WALD

• Michel highlighted that the company made progress against its growth strategy despite Q1 challenges, focusing on strengthening brands, launching innovation, expanding distribution, and enhancing community engagement. - Manuel discussed financial results, noting the net revenue decline but strong adjusted gross profit margin. - For Milk Makeup, innovation was a key driver, with the successful launch of Hydro Grip Gel Skin Tint and entry into Ulta. For Obagi Medical, growth was seen with supply chain transformation initiatives underway. - A key operational focus is strengthening the supply chain to improve reactivity to increasing demand.

• Waldencast targets mid-teens net revenue growth and mid to high-teens adjusted EBITDA margin for the full year. - Growth drivers include Milk Makeup's expansion across brick-and-mortar and e-commerce channels in the US, improvement in fulfillment rates at Obagi Medical, continued rollout of blockbuster innovation on both brands, and growing returns from marketing investments.

For the first quarter, Waldencast reported net revenue of $65.4 million, a decline of 4.1% from the first quarter of the prior year. Milk Makeup saw revenue decline 15.1%, with solid domestic performance despite international challenges; the launch of Hydro Grip Gel Skin Tint and entry into Ulta contributed to high single-digit growth in US retail sales. Obagi Medical achieved net revenue of $36.2 million, a 7.1% increase, though impacted by out-of-stock issues in key SKUs. Milk Makeup's adjusted gross profit margin was 69.5%, while Obagi Medical's adjusted gross profit margin was 82%.

• Broader macroeconomic environment and softer consumer sentiment posing potential pressure on results. - Tariffs impacting cost of goods, though manageable with limited China exposure (only about 10% of total cost of goods). - Supply chain disruptions leading to out-of-stocks and impacting product availability.

Q: Expand on Obagi's supply chain restructuring and its impact on innovation?

A: Michel explained that the company is streamlining warehousing to improve supply chain flexibility and responsiveness. While this transition caused some disruption in Q1, it will enhance the ability to meet increased demand, which previously hurt growth due to out-of-stocks.

Q: Discuss the slowdown in the physician channel for Obagi?

A: Michel attributed the slowdown to less tailwind from Amazon distributor conversion compared to the prior year, but noted the physician channel remains robust and expected to be a growth source.

Q: Provide color on sell-through trend versus sell-in for Obagi and Milk?

A: Michel noted Milk had differences between sell-in and sell-through due to timing of inventory flow and initiatives, while Obagi has a sell-through model tied to physician dispense.

Q: Talk about pricing strategy and tariff impact?

A: Manuel mentioned a low single-digit percent increase in cost of goods sold for fiscal 2025 is manageable due to limited China exposure, and potential selective pricing actions may be implemented.

Q: Discuss SG&A and marketing spend?

A: Michel stated SG&A will grow with sales but with operational leverage, and marketing is evolving—more top-of-funnel for Milk to reach new consumers and consumer outreach for Obagi to drive brand discovery.