Q3 2021 Olaplex Holdings Inc Earnings Call
[music].
Yeah.
Good day, ladies and gentlemen, and welcome to all of Plex, Inc. 's third quarter earnings Conference call. At this time all participant lines are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time to ask a question you would need to press Star then one on your telephone.
Minor this conference call is being recorded if anyone should require operator assistance. Please press Star then zero.
I would now like to hand, the conference over to Allison Malkin of ICR.
Please go ahead.
Thank you and welcome.
<unk> third quarter fiscal year 2021.
With me today are <unk>, Chief Executive Officer, and Eric <unk>, Chief Financial Officer here for today's call Julie will begin with a review of our practices.
Energy and highlight our third quarter performance.
Ray will provide additional details regarding the company's financial performance.
Introduced the company's outlook for 2021.
These prepared remarks, the operator will open the call to take the questions you have for Eric today.
Before we start I would like to remind you that management will make certain statements which are forward looking.
Statements about the outlook.
Fitness 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 or.
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.
In the company's filings.
With the Securities and Exchange Commission that are available at Www Dot FCC Dot Gov, and the Investor Relations section of the company's website at IR Dot all the tax dot com.
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 and evaluate.
The company's performance.
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 <unk>.
<unk> Dot com.
I will now turn the call to Richard you anymore.
Thank you Allison and good morning, everyone I'm delighted to speak to you today and share our school third quarter performance.
Also marked an important milestone for our company as we completed our initial public offering.
Before I discuss our results for those new to old plug, let me first highlight who own pluses why do we believe we have been successful at.
Why do we believe we are positioned to continue to be disruptors in the global healthcare and beauty industry.
All the pluses and innovative science and able technology driven beauty company.
The competitive advantages, we will follow that with a mandate to deliver effective Hudson 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.
From the very first application studies have shown that 91% of women.
One thing to damage the head daily.
But with consistent and regular use of all opex caught us consumers will have stronger healthier looking here.
All patent protected technology, all consumers of all diverse types whats the shine hydration last first.
Bobby bones, because their heritage pet strengthen and protect it from the very first application.
Today, we have 11 key products, Inc will take hold him and suite exclusively used by professional stylist.
Which are sold in three channels professional.
So T retail and direct to consumer.
We believe we have been successful because.
That's able to deliver visible results, we believe consumers who purchase at least one all opex product on average have purchased over three and a half although product 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.
And it's not only cover what we now sell but also what you expect to sell in the future.
We are supported by our highly engaged community of over 250000 professional stylists on a private Facebook group.
Our Instagram community alone comprise of our committed trade partners and loyal growing consumer base with $2 2 million followers.
Leave makes us the number one prestige hair care brand on social media.
We have a synergistic omni channel mix, but each channel is mutually reinforcing.
<unk> professional retail and direct to consumer and all experienced strong growth in the third quarter of <unk>.
58%, 128% and 7% 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 30th 2021.
We operate in a growing category with a large addressable market.
Your monitor the global total addressable market for <unk> 77 billion, and we think that 10 prestige hair care.
This growing segment.
In addition to her we have patents for applications of our technology, and skincare, which has a $140 billion Tam.
We believe all of this positions all the pipes for consistent strong growth at robust margins that we believe are among the best in our industry.
Now turning to our third quarter results.
Net sales rose, 81% driven by broad based strength for all Opex regimen across all omnichannel distribution from professional to specialty retail to direct to consumer.
This growth comes on top of already a very strong growth in the third.
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 with adjusted EBITDA, increasing 63, 3% to deliver an adjusted EBITDA margin of six 1%.
Our adjusted EBITDA margin in this years third quarter, including investments to support future growth, which Eric will review in more detail shortly.
In addition, the quarter included progress against our growth initiatives with increased sales productivity, new product innovation and growth from new distribution and international expansion.
Sales growth was led by increased productivity and existing distribution across our professional specialty retail and direct to consumer channels. We have launched three new highly incremental products. This year two of them will take hold views and one exclusive to the professional channel.
In the third quarter, we launched <unk>, our first Tony Shampoo, we are very excited about this product, which uses our exclusive multi patented technology to hydrate.
And then soften and neutralize brasenose for brighter belongs highlights Grace and platinum strengths.
First quarter sales also benefited from the first half introductions of the four in one intense moisture mass full Rx treatment, a new professional backbar reparative treatments designed to Moisturize and smoothed her while adding schein and body in just 10 minutes.
And number eight our first born intense moisture head mask.
