Waldencast plc (NASDAQ:WALD) Q4 2024 Earnings Conference Call March 19, 2025 8:30 AM ET Company Participants Allison Malkin - Investor Relations Michel Brousset - Founder and Chief Executive Officer Manuel Manfredi - Chief Financial Officer Conference Call Participants Jonna Kim - TD Cowen Ashley Helgans - Jefferies Linda Bolton Weiser - D.A. Davidson Olivia Tong - Raymond James Operator Greetings, welcome to the Waldencast Fourth Quarter and Fiscal Year 2024 Earnings Call. At this time, all participants ar ...

Financial Data and Key Metrics Changes - Net revenue for Q4 reached $72.1 million, a 29.4% increase year-over-year, with Milk Makeup growing 31.9% and Obagi Medical growing 27.7% [18][19] - For the full fiscal year, net revenue was $273.9 million, a 27.5% increase compared to the previous year [20] - Adjusted EBITDA for Q4 doubled to $11.2 million, with an adjusted EBITDA margin of 15.5%, reflecting strong revenue momentum [19][21] - Adjusted gross profit for the full year rose to $203.6 million, a 35.3% increase, with an adjusted gross profit margin of 74.3% [20][21] Business Line Data and Key Metrics Changes - Milk Makeup generated Q4 net revenue of $29.9 million, a 31.9% increase, with adjusted EBITDA rising to $4.8 million [28][30] - Obagi Medical achieved Q4 net revenue of $42.2 million, a 27.7% increase, with adjusted EBITDA of $9.8 million [38][39] - For the fiscal year, Milk Makeup's net revenue was $124.6 million, a 24% increase, while Obagi Medical's net revenue was $149.3 million, a 30.7% increase [30][39] Market Data and Key Metrics Changes - The prestige beauty market grew 7% in 2024, with professional skincare growing 8% and prestige makeup growing 5% [7][8] - The company noted that its brands are outperforming the market, with Milk Makeup growing five times faster than the overall beauty market rate [14][47] Company Strategy and Development Direction - The company aims to build a multi-brand platform encompassing various strategic categories and geographies, focusing on operational efficiency and brand equity [12][16] - The growth strategy for Milk Makeup includes expanding brand awareness, launching innovative products, and broadening distribution both online and offline [31][34] - Obagi Medical's strategy focuses on dermatological brand DNA, cutting-edge innovation, and increasing brand awareness to fuel growth [40][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of beauty consumers despite a changing macro environment, emphasizing premiumization trends [72] - The company anticipates strong performance in 2025, expecting mid-teens net revenue growth and further expansion of adjusted EBITDA margins [25][26] Other Important Information - The company secured a new $205 million credit facility, enhancing financial flexibility and extending debt maturity [24] - Cash position at the end of 2024 was $14.8 million, with an additional $30 million available on the revolving credit facility [23] Q&A Session Summary Question: Can you provide details on the cadence of innovation and confidence in sales acceleration? - Management highlighted that Q1's flat guidance is due to anniversary effects of previous successful launches and retail inventory adjustments, with expectations for strong sequential growth throughout the year [50][52][54] Question: What are the marketing strategies for the year? - Management plans to increase marketing investments, focusing on broader paid campaigns while maintaining organic growth strategies [61][63] Question: How is the macro environment affecting consumer health? - Management noted that the beauty industry remains resilient, with consumers continuing to spend on premium products despite some normalization in growth rates [70][72] Question: Will the Ulta launch affect Sephora sales? - Management confirmed that there is no loss of space at Sephora due to the Ulta launch, and the overall impact is expected to be incremental [88][90]

Core Insights - Waldencast achieved significant growth in Q4 2024, with net revenue of $72.1 million, representing a 30.8% increase year-over-year, and a 29.4% increase in comparable net revenue growth [5][12] - The company reported an adjusted EBITDA of $11.2 million, doubling from Q4 2023, reflecting strong operational performance and effective cost management [8][16] - Obagi Medical was recognized as the fastest-growing professional skincare brand in the US for 2024, driven by increased brand awareness and successful product innovations [3][13] Financial Performance - For the year ended December 31, 2024, Waldencast's net revenue reached $273.9 million, a 27.5% increase in comparable net revenue growth compared to 2023 [15][19] - The gross profit for FY 2024 was $191.7 million, with an adjusted gross profit margin of 74.3%, improving by 530 basis points from the previous year [15][19] - The net loss for FY 2024 improved to $48.6 million from $106.0 million in FY 2023, primarily due to operational growth and reduced non-recurring costs [16][19] Brand Highlights - Obagi Medical's Q4 2024 net revenue was $42.2 million, up from $32.5 million in Q4 2023, with a comparable net revenue growth of 27.7% [13][19] - Milk Makeup's Q4 2024 net revenue increased by 31.9% to $29.9 million, supported by initial shipments to Ulta Beauty and growing consumer demand [20][19] - Both brands have introduced innovative products, contributing to their growth and market presence [3][20] Strategic Initiatives - Waldencast secured a new $205 million credit facility to enhance financial flexibility and extend debt maturity, supporting its strategic priorities [10][2] - The company plans to continue expanding its distribution footprint, including the launch of Milk Makeup in over 600 Ulta Beauty locations in spring 2025 [3][18] - Waldencast aims for mid-teens net revenue growth in FY 2025, with expectations for further expansion of adjusted EBITDA margins [17][18]

