Q4 2024 Olaplex Holdings Inc Earnings Call
Speaker Change: [music].
Greetings and welcome to all the Plex holding Inc's fourth quarter 2024 earnings results Conference call.
Speaker Change: At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Allison Malkin Investor Relations.
Allison Malkin: Thank you you may begin thank you and good morning, everyone. Joining me today are Amanda Baldwin, Chief Executive Officer, and Catherine Dan Levy, Chief operating Officer, and Chief Financial Officer before we start I would like to remind you that management will make certain statements today, which are exploring smoking, including statements about the outlook for all.
Allison Malkin: The Texas business and other matters referenced in the company's earnings release issued today.
Allison Malkin: Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected 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 the filings. The company makes with the Securities and Exchange Commission that are available at Www Dot FCC Dot Gov and on the Investor Relations section.
Allison Malkin: The company's website at IR that'll Plex dotcom.
Allison Malkin: 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.
Allison Malkin: Also during this call management will discuss certain non-GAAP financial measures, which management believes can be useful in evaluating the company's performance. The presentation of non-GAAP financial measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Allison Malkin: You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP financial measures. She was the most directly comparable GAAP measures in the company's earnings release.
Allison Malkin: A live broadcast of this call is also available on the Investor Relations section of the company's website at IR Dot all the plaques dotcom.
Allison Malkin: Additionally, during this call management will refer to certain data point estimates and forecasts that are based on industry publications or other publicly available information.
Allison Malkin: Well as our internal sources.
Speaker Change: He has not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. Furthermore, this information involves assumptions and limitations and you are cautioned not to give undue weight to these estimates with that I will now turn the call over to Amanda.
Amanda Baldwin: Thank you Allison.
Amanda Baldwin: Everyone and thank you for joining us for today's call I will share with you our fourth quarter and fiscal 2024 results and discuss the progress we have made on our strategic priorities and transformation.
Catherine: And Catherine will discuss our financial results and outlook.
Catherine: Following this I will introduce our bonds and beyond strategic vision.
Catherine: A year ago on my first call after having joined all the facts I shared my excitement for leading that's truly powerful business with an extraordinary technical foundation and differentiated science.
Catherine: Deliver superior products that have garnered consumer and pro enthusiasm across the world.
Catherine: At the same time I acknowledged that we were at a pivotal moment in our transformational journey will take time as we focused on building our business and our brand for the long run.
Catherine: 'twenty 'twenty four was a productive year in moving us towards that goal.
Catherine: We started to harness our innovation and marketing capabilities as well implemented important work streams to connect with our partners across the globe strengthen our business processes and attract talented executives to our team.
Catherine: In addition, we worked behind the scenes to create a brand vision and strategy that we believe will capitalize on our unique strength and position our company to deliver long term sustainable and profitable growth.
Catherine: Overall, our financial performance and execution of learning were indicative of a company in the midst of a transformation was 2024 net sales and adjusted EBITDA below 2023 level.
Catherine: Faced headwinds internationally as we focus on resetting the business for the future.
Catherine: While we are confident in our overall marketing strategy the investment has taken longer than expected to improve demand across our skus in China.
Catherine: That being said I remain focused on our future and I'm encouraged by our ended the year performance as we continued to make progress against our strategic goal and delivered a better than expected holiday season.
Catherine: Let me briefly touch on our fourth quarter financial.
Catherine: For the fourth quarter, we reported net sales of $100 7 million and adjusted EBITDA of $17 5 million for.
Catherine: For the year net sales were $422 7 billion, representing a decline of seven 8% from 2023 and adjusted EBITDA was $129 7 million for an adjusted EBITDA margin of 37%.
Catherine: At the start of the year, we identified three transformation priority.
Catherine: First maximizing the impact of sale marketing and education investment to generate demand.
Catherine: Second strengthening capabilities and culture to support our future and third developing the long term roadmap and future vision for all of us.
Catherine: Let me share some highlights of our progress against these goals.
Catherine: Our first priority with maximizing the impact of sales marketing and education investments to drive demand.
Catherine: At the core of OPEC brand as an R&D engine that powers high impact innovation and.
Catherine: In 2024, we began to harness these capabilities by strengthening our product development function and our sales marketing and education efforts to elevate and differentiate our products.
Catherine: We focused on bringing new breakthrough products to market deepening engagement with our pro and consumer community are more clearly articulating why all blacks stands apart from its peers.
Catherine: As we began these efforts we kept our focus narrow targeting much of our marketing spend to drive demand for our new launches.
Catherine: This led to a strong performance for our third quarter launch of number five L leave in conditioner, which outperformed our expectations and remained a top five SKU within a subcategory at sephora at your at.
Catherine: In addition during holiday we did begin to see this marketing effort create a halo for our brands leading to improving sales trends for all of plaque across channels and regions throughout the holiday season with old flex dot com as a bright spot.
Catherine: In addition, according to start kind of data all parks had the number one set in U S prestige hair care during the 'twenty 'twenty four holiday season.
Catherine: We are also focused on returning to our stylists routes and re creating meaningful connections with our pros.
Catherine: We amplified our support in multiple ways listening to this community to hear what would best serve them well, we continue to develop new products to address their client needs such as our bond shape, our crawl rebuilding treatment.
Catherine: We believe that focusing on our pro heritage as in a central part of our strategy.
Catherine: As we look forward to 2025 and beyond we plan to continue to refine and amplified these efforts.