We expanded our distribution, adding shelf space in Sephora with an increase in older class a sixth linear square feet from three and the majority of their U S locations.
End of the quarter.
Oh class was part of the forest rollout into Kohl's too.
200 locations through October.
In October we entered altice, along with a professional offering.
Exclusive bond buildup 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 stakeholders.
Stakeholders.
We look ahead.
They're 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 all Opex 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.
Thanks, Joey and good morning, everyone I'm excited to speak with you all today I'll begin with an overview of our business then move to our third quarter results and finally I'll introduce our outlook for full year 2021.
Let me start by saying that I'm thrilled to be a part of telling the <unk> story on behalf of our passionate team.
All the plants have an outstanding financial profile with top tier profitability metrics deep competitive advantages and a disruptive business model.
We believe that our strategy provides us with a sustainable platform from which to deliver long term sales and earnings growth.
We see substantial white space to grow old flex within our core category of hair care across channels and geographies.
Now turning to our results.
Pertaining to any remarks on adjusted results you can find reconciliation tables to the most comparable GAAP figures in our earnings release, which was also furnished on form 8-K with the SEC today.
Net sales for the third quarter increased 81% to 101 hundred $61 6 million from $89 $4 million during the third quarter of last year.
As Joey mentioned sales were strong across channels, including a 58% increase in professional to 75 million.
A 128% increase in specialty retail to $46 3 million.
And then 87% increase in direct to consumer to $48 $3 million.
This growth was driven by increased velocity of existing products successful product launches and the addition of new customers.
We're also happy with the resilience of our supply chain in the quarter, which enabled us to deliver this growth and build the appropriate inventory to support forward looking demand.
Gross profit Rose 103, 1% to 127 5 million from $62 8 million in the 2023rd quarter.
Gross profit margin expanded 870 basis points to 78, 9%.
The margin increase was primarily due to lapping the one time fair value inventory adjustment in the prior year period related to the business acquisition of older Blacks in January 2020.
Adjusted gross profit increased 77, 9% to $129 $2 million.
From $72 6 million in the 2023rd quarter.
Adjusted gross profit margin was 79, 9%.
Versus 81, 2% in the 2023rd quarter.
The 127 basis point decline was primarily due to higher input costs, particularly for inbound distribution in the current environment and some product mix.
Our operating expenses consist primarily of SG&A and amortization of other intangible assets.
G&A in the third quarter of 2021 was $33 million.
Compared to $8 $2 million in the 2023rd quarter.
This increase was driven by $6 1 million of non capitalized the bowl IPO and strategic transition costs.
And $1 4 million of stock comp expense.
Which are add backs for our adjusted EBITDA and adjusted net income.
The increase was further driven by $4 $3 million in cash settled unit compensation expense.
$3 $4 million in sales and marketing expense.
$2 $6 million in payroll for expansion of our workforce.
One $6 million in distribution and fulfillment costs related to the increase in sales volume.
And $2 $6 million in other expenses relating to general business growth.
Strong increases in sales and gross profit more than offset higher expenses, leading to a third quarter adjusted net income improvement to $74 $4 million.
Or 11 cents per diluted share, which gives effect to the corporate reorganization affected in connection with the IPO.
This compared to $45 8 million or seven cents per diluted share in the 2023rd quarter.
Adjusted EBITDA grew 63, 3% to $106 $8 million.
Adjusted EBITDA of $65 4 million in the 2023rd quarter.
Our adjusted EBITDA margin was 66, 1% compared to an adjusted EBITDA margin of 73, 1% last year for the third quarter, which reflects increased investment in SG&A to support our higher sales.
This included a year over year increase of 170 basis points expressed as a percentage of sales in sales and marketing expense.
And a 141 basis point increase in payroll and other G&A, excluding the IPO related and strategic transition costs.
In addition, adjusted EBITDA in the third quarter. This year was negatively impacted by 265 basis points expressed as a percentage of sales due to the incremental cash settled units compensation expense.
The majority of this is a one time pull forward of vesting for an approximately four year period into Q3 for.
For one particular tranche of awards for Nonexecutive employees, which was triggered by the upsizing and pricing of the IPO.
Turning to the balance sheet.
As of September 32021, we had cash and cash equivalents of $121 $5 million.
And our long term debt balance stood at $742 $4 million.
Inventory at the end of the quarter was $69 $1 million compared to $21 2 million at the end of the fiscal 2023rd quarter.
We are pleased with the composition of our inventory at quarter end, which is well positioned to meet demand.
Regarding the cash flow statement.
We had net cash provided by operating activities of $133 million for the nine months ended September 32021.
