Q4 2024 Waldencast PLC Earnings Call
Greetings. Welcome to the Waldencast fourth quarter in fiscal year 2024 earnings call. This time, all participants are in less knowing mode. The question and answer session will follow the formal presentation.
If anyone who would require our Board of Citizens during the conference, please press star zero from your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: At this time, it's now my pleasure to introduce Allison Malkin with the best relations. Thank you, Allison. You may now begin.
Speaker Change: Thank you and welcome to the Waldencast PLC for a quarter and fifth for year 2024 earnings call. Here with me today are Michelle Brousset, founder and chief executive officer, and then well-manfredi, chief financial officer.
Michelle Brousset: For today's call, Michelle will begin with an update on our business and vision and discuss the company's performance within the context of the meeting market. Manuel will follow with a review of the fourth quarter and full-year performance and provide our fiscal 2025 outlook.
Michelle Brousset: Following this, Michelle will share the Strategic Growth Initiative for our Milk Makeup and Ubadge Medical Brands. After the prepared remarks, the operator will open the call to take questions.
Michelle Brousset: I would like to remind you that management will make certain statements today, which are forward looking in nature, including statements regarding the outlook of Waldencast's business and other matters referenced in the company's earnings release that was issued yesterday.
Michelle Brousset: Each four-looking statement is subject to risks and uncertainties that could cause actual results of different 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.
Michelle Brousset: and should be read in conjunction with this section entitled Risk Factors in the company's Annual Report, 4, 2023, on Form 20F, filed with the Securities and Exchange Commission on April 30, 2024.
Michelle Brousset: The four-looking statements on this call speak only as the original date of this call, and we undertake no obligation to update or revise any of these statements.
Michelle Brousset: Also, during this call, management will discuss certain non-GAAP financial measures, which management police can be useful in evaluating the company's performance.
Michelle Brousset: The presentation of non-GAAT measures should not be considered in isolation or as a substitute for results prepared in accordance with GAT.
Speaker Change: You will find additional information regarding the definition of these non-gaps financial measures and a reconciliation of these non-gaps to the most directly comparable GAAP measures in the company's earnings release. With that, let me now turn the call over to Michelle Brousset.
Michelle Brousset: Thank you, Allison and good morning everyone. It is a pleasure to be here today and share a fiscal year 2024 financial performance.
Michelle Brousset: Before we start, let's have a look at the health of the beauty market. In the context of an uneven consumer market, beauty remains resilient and has shown consistent growth over the years, with expectations of this trend continuing in the future.
Michelle Brousset: In the categories where we're present, the speech makeup grew 5%, but professional skinker showed a strong growth of 8%, well ahead of the speech skinker at 2%.
Michelle Brousset: Once again, the beauty consumer has shown incredible resilience despite external uncertainties and our industry continues to thrive, launching brands and products that increasingly need
Michelle Brousset: We are building a global best-in-class beauty and wellness platform that creates, acquires, accelerates, and scales the next generation of high-girls highly profitable purchase-driven brands.
Michelle Brousset: Implicoot were capitalizing on the increasing strength of an operating platform, the power of our brands and our proven execution capability to deliver consistent, strong growth and increasing
Michelle Brousset: Today, we have two of the most exciting brands that are substantially outperforming the market in the two biggest beauty categories, makeup number one and skincare number two in the U.S.
Michelle Brousset: Our brands participate in the most attractive sub segments of these two categories, Prestige
Michelle Brousset: Their superpower is high consumer affinity and strong run equity in the respective markets, amplified by our strong innovation capability and superior returns on business-liberal investments.
Michelle Brousset: Not makeup. It's a cult-favorite Gen C brand that benefits organically from an engaged community due to its cultural relevance and iconic products. It's a leading clean makeup brand with 2.5 million Instagram followers that is growing 5 times faster than the market in the US.
Michelle Brousset: It is also quickly building a global following with leadership positions in several international markets demonstrating its universal appeal and efficient expansion potential.
Speaker Change: Obadi Medical, Continuous is clear advantage of the number one U.S. decision recommended medical grade skin care plan for top-ranked patient needs, documentation, fine lines from wrinkles and second scheme.
Speaker Change: Leeds in the most attractive, fast-growing settlement of premium skincare. Ovaji Medical Consistently Delivers breaks through technology for transformative, cleanly proven results to answer the needs of physicians and patients alike. Both groups show high loyalty to the brunt.
Speaker Change: The strengths of the budget branch, which we acquired a bit over two years ago, combined with our acceleration of acceleration, our efficient investment in business drivers, and our go-to-market expertise have meaningfully propelled the brass grills.
Speaker Change: We're very proud that a vagimedital, the pioneer brand of association dispense, professional skinker industry, is today the fastest growing brand among the top 10 professional skinker brands in the U.S.
Speaker Change: and this is only the beginning, as we believe Obaji Medical is perfectly positioned to answer globally the growing consumer needs for high-performance effective skin care while also paving the way for expansion into new categories.
Speaker Change: At Waldencast, we've built a powerful and repeatable formula for growth and profitability, what we call the Waldencast slide-wheel effect.
Speaker Change: It is simple yet highly effective model, but executing it consistently requires deep industry expertise and a strong capability.
Speaker Change: It all starts with foundation. Strong brands in high growth structure the attract is beauty
Speaker Change: These are Brousset, don't just offer great parts, they forge deep, authentic connections with our communities, often beyond just functional benefits. And by being part of Waldencast, they gain access to even greater opportunities for growth and value creation.
