsor members approximately 22.8%.
spk06: Now let's go into more detail on Obagi.
spk05: Obagi Skincare is the number one recommended brand in the US by physicians and highly respected thanks to its science-led products protected by 80 plus patents that delivered transformative results which unlock a strong product loyalty both from the patient and the physician. Obagi delivered a front half with a growth of 18.1% in net sales, a very strong gross margin growing by 201 basis points to 77.1%, and EBITDA margin was 24.4%, but down 374 basis points versus a year ago. Growth was driven by continued strong growth in our core U.S. physician channel, stellar growth internationally, and the beginning of our e-commerce strategy. Growth was slightly tempered in the U.S. by our wholesale channel, as we realigned the distribution to support our growth strategy. As mentioned before, we manage the company on an annual basis, so we're very comfortable with our annual objectives. Lower EBITDA versus a year ago, is driven by normalization of SG&A activity post-COVID and marketing investment ahead to support new product launches. Obagi has significant growth opportunities, and our strategies are very clear. Number one, grow our footprint within our U.S. physician business through new doors. Second, expand the breadth and depth of our portfolio. And third, expand our footprint to new geographies and channels. Now, in addition, if this was not exciting enough, we have two big oceans of opportunities. Not currently capturing our projections that we're currently working against. First, capture the opportunity of the in-clinic device market to drive further our skincare business. We're just at the beginning of a broad market test with our skin intrinsic device, a product that boosts the effectiveness of our skincare product efficacy by infusing it deeper into the skin and driving even more transformative results faster. Second, an answer to the increased consumer desire for an accessible range by building a bespoke Obagi brand and product proposition aimed at consumers not currently captured within our brand universe. Now, back to our core three levers, more physicians, more products by physician, and consumer and a larger footprint. We are deepening our account penetration and we're just getting started. In the first half of 2022, our Obagi Physician Dispense business grew 8.3%. Importantly, approximately $1.4 million of sales came from new accounts. Today, we're covering approximately 35% to 40% of dermatologists in the U.S., and only a fraction of that among plastic surgeons and other skincare dispensing multi-specialty practices. So the potential for growth within the U.S. physician channel to have Obagi in more doors is big. To drive further Obagi's breadth and depth, we have a two-prong approach. First, by anchoring our deep hero products deeper in the distribution. Our award-winning Professional Seed Serum is a great example. In the first half of 2022, we increased its distribution in the physician channel by 7.4% and became our number two SKU across all channels. This performance was driven by a push in deeper distribution and an increasing consumer pool aided by the recognition given by two prestigious beauty seals of approval. Secondly, innovation targeting unmet needs and delivering transformative results. In Q2, we introduced ElastiDerm neck and décolleté, where 94% of participants showed visible signs of improvement in horizontal lines and sagging skin in those areas. This innovation achieved our number four sales ranking within the physician channel in its first three months and helped grow the core Elastin franchise by 38% over half one. Now let's look beyond the U.S. business. We have intently focused on growing our international footprint. The international business grew 45.9% in the front half. If we focus for a moment in Asia Pacific, the area where our international business is most developed and our largest market, we launch in the region our Obagi Clinical Entry Price Point Range. as well as a tailored new scar cream product for the region. These product innovations allow us to penetrate deeper the market and resulted in growth of 81% versus the same period year ago. We have also started expanding our e-commerce footprint, albeit from a still low base, through a unique model. We not only are serving our consumers directly through e-commerce and a few selected e-commerce players, but we provide our partner physicians with the tools to service their own patients directly. We're just at the beginning of unlocking the potential of digitalization in our business, and being part of the World NCAS platform will accelerate this. Now, turning to the buoyant makeup category and one of its star performers, Milk Makeup. Milk Makeup is the number two clean brand at Sephora, with a cult following of 2.7 million consumers and iconic products ranking as top sellers at Sephora. It has had a fantastic start to the year, with the front half fell out at 48.1% versus a year ago, and for perspective, 46.8% versus 2019 to normalize for the COVID base. This is well ahead of the makeup category at 20%. The front half net sales grew 45%, with a specially strong Q2 at plus 82%, fueled by the brilliant launch of Rice Mascara and Pore Eclipse Mattifying Prime. equally positive results from a profitability point of view with a strong evolution of gross margin of 783 basis points to 65.3% and evident margin up 996 basis points to 21%. Mixed performance and roadmap for the future is based on three strategic plans. First, grow our awareness and community as milk, despite its large organic community following, is a relatively under-marketed brand. Second, continue to deliver breakthrough innovation and expand our category footprint. And third, expand our distribution domestically and internationally. Zooming on the first lever, we can see that not only has Makeup built its awareness through a strong visibility at our great Sephora partners, but it's also strongly grown its fellowship with existing media touchpoints. This has led to something that is difficult to achieve in makeup, very