Catherine: We finished the year with four out of five of the best selling prestige hair care products in 2024. According to start kind of data and we consistently ranked as a top brand in key accounts across our three distribution channels.
Catherine: In addition, we regained the number one position in earned media value of December among U S hair care brands per creator IQ.
Catherine: Our second priority was strengthening our capabilities and culture to support our future.
Catherine: Building the right team has been a top priority for me since I joined all apart and I'm very pleased to be able to say that we now have a highly experienced talented executive leadership team in place.
Catherine: During 'twenty 'twenty four we were joined by Catherine Dan Levy, who is here with me today is our Chief operating officer, and Chief Financial Officer, Katie Coleman, Our Chief Marketing Officer, and Michelle Brett Our Chief revenue Officer. In addition, this past year, we strengthened our extended senior team.
Catherine: Being an expanded innovation and R&D capability as well as making key hires in our international scale and digital marketing team.
Catherine: Overall, we are creating a culture that promotes execution excellent collaboration and data driven decision, making we opened an office in New York City and another in London to provide our teams from across our organization with a space to come together in person.
Catherine: It's been incredibly rewarding and exciting to see our team United and working towards a common goal are.
Catherine: Our business leaders and team members are energized committed and passionate about the road ahead.
Catherine: I'd like to take a moment to share a bit more about what we've been doing to strengthen our innovation capabilities. As it is so core to what <unk> is and will continue to be.
Catherine: We expanded the footprint of our laboratory, enabling our Chief Science, and research officer, and the R&D team to Ideate and iterate more effectively and efficiently on new technologies.
Speaker Change: In parallel our newly appointed Chief product and innovation officer spearheaded the building of a new product development process is intended to maximize our R&D capabilities and fuel future innovation, leading to the introduction of a more successful and strategic product launch calendar.
Speaker Change: Innovation is just one area, where we are seeing more rigorous processes improve our business we.
Speaker Change: We continue to enhance our go to market process and evolve our integrated business planning, which you'll hear me speak more about as we move into 2025.
Speaker Change: Our third priority for 'twenty 'twenty, four with developing the long term roadmap and future vision for all apart.
Speaker Change: Charting our future path required a deep understanding of what made all effects. So revolutionary from day, one as well, it's continued strength and advantages and then developing our transformation strategy with those insights in mind.
Speaker Change: It was also important to ensure that our future strategy is grounded in concrete researched the targets the needs of each of the critical partners to our brand and is aligned with where our industry stands today and is going forward.
Speaker Change: We undertook a multiple different areas of research, including a brand perception study that has influenced the direction and evolution of our brand and business strategy.
Speaker Change: Based on these insights we believe there is considerable enthusiasm for all apart from consumers pros and our partners, who all share a strong interest in what <unk> is today and the innovation, we can bring to market in the future.
Speaker Change: Our pro and consumer insights work indicated that our brand is still very strong with positive association to build upon particularly around equities such as innovative reparative healthy unaffected.
Speaker Change: We also uncovered key opportunities to broaden our reach upgrade our messaging improve our education and fostered deeper emotional connections with our audiences.
All of this is being incorporated into our future brand design and long term strategic plan.
Speaker Change: Outside of North America, we focus on engaging with distributors and retailers to assess and realign our network with fewer stronger partners to support our brand value.
Upon joining older blocks I personally traveled to multiple countries across Europe, and Asia, meaning with our local teams and international partners to hear how we can more closely collaborate as they work to establish the right structure for the future.
Speaker Change: The feedback from these conversations with positive and highlighted that we have an opportunity to further develop our global brand by localizing to the unique customer and distribution channels across the world.
Speaker Change: As we have discussed this is an ongoing process and we believe we are making good progress.
Speaker Change: Transformations of our scale, we did not expect our path to be linear.
Speaker Change: We did have some setbacks I am proud of how our team worked together to evaluate and implement needed changes to move us forward in a positive way.
Speaker Change: And now I will turn the call over to Catherine to review, our 2024 financial result.
Catherine: Thank you Amanda I.
I am pleased to speak with you today and share additional insight into our fourth quarter and fiscal year results and provide our 2025 outlook.
Catherine: As Amanda noted, we made progress on our strategic priorities with our financial performance reflective of our stage of transformation, while ending the year with a strong balance sheet and generating positive cash flow.
Catherine: In the fourth quarter net sales of $100 7 million declined nine 8% from the fourth quarter of last year.
Catherine: As noted on our third quarter call. We highlighted three factors that we expected to impact our fourth quarter sales performance.
Catherine: First we anticipated the weaker performance from our international business and we reset for the future.
Catherine: Second from a sales and marketing perspective, we had not yet experienced a lift from our brand marketing and felt it was prudent to assume disinvestment would take longer to increase demand.
Catherine: And third we plan for increased promotional intensity across geographies as we prepared for a highly competitive holiday season.
Catherine: I am pleased to say that we did not see headwinds develop to the levels included in our November outlook. In fact, while we continue to have work to do on our international strategy, Our international results were better than expected.
Catherine: In addition, consumer demand in North America strengthened in Q4 underpinned by the marketing investments we made in the second half of the year and with improved global demand our promotional activity did not increase to the levels are incorporated into our outlook.
Overall, we are encouraged to see this progress.
Catherine: Turning to performance by channel spur.