Speaker Change: Once a brand-new answer portal for you, our first priority is driving operational efficiency with a sharp focus on expanding gross margins. And we do this without compromising. In fact, we end to enhance consumer perceived product quality and also accelerating the ratio.
Speaker Change: We then reinvest these savings into sales and marketing business drivers which fuel further top-line growth, further enhancing growth margin and delivering operational leverage by
Speaker Change: As you will see in this presentation, we have delivered on these objectives in a big way.
Speaker Change: This welding of flight will affect its already paying dividends even if we are very much at the beginning of our journey. In fiscal year 2024, we outpaced the top three best in-class competitors and grew three and a half times faster than the average of our peer group.
Speaker Change: Our adjusted gross margins are 430 basis points, above the industry average, even as the ability to invest in higher-wide business drivers that fuel further growth.
Speaker Change: As a result, despite making significant investments in the group's capabilities, we achieved a strong operational leverage. Spending our ability to margin significantly to reach 14.7% in 2024.
Speaker Change: So where are we today and what comes next? Our platform today has two brands, Malkmakeup and a Vagy Medical, which participate in a limited segment of the vast, vast, vast beauty space.
Speaker Change: We're aiming to build a multi-brand platform that will encompass over time all strategic categories, geographies, channels and price points. We're just getting started. Let me now turn the presentation over to Manuel to review your financial results and I'll look.
Manuel Manfredi: Thank you, Michel. Good morning, everyone. So I'm pleased to share our fourth quarter and a fiscal year 2024 results with you today.
Manuel Manfredi: A performance continues to reflect the successful execution of our strategy. It provides a powerful framework to maximize the inherent strengths of our brands. We'll make up Anobaiji Medical.
Manuel Manfredi: As we have demonstrated this year, our strategy continues to deliver ongoing revenue and profit growth and further commitment to deliver value for our shareholders.
Manuel Manfredi: Today, I will focus on our adjusted financial measures. You can find a reconciliation to U.S. financial measures in our press release each adjusted day and also in the appendix to this morning's presentation. So now let's delve into the highlights of our fourth court that performance.
Manuel Manfredi: Net revenue reached $72.1 million and represented a robust 29.4% increasing comparable growth with balanced performance across our brands.
Manuel Manfredi: Bill Maycapp, close thread 31.9% in the quarter, reflecting channel expansion, including initial achievement in support of our recent launch into 600 ultra beauty locations and on ultra.com.
Manuel Manfredi: O'Brien Medical, Delivered 27.7% comparable net revenue growth, fuelled by accelerated performance in the U.S. decision dispens and the Commerce Channel.
Manuel Manfredi: Adjusted Gross Profit rose 30.7% to $52.6 million from $40.3 million in the first quarter of 2023 and Adjusted Gross Profit margin remained stable at 73% with little change from 73.1% reported in [inaudible]
Manuel Manfredi: And yesterday did that doubled to 11.2 million dollars from the fourth quarter of 2023 with a just a Tepita margin expansion of 530 basis point year over year to reach 15.5%.
Manuel Manfredi: Next adjusted gross profit that jumped to $203 $6 million.
Manuel Manfredi: Up 35, 3% from 2023 and adjusted gross profit margin of 74, 3% 530 basis point improvement year on year.
Manuel Manfredi: And finally, our adjusted EBITDA deliver.
Manuel Manfredi: Stellar growth up 65, 1% to $43 million.
Manuel Manfredi: These adjusted EBITDA was driven by strong sales and improved gross margin, which more than offset our increased investment in support of our growth.
Manuel Manfredi: This growth adjusted EBITDA margin to 14, 7%, marking at 350 basis point increase from 11, 2% in 2023.
Manuel Manfredi: These results demonstrate the power of our strategy our brands and Rfps.
Manuel Manfredi: Now one of the strengths of our business is our ability to efficiently convert our adjusted EBITDA into cash.
Manuel Manfredi: This is largely due to our asset light business model combined with disciplined approach to operations.
Manuel Manfredi: In 2024, we saw robust adjusted EBITDA to cash conversion ratio of 78, 8%.
Manuel Manfredi: This was achieved through effective working capital management.
Manuel Manfredi: Fact that our business model requires a relatively low capital expenditure.
Manuel Manfredi: Let me illustrate this point.
Manuel Manfredi: Our year end inventory was down four 7% versus prior year, while accounts receivable grew 19, 7% that growth is well below our revenue increase.
Manuel Manfredi: Now it's important to note that currently a significant portion of our cash is being used to cover non recurring expenses.
Manuel Manfredi: Associated with the ongoing regulatory investigations that we have previously disclosed we expect that once these matter concludes we will see an increase in our cash generation, which will allow us to further strengthen our financial position and improve our overall capital structure.
Manuel Manfredi: Now, let's take a look at our financial position.
Manuel Manfredi: At the end of 2024, our cash position was $14 8 million.
Manuel Manfredi: We had an addition of $30 million available on our revolving credit facility.
Manuel Manfredi: Our net debt totaled $154 $2 million.
Manuel Manfredi: For an update on the share count.
Manuel Manfredi: As of February 28, 2025, we had 122 7 million shares outstanding.
Manuel Manfredi: We're also excited to announce that we have secured a new $205 million five year credit facility.
Manuel Manfredi: This facility replaces our current Guang and includes $175 million stand alone and a $30 million revolving credit facility.
Manuel Manfredi: We have secured the financing significantly in advance of the July 2026, aspirational Hofbrau facility and these proactive more provides us with greater financial flexibility and extends our debt maturity profile through 2030.
