OLAPLEX HOLDINGS, INC. Q4 FY2023 earnings call

• Amanda Baldwin emphasized her excitement about leading Olaplex, noting the brand's strong technical foundation, passionate community, and potential for growth. She outlined 2024 priorities: maximizing impact of sales/marketing/education investments, strengthening capabilities/culture, and developing long-term road map. - Eric Tiziani reported Q4 2023 results were in line with expectations, with stabilized demand trends, including sell-through trends, aggregated sell-out sales growth in Q4, strong performance from olaplex.com, and strong brand health metrics among prestige hair care consumers.

In the fourth quarter of 2023, net sales declined 14.5% year-over-year to $111.7 million. By channel: Professional channel sales decreased 22.7% to $42.5 million; Direct-to-Consumer channel decreased 2.8% to $42 million; Specialty Retail sales were down 16.3% to $27.3 million. Geographically, the U.S. declined 27.9% compared to the prior year, while international was flat. Adjusted gross profit margin was 70.6%, down from 72.5% in the prior year quarter. Adjusted SG&A grew 54.4% to $44.5 million, and adjusted EBITDA declined 46.8% to $36 million.

For fiscal year 2024, Olaplex expects net sales in the range of $435 million to $463 million, adjusted EBITDA in the range of $143 million to $159 million, and adjusted net income in the range of $87 million to $100 million. Key assumptions include incremental sales from new product launches (with lower contribution in 2024 due to timing), constraining new account openings and rationalizing distributors, and benefiting from lapping customer inventory rebalancing in 2023. Adjusted gross margin expected to expand, adjusted SG&A to increase with sales/marketing spend, and adjusted EBITDA margin in the range of 32.8% to 34.3%.

• Distributor rationalization, including targeting distributors that divert products or have off-strategy pricing, which may have short-term negative volume impact, particularly in Europe. - Competition in the prestige hair care category, which can impact market share and sales. - Impact of customer inventory rebalancing in prior years affecting current sales trends.

Q: Ashley Helgans from Jefferies asked about innovation outlook and price elasticity in hair care.

A: Amanda Baldwin emphasized passion for innovation and a strong R&D history, while Eric Tiziani discussed Olaplex's promotional strategy focusing on strategic events and sampling programs working well.

Q: Jonna Kim of Cowen asked about salon category sentiment and promotional strategies.

A: Amanda Baldwin was optimistic about the salon channel's potential despite shifts, and Eric Tiziani discussed promotional strategy focusing on key events and analyzing incrementality.

Q: Lauren Lieberman of Barclays asked about international sales, distributor rationalization, and demand-building activities.

A: Eric Tiziani noted continued growth in APAC and Latin America, and Amanda Baldwin discussed measured approach to international markets and focus on execution details in demand-building.

Q: Andrea Teixeira of JPMorgan asked about consumption trends, distributor rationalization, and cadence.

A: Eric Tiziani discussed stabilized demand trends and phasing of guidance based on new product launches and marketing initiatives.

Q: Susan Anderson of Canaccord Genuity asked about marketing investment magnitude, channels, and promotions.

A: Amanda Baldwin discussed balanced funnel approach and Eric Tiziani provided details on marketing spend range and promotionality expectations.

Q: Dana Telsey of Telsey Advisory Group asked about similarities/differences of Olaplex and product assortment direction.

A: Amanda Baldwin highlighted Olaplex's category creator status, innovation, and stylist community heritage, expressing optimism about product assortment and innovation direction going forward.