Catherine: Specialty retail had an encouraging performance with Q4 sales up five 7% to $28 8 million compared to the fourth quarter of 2023.
Catherine: North America sell through improved during the holiday, which led to Richard replenishment activity as we close the year.
Catherine: Based on feedback from our key accounts, we were top performing U S hair care brand during black Friday, and cyber Monday, what our holiday kits selling out ahead of expectations with this momentum continuing through year end.
Catherine: Our Q4 D to C channel sales decreased 2.5% versus a year ago with a year over year growth at all flex dot com offset by strategic international rationalization.
Catherine: And finally, our professional channel sales declined 27, 1% year over year with a channel seeing a greater impact from our focus on partnering with fewer but stronger international distributors that are aligned with our brand values and softer selling across geographies.
Catherine: Adjusted gross profit margin for the quarter was 68, 6%, which compares to 76% in the fourth quarter of 2023, this reflected higher promotional activity versus the fourth quarter last year, although the level of intensity was lower than we had expected, giving us a better than planned perform.
Catherine: It.
Catherine: Gross margin was also impacted by higher warehousing costs, partially offset by improved channel mix.
Catherine: Adjusted SG&A was $50 3 million up from $44 5 million in last year's fourth quarter.
Catherine: This increase was mainly driven by investment in talent to support our transformation and long term strategic framework as Amanda mentioned, we added executive leadership and key hires across the organization.
Catherine: Of note during the fourth quarter, we spent approximately $17 million and non payroll related advertising and marketing expenses.
Catherine: We delivered $17 5 million of adjusted EBITDA for a margin of 17, 4%, which was below last year's as our sales decreased at discussed and we invested for the future that said adjusted EBITDA surpassed the expectations we provided in November.
Catherine: Turning to our balance sheet, we continue to have a strong balance sheet at year end, we had lower working capital needs during 'twenty 'twenty four compared to 2023 as we reduced inventory this.
Catherine: Along with improved operating discipline resulted in year end cash and cash equivalents, increasing 100 in 20 million to 586 million from $466 4 million at the end of fiscal year, 2020 three.
Catherine: In total inventory declined $20 7 million to $75 2 million from $95 9 million at the end of fiscal 2023.
Catherine: As we begin fiscal 2025, we feel good about the composition of inventory and we will continue to remain disciplined with investment expected to be aligned with sales growth.
Catherine: Finally long term debt net of the current portion of deferred fees was $643 7 million.
Catherine: As it relates to the year ahead, we begin 2025, having marked strong progress on our groundwork and experiencing early signals that give us the confidence to enter the next stage of our transformation.
Amanda Baldwin: As Amanda we'll share momentarily in 2025, we have a new brand vision and corresponding strategic priorities.
Amanda Baldwin: These priorities are focused on generating demand for our brand.
Amanda Baldwin: Increasing our pipeline of innovation.
Amanda Baldwin: And strengthening our capabilities to execute with excellence.
Amanda Baldwin: Given the scale of our global business. This will require continued investment in talent and marketing.
Amanda Baldwin: Which is incorporated into our 2025 outlook.
Amanda Baldwin: We expect to achieve progress on our strategy throughout 2025, I believe our efforts will position the company to advance our transformation and you generate.
Amanda Baldwin: Long term profitable growth.
Amanda Baldwin: Let me walk you through our 2025 outlook.
Amanda Baldwin: We expect net sales to be between minus 3% to plus 2% versus 2024 and.
Amanda Baldwin: In addition, while we plan our business annually and give guidance Accordingly, I will note that we expect our first quarter sales performance to be below the range. We expect for the full year as we anticipate demand growth through 2025 after investments and initiatives land in the market.
Amanda Baldwin: Adjusted gross margin is expected to remain strong in the range of 75% to 71, 5%, even as we introduce innovation that will not fully scaled.
Amanda Baldwin: Adjusted EBITDA margin is expected between 20% to 22% as we invest in marketing and talent to support our 2025 strategic priorities and to position <unk> as the authority in foundational care health and beauty.
We've chosen to invest aggressively behind our U S business, which we believe leaves our transformation to ensure that the brand work and new vision are visible to the pro and to the consumer.
In addition, we've hired a talented team who will enable our growth overtime and sure. We are investing today to build the capabilities that we believe are needed to grow the business for the future and why not work is further along we will talk to you about our longer term EBITDA margin expectations.
Amanda Baldwin: Before turning the call over to Amanda I wanted to reflect on my first six months I joined <unk>, because I admired how the company disrupted the hair care category and saw significant opportunity to join this fast paced company helped architect and implement the strategy that allowed <unk> to achieve its true potential.
Amanda Baldwin: I remain confident in our vision and strategy and look forward to sharing our progress along the way.
Amanda Baldwin: With that I will turn the call back over to Amanda to introduce our strategic vision bonds in the yard.
Amanda Baldwin: And now to the future our bonds would be on vision for Ola Plex begins with its original breakthrough innovation and powerful origin I believe that a great strategy harnesses businesses unique heritage and capabilities and put them in context of where the broader industry and consumer trends are headed.
Amanda Baldwin: In 2014 oil plex revolutionized the hair care category through the introduction of our patented bond building technology. This amino and our number one bond multiplier and number two bond protector product.
Amanda Baldwin: This new two parts along treatment allowed pros around the world to repair disulfide bond deep inside the hair that are broken dry chemical services, such as coloring permit and straightening.