Manuel Manfredi: We are pleased with the performance of our brand name business and we believe that our ongoing growth strategy, coupled with further enhancements to our internal capabilities position us well to maintain this positive momentum throughout 2025.
Manuel Manfredi: With this in mind, we anticipate strong performance for the full year 2025, and we expect to deliver net revenue growth in Miami Beach.
Manuel Manfredi: Additionally, we expect adjusted EBITDA margin to further expand into the mid to high teens.
Manuel Manfredi: Now I would like to share some perspective on the quarterly phasing of revenue.
Manuel Manfredi: For the first quarter, we expect our net revenue to be relatively flat due to the diversity of the highly successful makeup jealous launch from Q1 2024 as well as inventory adjustment in some of our retail partners.
Following the first quarter net revenue growth is expected to accelerate progressively driven by our strong innovation pipeline and the continued expansion.
Manuel Manfredi: Our distribution footprint in the U S and internationally.
Manuel Manfredi: Clothing. The launch of makeup at Ulta beauty in March 2025.
Manuel Manfredi: And with this let me now turn the call over to Michelle to cover our brand performance and strategic growth driver.
Michelle Brousset: Thank you Manuel.
Michelle Brousset: Let's now look at the performance by brand starting with makeup.
Michelle Brousset: In the fourth quarter makeup generated net revenue of $29 9 million, an increase of 31, 9% versus the fourth quarter of 2020 through.
Michelle Brousset: This growth reflected the initial shipments to Ulta beauty in support of our brands Spring 2025 launch is compensated for a normalization of the market combined with retailer inventory adjustments resulted in lower growth in consumption of that anticipated.
Michelle Brousset: Adjusted gross profit margin of 64, 9% increased 180 basis points from the last year.
Michelle Brousset: Given by the positive impact of channel and product mix as well as margin accretive innovation.
Michelle Brousset: Adjusted EBITDA was $4 8 million representing growth of three 4 million from adjusted EBITDA of $1 4 million in Q4 2023, demonstrating the success of our Walnut the flywheel adjusted EBITDA margin expanded 1000 basis points to 16, 1% from six 1% in the fourth quarter of 12 23.
Michelle Brousset: For the fiscal year milk makeup generated net revenue of $124 6 million, increasing 24% from 2023 adjusted gross profit Rose 27, 4% to 85 million with gross profit margin expansion of 180 basis points to 68, 2%.
Michelle Brousset: Adjusted EBITDA rose, 58% to $29 1 million from $18 4 million in 2023 with adjusted EBITDA margin expanded 500 basis points to 23, 3% of net revenue from 18, 3% in 2023.
Michelle Brousset: Our vision for milk makeup is for the brand to be the number one beauty choice of the next generation is already a cold beauty brand among genesee increasingly millennials and halo onto gel alpha.
Michelle Brousset: So the brand is and what your target generals.
Michelle Brousset: In recognition that younger regeneration will see themselves under values represented in the browser use we unveiled a new brand mantra lift or look.
Michelle Brousset: Which is a celebration of individuality and self expression. It is not how consumers wherever the makeup is what are they doing it that matters.
Michelle Brousset: Our growth strategy has consistently focused on three pillars.
Michelle Brousset: First expand our brand and community reach by broadening brand awareness strengthening our core Royal Genesee audience, and welcoming New Orleans, where our brand mantra beauty point of view products resonate as strongly as with millennials and Gen X.
Michelle Brousset: Second continue to launch market disrupting beauty emulation was expanding into bigger segments such as complexion.
Michelle Brousset: And lastly, broadening our footprint by expanding the brand's presence online and offline both in the U S and internationally.
Michelle Brousset: Now this is real quick here and review with just a few highlights.
Michelle Brousset: In 2024 mill to make up any of our strong and consistent results across all key growth strategies.
Michelle Brousset: They will make up has expanded its reach and community by reached a record <unk> ranked number six in February 2020 for reaching 1 million photos and kicked off in Q2 being coal in 2020 for one of the most powerful BT browse by women's wear daily in Q3 and close to the year in Q4 at number 14, <unk> and <unk>.
Michelle Brousset: $4 8 billion PRA pressure as well as garnering 20 Global Beauty awards.
Michelle Brousset: There's a huge amount of baas, our support for the brands.
Michelle Brousset: Secondly, we will make up emulation broke all records with the launch of the vials sold our cooling water agility and which we can the number two biggest beauty launch in the United States in 2024, and this coming for a relatively small brand in the category.
Michelle Brousset: And continuous expansion into live with core sleep oils mascara with high roll a new installation NPD to Halo core on premise with for Eclipse Hydro great Pablo.
Michelle Brousset: The last one will make us successfully extended its footprint in 2024 internationally in Europe and Asia. So it's viral launch in leeco in Scandinavia boats in the United Kingdom answer for in India among others.
Michelle Brousset: Looking ahead into 2025, we're doubling down our three proven growth strategy simulation expansion in distribution on growing <unk>.
Michelle Brousset: Nearly peek into a couple of 2025 to highlight this.
Michelle Brousset: Let's start with emulation.
Michelle Brousset: First our launch of next generation skincare clinically proven team safe for all skin types for anytime and anywhere.
Michelle Brousset: Of course, the makeup away.
Michelle Brousset: On the back of a record breaking launch of cooling water agility. In 2024 makeup introducing February daily skincare, the first Jeremy zero stick mess free goods for you ingredients for the juices skin ever.