strong growth in its core franchises benefiting from the increased awareness of the brands. And this is just the beginning as we see significant opportunity to expand our consumer base as we grow awareness across all consumer segments. Today, we have a strength in the Gen C consumer, but plenty of opportunity to further consolidate our stronghold there but also invite into our community additional makeup consumers for which Milk's product performance and strong brand values are compelling. And we're staying always ahead by continuing to develop our community across new emerging platforms like Roblox, Twitch, or Discord. Our second growth pillar is innovation. Innovation is a lifeblood of makeup, and Milk Makeup has demonstrated a consistent ability to deliver breakthrough products that have become icons and top sellers at Sephora. In the front half, we built on our mascara and primer category strengths by delivering two big launches. Rice Mascara, to complete a category where we already have one of the best-selling mascaras, and Pore Eclipse, to consolidate our leadership in primers. If we zoom on primers, a category in which we have decided to play hard and win on milk makeup, We have in our range the HydroGrip Primer, the number one best-selling primer at Sephora by a long margin. And we managed to launch a second primer, Pore Eclipse, addressing an unmet and complementary consumer need, mattifying and blurring of pores. It has quickly become the number three primer at Sephora, incrementally to our existing HydroGrip, who has not only maintained its number one position, but grew after the 69%. We have chosen so far to focus on ancillaries and low-consumer barrier-to-entry categories, such as mascara, and have succeeded in building best-selling iconic products. Now, the brand is ready to successfully expand in other subcategories of makeup that have significant scale and to expand in a bigger way into high-loyalty, high-replenishment areas of the market, such as complexion. More to come on this exciting new launch. Longer term, we believe Milk has the permission to successfully expand into other adjacent beauty categories. Looking at our distribution footprint, Milk is also just getting started having tremendous white space of opportunity to increase penetration and deepen our successful partnership with Sephora, as well as expand our distribution in the U.S. and internationally. In addition to operating in all of Sephora U.S. and Canada doors, Milk distributes its products in Sephora at Kohl's. We have today a footprint of approximately 250 doors, with 400 doors to be added to reach over 600 doors by the end of 2022. As of retail, Milk is expanding its digital presence with its recent debut on Amazon. And we have a very exciting plan to launch in a big way in the UK, the fourth biggest makeup market globally in the second half of 2022. With MilkMakeup.com, we're just at the beginning of building a strong and profitable long-term platform for D2C growth. Direct-to-consumer sales saw 31% in the first half of the year, accelerating into two with a nearly 50% increase while maintaining a very strong ROI discipline. We do not only perform on our business KPIs, but we're also very proud of our ESG achievements for a very young company. First, focus on the environment with constantly developing ways to reduce our footprint all along the supply chain by removing waste and championing recycled and recyclable materials. At WeldingCast, we're proud of our diversity across all levels of our organization. WeldingCast, MilkMakeup, and Obagi are built on inclusivity. MilkMakeup's social philanthropy focuses on self-expression and equality for underrepresented LGBTIQ and POC groups. And the Skin Inclusion Initiative represents Obagi's commitment as leaders in the skincare space to elevate the global dialogue about diversity and inclusion. Obagi is very proud to be providing effective science-based skincare products for all skin tones. And it's also proud that it was the very first professional skincare company to clinically test product performance on all Fitzpatrick-scale skin tones. Despite its young age, Waldencast has equipped itself with a best-in-class governance with its board of directors and processes. So to recap, Waldencast brings the operational excellence of a multi-brand platform built for growth and profitability, a house of brands built for speed and scale. Its balanced portfolio plays in structurally attractive segments that favor our growth ambitions and mitigate risks linked to single-category fluctuations. We have expertise in managing and scaling beauty brands and businesses, which we intend to do while keeping an asset-lighted structure and agility to retain the market responsiveness and speed of entrepreneurial indie brands. Our management team has a strong alignment of incentives to drive long-term value creation for operational and capital allocation scale. We are just at the beginning, and we are pleased with our performance through the first half of 2022 and believe we are well positioned to achieve the goals we outlined with many of you when we announced our business combination in November 2021. With that, I would now like to open the call to take your questions. Thank you.
spk00: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. Please limit to one question and one follow-up question to make time for everyone's questions during the call. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Dana Telsey with Telsey Advisory Group. Please go ahead.
spk04: Hello, Michelle. Congratulations on such a nice quarter. As you think about the sales that you had in the quarter, given what we've heard in the environment, was there any changes in cadence during the quarter that you saw? Number two, as you think about the adjusted EBITDA numbers, which for Obagi and for Milk each showed nice increases, how do you think of the underlying drivers? Is price increases, unit volume, expanded distribution, where does it come from? And how are you thinking about the cadence of new product introductions as we go through the rest of the year? Thank you.
