Olaplex Holdings, Inc. Q2 FY2025 earnings call

Generate Brand Demand

• Invested $45.4 million in non-payroll sales and marketing year-to-date, up ~$14.6 million y-o-y, with 24.7% adjusted EBITDA margin.
• #1 in EMV across prestige hair care in Q2. Brand building in 3 stages: building brand baseline, creating brand platform, building ongoing content engine.
• Unveiled new brand look in U.S. in Feb, launched Designed to Defy platform in Apr, and Endless Summer Endless Possibilities campaign in Jun.
• Focused on honoring and empowering Pro, updated education program, launched market blitz strategy in initial cities, enhanced presence at trade shows.

Harness Innovation

• Built innovation team and processes, launched 3 new innovations in first half of 2025 vs 1 in first half of 2024.
• Launched scalp longevity treatment in Feb, Number 4 and 5 FINE in May, and Pro-exclusive scalp service in back half.
• Plan to launch additional innovation across all channels this fall.

Execute with Excellence

• Streamlining and modernizing business processes: added new talent, stood up AI-supported demand planning tool, launched dynamic sales dashboard.
• Executing globally aligned go-to-market strategy: opened office in London, implementing tiered approach for international business with 3-tiered model (partner-led priority markets, direct investment markets, light-touch partner markets).

Net sales were $106.3 million, up 2.3% year-over-year. Adjusted EBITDA was $24.6 million, with a margin of 23.1%. By channel: Professional grew 12.1% year-over-year in the quarter to $37.4 million, with net sales approximately flat year-to-date. Specialty retail declined 16.7% year-over-year in the quarter to $30.4 million, with net sales down approximately 3% year-to-date. Direct-to-consumer grew 12.8% year-over-year to $38.5 million in the quarter and is up approximately 4% in the first half of 2025.

• Maintain full-year 2025 guidance: net sales in range of -3% to +2% vs fiscal 2024, adjusted gross margin 70.5%-71.5%, adjusted EBITDA margins 20%-22%.
• Third-quarter net sales expected to decline high single digits y-o-y, offset by strong high single-digit net sales growth in fourth quarter.
• Fourth quarter to benefit from participation in Black Friday, Cyber Monday events for Pro and PIPE and sell-in of 2026 innovation.

• Uncertainty in precise timing of impact across professional channel, consumer behavior, and sales during transformation.
• Trade environment fluidity with potential impact on tariffs, although currently no material impact expected this year.

Q: For third quarter, just a follow-up there on the sales. I guess, are you expecting most of the decline in specialty retailer in the specialty retail channel, just given the shift in sell-in to be more even between third and fourth quarter?

A: Thanks for the question. Nice to hear your voice. Let me just talk about the third and the fourth quarter dynamics in a little bit more detail across. When you think about the third and fourth quarter, there are just natural ebbs and flows on a quarterly basis, especially as we're in the midst of the transformation. And we really are planning our business annually versus managing for any single quarter as we work to deliver what our customer needs and wants. And so broadly speaking, we are intentionally working to establish a more consistent and demand-driven cadence of launches and events. As we apply these learnings, the timing of the commercial activity has shifted a bit, resulting in lighter third quarter and greater concentration of sales in the fourth quarter. And while this does create some variability in year-over-year comparisons, it better reflects the meeting customer demands and us building, quite frankly, a more effective go-to-market model over time. So I went through earlier what are the drivers, but I can list them a little bit again, which is DTC, second quarter, we had some events, third quarter, that's going to have some headwinds. In specialty retail, we expect the percentage of holiday shipments to be better split between the third and the fourth quarter versus being more concentrated in the third quarter of 2024. When you think about in specialty retail, what happened last year is we are pretty broken in the fourth quarter in some of our big partners. And so we've worked together to split out that flow. And so more of that is actually going into weekly into the fourth quarter. And then on Pro, we expect the fourth quarter, as I said, to benefit from Black Friday, Cyber Monday events. I'll stop there.

Q: This is Lillian on for Olivia. I'm wondering if you can share some of your key learnings so far from your refreshed marketing. And just as a follow-up, as we look to the second half, can you give any color on the cadence of SG&A spend and whether it's relatively balanced between the quarters or if it follows the same timing shift between Q3 and Q4?

A: Sure. I'm happy to talk a little bit more about marketing, which has obviously been a significant part of our strategy coming into this year and really something that we are approximately about 4, 5 months in, if you really think about when we started to really operate in the way that I look forward to continuing to operate in this business. And it is a 3-stage process, and I think we've had incredibly strong response to each stage of the process, but we're still mid-build, I think, is really the way to think about this. So Phase 1 was what we were talking about in terms of setting the brand baseline. That's always a big and exciting bet that one makes when you're taking a brand and you're really looking at the visual identity and updating it for the future. We've heard tremendously positive feedback on that from -- I think we mentioned in last quarter's call from our retail partners. And then you get to be out there and see the consumer response, which has been really enthusiastic. And I think the best way that I've been able to articulate is people who know and love the brand say it looks like Olaplex and what it deserves to be. The second piece was the Design Defy platform, which launched in April. And that's really the way to think about that and translate the marketing strategy, is this is the broader purpose that our brand needs to live up to, and really ties together the way in which we go to market. So you have the visual identity, and then you have the ways in which we're taking that and bringing it to life. That is also a first for this brand. And those are the metrics that I was referring to earlier on the call in terms of some of the really positive responses to the initial launch of that, and really what we're able to showcase for our brand. The third phase, I would say we're still in mid-build. We did some great work around the Summer and really building a full funnel content engine, and there'll be a lot more to come as we get into the second half. And that's really, really critical to our growth across different channels. And the way to think about that when we speak about that language is really not just the upper funnel, not just how the brand looks, but every single touch point and connecting every single dot in the case of the Pro for them, and in the case of the consumer education is a very important part of that. We talked on the call today about some of our initiatives there. So it's really about getting that full flywheel going. So a lot more to come with that. And in my experience, one gets better and better every single launch, every single quarter, and that's really what we'll be focused on. If we remember, Katie, our CMO, she just hit her 1-year anniversary. So I think we've made tremendous progress and the talented organization that she's building to support that effort.