Michelle Brousset: It comes into various cooling water geely is on water melon journey globe, bringing hydration Anglo and a unique and be subtle performance.
Michelle Brousset: Perfect for recruiting new consumers further building, our stronghold on Genesee and entering incremental category skincare.
Michelle Brousset: And in March milk makeup launched their foray into the big complex from market a skin things like no other.
Michelle Brousset: Hinton one quick.
Speaker Change: Building on that you said that most existing skins or tinted moisturizers don't last thereby causing dissatisfaction with consumers.
Speaker Change: <unk> launched the first Jill skin tint that it's longer for up to 12 hours.
Speaker Change: House in Nebraska, Cold Hydro franchise hydro grip guilty and is perfectly feel sufficient to win new consumers and a category that is a big a high loyalty and over indexed one incremental target audience of millennials.
Speaker Change: I think this is the first step of unlocking complexion opportunity. The biggest prestige makeup category with 40, 47% of our face category on a staple in consumers' top III makeup products is a key category to win to build the brand to the next level.
Speaker Change: Milk makeup hydro grips kimpton with skincare benefits is well positioned to win in that category, where 94% of consumers use makeup with skincare benefits.
Speaker Change: <unk> only launched two weeks ago, but is showing early signs of a viral success with a four seven star review on Sephora Com, 96% of recommended and 34000 loss with a $3 8 million earned media value on count.
Speaker Change: Now another highlight for 2025 is of course, the much anticipated expansion of our U S distribution for the first time since we launched milk makeup in 2016.
Speaker Change: Starting the second of March of 2025, Nook makeup expanded into more than 600, Ulta doors and online in the United States.
Speaker Change: These very important strategic expansion was much awaited are requested by old I guess.
Speaker Change: We believe all the largest specialty beauty retailer in the U S with more than 1400 stores 500, Ulta beauty of target location on 44 million loyalty members is the perfect partner to allow us to reach a whole new set of consumers on the brown.
Speaker Change: These new retail partner is quite additive and complements our strong so for distributions.
Speaker Change: Now for me makeup listener you are high performance is stinker Brown <unk> medico our.
Speaker Change: While you May you've got continued its excellent performance regarding net revenue of $42 $2 million in Q4, representing comparable growth of 27, 7% from Q4 2022.
Speaker Change: This growth was driven by the success of our expansion strategies focused on introducing blockbuster innovation.
Speaker Change: Accelerating growth in our physician dispensed channel and expanding our consumer reach with high impact marketing.
Speaker Change: Adjusted gross profit totaled $33 2 million with adjusted gross margin contracted 130 basis points to 78, 7% from 80% in Q4 of last year.
Speaker Change: We plan this reduction in gross margin in the quarter in order to drive future operational efficiency as we continue to work on streamlining our product portfolio by discontinuing some products at lower margins.
Speaker Change: The strong sales growth combined with significant growth in adjusted gross profit dollars more than offset increased investment in business drivers leading to adjusted EBITDA of $9 8 million, representing a 23, 7% increase from Q4 2023.
Speaker Change: Adjusted EBITDA margin was 23, 3% and compressed one adjusted EBITDA margin was 24, 5% in the fourth quarter of 2023.
Speaker Change: Now looking at the fiscal year <unk> medical delivered net revenue of $149 3 million.
Speaker Change: <unk> comparable growth of 37% from fiscal 2023.
Speaker Change: Adjusted gross profit rose to $118 6 million to 79, 4% of net revenue versus $83 7 million or 71, 2% of net revenue in fiscal 2023.
Speaker Change: This growth led to adjusted EBITDA of 35 million or 46, 4% increase from fiscal 2023 with adjusted EBITDA margin expanding to 24%.
Speaker Change: 17, 7% in 2023.
Speaker Change: Although medical vision is to be the number one physician dispenser metallurgical brining the world we are to the already the leading U S decision recommended brands for top three concerns representing two thirds of in office skincare sales, namely pigmentation fine lines, and wrinkles and secondly, king loss of life.
Speaker Change: That is a reason to relief on this globalization of number one in the world.
Speaker Change: And in the U S <unk>.
Speaker Change: I mentioned earlier was the fastest growing top 10 professional skincare, Bryan 2024, showing the potential and ability to scale growth domestically as we expand internationally.
Speaker Change: Our growth strategy has consistently focus on three pillars.
Speaker Change: Double down on their metallurgical brand DNA.
Speaker Change: Starting with a brand refresh from packaging to campaigns with our look and feel that reinvents, our medical carriers touching a modern twist that harmonizes the brand execution risks and it's even more strongly with physicians and consumers alike.
Speaker Change: Keep driving cutting edge science backed innovation the recent for biomedical to deliver a much targeted transformative solutions with a robust pipeline of global products with a market leading clinical data to support.
Speaker Change: And go over on awareness on footprint, making more consumers aware of our biomedical domestically and internationally to fuel our physician centric ecosystem.
Speaker Change: In 2020 for <unk> medical deliver strong and consistent results across all key brand strategy just a few highlights.
Speaker Change: <unk> doubled down on its dermatological bronchia nay by signing Doctor Susana <unk> at the branch medical director voting.
Speaker Change: Decision, it's at the heart of our innovation and education as well as our filming our thought leadership and leading trade shows such as interesting in Paris.
In the U S or the second half of a rebound from identity you start with cascading into a world tour packaging upgrade opening of celebrating the power of our brands of choices in a more relevant to look as well as our new visual identity.
Speaker Change: Our biomedical accelerated innovation with a range of successful launches of both consumers and the professional skincare medical community.