Compared to $84 5 million for the nine months ended September 32020.
This was primarily driven by net income and the amortization add back.
Partially offset by investments in working capital.
Additionally, our purchase of property and equipment, primarily for internal use software for the period was slightly under $1 million, reflecting our asset light business model.
Now onto our outlook.
For fiscal year 2021, we expect.
Net sales in the range of $580 million to $588 million.
Based on the midpoint of this range. This is a 107% growth versus full year 2020.
Adjusted net income.
In the range of $263 million to $268 million.
Or based on the midpoint.
103% growth versus full year 2020.
And finally adjusted EBITDA.
In the range of 392.
The $398 million or based on the midpoint, plus 98% growth versus full year 2020.
Our full year 2021 outlook reflects our plans for growth, both with existing and with new distribution opportunities.
Keep in mind, we are not able to provide without unreasonable effort a reconciliation of the guidance for adjusted EBITDA and adjusted net income to the most directly comparable GAAP measure.
The company does not.
Currently have sufficient data to accurately estimate the variables and individual adjustments included in the most directly comparable GAAP measure that would be necessary for such reconciliations.
In summary.
We are very pleased with our third quarter results and the positive momentum of our business, which is reflected in our full year 2021 outlook.
We believe that our disruptive business model is working.
And that our deep competitive advantages have us poised to continue delivering strong results.
We look forward to reporting our progress in the quarters and the years to come.
This concludes our prepared remarks, and we will now turn the call back over to the operator for questions opt.
Operator.
Thank you Pat.
It's a good question do we need to press Star then one on your telephone to withdraw your question. Please press the pound key we ask that you limit yourself to one question and one follow up then you may rejoin the queue for additional questions. Please standby, while we compile the Q&A roster.
Our first question comes from the line of Erinn Murphy with Piper Sandler Your line is now open.
Great. Thank you good morning, and congratulations on your first quarter out of the gate.
Mike My first question is just for Joey on the launch of the four P product. It seems incredible at least from our channel checks with love if you could share a little bit more detail of how that's compared to some of your former product launches over the history of the company and then I do have a follow up for Eric.
Yeah. Thank you Eric for the question, yes, so as we have said the fall the 14th our blonde toning shampoos, Ms yourself first toning shampoo.
Has been very well received because most popular shampoo tends to be drawing and only brighten the hare in our case with our technology with the patents that we have been not only are able to repair with the business. You know there'll be also able to hydrate with a lot of the moisturizing ingredients that we have that.
And to highlight any kind of pressing us in long as far as people, who aren't getting their hair to a natural grade situation. So that's a comparison I would just say that it is.
Very successful it is definitely a product that is very professionally hone in and a lot of the customer.
A very much about looking for something of this nature that does not exist currently.
The retail market. So we have been very happy with its performance.
Great to hear and then I guess my follow up is for Eric on the fourth quarter implied guidance I think it would imply about 152 million in sales at the midpoint and I guess I'm curious why is it implied down versus the third quarter, it's kind of $162 million a quarter is you know just given everything with Ford.
P that Jay just talked about holiday is there anything else on the sequential deceleration that you're implying at the midpoint for the fourth quarter. Thanks, So much.
Yeah. Thank you Erin so.
While we don't have a lot of material seasonality to our business that there is there is some and so one thing that we do see is in the third quarter, we tend to sell in the kits that are sold through an end of year holiday and so that's one of the reasons that we traditionally see Q3 sale.
In absolute terms a bit higher than Q4, and we also see particularly in the professional channel.
Stylus buying of inventory in Q3 to get ready for the holidays get ready for Q4, and that's the seasonality we've seen over the years between Q3 and Q4 all of that said we feel.
Confident and good about the momentum we've reflected in our Q4 guidance and we think it's a strong quarter.
Great. Thank you so much.
Our next question comes from the line of Dara <unk> with Morgan Stanley. Your line is now open.
Hey, good morning, guys.
So much better revenue results than we expected on the professional side here in the quarter can you just discuss some of the key underlying drivers there as you look at it on a year over year basis, obviously.
Obviously pretty strong growth year over year, how much of that was driven by a more normalized environment here from a COVID-19 perspective versus other factors that could maybe are more sustainable.
Moreover, on the subject.
Can you talk about longer term sort of the biggest revenue opportunities as you look at our growth over the next few years in the professional channel is an increase in the number of salons customers within salons et cetera. However, you want to break it out just also looking out from a longer term perspective over the next few years.
Uh huh.
Yeah.
Hum, Eric if you want I'll take the <unk>.