Amanda Baldwin: This new Salon service change the ability of colors to pursue their craft and its the alchemy <unk> science and the pro community that is our reason for being and the inspiration for our path forward.
Amanda Baldwin: We're fortunate to participate in a category that is poised for continued growth as.
Amanda Baldwin: As of February 2025, Euro monitor international forecast premium hair care to grow at a CAGR of 6% to 7% from 2024 to 2028 and in fact premium hair care represents only 20% of the overall hair care market in 2024, according to Euromonitor and car.
Speaker Change: Contract premium is estimated to represent on average approximately 47% of the market across color cosmetics fragrance and skincare.
Speaker Change: We believe hair care is in their early innings of premium innovation and that <unk> is well placed to benefit from this potential.
Speaker Change: In addition to macro momentum in prestige hair beauty health and wellness are converging and consumers around the world care now more than ever about what they put in on and around our bodies. We believe our technology and original positioning allow us to focus on a uniquely important white space of highly efficacious hair.
Speaker Change: Care that is not just about band dating or extreme damage repair what about actually improving the health of her.
Speaker Change: Our strategic vision is based on three pillars.
Speaker Change: First is to move beyond damage repair and the bond building category, we created to grow our addressable market and position <unk> as a solution for everyday foundational her health.
Speaker Change: Second honoring and empowering the pro as the start of the flywheel of this business the promos.
Speaker Change: <unk> is both a powerful distribution channel as well as the Muse for all that we built in our brand without them. Our formulas are incredible science who's in the chair that they truly come to life.
Speaker Change: Third while our products are always created fans based on their efficacy, we must find opportunities for our brand to generate the emotional connection that drives lasting brand relevant resilience and love.
Speaker Change: Across the globe, the feeling of a great hair day is universal and the unapologetic confidence that comes with it is a powerful human truth that we have the unique ability to tap into.
Speaker Change: Combining innovation with brand storytelling will be critical to getting back to growth.
Speaker Change: In conclusion, our vision is to create a foundational health and beauty company powered by breakthrough innovation that starts with and is inspired by the professional hair stylists that is what we believe we are uniquely positioned to do and that is the future of all the boxes.
Speaker Change: In 2025, we have three priorities, which we believe will position us to achieve our financial goals and advance our vision as a foundational health and beauty company.
Speaker Change: First generate brand demand we.
Speaker Change: We will elevate our visual identity, while executing a 360 degree marketing plan that drives demand in honors and surfaces the probe.
Speaker Change: Second harness innovation, we will build the future pipeline of innovation that is grounded in foundational her health and Leverages our strength in product development process to continue to introduce breakthrough science, while expanding our product portfolio. Thus reaffirming Olympics as a revolutionary healthy hair authority from root to tip.
Speaker Change: Third execute with excellence.
Speaker Change: Our organization will shift from planning for the future to the ongoing processes data and rhythms of implementation will focus on continuing to evolve and refine our operational and strategic processes realigning, our international partnerships and driving efficiencies across the organization to provide the fuel in support of our growth.
Speaker Change: Turning to our first priority in more detail generate brand demand.
Speaker Change: Last week, we began an exciting journey to surround the powerful <unk> product with a new visual identity and brand marketing strategy is intended to showcase our unique brand DNA and build longevity for the future.
Speaker Change: Our new visuals are elevated dynamic and relatable showing texture and warm as well as the special bond between the client and the stylus that has always been a part of our history.
Speaker Change: We aim to show science, and the technology forward and approachable way always show emotion and passion for our category that has deepened feeling and moves beyond the colorless and clinical work of the past.
Speaker Change: This visual identity with launch in the U S. On February 25th that's clearly showcased in our new social presence and website.
Speaker Change: Our in store visual merchandising and our 360 media campaigns and will continue to roll out globally over the coming months.
Speaker Change: A key element of this update is the way, we communicate visually and verbally the unique benefits of all that clear.
Speaker Change: Clear compelling messaging across all digital and physical touch points makes it easier for consumers and pros to understand why and how to build their own duplex routine.
Speaker Change: In addition, our visuals will showcase the pro and their clients with a renewed focus on communicating our salon services.
Speaker Change: In 2025, we will begin to execute our updated pro for a strategy we plan to improve education drive engagement among the community with an elevated presence and lead with our ambassadors and pro collective.
Speaker Change: In addition, we plan to strengthen our customer management and field sales execution to provide us with a sustainable platform for success and the pro channel.
Speaker Change: To bring the brand updates to life, where we're taking a 360 degree full funnel marketing approach that moved us into the brand demand creation phase of our transformation leveraging our greater lead point of view and product messaging that reframe the conversation from damage repair to healthy hair from root to tip.
Speaker Change: This began last week with campaign launched across digital channels and will continue throughout the year.
Speaker Change: In addition to our consumer focused effort everything we do will have a pro angle from our digital presence to our physical event to how we communicate about our technology.
Speaker Change: We have developed multiple touch points for measurement, but are intended to evaluate the impact of these efforts and allow us to adjust as needed.
Speaker Change: We believe we will need to invest strongly behind our new brand identity and will continue to expand this effort to international markets and modify our spend over time.
Speaker Change: Our second priority is to harness innovation, we have over 10 years of experience developing products that target. The disulfide bond most important foundational her health by reforming and replenishing bonds from cortex. The cuticle through molecular level clients. We believe we can continue to innovate beyond damage repair.