Speaker Change: Most of them ultimately daily hydrogel to ice, which became the number one directed sufficient sales volume in Q2 2024.
Speaker Change: On the blockbuster, Alaska lift up of scold facial moisturizer and lastly, the advanced filler concentrate which led Q4 being the biggest illustrious franchise quarter ever.
Speaker Change: As for brand awareness of as you may recall in Q4 2024.
Speaker Change: The number of the fastest growing <unk> total beauty brands and close 2024 of the fastest growing brand <unk> versus its competitive set plus 85% was gathering inorganic coach social following from professional on Skeena Influencers in the U S and globally with more than 50 worldwide.
Speaker Change: <unk> I know you just lost.
Speaker Change: I think 2025 or <unk> dot is taking this new brand identity of disability service.
Speaker Change: Visuals that celebrate the transformative skincare results of the broad and then one level under muscle logically center execution across multiple touch points in office and outside the office.
Speaker Change: And realized online driving awareness with consumers allocation to guide them into the Bravo and into practitioner offices.
Susana: Well argue medical expanded Susana <unk> MD collection with groundbreaking new products, including the Super anti <unk> zero and then most of the restore hydration replenishing cream.
Susana: And in Italy back innovations inspired by an in office patients needs identify back Susana <unk> designed to be incremental and complementary to existing portfolio.
Susana: Moisture restore provides medical grade multilayer moisture. So a unique combination of hydro interests that deliver multiyear hydration replenishment boost skin barrier.
Susana: Well Super <unk> serum delivers medical grade defense against oxidative stress, thanks to a potent anti wholesale complex that works even in a sense the scheme and it's a perfect alternatives to adults, who do not tolerate well vitamin C.
Susana: Both of launching in February and their results are promising and we will have more to share on the next call.
Susana: To conclude we're very pleased to share our strong performance across both brands, reflecting the increasingly sorry ability relevance and awareness of our robot Jamaica makeup brands.
Susana: 2024 was a transformative year the source deliver revenue growth, our three and a half times better than the average of our peer group.
Susana: Adjusted gross margin decreased 430 basis points better than the average of our peers.
Susana: Makeup grew five styles. The overall beauty market rate on <unk> is the fastest growing of the top 10 with professional skincare brands in the U S.
Susana: Importantly, we're just getting started and we believe our companies.
Susana: <unk> for long term profitable growth so the growth and you will have build with our welding a flywheel.
This magical combination of highly expert motivated talent with a highly efficient growth and profitability engine.
Susana: Will only get stronger as we add new routes to the group. Thank.
Susana: Thank you for listening and I will now turn the call over to the operator to close the question and answer session.
Susana: Operator.
Susana: Thank you we will now be conducting a question and answer session.
Susana: To ask a question today, you May press star one from your telephone keypad.
Susana: Information come indicate your line is in the question queue.
Susana: You May press Star two if you would like to withdraw your question from the queue.
Susana: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: So that as many as possible to ask questions. Today, we ask you. Please limit yourself to one question and one follow up.
Susana: Maybe then requeue for any additional questions.
Speaker Change: One moment. Please will report for the first question.
Susana: Yeah.
Speaker Change: Thank you and then a question today comes first question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your questions.
Speaker Change: Hi, good morning, Alex leg on for Susan.
Speaker Change: Just a question on the guide for the year. So I know first quarter was guided flattish, but then they'll accelerates through the year can you kind of give us some details on the cadence of innovation and what gives you the confidence that you can get sales to accelerate through the year. Thank you.
Speaker Change: Yeah of course, Alex how are you. Thank you for joining us.
Speaker Change: We are I mean, our guidance is fairly clear, we're very confident on the girls on both fronts.
Speaker Change: Very clear acceleration Q1 is particularly in the case of milk.
Speaker Change: In effect of two things number one the anniversary of jellies, which was a really blockbuster launch last year.
Speaker Change: It's on the base and the cycle is saying as we have mentioned during the call.
Speaker Change: Adjustment of 3 billion inventory adjustment by retailers and just a general market that as you know has been normalizing and getting softer so.
Speaker Change: So retailers have adjusted inventory a bit.
Speaker Change: A majority of the effect in Q1 is really the anniversary of.
Speaker Change: James as we look forward in the case of milk, we only Joseph at beginning of the year skin, 10th which is our innovation is just getting our big innovation on the rest of it was not just accounting, but the rest of our.
Speaker Change: Innovation is hitting only now as well as the ultra launch is getting only now so we expect a strong acceleration throughout the year.
Speaker Change: National basis indications.
Speaker Change: I guess on <unk> I mean <unk> is.
Speaker Change: Pretty strong growth overall.
Speaker Change: And we expect substantial growth coming where physician expense based on something somewhere else or.
Speaker Change: Digital channels in international So we are there.
Speaker Change: Call of <unk> in the acceleration of sequential acceleration through the year, we have a very specific issue of in.
Speaker Change: In Q1 of <unk>.
Speaker Change: Our base being very strong with the launch of dailies are some adjustments I think thats, how we view the consumption in Q1.
Speaker Change: Thanks, Michelle and just a quick follow up if you are able to answer are you able to quantify the boost that chili's gave in first quarter and then also it sounds like fourth quarter had the pipes into ultra are you able to provide some color on how much that benefited milk in fourth quarter, Yes, we were.
Speaker Change: We don't disclose the specific numbers of behind of US you can imagine for competitive reasons, but I think youre right. We have a beautiful effect also.
Speaker Change: We launch.