<unk> on the outlook.
And I'll, let Eric cover more.
Specific numbers, if you kind of looked at what is happening.
In the United States, the number of stylists and Salon for oil prices are now above.
Both pre COVID-19 levels, we are seeing significant growth in our professional channel with both new and repeat customers and outside of the U S. All the professional markets are open.
There are still some limitations in their ability to conduct business vaccine mandate.
As far as social distancing, we still believe that at the end of it because of a runway and opportunities. We are still going to continue to experience growth in the professional channel.
So hopefully that answer to your question of where we see ourselves on the professional side I'll turn this over to Eric on the revenue expansion.
Hi, Dara.
Yeah, So professional had a strong quarter in the third quarter, we think all of our channels did.
Did and and I must say it is broad based so broad based across channels, but also within professional.
It's really momentum in our core portfolio.
As awareness is building.
It was momentum and the new products that we've launched four and one which is our professional exclusive launch in the second quarter continued to do well in the third quarter as well as the launch of <unk>.
And also the <unk>.
Support for the holiday programming, that's being sold in across all three channels. So we really just saw broad based.
Across the portfolio and across geographies.
Great. That's helpful and just one follow up in specialty retail.
Very strong growth also in the quarter. So far your your retail partner footprint is fairly limited obviously, particularly in the U S. Can you talk a little bit about the potential to expand to additional partners in the U S. Over the next couple of years here the longer term door opportunity versus where.
You stand today on the specialty retail side.
Thanks, Sarah for the question as you can see we are very focused on our current distribution. If you look at our footprint even at Sephora from our publicly resource documentation you will see that our penetration.
A lot of runway, while we are very successful standalone brands. All at Sephora. You also have seen that we have recently expanded into 200 doors with Kohl's.
To October and in October we entered into the ultra salons with our standalone treatment as well as our professional offerings. So we are going to continue to focus in our core distribution and couple of those new distribution opportunities that we have to have just articulated for you and we do.
If we continue to monitor how we performed in those areas. We will continue to deliver the performance that we believe we can deliver ultimately I think what is exciting for US is our core footprint has still a lot of runway and opportunity for ourselves to grow.
Great. Thanks, guys.
Our next question comes from the line of Jason English with Goldman Sachs. Your line is now open.
Hey, good morning folks thanks for Slotting me and congrats on a successful IPO and a strong quarter obligates them.
I want to put a slightly finer point on <unk> question. There on distribution you mentioned that you've gone into this launch the back bar at Alta can you give us an update on how that's going so far.
And can you can you describe maybe some of the criteria or milestones that need to be met before you just start to sell your products on the front end of the store there.
Thanks, Jason for the question. So let me take your first part of your question. We are going to continue to monitor monitor how.
Our professional products are doing at <unk>, because we know that the opportunity to grow our service offerings as well as the winter.
Altra is tremendously high because more women have to revisit the ultra salon and how are we going to truck as it will go to attract a number of customers that got color services and how many of them as we choose to hold Opex without service is a key metric for success.
As to what else are we going to go in terms of expansion of distribution in specialty retail.
Mentioned, we just have so much with I'll call accounts that we really want to be the number one <unk> brand at the top five.
Beauty brand in their offering so that we become an anchor brand for them and but we our anchor brands for any of our partners that are able to really partner up on marketing brand building as well as growth. So those are the key growth considerations for us and our partnership with our existing players.
That's helpful. Thank you.
And you also just talking about expansion, but it's shifting from distribution to portfolio.
You mentioned in your prepared remarks that you've got patents covering not only what you sell that April you could sell in the future and then you went on to specifically call out skincare I think most listeners are going to interpret that as you foreshadowing a launch into skincare. So two questions.
Our two part question a is that a reasonable interpretation.
B, if so what and when what it looked like.
Again, thank you Jason for the question.
I think what we were doing is what we were just reiterating what we have previously shared we have patent applications for skincare, we did a study through our transformation team with an independent.
<unk> seen two really cant see do we have commission.
To play in a Jason such as skincare and we saw that data has been very promising 82% of people familiar with all of that actually said look we want to see a skincare from you all apart and 51% of them basically say I was switched my skincare, two and all types of products.
On <unk>, because you guys lead with science and technology. So we know we have the permission to play we have permission to win as to when we will get in there at this time, it's all about exploring and keeping ourselves options.
I would not be able to give you anything definitive at this time.
Got it great steps so thanks for sharing those I'll pass it on.
Sure.
Our next question comes from the line of Andrew <unk> with J P. Morgan. Your line is now open.