Speaker Change: And leverage our R&D capability to unlock he signs of healthy hair strengthen elasticity shine and Shane smoothness and press control softness and moisture innovation and shape retention and integrity.
Speaker Change: We chose scout because the first innovation in 2025 is a perfectly aligned with our mission of foundational her house quite.
Speaker Change: Quite simply healthy hair starts at the scope.
Speaker Change: Our R&D led us through an advanced understanding of the science of a healthy scalp and how to treat it through a holistic approach that not only addresses accelerated scalped Adrian but also balances the scalp microbiome and strengthens the scout barrier by rethinking the disulfide bonds and the surf scope.
Speaker Change: Oh part because the original patent was not only for her but also covers and scalp, allowing us once again to take a unique approach to address a crucial element of overall hair out.
Speaker Change: Launched just last week number 0.5 golf longevity treatment will be joined later this year with an additional specialized pro service.
Speaker Change: Both clinically proven to establish the foundation for long term scalp and hair health.
Speaker Change: Combined with our best selling number three pair per factor. This innovation is emblematic of old taxes, new vision and its efforts to deliver lasting her health from root to tip and leverage innovation as well as reinvigorate our hero Skus, which will be important to driving overall brand demand.
Speaker Change: Our third priority execute with excellence.
Speaker Change: In 2025 organization will shift from significant behind the scenes work to plan for the future to daily implementation and execution rigor.
Speaker Change: To this end we have built upon our product innovation process to develop a global go to market engine integrated business planning process and a new strategic planning procedure, each of which is integral to enhancing the efficiency and effectiveness of our internal workflows.
Speaker Change: In addition, we're mining for productivity to provide the fuel in support of our growth and do all automated performance metrics to make faster more informed decisions.
Speaker Change: International distributors are an important part of our business and an area of significant opportunity.
Speaker Change: And 'twenty 'twenty, four we began rationalizing and transforming our partnerships.
Speaker Change: Fewer but stronger distributors, while we continue this work in 2025, we're also focused on enhancing our ongoing partnerships and introducing and executing localized strategies.
Speaker Change: This work is expected to enable our broader strategic vision as we work more in sync with our partners and incorporate the specific dynamics of each market.
Speaker Change: We believe that our brand remains desirable on a global basis with the right partners for well versed in their local market. We believe we can drive brand growth.
Speaker Change: These three strategic priorities represent the next stage of our transformation and will drive our financial performance. This year and importantly continued to elevate our platform as we position our company for sustained long term profitable growth.
Speaker Change: We look forward to sharing our progress towards our priorities as we move throughout the year.
Speaker Change: We've accomplished much in my first year IPO, we're a different company today with a clear vision and improved innovation engine, a new articulation of our brand and a talented organization directing at executing the strategy that is expected to maximize our competitive strengths.
Speaker Change: I shared with you today is the first step in our longer term vision. Overall, we believe this is the beginning of a bright and exciting future as we position old blocks for its next chapter as a foundational health and beauty company.
Speaker Change: I want to thank our team for their exceptional work and commitment that got us to this critical moment.
Speaker Change: I'm honored to be leading this organization for the journey that why is that.
Operator, we're now ready to take questions.
Speaker Change: Thank you the floor is now open for questions. If he would like to ask a question. Please press star one on your telephone keypad at this time a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up the handset before pressing the star.
Speaker Change: Our keys, we do ask that you. Please limit yourself to one question and one follow up again Thats Star one to ask Register a question at this time. Today's first question is coming from Susan Anderson of Canaccord Genuity. Please go ahead.
Susan Anderson: Hi, good morning, nice job on the quarter nice to see the stabilization of the sales.
Speaker Change: I guess, maybe just.
Speaker Change: Touch on the professional channel. It sounds like you guys are still very committed there. It does seem like competition has maybe been increasing there with other brands really trying to kind of get a foothold into there. So I guess I'm curious just how you're thinking about that.
Speaker Change: How much of the decline is really due to the back bar versus the front of the store and then I guess what else do you think you guys need to do to kind of like stabilize that channel.
Speaker Change: Hi, Suzanna Amanda Thanks for joining us this morning, a couple of pop on that and yes, you definitely did here loudly and clearly and we have been talking about for really since I joined about the importance and approached channel I think theres a couple of elements to that.
Speaker Change: First of all why is it important beyond being a part of our history. We believe that it remains a significant channel as well as a really important marketing vehicle. When you think about there's some really impressive statistics out there.
Speaker Change: Two thirds of consumers looking at the pro as someone that can give them advice about.
Speaker Change: Piling products and about hair care products. So we think of it as both a revenue generating channels, but also part of our marketing engine and that's why we're really focused on at this time.
Speaker Change: Second thing I would say in terms of this how do you get after it in the right way to think of it is makes sense to draw the distinction between what's happened, thus far and funded so far.
Speaker Change: Sean.
Speaker Change: We started as a services business, that's really important to us I think I also spoke about how the scalp retail product will have a service component. We think that that's a really important way to continue to drive consumers into this one.
Speaker Change: And part of actually continuing to grow that channel I think in terms of how we will approach competing effectively it really is across a lot of different touch points.
Speaker Change: Similar to how we think about our entire strategy, which begins with products do we have the right products that really enabled approach you do do what they do as well as hospital that was certainly the motivation behind introducing something like our bond shaper treatment back in September.