Speaker Change: Despite of all the.
Speaker Change: At the end of the year of last year in preparation for the lunch Wilson senior so when your pipe into a customer you're probably picking a number of months until which time assessing pumps against us we just starting to consumption in Q1.
Speaker Change: Don't really get a substantial amount of replenishment orders were only a few weeks in but we're very very pleased with the launch at.
Speaker Change: At Ulta.
Speaker Change: And then they get some jellies as I said it accounts for the.
Speaker Change: The majority of the difference between the Q1 versus Q1 index from <unk> to be able to sleep.
Speaker Change: Hey, Jay disclose are quite quite substantial launch.
Speaker Change: Yeah.
Speaker Change: Thanks, It looks really good and Alta.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The next questions are from the line of John Kim with TD Cowen. Please proceed with your question.
John Kim: Thank you for taking my questions first one is on on marketing yet you continue to invest this year across both brands and what might be different from last year or the same and just any details around.
John Kim: How are you thinking about allocating spend as you ramp up your marketing campaigns and then a follow up just curious on the physician that channel if you're seeing any.
John Kim: And you sort of softness in consumer where you're still seeing the resilience of consumer in that channel. Thank you so much.
Speaker Change: Thank you Jonathan so the marketing is.
Speaker Change: As you know we discussed before we expect to continue to accelerate our marketing investment into our business both in absolute value. So that's a percent plus some spend.
Speaker Change: Our mall and as we indicated is one that where we drive operational efficiency and gross margin and reinvest that into business right. So we expect to continue to move out on both fronts in terms of what is different I think in that case, specifically of MC to start with.
Speaker Change: We are getting to a scale on that brand, especially in the context of the launch of all time in the U S. Where we are you should expect to see and you're probably starting to see already a broadening offer the type of marketing with them.
Speaker Change: You should think about male colleagues the marketing mix has evolved over the years. It came from a very organic following.
Speaker Change: Just people and that's really discovering the Bryan talking to our friends about it and organically building the brand.
Speaker Change: Side by side with regional exclusivity of Sephora.
Speaker Change: And then shifting to a more.
Speaker Change: Influencer based.
Speaker Change: And boosting user generated insurance and face.
Speaker Change: Marketing and what we would do with or into that is more of that but now enhancing and complementing that with us on brother.
Speaker Change: More paid brand campaign that will.
Speaker Change: Now us to reach more and more consumers with acts as a natural evolution of kind of ongoing Brian and one that is getting dwell.
Speaker Change: To a size that is just starting to be significant particularly in the context of your email.
Speaker Change: The launch of.
Speaker Change: And I guess the whole bodgie, you've seen already this year.
Speaker Change: What we've been doing.
Speaker Change: To drive the brand. We are also as I said, we're very proud that <unk> is the fastest growing.
Speaker Change: Professional Brian in out of the top 10 brands in the market and this is a brand that we used to demonstrate that with English is a great brand with great products with innovation and the marketing support we are giving it.
Speaker Change: It can accelerate very efficiently and what we've done in 2004, which we'll do more this year at least taking the brand from a marketing standpoint outside of the Doctor's office on advertising to consumers directly.
Speaker Change: Presenting the benefits of our <unk> and asking them to come these costs with MCC shuttle the different options that they have.
Speaker Change: For great transformative for skincare results. So you will see more of that.
Speaker Change: In the year and I guess I was a DTP channel.
Speaker Change: Would you be channels as we saw as you saw in the presentation continues to perform very strongly is.
Speaker Change: He is normalizing a bit from <unk>.
Speaker Change: The low double digits call 11, 12% growth in prior years to the latest data we have plus 8%.
Speaker Change: On the channel social littered with normalization.
Speaker Change: On the channel, but the challenge remains very strong and what is important in China is that we're seeing.
Speaker Change: Two effects that are that are substantial that play very well to our to our business. One is it premium mutation with channel continue to desire for more and more levels of performance and are supported by the launches we are doing.
Speaker Change: And second.
Speaker Change: A very important trend.
Speaker Change: Goes beyond the channel, but it brings people into a channel which is the confluence of beauty aesthetics on wellness.
Speaker Change: When we bought <unk>.
Speaker Change: And so those are all margin piece was one of the trends we were identified as something that would propel us.
Speaker Change: Through the years, which is the sculpsure lengths of the science based.
Speaker Change: Stinker, but not only skincare, the sculpsure install beauty, <unk>, wellness, and which more and more procedures and different procedures are being supported by by skincare and many of our products with you know budget support.
Speaker Change: Post procedure.
Speaker Change: Thank you very much for the color.
Speaker Change: Our next questions are from the line of Ashley Hogan with Jefferies. Please proceed with your question.
Ashley Hogan: Hi, Thanks for taking our questions. So curious if you could talk a little bit about the macro environment and consumer health you have embedded for the guide for the year and then any other initial takeaways you can share on <unk>.
Speaker Change: Milk.
Speaker Change: As it's now, especially in ultra thanks.
Speaker Change: Yes, I mean.
Speaker Change: As we all know the micro environment is changing I mean, it's interesting and exciting every week seems like that said as we highlighted the beauty consumer beauty into remains resilient with consumers.
Speaker Change: Continue to who.
Speaker Change: To increase the dollar spend year over year, albeit with a level of normalization now the drivers of that consumption remained frankly, the same that they have been for frankly decades, which is the premium inflation of confluence people's desire for higher and higher levels of performance almost like premium beauty journey.
Speaker Change: <unk> speaking is performing ahead of March.