Thank you good morning, and congrats again my question Firstly on innovation and it's the success of four P for P lounge.
Allow you to potentially launching her hair dye infused with these immuno I think that probably paves the way for you to do that and I was curious to see if you. If you were looking at that more closely.
And then just a clarification on the Alt a salon backbar availability and some of your comments on waiting for that performance is there any timetable for that decision and do you have any potential exclusivity with other resolving retailers, including sephora that needs to be lapped in order for you to go into.
Two into OTA or anything that prevents you to go right away.
Again, thank you so much for the question because it will help us clarify so first and foremost we have a clear line of sight in our product development.
Platform of launching an average of two to three products a year all the way through 2024 and the way our R&D work that we are working on a long haul meaning that when we look at opportunities for ourselves. We look at data driven studies as well as trend analytics and that.
We will continue to really sofa, or what our consumers want and need because consumer insights really guidance and delivering what is the most appropriate products for the market. Secondly in terms of <unk>. We are in early innings with Alta.
You've seen we've just entered.
Offering with them in October we will continue to monitor our spring early indications is we are doing very very well from our sales team.
Hi, Tiffany Warden, who is our COO and she has been really keeping very close to the pulse of it as two exclusive the team you have seen we are in Sephora. We are in Blue Mercury. We are now at an office along.
So we will continue to really double down on being the number one hair care brand. The top 10 beauty brand with all of this.
Retailer so that we can continue to be an anchor partner with them.
Thank you.
Our next question comes from the line of Olivia Tong with Raymond James Your line is now open.
Great. Thank you congrats on the IPO in a quarter.
First question is around further increasing brand recognition because obviously it sounds like your consumers are incredibly satisfied with the product. So we've obviously seen the holiday program and support which looks like a great trial builder can you talk about other things that you're doing either through the holiday season or beyond that helps build the brand recognition.
And and potentially the consumer base. Thank you.
Thanks, Oliver for the question I think what is important to note is we are very focused on what really built long term growth and when studies have shown us that the three sources of truth. When it comes to brand building and marketing awareness first and foremost is the.
It's especially for her is where they want to take.
Recommendations from their professional hair stylist. So building that community will continue to be our focus so with that set the number two areas and number two source of truth is product reviews and word of mouth, which is the third one which means that we are already in that space through our social media.
Engagement connection and conversion with our performance marketing, whether it's via digital media search engine optimization. We will continue all of this interactive tools to connect engage and convert our customers and if we continue to do that the marketing branding and awareness built.
Would just be a lot more organic as well as strategic because this is in partnership not only with what we are doing but driving traffic to both online and offline retailers that we partner with them.
Great. That's helpful and then I, hopefully I'm not getting too ahead of myself here, but clearly as we sort of cycle into Q4 into next year. The first half comps are are quite.
Our are quite impressive so I'm, just if you could give a little bit of color in terms of thinking about the comps.
Maybe as you lap those quarters next year was there a pent up demand or anything else in the base that we have to be concerned about what our stimulus had an impact or anything like that just trying to think through as you start to come from some pretty big growth, even bigger growth numbers heading into next year. Thank you.
Hi, Eric do you want me to.
I'll take that yeah, I'll take that one.
So we provided and introduced are our full year 2021 guidance, which takes us through Q4, we would anticipate providing full year 2022 guidance when we come together for Q4 results.
So I can't say much there other than you know.
We were.
We're happy with the guidance and outlook that we've provided for 2021, and we're going to aim to grow at our ambition on top of that that new higher base, but im not going to get into the <unk>.
Each of the quarters, which there is always going to be some noise in the quarters, we're going to focus on delivering over longer periods of time, but thank you.
Thanks, very much best of luck.
Our next question comes from the line of Steph Wissink with Jefferies. Your line is now open.
Thank you good morning, everyone.
And a follow up question on costing I think Eric in your prepared remarks. He mentioned some inbound distribution costs higher input cost just wanted to make sure. We're thinking accurately about the fourth quarter whats implied in the guidance for gross margin and then if you could just remind us how your inventory mechanism works is it because of first in first out last in first out how should we be thinking.
About more recent costs versus what's on the balance sheet and any considerations for gross margins going forward. Thank you.
Absolutely. Thanks, Thanks, Stephanie so yes, when we when we talk about Q3 gross margin performance in adjusted gross margin performance, we noted that.
There was some some pressure there, particularly from inbound freight costs.
Freight costs between warehouses into our warehouses that falls into our cost of goods.
In the current environment and that's in the current macro environment that we're all well aware of.