spk05: Thank you, Dana. Great questions. Great to have you today. I'd say first starting with your first – I'll do them in reverse. Start with drivers of growth. We are – I think it's been a broad-based growth across both, primarily driven by volume on both fronts. We have taken some small level of price increases, I think, on average across the line of about 2%, but it's really a volume-based driven business with a combination of very strong growth in our core business as well as new launches. New launches are accounting for about a third of the growth and two-thirds coming from our core businesses. There is an element, in the case of milk, of distribution expansion as we expand into new doors today, particularly at calls. So, broad-based, we are feeling very, very good about the strong and the growth prospects. From an EBITDA standpoint, we think that, obviously, we have, as said in the call, we manage the business on an annual basis. We think that obviously we had a very strong Q2 quarter, and we believe that over the next quarters, we will continue to confidently deliver against our objectives that we set out in November.
spk06: Got it. And then on the cadence of the quarter?
spk05: Yeah, in the case of the quarters, we have not seen any changes in particular against Obagi. It tends to come in the last month of the quarter, or a significant ramp-up in the last month of the quarter. We have not seen any significant differences in consumption or in net sales in either of the two businesses.
spk06: Got it.
spk04: And then lastly, on Obagi with the net income you'd mentioned that lower in the second quarter this year than last year, can you expand on that again?
spk06: Sorry, could you repeat?
spk04: I think Obagi's net income in the second quarter of $2.2 million, a little bit lower than the second quarter last year. You'd mentioned, I think, a change. Anything to note there?
spk05: Yeah, in terms of on an adjusted EBITDA basis, as I said, we are, in the case of Obagi, again, we manage on a normal basis. It's a bit of normalization of our SG&A activity. At the beginning of the year, we had a sales meeting and traveling expenses as we reignite the company to a more normalized world after COVID, as well as some incremental marketing spending, particularly in Q2, to support our launches through the year. So a little bit lower in terms of maybe the margin overall, but again, confident in our delivery of the year.
spk06: Thank you.
spk00: The next question is from Jonah Kim with Cowan & Company. Please go ahead.
spk03: Thank you for taking my question. Congrats on a nice quarter. Maybe just talk about a little bit on the marketing strategy for both milk and Obagi as you think about expansion at both brands. And I would be just curious to also know your thoughts about milk distribution expansion opportunity. You're on the penetrated Sephora, but maybe incremental opportunities at other retailers in the U.S. Thank you.
spk05: Thank you, Jenna. Thanks for the question. Well, our strategies, let me start with milk. Our strategies are clear. I think milk, as you have seen from the presentation, is a brand that has an incredible organic following, but has been historically relatively under-marketed. Our marketing and spending in the business has always been relatively low. So we think there's a big opportunity to expand the community behind milk by taking those great products that were as great values of milk beyond its core Gen C audience. So what we should expect and we will be expecting is really increasing our marketing support in order to reach new and older consumers. Additionally, we have a big opportunity to highlight that in terms of innovation. I mean, MIG is a brand that has a number of hero iconic products, but relative to other specialty makeup brands, it's a brand that has relatively few skews and it doesn't participate really in a lot of very meaningful categories. So another key plank of milk's growth is innovation and new launches. I'll address now and then come back to Obagi, the point of distribution. We have a great partner in Sephora. And we are really, while we are fully penetrated in terms of stores in North America, there's plenty of opportunity internationally still within Sephora. Also, when we look at a consumer standpoint, until today, we've only touched about 3% of the Sephora clientele. So there is plenty of room to still grow within Sephora. But of course, extending our footprint outside of Sephora is something that We are doing already, particularly in places like the UK, where Sephora is not particularly strong today. But also, we will evaluate when is the right time to expand distribution further in the US. But for now, Sephora is a great partner, and we think we still have plenty of room to go. In the case of Obagi, Obagi is less of a marketing-driven company. We are a company which is based on science and physician dispense, a great push business into physicians, and physicians recommend and credential the brand to consumers. We think there is an opportunity to also create additional consumer pool into a brand by having consumers coming to their physicians, asking for Obagi, and having the great transformative solutions that Obagi can provide to them. So you will see over the coming quarter an increase on consumer pool and marketing support in Obagi to be able to do that.
spk06: Got it. Thanks for the call, Eric. Thanks, John.
spk00: As a reminder, if you wish to ask a question, please press star and 1. Your next question comes from Olivia Tong with Raymond James. Please go ahead.