Speaker Change: <unk> four continue to lease our proportional amortization higher levels of performers higher levels of quality for which our brands are very well positioned as well as the reality of ETB and expandable consumption categories and wishes is as much I need categories, one category and that allows consumers importantly these.
Speaker Change: Small luxury so small splurges uptime that feed consumption. So overall in the context of <unk>.
Speaker Change: Kind of changing.
Speaker Change: Micro environment, the beauty consumer Hussein remains very very resilient, albeit with some normalization.
Speaker Change: It's important to note that for us relative to other companies in the space large companies in this space, we're relatively less exposed to.
Speaker Change: Variations in geographic.
Speaker Change: The geographic up some dollars I was in China and other places so at least the marketing, which we compete from a beauty. Some 400 men Barry there was a shortage.
Speaker Change: And how should we just go back to your question you wanted some comments on milk specifically in what regard.
Speaker Change: Oh, just kind of any initial takeaways on consumer.
Speaker Change: It's officially rolled out into Ulta stores.
Speaker Change: Yes. It is.
Speaker Change: Sure I mean, the brand is on fire and continues to be on site and yes. There is this guidance we have given them on Q1, because it is very specific.
Speaker Change: Amortization officials from the base and there is some bigger deals.
Speaker Change: Retail adjustment, but the overall demand for the brand is extremely strong as evidenced.
Speaker Change: <unk> for the early results well first you sold it to anything before we sold something that Brian has grown substantially hit on the market gaining more consumers gaining momentum growing and <unk> getting more and more awards, becoming one of them.
Speaker Change: By industry sources, one of the most powerful brands in the industry.
Speaker Change: But even our air results now that we are starting to activate behind all time schemes and we're very very pleased with our progress on both on both those peak key launches and just a word on our skin too because it's an important launch that we want to make sure everybody fully appreciates the.
Speaker Change: The imports also assist kimpton is not just a simple addition of innovation it allows us to enter the largest category.
Speaker Change: In the U S of complexion medical so much even though skin to many consumers and you see reviews are calling even a foundation, we built all things build <unk> characteristics. So it allows us to participate a massive massive market that is not only to dig but importantly, it has very high degree of loyalty and very high degree of repeat.
Speaker Change: So building another franchise in a business that has high repeat high loyalty is very strategic and very important because it propels again propels our business not just in terms of growth, but also profitability negotiated the repurchases quite important we don't have to we'd have to drive trial and true consumer set itself.
Speaker Change: So we have very two very important initiatives supporting tier one scheme for all the reasons I said I mean, it's evident in the.
Speaker Change: The launch of <unk>, it's not just expansion of the footprint, but importantly, reaching.
Speaker Change: More consumers that today.
Speaker Change: <unk> reached by Sephora, you'll simply lockdown on Shabbos Sephora and Sephora.
Speaker Change: So for that first line.
Speaker Change: So.
Speaker Change: We're very very pleased with the with the evolution of those two things.
Speaker Change: And.
Speaker Change: Lastly, vis vis the ultra long Joseph Ora, we believe that the launch as I said is there incremental loss when youre consumers, but there is obviously a natural.
Speaker Change: Level of cannibalization on reaching all time and Sephora.
Speaker Change: That is going to be a.
Speaker Change: Part of that first quarters, as we ramp up alter and.
Speaker Change: Most of the exclusivity out of auto sephora into old southwest unnatural.
Speaker Change: Kind of utilization are a bit less support when it comes from sephora to deliberately in the short term, but overall there the movies met Nick quite.
Speaker Change: Quite incremental.
Speaker Change: We have the same space at Sephora, where at the same stores et cetera, but there is just a natural shift towards for some consumers or kind of any fishing adult but net net it's a quite incremental incrementally.
Speaker Change: The next questions are from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.
Speaker Change: Yes, hi, thank you.
Speaker Change: I just wanted to make sure I understand sorry, if I missed the details, but I know, there's a skin care launch, which is for the complex and category and then there's a skin care lines is that correct. So there was like a separate skincare and skincare, Okay and is the skin care products going to be sure.
Speaker Change: All.
Speaker Change: Right near the color products like <unk> and Altra is that is that that's the plan.
Speaker Change: Yes, Youre right.
Speaker Change: Theres two launches skim tank and ideally skincare launch what we saw in the end there will be shelf on the same fixture and both old town. So for other skincare launch would you may have seen we announced as part of it.
Speaker Change: You have here is taking the breakthrough technology of Genies in that form factor, but the learning that it was highly appreciated and launching two new skinny.
Speaker Change: Skincare products and those two new skincare products.
Speaker Change: Asset same configuration, but a part of our religion.
Speaker Change: Two different things to skim tank on this clinker Protiviti comes again and they're both performing very well.
Speaker Change: The skin tent being the one that is a reasonable highlighting it would be in the most kind of a strategic issue one because it allows us to panic.
Speaker Change: Penetrating the foundation category the complexion category.
Okay Gotcha and then.
Speaker Change: In terms of the also.
The alpha launch.
Speaker Change: Is there the potential to go beyond 600 doors. If it's successful and also are you in any of the target.
Speaker Change: So the short answer is the potential yes. There is there is a potential.
Speaker Change: That said, what really is important to us and has always been important is to limit distribution the branch.
Speaker Change: We are very focused on productivity per store.
Speaker Change: And when we developed the least income initially we wanted to not go into full distribution from the beginning of this hour.
Speaker Change: Good question and I'll go into a whole distributional as we collaborate with old town.