And we do project that forward.
Into 2022, and we've assumed that and we've reflected that.
And ticket.
As a consideration in the guidance that we provided for full year 2021.
There's one other element in Q3 that we mentioned which was some product mix.
And that really relates to we do sell more kits.
In Q3, as we as we sell in in Q3 for end of year holiday programming those come at a slightly lower gross margin and that's something for example that we don't project forward into into Q4. So it was more of a Q3 thing which is.
Her usual per normal per our normal annual programming there.
And then in terms of the.
Yeah go ahead I'm sorry go ahead go ahead, Eric I apologize I was just going to say.
In terms of our inventory builds.
It does mean that we believe our base, our inventory accounting and cost accounting that we do have good line of sight too.
The finished goods cost and the input costs that we've assumed in our Q4 gross margin outlook.
Very helpful. Thank you so much.
Sure.
Our next question comes from the line.
Of Lauren Lieberman with Barclays. Your line is now open.
Great. Thanks, good morning.
I wanted to talk a little bit about DTC and I was curious if you could comment on how much of your growth.
Qualitatively or quantitatively is coming from your own DTC website versus Amazon or other third parties.
And then also anything you can share on investments youre, making to improve the DTC experience beyond the kind of initial sort of rudimentary diagnostic tool that exists today. Thanks.
Eric do you want to take that the first part and I'll take the second part on what we're going to build out on the DTC, yes, absolutely.
Hi, Lauren I, just took a look specifically at that and it's a pretty easy answer the growth were seeing between our own dot com and care play E. Com. So when we report direct to consumer just to clarify for everyone. It's the combination of both of those things are <unk> dot com and pure play E Com Theyre very similar.
Growth rates, so we're seeing similar trends across both.
Great Alright, yeah, and so in terms of our own all Opex dot com one of the things that we have also highlighted is that we are expanding our bespoke all opex dot com to key markets.
And this includes markets outside of the U S like Canada, the UK, Australia. Some of those markets that we have already shared earlier on but what is important to note is that our high diagnostic program is also going to go through a two <unk> version. So we believe that as consumers continue to be so.
<unk> and wanting to know what about their hair. We are also going to expand on that opportunity for them to answer more questions to provide more data about themselves. So that we can serve them better recommendations and regimen programs for them. So those are all in the works.
We are excited and hopefully we'll be able to share with you at the appropriate time.
Joey is any of that is that in pilot today, because I think you've talked a bit about your ability to collect data also.
So I was wondering if that data collection that is already serving us. So well is primarily from the existing diagnostic or if it's also some of the if theres a pilot of this to point out or is it still premature.
So our transformation team.
<unk> been working on a tear to make sure that the $2 is up to speak together, we our econ team, but why it's important to note as consumer insights have been gathered.
Not necessarily just on dot com, but also from our own sales team and as you know we updated our own dot com in April of 2020. So that is a lot of data that we are able to glean from and be a lot more sort of discipline and structure in analyzing those data to help us make better decisions.
Okay, Great and then I had one follow up on the professional conversation from earlier.
I was just curious if there's any good share on your your strategy for penetrating the professional network outside the U S. And just same kind of question I guess on DTC and even share on the positive surprise in professional this quarter being U S or international.
Yeah. So in terms of expansion, we will continue again the plan that we have like I said, we are here for the long game and we have successfully introduced in the U S that plan program that we have we will continue to use that and introduce that into the international space, which we are.
Already doing part of it meaning that we will have multiple distributors serving each segment of the salon market. While we will then layer in specialty retail to really drive brand awareness partnering with premium retailers in those respective countries and that DTC as you have correctly pointed out it is really getting.
Our ability to gain more consumer insights to serve up what our consumers want and need from us while at the same time, providing $24 seven convenience for them to buy from us So our international playbook and our domestic playbook is very similar but obviously, we will look at the nuances.
Each region or in each market.
Okay, great. Thank you very much.
Oh, yes, sorry.
Just to expand on the question you had around that.
U S versus international in Great order. It was strong in both but I will say it was particularly strong in the U S, which is great to see as we have our channel flywheel that we've talked about really humming.
Okay. Thank you very much.
Our next question comes from the line of John Q4 with Bank of America. Your line is now open.
Hey, guys congrats.
The very strong quarter.
So I mean, a bunch of good question got asked I will kind of wanted to tag went onto Stephanie's question around the inflation environment and all of that I understand you guys have a good line of sight on how to manage it I was just wondering.
Near or long term what is your willingness to move away from that $28 price tag that sort of become associated with the brand.