Group 1 - Waldencast plc will release its Fourth Quarter and Fiscal Year 2024 results on March 18, 2025, after the U.S. market closes [1] - A conference call to discuss the results is scheduled for March 19, 2025, at 8:30 am ET, with participation details provided for investors and analysts [2] - The company aims to build a global beauty and wellness platform by developing and scaling purpose-driven brands, having completed a business combination with Obagi Skincare and Milk Makeup in July 2022 [3] Group 2 - Waldencast's business model focuses on brand-led operations, ensuring customer proximity and market responsiveness while maintaining brand distinctiveness [3] - The platform offers operational scale, expertise in managing global beauty brands, and a balanced portfolio to mitigate category fluctuations [3]

Core Insights - Waldencast plc is participating in the TD Cowen 2 Annual Glowing Ahead: Beauty & Wellness Summit on February 26, 2025, in New York [1] - CEO Michel Brousset will engage in a fireside chat presentation and host investor meetings during the summit [2] - Waldencast aims to build a global beauty and wellness platform by developing and scaling purpose-driven brands, with a focus on operational efficiency and market responsiveness [3] Company Overview - Waldencast was founded by Michel Brousset and Hind Sebti, with a vision to create a best-in-class beauty and wellness operating platform [3] - The company’s strategy includes acquiring and accelerating high-growth brands while maintaining their unique identities [3] - The initial step in this strategy was the business combination with Obagi Skincare and Milk Makeup, which allows brands to leverage operational scale and expertise [3]

Core Viewpoint - Obagi Medical has launched new skincare products, the Super Antioxidant Serum and Moisture Restore Hydration Replenishing Cream, aimed at addressing skin discoloration, oxidative stress, and hydration for all skin types [1][5]. Product Details - The Super Antioxidant Serum is designed to combat oxidative stress and improve skin brightness, containing encapsulated Silymarin and stabilized Vitamin C [3][5]. - The Moisture Restore Hydration Replenishing Cream provides multi-layered hydration using both low and high-molecular-weight Hyaluronic Acids [4][5]. Clinical Testing and Results - Clinical tests showed that 94% of subjects felt their skin was refreshed and smoother after one application, and 97% observed an improvement in overall skin appearance after two weeks [5][6]. Expert Involvement - Dr. Suzan Obagi, a leading dermatologist and Chief Medical Director at Obagi, developed these products based on her extensive research and experience treating various skin concerns, particularly hyperpigmentation and sensitive skin [2][3]. Company Background - Obagi Medical is recognized for its advanced skincare solutions, with a legacy of 35 years in the industry, initially focusing on hyperpigmentation treatment [7].

Core Viewpoint - Waldencast plc is set to announce its financial performance for the fourth quarter and full fiscal year 2024, along with the first three quarters of fiscal year 2025, through a series of press releases and conference calls [1][2][3][4][5]. Financial Performance Announcements - The company will release its fourth quarter and full fiscal year 2024 financial results after the U.S. stock market closes on March 18, 2025, followed by a conference call on March 19, 2025 [2]. - For the first quarter of fiscal 2025, the financial results will be released after the market closes on May 13, 2025, with a conference call scheduled for May 14, 2025 [3]. - The second quarter results will be announced after the market closes on August 18, 2025, with a call on August 19, 2025 [4]. - The third quarter results will be released after the market closes on November 11, 2025, with a conference call on November 12, 2025 [5]. Company Overview - Waldencast aims to build a leading global beauty and wellness platform by developing and scaling purpose-driven brands, emphasizing a brand-led business model that ensures customer proximity and market responsiveness [6]. - The company’s strategy includes leveraging operational scale, expertise in managing global beauty brands, and maintaining a balanced portfolio to mitigate category fluctuations [6].