Speaker Change: A quite closely to ensure that we have very very high productivity is an upper lower basis makeup is close to the game.
Speaker Change: Said many times before that.
Speaker Change: Fastest way to ruin the long term profitability O'brien, who make up on you, but I think it was to expand distribution to us. So yes, there is that potential in <unk>.
Speaker Change: We believe that as we continue to roll that Brian and will continue to grow the brand awareness of our bonds.
Speaker Change: We shouldnt have distribution on running our hurdles for Brian Brian awareness on growth and as a consequence.
Speaker Change: Quite focused on that and not we're not in all type target.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: Just in terms of I was wondering sorry, if you said this already I missed part of the call but.
Speaker Change: Do you have an operating cash flow and our capital spending number for 2024.
Speaker Change: Yes, we do you will have it as part of the 20th.
Speaker Change: Okay.
Speaker Change: Yeah you.
Speaker Change: You will have you will have the different financials I guess.
And will can comment a little bit on what we shared in the presentation. It yourself.
Linda: Okay, Hi, Linda So, yes, I mean, our working our our Capex last year.
Speaker Change: Hey.
We provided on that piece.
Speaker Change: $6 million.
Speaker Change: Our capex in 2024.
Speaker Change: Chipotle 90, sorry to put an undisciplined.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Next question is from the line of Olivia Tong with Raymond James. Please proceed with your question.
Olivia Tong: Great. Thank you.
Speaker Change: First question is just a clarification first on milk milk content Alta.
Speaker Change: As you expand into ultra are you, losing any space at Sephora.
Speaker Change: No we're not.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: And then can you help us on.
Speaker Change: On Q1, just see layer that outlook for flat year over year, how much of that is a function of the growth deceleration, which we of course see.
Speaker Change: We're seeing across the industry versus the retail inventory correction, which eventually normalizes and then <unk>.
Speaker Change: Given the.
Speaker Change: Change and growth dynamics within the category can you just talk about how you're adjusting your strategy given the.
Speaker Change: The new growth. Thank you.
Olivia Tong: Thanks, Olivia just Q1.
Olivia Tong: The deceleration has two components one is not a really I would say, it's not really an absolute value selling.
Olivia Tong: The ratio of what we have is just simply.
Olivia Tong: A very very big launch and I guess on <unk> in the base of Q1 that explains the vast majority TLC.
Olivia Tong: Also the index if you one person versus the base, we had a very big launch.
Olivia Tong: Like I mentioned.
Olivia Tong: In the past been NBC industry four <unk>.
Olivia Tong: Over 30 years.
Olivia Tong: Launches of jelly don't come across very soon so that was a very very big launch that we have we have to anniversary and the second thing is retail in retail inventory.
Olivia Tong: And.
Speaker Change: Yes, I'll take the inventory question. So things the market has been tougher for everybody and I think retailers are constant recipes.
Speaker Change: Normally session. After a very buoyant last few years have adjusted ideal.
Speaker Change: A bit of inventory and as a consequence in that adjustment of inventory.
Speaker Change: So obviously in our.
Speaker Change: In our sales.
Speaker Change: So that's that's good.
Speaker Change: Greg will disconnect yet so.
Speaker Change: Sorry.
Speaker Change: So we've got this we've got manual disconnected.
Speaker Change: You want to put it on mute sorry.
Speaker Change: Okay, sorry about that we we have minorities connector chemical.
Speaker Change: Sorry.
Speaker Change: Going back to what you saw in Q1, the vast majority of the issue is the Senegal, So youll jellies, which is a very big launch for some retail inventory.
Speaker Change: Adjustments a slowdown in the overall market and of course impact to a literally a floor on our consumption.
Speaker Change: Which is why we guide in Q1, but we also said wed call change on the acceleration.
Speaker Change: In terms of how are we adjusting the reality is that the market is a point of information for us.
Speaker Change: But it's not what guides our strategy what guides our strategy.
Speaker Change: Because we're a relatively small influence markets our opportunities for growth are only limited by our ability to innovate to create great compelling business propositions like journeys like ski intent.
Speaker Change: By expanding our distribution executing that well like Ulta.
Speaker Change: So we believe that our growth prospects.
Or a little bit independent not fully independent but for the most of our independent of the realities of the market.
Speaker Change: And so our growth prospects remain remain very strong we have sequential sequential progression on the year after on your southern Jellies us.
Speaker Change: Executing a regulation clients as well as our sponsoring adult upper mid comes into play.
Speaker Change: Got it and then just one last point of clarification was on the sell in for Alta in the December quarter or did any of that trickle into the March quarter.
Speaker Change: Nonetheless evenly with da Vinci.
Speaker Change: Yeah.
Speaker Change: So we.
Speaker Change: For logistic reasons, we split the Alta so part of what shipping in Q4 parties be shipped in Q1.
Speaker Change: In Q1 this year.
Speaker Change: Got it thank you.
Speaker Change: Youre welcome.
Speaker Change: Thank you at this time, we've reached the end of the question and answer session. I will now turn the floor back over to Michelle <unk> for closing remarks.
Speaker Change: Well, thank you very much for joining us.
Speaker Change: As you can see from the presentation on our sentiment we are very very bullish about the prospects of the company's growth.
Speaker Change: And advancing and profitability our flywheel is working is performing.
Speaker Change: Very very well and we continue to be very excited levels across for example makeup brands.
Speaker Change: <unk> both in the U S and internationally. So thank you very much and I. Appreciate you guys being a good estimate.
Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may now disconnect your lines at this time.
Speaker Change: Okay.