Speaker Change: Do they have the right support the right education, the right materials, the right ability to talk about the product and then the third piece of this which has been a really interesting and fun part of something that we've been working on Australia is it it's about building community.
Speaker Change: And being in the right.
Speaker Change: Places supporting them in the right way I had a really great experience.
Speaker Change: Being in a room with a model for teaching each other and that was certainly something that was incredibly inspiring for me. So are we creating those environment successfully so I think there's some very specific things that relate to product some very tactical things that relate to how we educate how we work and then there are things that are emotionally.
Speaker Change: Oaken about a lot with respect to this brand, but in addition to it incredibly application science here is an emotional category of crossroads and consumers and we really need to also lean into that.
Speaker Change: Okay, Great. That's really helpful and if I could just add one more on the international business I'm curious.
Speaker Change: It may be a bit early but any thoughts on how many distributors do you think you'll end up with versus where you were at I guess, how should we think about that sells there in 2025 and you know.
Speaker Change: Should we expect more rationalization I guess throughout the year or in the back half does that start to I guess kind of stabilized.
Speaker Change: I think we're not giving specific numbers around that at this time.
Speaker Change: Spoke about on the last call. This is a very methodical country by country process.
Speaker Change: We have a very specific plan around kind of how we're thinking about each one of the geographies that we play and what the potential foreign who is the right partner, we have a lot of really great partners. So I think I really want to make sure. It's everybody walks away from this conversation about international understanding that we remain very optimistic about international is that is there.
Speaker Change: A huge opportunity for us one of the things that I think is unique and attractive needs of this brand in the first place is that it is the successful around the world.
Speaker Change: It services are the brand resonates with those are amazing things that shouldn't be taken for granted this is really an operational and tactical aspect of how do we get back route. So we're equally focused on not just you.
Speaker Change: Who do we not want to be.
Speaker Change: I'm more focused on who do we want to be in business with and how we better partners and that's an important part of this work stream as well we've talked about I think it was it was back in the in the third quarter call that in order to really.
Speaker Change: Roll out or effective international marketing engine and even as we think about this new brand visual identity and the efforts that we're putting around that we need to be great partners with fewer distributors wanted to effectively execute that so there's really two sides to this and I feel really good about the progress that we're making along that.
Speaker Change: With everything that we're doing in this organization as we go through a transformation we have a huge emphasis on moving quickly, but also making the right long term decisions, we're always toggling back and forth between those but well keep chipping away at that and I feel good about this.
Speaker Change: Thus far.
Speaker Change: And I'll just add that.
Speaker Change: We think we love the long term, we do have significant room for growth internationally and it will take time as amended just said for us to execute the strategy for 2025, we do expect North America to lead her performance and be moderated a bit but our transformation is still going on in the international business.
Speaker Change: Okay, great. Thanks, So much you guys. Good luck for 2025.
Speaker Change: Yeah.
Thank you. The next question is coming from Olivia Tong of Raymond James. Please go ahead.
Speaker Change: Great. Thank you good morning.
Speaker Change: We're putting quite a outlook implies a return to positive sales at some point in the year. So what's your view on what needs to happen in order to get there and do you think you have the parts already in market or is there more to come and then what's your view on the growth rate in your categories in the state of competition not only for fiscal 'twenty.
Speaker Change: Thank you.
Speaker Change: I can speak to those macro and then Katherine can talk a little bit about about what we've talked over the course of the year.
Speaker Change: From a from a big picture I feel that we're in a really good position to be able to compete effectively in our category going forward and there were a couple of elements to that and really getting our business back to growth.
Speaker Change: First is product and product innovation, that's why we spent a lot of time last year.
Speaker Change: Focusing on our innovation engine and not just our R&D capabilities by our ability to bring product to market in the right way. It was point number one so that journey started with scout last week.
Speaker Change: Making sure that we have.
Speaker Change: Big innovations coming in the pipeline is critical to our future.
Speaker Change: And as the brand work that we did and that was a yearlong process I would say very fast.
Speaker Change: Making sure that we're getting to this quickly and that has to do with our our ability to market effectively so I've been speaking a lot since the beginning it's not just the dollars that we spend on marketing, but how we spend on the visual that we're using our marketing team is able to target media effectively there's a lot of water.
Speaker Change: Work that needed to happen last year to put us in a position to be able to actually how are.
Speaker Change: Our story effectively so what is that story how does this look how do we spend money against telling that story again, that's an engine that just started last week. We now have the leadership and the team to be able to go after that aggressively. So we think that those are really I believe that in any business you need to have good innovation in product a strong <unk> and strong <unk>.
Speaker Change: Marketing happening all at once and you know this is the year that will really begin that journey. So that's something I would say that we're.
Speaker Change: We're looking towards in terms of what's going to drive our growth and execution why it's behind us that that's why not is number three and I would say that Kathryn and I are laser focused on making sure that we're really getting into the rhythms of implementation that we have the right data at our fingertips that we're able to evaluate the decisions that we're making on.
Speaker Change: The daily basis about we're replacing the spend and adjusting and learning as we go forward. So all three of those really are our critical I don't know what.
Speaker Change: Katherine talk a little bit about the cadence through the year.
Katherine: Yeah, I mean, I think that's well said and then we.
Katherine: Definitely our focus on our three priorities first generating brand demand second harnessing innovation and third executing with excellence.