spk01: Great. Thanks. Good morning, and congrats on your first public quarter. I had a few questions on specific brands and then a couple of longer-term questions. But first on the brands, on Obagi, obviously realizing, of course, that you are managing to the year rather than quarters, it does seem like the – skincare category did outpace Obagi's growth. So could you just talk about what is happening in the second half to turn that around and the drivers of that and how you think about its growth versus the category going forward?
spk05: Thank you for the question. I think one thing perhaps to understand is when we present the NPD data That is a different circuit of distribution versus where Obagi is placed. We just put it as a point of reference to see the overall appeal of skin care. We're very pleased with the development of Obagi in North America. We do our physician dispense business. As you saw, by 0.4%, there's plenty of international growth. And as I said in response to John's question, I think there's an opportunity with Obagi to complement the commercial push that we have for the commercial selling with consumer pool and consumer demand, which we think will further accelerate our growth.
spk01: Got it. And then with respect to milk, I know that you've obviously got the exclusive right now But, you know, can you talk about the opportunity to improve the or to accelerate the customer penetration at Sephora? And then also, with respect to further expansion in not only in first in U.S. markets, but then also eventually overseas, can you talk about how you're thinking about the timeline for that expansion? And are you looking at particularly you know, largest retailers, a whole group of retailers, as far as, you know, expanding milk beyond its current base.
spk05: Thank you, Olivia. So, I think that first, as I said, with Sephora, it's a very strong partnership and one that we think still has a long way. We've touched only about 30% of the Sephora clientele. One way to expand that we're intently focused on that is building the awareness of the brand as well as introducing the product. So these strategies are broad strategies, are the strategies that are going to bring more consumers into the brand. In fact, we had this year so far about a 48% to 50% increase in new consumers coming to the brand through Sephora. So we are building new consumers as we speak coming into the brand. Now, an important thing on distribution is that one thing to understand about the makeup business. Makeup is a top-door strategy. It is relatively easy, but sometimes dangerous, to expand distribution too fast ahead of the awareness of the brand. So we want to have a very disciplined approach to our distribution expansion. For now, we have, in the case of the US, an exclusivity with Sephora that we just renewed not long ago until the end of 2023. They continue to be great partners. And if we were to expand, again, we're going to expand in a very ROI disciplined way into key top doors in the country as well as internationally.
spk01: Great, thanks. And then just broader, you have a really unique business model and strategy. could you talk a little bit about what role your current brands play versus the potential for acquisitions of new brands, who you think your competition is, you know, is it private equity, is it strategics, and just thinking about the path, you know, over the next, not necessarily just this year, but three to five years or so in terms of your growth profile, just given how unique your strategy and model are. Thank you so much. I appreciate it.
spk05: Well, thanks, Olivia. Great question. I guess the way to frame the role of the brands and the acquisition strategy is the goal that we set at the beginning. We want to build a global best-in-class house of brands. We're starting with two brands in some of the most, if not the most, attractive segments of beauty today. We continue to add brands in other categories as well as within the skincare and makeup category that are complementary and incremental to to our business. I think the playbook for new acquisitions is very similar to what we have deployed. It's first starting with brands, and what I mean by that is real brands, brands that have a connection with consumers, an authentic connection with their communities, a way to activate them. Brands probably that have a financial profile are likely similar to what we have seen so far, brands perhaps in their revenue somewhere between 40 to 200 million dollars, with probably a sweet spot being around 80 to 120. These brands are typically profitable and cash generating, and as a consequence, they provide a great further springboard to WaldenCast, and these are brands that could benefit, that should benefit from the global scale of participating in the WaldenCast platform. In terms of cadence of these, we think that we will see how it goes. Our focus today is really on the operational excellence and continued growth of these brands. So we think that a likely cadence of maybe one a year or so is probably a prudent cadence on acquisitions. Regarding who is our competition, I mean, the amazing thing about the beauty business, one of the many features that are amazing of the beauty business is the reality is that there are more wonderful, fantastic, compelling, and interesting assets out there than there are buyers. So we don't think of it as necessarily competition. I think what we provide in Welding is a very unique platform for brands and founders to participate in the upside growth with a brand and be able to create, be part of creating with us the next best-in-class global and wellness, good and wellness global platform. So there is more assets out there. There are more sellers than there are buyers. There are plenty of great assets, and we think we have a very good line of sight to a number of great brands.
spk06: Great. Thanks. All the best. Thank you, Lucia.
spk00: This concludes the question and answer session. I would now like to turn the conference back over to Michel Brousset for any closing remarks.
spk05: No, I just want to say thank you to everyone. I am looking forward to speaking to you again on Q3. Thank you very much.
spk00: This concludes today's conference call. You may disconnect your lines. Thank you for participating. Have a pleasant day.
Disclaimer