Waldencast plc Q3 FY2024 earnings call

• Waldencast saw comparable net revenue growth of 34.6% in Q3 2024, accelerating from prior quarters, driven by increased consumer demand for Obagi Medical and Milk Makeup and improved stock availability.
• Milk Makeup is a cult favorite Gen Z clean makeup brand with 2.7 million Instagram followers and growing global presence. Its growth pillars include expanding community, innovation, broadening footprint, and leveraging the Waldencast platform.
• Obagi Medical is the number one US physician-recommended medical-grade skin care brand, with strong growth from product launches like ELASTIDERM family and expansion in digital channels. Its growth pillars are anchoring brand DNA, accelerating science-backed innovation, and growing brand awareness and footprint.

Milk Makeup: In the third quarter, net revenue was $31.5 million, a 23.5% increase year-over-year. For the first nine months of 2024, net revenue was $94.7 million, up 21.7% from the same period in 2023. Adjusted gross profit margin improved to 69.2% for the first nine months. Obagi Medical: Third quarter net revenue was $38.7 million, a 45.5% increase year-over-year. For the first nine months of 2024, net revenue was $107.1 million, up 32% from the same period in 2023. Adjusted gross margin expanded to 79.7% of net revenue for the first nine months.

• For full year 2024, reaffirmed prior guidance, expecting comparable net revenue growth to accelerate beyond Q2's 25.7% increase and adjusted EBITDA margin to land in the mid-teens range.
• Cash generated by the business is allocated to cover non-recurring costs related to regulatory investigation, and once concluded, will strengthen the capital structure.

• Tariffs: Expected to have a modest impact, with ways to shift costs if necessary, and ample gross margin to manage. Inventory issues: Obagi had out-of-stock problems in Q2, improved in Q3 but still expected to be a factor into Q1 2025.

Q: Gave color on innovation cadence and sustained growth vs market for next year, and how to manage gross margins with potential tariffs A: Strategy remains same for innovation, expecting strong pipeline. Tariffs not expected to be material, with ways to shift costs and gross margin having room to manage Q: Asked about Milk's gross margin trends and beauty market performance A: Gross margin phasing issues are normal, beauty market is strong with prestige market up 7% YTD, makeup up 5%, skin care moderated but still thriving Q: Inquired about Obagi's in-stock levels, physician office penetration, and international expansion A: Obagi in-stock levels improved from Q2, still expected to normalize by end of Q1 2025. Physician office penetration has opportunity for both penetration and dollars per account. International expansion is substantial with pent-up brand equity allowing efficient launches Q: Asked about holiday promotional levels and retailer inventory caution A: Holiday plans similar to prior years, seeing increase in beauty product purchase intentions. Retailers showing more caution in inventory management, especially outside North America Q: Asked about Milk's innovation pipeline, physician dispense channel, and M&A landscape A: Milk has strong innovation pipeline with upcoming new categories. Physician dispense channel is thriving but data less robust. M&A landscape has attractive opportunities with valuations still high for great assets and brands Q: Inquired about Milk's brand awareness and US distribution expansion A: Community continues to grow with increased followers on social media. Expanding distribution internationally with new retailers and evaluating US opportunities carefully Q: Asked about marketing spend going forward A: Will continue to increase marketing and spending behind both brands, reinvesting savings from gross margin improvements into sales and marketing