Katherine: Clearly the ability to hit the high end of the range is tied to the speed at which we make progress against those three things we feel confident in our new brand positioning and we expect it and our innovation to drive demand.
Katherine: As Ben just mentioned we have spent the last six.
Katherine: Six months, putting in place very detailed strategic plan and metrics that we'll use to monitor our progress and we'll use those detailed measurement system to react quickly to what's working and adjust our investments. So we're confident in the range and our ability to deliver within it.
Katherine: So I know we're ready for the next question.
Katherine: Certainly the next question is coming from Jonna Kim of TD Cowen. Please go ahead.
Katherine: Hi, there. Thank you. This is Katie on for Jonah one question I'd like to ask is around the marketing investments and why why do you think that they could be taking longer than expected to lead to that higher interest and customer acquisition, what what's embedded within your plan for this year versus last.
Katherine: Here as you evolve your marketing strategy and as a follow up what is the right level of marketing as a percentage of sales to support growth. Thank you.
Katherine: I think brand building takes time and that any marketing engine. That's really designed to build long term brand does not happen overnight and as an organization. We certainly are moving more into the demand creation phase and by that what I really mean is thinking about.
Katherine: Balanced marketing funnel and a 360 degree approach that performance marketing you can measure by minutes right and you have an impact there is a ceiling on horsepower that will take you. Both in terms of the scale of your business as well as the longevity of your business and I think we're focused on really improving both of those so when the reason that we.
Katherine: We've given ourselves time reason that we provided the guidance that we have is that we think we need to be aggressive in how we're investing behind particularly our U S business.
Katherine: And that those results will take time, we feel very confident in the reception new brand identity and what it enables us to do again, we have a team. That's just been put in place under the leadership of JD Goldman who is you know that team is extremely strong and we're now have the right partners and the right strategy in order to enable us.
Katherine: To market effectively but we didn't think that it is prudent to expect that that happens overnight. This will be a build over time and it certainly is something where you would get better and better at it and my background is in product innovation and marketing.
Katherine: 20 years of this and have watched how it what it really takes to build a brand and what the reasonable expectations of our performance over time.
Katherine: Well, yeah, I'll just add that we are.
Katherine: Alright, then I won't add anything.
Katherine: [laughter].
Katherine: Okay, well I would just add that we're focused on to any 25, you know right now we're in the early stages of that we'd use strategy that Amanda just shared and we've really set ourselves up to be able to invest aggressively this year to reignite the brand and we expect that to gain leverage over time, but we need this year's learnings to help optimize our <unk>.
Katherine: And so we're investing today to build the capabilities that we believe are needed to grow the business for the future and again as we said before we get back to you. Once we learn more to talk about the longer term margin percentage and EBITDA margins.
Speaker Change: Thank you so much for the color really appreciate it.
Speaker Change: Thank you. The next question is coming from actually elegance of Jefferies. Please go ahead.
Speaker Change: Hi, Thanks for taking our question.
Speaker Change: If we can talk about trends in the professional channel are we still seeing consumers kind of extend length between appointments and then what we should expect in terms of stabilization in 2025, and then if I could just squeeze in one more when you talk about the region specific approach to international markets are you talking more like a marketing approach or.
Speaker Change: Assortments by region. Thanks.
Speaker Change: Okay.
Speaker Change: So first is just with respect to the pro channel what we're seeing in the data is that Theres, certainly I would say over the past several years and that's been an emphasis on post COVID-19 that visits have been extended the time periods between visits have been extended there's nothing in the data that we're seeing and it suggests that they are extended further.
Speaker Change: Where are the things that we expect it to go you know that this is a time to kind of keeps keeps ongoing I think it was more about what also call Lisa.
Lisa: It's driven by how frequently people often women on our coloring their hair as well as the average length of women's here right. So those two things certainly have changed which is why when we were talking earlier about the pro channel, giving other reasons to be in for services is something that's really important it's something that's a lot of converse.
Lisa: Patients as we've done our own research around the broker community to really understand how can we support them.
Lisa: Idea what else drives me into this one is a critical part so that's really how I would think about that is is what we're seeing right now is relative stabilization in those trends, but they certainly are down from where they were pre COVID-19.
Lisa: The second part of your question about International I think in a way brand how global consistency rent Theres, no doubt and and I've had the privilege of working at several of them that there is a granted down across the entire book that's something that as we think about our our strategy is essential.
Lisa: One piece of that is how do you localize that to really think about and every country has slight nuances of how the pro channel works, how the retail channel work the DTC channel. So it it's about your channel mix, how youre approaching the channels. How you may communicate specific things that we've really learned about how.
Lisa: Numerous think about their hearing on a global basis, the benefits that someone who is looking for in China are different than what they're looking for in France, just even the words that they use so there and that's why actually having a distributor partners. So incredibly powerful because they really understand the nuances of their market. So it's it's about blending those things too.
Lisa: And that's why.
Lisa: A lot of them just international work has to do with partnership on both sides.
And making sure that worth at all.
And we have the right infrastructure, we called out in the last call that we hired an SVP of international with a marketing organization. Those are the things. We're halfway talks about investing in talent. That's why not so critical and we have to do that now even ahead of getting those those markets moving back in the right direction.
Lisa: Great. Thanks, so much.
Lisa: Mhm.
Speaker Change: Thank you. The next question is coming from Lauren Lieberman of Barclays. Please go ahead.