Yeah.
I just wonder how.
Hesitant you guys might be to move away from that price point and if so.
Can you guys drive margin support from <unk>.
Like pack pack size architecture or mix or something like that just just wanted to get a sense of the.
The potential for margin support.
Absolutely Jonathan.
Thanks for the question so.
Let me start by saying as we see cost inflation pressures.
First and foremost.
We're going to be focused on efficient sweep efficiencies, we can drive in purchasing and efficiencies. We can drive in our supply chain, particularly as we're growing at the rate that we're growing there are efficiencies that come from the higher volume and so that is an offset to some extent both this year and what we assume moving.
A word.
We will we're not going to comment on any intentions, we have on pricing.
But you asked a great question.
Follow up question, there, which is we're always looking at net revenue management opportunities pack price architecture as we go into new markets as we launch new products and those are absolutely.
Leavers that we will pull over time and that we look at constantly.
In Reno.
Ill just close by saying we believe the equity of our brand is very strong and so we'll have options in the future, but we're not going to talk about our intentions there.
Yeah Fair enough and then I guess lastly.
I was just wondering about the innovation timeline in 2022.
I think we all we all understand that you guys have a long runway of products lined up for the next few years I was just wondering about timing.
Quarterly what should we expect them to land should that.
Whether you guys be.
Consistent year over year, when new products do land and then I guess sort of as a follow up I was just wondering.
And this is sort of a long shot but.
The best immuno technology has has done well to expand the product offering to 11.
Different products I was just wondering if.
Right.
Should we expect a new technology or a new chemical.
Near term or is that something thats slated for beyond 2025.
Well. Thank you very much for that question I'll take your last question first because that's a very exciting one for us as we've mentioned prior before.
As we were getting ourselves ready for an IPO. It was very clear to us that RMB RFID enabled technology, driven beauty company. So for US the technology piece is very important and we are not going to rest on one.
On our Laurel and we already have our R&D team.
Has already started.
Before even the IPO process, unlocking and partnering with research Institute as well as.
Universities without grants that will look at opportunities.
Biotech companies, where we can really partner and really leapfrog, the technology space and be able to use delivery system, you mean not only for.
Well, what we call.
Results that are visible on the first application that is what we stand pool, but also in terms of a long runway in helping us to be defined in that space in signs. So our R&D team managed by our chief scientist.
At least close to 30 years of experience is going to help meet that charge for us. So hopefully that answer to your question on our R&D and our dependency on one or two technology.
Other question that you asked about its launch timing we have.
You have seen in 2000.
'twenty one we have launched three products, we are going to keep to that cadence of two to three products a year.
And when the time comes we will make the announcement because being able to make in the launch announcement is critical to our marketing campaign. So you will hear about it in good times and we're very excited of what we have in 2022.
Great. Thank you.
Our next question comes from the line of John Kim with Cowen. Your line is now open.
Alright. Thank you for taking our question I'm just curious I know, it's early on but sephora and Kohl's how those stores.
Four out of the gate versus the regular sephora stores as you kind of monitor the progress and just another follow up is obviously you have an impressively lean organization currently and as you scale the business across channels and geographies do you expect to invest higher on the head count and just building up here.
Innovations. Thank you so much.
So let me take the Sephora and cold. It is very early innings in very early days, they've just really launched through October that 200 doors for Doug, but early indications. It's just very promising we are one of the few sort of.
125 Grand separately and we are one of the 125 in a slate of 300 plus brands that Sephora has in Dell proper Standalone sephora doors, so to be part of the 125, you will note that our performance will continue to be strong and that we have delivered for them all prior in terms.
Of our organization, we are growing our organization and this is the reason why you've heard from Eric where some of our expenses has been going really managing for a plant tour investment ahead of growth.
We will continue to do that primarily because we expect ourselves to continue to deliver and we move the people to really support us and we will continue to invest behind them.
Yeah.
Got it. Thank you and just one follow up is I know China is still small but did you see any sort of notable performance there and sort of what initiatives initiatives you have in place to drive higher when Orion isn't the country. Thank you so much.
Right. So we are very excited as you know 11 11 is just in fact is tonight.
In China, and we are seeing very strong early indications as you don't even though it's 11 11, a lot of Brent started in mid October and we have seen very promising results. In fact, we believe China Tmall global online business will be something.
That will continue to grow and the reason why that is exciting for US is we are able to build brand awareness.
Online with the mainland Chinese consumers and so even when we are able to get into the mainland Chinese proper dose consumers would already be familiar with our brand.
Thank you.