Core Insights - Waldencast plc is participating in the 2025 International Master Course on Aging Science (IMCAS) World Congress in Paris from January 30 to February 1, 2025, highlighting its commitment to the beauty and wellness industry [1][2] Company Overview - Waldencast aims to build a global best-in-class beauty and wellness platform by developing, acquiring, and scaling purpose-driven brands, with a focus on maintaining each brand's distinct identity [4] - The company has already taken significant steps by combining with Obagi Skincare and Milk Makeup, which will allow its brands to benefit from operational scale and market responsiveness [4] Industry Participation - The IMCAS World Congress is a key event for dermatology, plastic surgery, and aging science, bringing together industry leaders to discuss innovations and business opportunities [2] - Michel Brousset, CEO of Waldencast, will participate in a capital markets roundtable to discuss the future of medical-grade skincare and the beauty industry [2] Expert Contributions - Dr. Suzan Obagi, Chief Medical Director at Obagi Medical, will lead sessions on enhancing skincare results and addressing complications related to energy-based devices, as well as a symposium on hyperpigmentation [3]

Core Viewpoint - Waldencast plc, a global multi-brand beauty and wellness platform, is set to participate in investor meetings and host a presentation at the ICR Conference 2025 on January 13, 2025 [1][2]. Company Overview - Waldencast was founded by Michel Brousset and Hind Sebti, aiming to create a best-in-class beauty and wellness operating platform by developing, acquiring, and scaling purpose-driven brands [3]. - The company's brand-led business model focuses on customer proximity, business agility, and market responsiveness while preserving each brand's unique identity [3]. - The initial step towards this vision was the business combination with Obagi Skincare and Milk Makeup, which allows its brands to leverage operational scale and expertise in managing global beauty brands [3].

Financial Data and Key Metrics Changes - Comparable net revenue growth was 34.6%, up from 21% in Q1 and 25.7% in Q2 [10] - Adjusted EBITDA rose 134% to 16.3% of net revenue, expanding 720 basis points from the prior year [12] - Adjusted gross profit margin increased by 400 basis points to 73.2% in Q3 2024 [35] - For the first nine months of 2024, net revenue reached $201.8 million, a 26.9% increase in comparable growth [37] Business Line Data and Key Metrics Changes - Milk Makeup generated net revenue of $31.5 million, a 23.5% increase year-over-year [45] - Obagi Medical recorded net revenue of $38.7 million, representing a 45.5% growth from the prior year [59] - Adjusted gross profit for Milk Makeup rose 25.2% to $65.6 million, with a gross profit margin of 69.2% [49] - Adjusted gross profit for Obagi Medical was $85.3 million, with a gross profit margin of 79.7% [64] Market Data and Key Metrics Changes - Milk Makeup saw revenue growth of 22.3% in North America and 20.4% internationally [50] - Obagi Medical experienced a 42.1% increase in North America and a 32.8% increase internationally [65] - The beauty market continues to normalize, with the prestige market growing by 7% year-to-date [84] Company Strategy and Development Direction - The company aims to build a global best-in-class beauty and wellness platform through acquisitions and brand development [12][22] - Focus on operational scale and efficiency to support growth and EBITDA margin expansion [14][16] - Plans to expand into new regions and categories while leveraging the Waldencast platform for brand support [23][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for continued growth, emphasizing the importance of innovation and brand awareness [78] - The company does not foresee significant impacts from tariffs on gross margins due to sourcing strategies [80] - Management expects to maintain strong performance into Q4 2024 and reaffirmed guidance for the full year [40] Other Important Information - The company ended the first nine months of 2024 with cash and cash equivalents of $17.6 million and $30 million available on a revolving credit facility [43] - The company is currently managing non-recurring costs associated with an ongoing regulatory investigation [42] Q&A Session Summary Question: Future innovation and growth strategy - Management is optimistic about next year, focusing on brand awareness, innovation, and expansion [78] Question: Impact of tariffs on gross margins - Management does not expect tariffs to have a substantial impact on the business due to sourcing strategies [80] Question: Trends in Milk's gross margin and beauty industry performance - Management noted temporary phasing issues with off-price sales and highlighted the resilience of the beauty market [84] Question: In-stock levels and penetration into dermatologists' offices - Management indicated improved in-stock levels for Obagi and ongoing efforts to increase penetration in physician offices [87] Question: Holiday promotional levels and retailer inventory caution - Management plans to maintain consistent holiday promotional strategies while observing cautious inventory management among retailers [92] Question: Innovation pipeline for Milk and near-term focus areas - Management emphasized the importance of innovation and plans to expand into new subcategories within makeup [96] Question: Performance of the physician dispense channel - Management noted strong demand for science-based medical skincare and ongoing growth in the physician dispense channel [99] Question: M&A landscape and opportunities with indie brands - Management acknowledged the beauty industry's acquisitive nature and the presence of attractive targets for potential acquisitions [101] Question: Brand awareness and distribution expansion for Milk - Management highlighted growth in community engagement and ongoing evaluation of distribution opportunities [106]