Lauren Lieberman: Great. Thanks. Good morning, I was just curious if you could talk a little bit about your pricing strategy and you know historically everything was lined price and you're moving away from that now. So I just wanted to know if you could discuss like a more fulsome thought process on pricing going forward and any kind of early adjusted or like reaction you're getting.
Lauren Lieberman: <unk> from customers, both retail and professional on that front. Thanks.
Lauren Lieberman: Yeah, I think that's a great question and as we've thought about the strategy in this business everything has certainly been something that we've done thoughtfully and based on a lot of research, where we feel that we have opportunity and I think is really really did too and looks at and where we sit within that as well as how do we ensure that we're maintaining.
Lauren Lieberman: Appropriate gross margins as we innovate right off products are jam packed with the best possible technology, and so we need to balance both of those things.
Lauren Lieberman: Yeah.
Speaker Change: So our pricing being reached that like is that where you're going to go across the line and kind of reset.
Speaker Change: Pricing because they got historically it looked like there was it was a one price point no matter of the product.
And that's been shifting so I just didn't know if there's a <unk>.
Speaker Change: Research area.
Speaker Change: Or is there like a price pack architecture. When you change the size of the bottles I'm just curious on how that gets implemented it was less about price increases going forward and more about like the absolute setting prices and appears on the shelf.
Speaker Change: I think what you see in the market today is what we intend to do at this time.
Speaker Change: Okay alright, thank you.
Speaker Change: Mhm.
Speaker Change: Thank you. The next question is coming from Dana Telsey of Telsey Advisory Group. Please go ahead.
Dana Telsey: Hi, Good morning, Amanda as you think about product launches for 2025, and the importance of the scalp, which we're beginning to see everywhere. How do you think of product launches timing, how many and as you think about the product assortment both globally and here in the U S. Any differences, we should be seeing in packaging size.
Dana Telsey: And just lastly on the adjusted EBITDA margin guide for 'twenty to 'twenty five.
Dana Telsey: What would make that come in better than expected and are there any building blocks for adjusted EBITDA as we move forward into 'twenty six.
Dana Telsey: That would trend with a tailwind or a headwind. Thank you.
Speaker Change: Good morning, David Good to hear from you. So I'll take the product piece and then I'll, let Katherine take the EBITDA piece with respect your product without.
Speaker Change: Giving away our future calendar.
Speaker Change: So really what we're what we're thinking about is is getting into our structure and approach around the timing of what we launched the framework in which we're looking at innovation and one of the big things that we have talked about that we've talked about today and now I'll continue to talk about is how do you balance the process with the creativity and <unk>.
Speaker Change: The theory, and that's something that again, Kathryn and I are very passionate about so you will consider continue to see innovation from us we've talked about two to three product launches a year I think there's always a balance of a couple of things that are happening in the decisions that we need. One is are we do we really believe that the science is there to drive differentiation.
Speaker Change: That would be really critical to us do we feel that we have the marketing impact to be able to get something off the ground in the right way.
Speaker Change: And also are we are rebalancing our core I'm one of the things that we talked about over time is that in order to really drive growth in this business, yes innovation is critical but there.
Speaker Change: The reason that we talked about number three being paired with the scalp is that that really is the best thing for the consumer which is always where we're gonna start but also in order to make sure that we're harnessing our floor and building our core through this transformation is going to be really critical we have 21 Skus. We have a lot of opportunity to continue to grow into continued in.
Speaker Change: Debate, but we're always going to do it because we believe that we have something different.
Speaker Change: And because we believe it's the right time for that product come to market and scalp is a great example of looking at our science looking to your point about where where the industry is going and really feeling that we can age is something different but also do something that made sense for all blacks and those two things have to happen at the same time.
Speaker Change: Yeah.
Speaker Change: Yeah, I'll just build on to the innovation point and then I'll do the EBITDA point I mean last year innovation perspective, we really turned on the innovation engine with several key launches that are still building. This year, we have the Pearl Kroll bond cheaper treatment probe gel the number five leaving <unk>.
Amanda Baldwin: And in 2025, we have additional innovations planned starting to scale that Amanda just discussed and innovation is a larger percentage of our unit sales in 2025, but all three of our four our priorities that we've outlined today are important to us achieving our goals.
Amanda Baldwin: And that leads me into your second question, which is the high and low end of the range and so just to re articulate those three goals generate brand to ban hardest innovation and execute with excellence ability to hit the high end of the range is tied to the speed at which we make progress against each of those.
Amanda Baldwin: So we feel confident that our brand positioning and expect it to drive that demand.
Amanda Baldwin: How quickly will hit the high end if it goes quick more quickly and we'll hit the trend if it goes a little bit more slowly, but we expect to monitor the progress using our detailed measurement system and we're going to quickly react to what's working I would say that over and over again, because I'm really proud of the time that we've taken to put in place these metrics measures of success.
Amanda Baldwin: So if we call them that will allow us to really react very quickly.
Amanda Baldwin: Thank you.
Amanda Baldwin: Yes.
Speaker Change: Ladies and gentlemen, Unfortunately, we have run out of time predicted I would now like to turn the floor back over to MS. Baldwin for any closing comments.
Speaker Change: Thank you I just wanted to thank everyone for joining us so pretty exciting time at gold bar and we appreciate everybody's interest and we wish you a great day.
Speaker Change: Ladies and gentlemen. This concludes today's event you may disconnect. Your lines at this time or walk off the webcast and enjoy the rest of your day.
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