Yeah.
Our next question comes from the line of Dana Telsey Telsey Advisory Group. Your line is now open.
Good morning, and congratulations on the results as you launch new products.
You mentioned in the past about higher margins on the new products. What are you seeing in new products is there a difference between the type of product in the margin.
And then I have a follow up on any update on the Tmall partnership. Thank you.
Hi, Dana I'll take that first one so I think what we've said in the past is in our product development.
Process.
We will set thresholds and goals for the margins of those new products and really designed around that and design and accordingly, and that's worked well for us.
To either be accretive or neutral to the rest of the portfolio. It will always depend it will always depends product by product.
As you know we have some new products that are exclusive to professional some that are across channels for at home. So we're not going to talk about specific margins at the product level, but just reassure that we have a very robust process that goes into that.
The design and ensuring that those are those are profitable for us.
And you have a follow up on Tmall global.
Exactly.
Joey how she's thinking about.
Skin and I know that expanding into other categories and when do you start investing in a potential skin launch. Thank you.
So on that question as I've answered I think Jason was the one who asked that question as well we are going to continue to explore opportunities for ourselves I would not be able to share with you definitively the timing of it because ultimately.
We need to understand the market better and we will do our due diligence accordingly.
And then T mall.
And what's your question on Tmall sorry.
How does that how is that partnership progressing.
On that partnership.
Expanding.
Benefiting from it.
Yes so.
<unk>.
This is our first year anniversary in 2021, 11% level would be where we are and we have studies that shows that we are the <unk>.
One of the most socially bus brand in China and as you can appreciate social media is the leading indicator of success in that market. We will continue to do to build our brand awareness through our portfolio with our distribution on Tmall global online and so.
What we have already done in terms of the social media platform build out we will continue to do the connection engagement and conversion as we have done.
And again I emphasize this is a long game for US we don't go in and out on specific activation, we really drive our activation and really measure it and then double down on it if it works and then drop it if it doesn't work and go onto something else. So that discipline is in our marketing disruption.
Thank you.
Absolutely. Thank you.
Yeah.
Our last question.
Okay.
Go ahead operator.
Our last question comes from the line of Rob Hottenstein with Evercore. Your line is now open.
Great. Thank you very much and I also want to offer my congratulations to a terrific start as a public company.
So my first question is a follow up.
Two I think one of the first questions of the.
The Q&A and that is.
You mentioned that your number of stylus is now above pre COVID-19 levels can.
Can you talk about what is what is the best way to measure your penetration in the professional segment is it by stylus is a bi salons.
And where would you see how would you.
Calculate our guesstimate what your penetration is of that segment.
I think first and foremost if you look at the professional Beauty Association data. They will let you know that there are 800000 professional stylist as registered with them.
And we have well over 250000 that is a constant engagement and connection with us on a Facebook group, meaning that they are interacting with us they are engaging with us yet producing content for us. So we feel very strongly that that continuous community built will continue to suffer.
Very well.
Great and do you have any kind of sense of the 800000, how many buy your products on an annual basis.
At this time, we would not be able to serve up specific data, but as you can tell from our growth of plus 58% year over year in the professional channel. It will indicate for you that we have a lot of the stylist as part of our ecosystem.
Terrific and then Mike My My real question is as we did a lot of survey work.
On your product and one of the things that was most surprising is that 70% of all women that we surveyed and it was a pretty good group I think 2500, 70% had not even heard of <unk>.
Is number one is that consistent with your data and number two what do you think the best ways are going forward to increase awareness in the general public. Thank you.
Thank you for that question as we have always said you know.
One way to kind of really do well is brand awareness and therefore in building brand awareness is about being disrupted by building our community.
Using data driven marketing performance to help us really hone in on what works and what does not work. So we are going to continue with that platform and really building the professional community to be our strongest advocate and.
We will not stray from that but at the same time through data performance. We're going to also look at digital media buy and driving consumers to both brick and mortar and online retailers so that.
That awareness built can be more long lasting.
Terrific. Thank you very much.
Absolutely.
Thank you there are no further questions I will now turn the call back to CEO, Julie Walsh for closing remarks.
Thank you so much Sarah and thank you everyone for joining US today, we wish everyone, a happy and healthy holiday season, and new year, we look forward to speaking with all of you again at the upcoming Investor conferences and when we do when we report our fourth quarter results in March of next year to see everyone. Soon.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
[music].
Okay.
[music].
Sure.
[music].
Okay.
Yes.
Yes.
[music].
Okay.
[music].
Okay.
[music].
[music].
[music].