Waldencast plc

Greetings, and welcome to the WaldenCast third quarter and first nine months 2024 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed in the question queue at any time by pressing star one on your telephone keypad, and we ask you to please ask one question, one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Allison Malkin with ICR. Allison, please go ahead.

Thank you, and welcome to the WaldenCast PLC Third Quarter Fiscal 2024 Earnings Call. With me today are Michelle Broussette, Founder and Chief Executive Officer, and then Will Manfredi, Chief Financial Officer. For today's call, Michelle will begin with an update on our business and vision. discuss the company's performance within the context of the beauty market. Manuel will follow with a review of the third quarter and year-to-date performance and provide our fiscal 2024 outlook. Following this, Michelle will share the strategic growth initiatives for our milk makeup and Obagi medical brand. 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 WalmanCast business and other matters referenced in the company's earnings release issued yesterday. 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 statements appears under the heading Cautionary note regarding forward-looking statements in the company's earnings relief 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.waldencast.com and should be read in conjunction with this section entitled Risk Factors in the Company's Annual Report on Form 20F filed with the Securities and Exchange Commission on April 30, 2024. 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 the definition of these non-GAAP financial measures and a reconciliation of these non-GAAP to the most directly comparable GAAP measures in the company's earnings relief. A live broadcast of this call is also available on the investor relations section of the company's website at ir.waldencast.com, which will remain available for 90 days. I will now turn the call over to Michel Rousset.

Thank you, Alison, and good morning, everyone. It is a pleasure to speak with you today and share another quarter of a strong performance. On the top line, comparable net revenue growth of 34.6% accelerated from 21% in Q1 and 25.7% in Q2 as we anticipated. This reflects increased consumer demand for our Obagi medical and milk makeup brands and improved stock availability. Amongst our target audiences, our brands are consistently delivering strong innovation and community engagement. As a result, we're seeing ongoing success as we expand our global distribution. We saw in Q3 and throughout the year, robust growth evidencing the power of our operating platform that enable us to deliver increasing rates of profitability as we grow our market-leading brands. To this end, in the third quarter, adjusted EBITDA rose 134% to 16.3% of net revenue and expanded 720 basis points from the prior year. We continue to make progress towards achieving our vision to build a global best-in-class beauty and wellness platform that creates, acquires, accelerates, and scales the next generation of high-growth, highly profitable, purpose-driven brands. Our repeatable Waldencast operating virtual circle of growth and profitability is continuing to pay dividends as we continue to strengthen our efficiencies to drive gross margin expansion and invest into selling and marketing drivers to sustain and grow our top line momentum. While very pleased with our performance in the quarter and first nine months of the year, we believe we're just getting started in realizing our true potential. Let me share with you why. First, we possess the operational scale of a multi-brand platform that will only get better as we add more brands to the portfolio. These pair with infrastructure and beauty operational talent to support accelerated growth and maybe the margin expansion for our portfolio of market-leading brands. Second, we have a proven track record identifying, managing, and building global beauty brands on scale. This success and the many opportunities we see in front of us provide us with a visible path to continue to attract leading brands to our fold. Third, we have taken a balanced approach structuring our portfolio in attractive segments of the category that enable us to maximize growth and benefit from diversification. We operate in the two most structurally attractive segments of the skincare and makeup categories. Fourth, we operate an asset-light and highly efficient capital structure, which give us the speed and agility and return on capital with the operating discipline of a much larger company. And fifth, and equally important, is that our management incentives are highly aligned to value creation for our shareholders and our focus on rewarding long-term value creation through operational and capital allocation excellence. As you know, we possess two of the most exciting brands in the two biggest beauty categories. Our brands, playing the most attractive sub-segments of these two categories, prestige clean makeup and professional science-led skincare. Note Makeup is a cult favorite Gen Z brand and benefits organically from an engaged and diverse community due to its cultural relevance and iconic products. It is a leading clean makeup brand, the number two clean brand at Sephora US with 2.7 million Instagram followers and is quickly building a global following with leadership positions in several international markets. Makeup has accomplished this through its relevant promise of who will clean makeup that works. Obagi Medical continues its clear advantage as the number one U.S. physician-recommended medical-grade skincare brand for top-ranked patient needs, leading in the most attractive, fast-growing subsegment of premium skincare. Leveraging 39 R&D partners, Obagi Medical consistently delivers breakthrough patented technology and transformative clinically proven results. This drives high loyalty from both consumers and physicians. We continue to believe Obagi Medical is perfectly positioned to answer the growing needs for high-performance, effective skincare, while also paving the way for expansion into other categories. Yet, we have set our sights on building a much larger business, not just organically, but also through acquisition and brand development. We believe we are the perfect partner for indie brands as we preserve their brand DNA and allow our acquired brands to operate with autonomy, thereby maintaining the entrepreneurial spirit of each brand. At the same time, our platform provides many benefits, from the sharing of best practices to leveraging the collective expertise of the world ecosystem. Simply put, we provide the data, technology, talent, finance, legal and supply chain support that elevates profitability and accelerates growth. Let me share a real-life example. When we acquired Milk Makeup, it was a cold favorite, but not reaching its full potential. With our platform, we implemented the processes that improved decision-making, created efficiencies, and removed costs to drive profit growth while increasing high ROI marketing expense to accelerate top-line growth, and we expect this to continue. As a result, we have created an algorithm for long-term success as evidenced by the delivery of top-tier comparable net revenue growth of 26.9% in the first nine months of 2024, and a best-in-class adjusted gross margin of 74.8%. Our flywheel of growth and profitability is simple and repeatable, with our world-renowned talent and expertise that you can see it play in both Milk Makeup and Obagi Medical. When we add a brand to our portfolio, we first laser focus on expansion of gross margin by driving operational efficiencies. We then reinvest these savings into sales and marketing business drivers, which drives top-line growth, further enhancing gross margin, and delivering operational leverage by diluting fixed costs to produce robust profit growth. While we have scale, we're only at the beginning of our journey to building a best-in-class global multi-brand portfolio. Today, we possess two powerful brands that have garnered critical mass while still having substantial runway for growth. With milk makeup on Obagi Medical, we have a solid foundation in prestige scheme and color. We have a core business in the U.S. and a growing presence in Europe and in Asia-Pacific region. We're achieving a strong growth in attractive channels, including professional, specialty retail, and online, and expect this momentum to continue as we drive awareness for both brands beyond their core communities, continue to introduce more blockbuster innovations, and expand into other regions and categories. Our increasing success with both brands and the power of our unique pure play beauty ecosystem, an industry that requires deep and specific expertise, give us a distinct competitive strength in attracting other brands and founders into our platform. And now I will turn the call over to Manuel to review our financials and outlook.