Olaplex (OLPX) - 2025 Q1 - Quarterly Report

General Information Form 10-Q Filing Details Olaplex Holdings, Inc. filed its 10-Q for the quarter ended March 31, 2025, indicating compliance with SEC filing requirements and its status as an accelerated filer, with its common stock trading on the Nasdaq Global Select Market under the symbol OLPX - Olaplex Holdings, Inc. filed its Quarterly Report on Form 10-Q for the period ended March 31, 2025[2] - The company's common stock, par value $0.001 per share, trades on the Nasdaq Global Select Market under the symbol OLPX[3] Filing Metrics | Metric | Value | | :--- | :--- | | Filer Status | Accelerated Filer | | Common Stock Outstanding (as of May 2, 2025) | 665,922,884 shares | Table of Contents The table of contents outlines the structured organization of the Form 10-Q, detailing Part I (Financial Information) which includes condensed consolidated financial statements and management's discussion and analysis, and Part II (Other Information) covering legal proceedings, risk factors, and exhibits Glossary This section provides definitions for key terms used throughout the Quarterly Report, such as '2022 Credit Agreement,' 'IPO,' 'Penelope,' 'Pre-IPO Stockholders,' 'Pre-IPO Tax Assets,' 'Reorganization Transactions,' and 'Tax Receivable Agreement,' to ensure clarity and consistent understanding - The '2022 Credit Agreement' includes a $675 million seven-year senior-secured term loan facility and a $150 million five-year senior-secured revolving credit facility[9] - The 'Tax Receivable Agreement' requires the Company to pay Pre-IPO Stockholders 85% of the cash savings in U.S. federal, state, or local tax realized following the IPO[9] Special Note Regarding Forward-Looking Statements This section advises readers that the report contains forward-looking statements based on management's beliefs and assumptions, which involve known and unknown risks and uncertainties that could cause actual results to differ materially, highlighting various factors that could impact future performance - Forward-looking statements reflect current expectations and projections about future events and financial trends, but are not guarantees of future performance[12] - Key risks include dependence on the business transformation plan, competition in the beauty industry, ability to maintain brand image, respond to market trends, manage supply chain, and impacts from international operations and legal proceedings[13][15] - Many factors are macroeconomic in nature and beyond the company's control, and actual results may vary materially from projections[14] Part I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents Olaplex Holdings, Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive income, statements of changes in stockholders' equity, and statements of cash flows, along with their accompanying notes, for the quarter ended March 31, 2025, and comparative periods Condensed Consolidated Balance Sheets Balance Sheet Summary | Metric | March 31, 2025 (in $ thousands) | December 31, 2024 (in $ thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Assets | $1,770,924 | $1,767,723 | | Total Liabilities | $892,595 | $893,321 | | Total Stockholders' Equity | $878,329 | $874,402 | | Cash and cash equivalents | $580,893 | $585,967 | | Inventory | $79,181 | $75,165 | | Long-term debt | $642,384 | $643,712 | Condensed Consolidated Statements of Operations and Comprehensive Income Statements of Operations Summary | Metric | Three Months Ended March 31, 2025 (in $ thousands) | Three Months Ended March 31, 2024 (in $ thousands) | YoY Change (in $ thousands) | YoY Change (%) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------ | :------------- | | Net sales | $96,978 | $98,906 | $(1,928) | (1.9)% | | Cost of sales | $29,622 | $27,563 | $2,059 | 7.5% | | Gross profit | $67,356 | $71,343 | $(3,987) | (5.6)% | | Operating income | $8,476 | $19,617 | $(11,141) | (56.8)% | | Net income | $465 | $7,746 | $(7,281) | (94.0)% | | Basic Net income per share | $0.00 | $0.01 | $(0.01) | (100.0)% | | Diluted Net income per share | $0.00 | $0.01 | $(0.01) | (100.0)% | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' Equity Changes | Metric | March 31, 2025 (in $ thousands) | December 31, 2024 (in $ thousands) | | :------------------------------------------------- | :------------------------------ | :------------------------------- | | Total Stockholders' Equity (End of Period) | $878,329 | $874,402 | | Net income | $465 | $7,746 | | Issuance of shares upon exercise of stock options and vesting of restricted stock units | 1,485,913 shares | 551,742 shares | | Share-based compensation expense | $2,918 | $3,183 | | Unrealized gain (loss) on derivatives, net of tax | $17 | $(361) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary | Metric | Three Months Ended March 31, 2025 (in $ thousands) | Three Months Ended March 31, 2024 (in $ thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash (used in) provided by operating activities | $(2,917) | $43,707 | | Net cash used in investing activities | $(996) | $(1,084) | | Net cash used in financing activities | $(1,161) | $(1,517) | | Net (decrease) increase in cash and cash equivalents | $(5,074) | $41,106 | | Cash and cash equivalents - end of period | $580,893 | $507,506 | - Cash paid for income taxes was $615 thousand in Q1 2025, significantly down from $4,998 thousand in Q1 2024[24] - Cash paid for interest was $13,135 thousand in Q1 2025, down from $14,990 thousand in Q1 2024[24] Notes to Condensed Consolidated Financial Statements NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION This note describes Olaplex Holdings, Inc.'s operations as a health and beauty company focused on innovation inspired by professional hairstylists, and confirms the unaudited interim financial statements adhere to U.S. GAAP and SEC rules - Olaplex Holdings, Inc. operates indirectly through Olaplex, Inc., a foundational health and beauty company focused on breakthrough innovation inspired by professional hairstylists[25] - The accompanying unaudited, interim Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP and SEC rules[26] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note details the significant accounting policies, including management estimates for revenue recognition, contingencies, fair value measurements, and the Tax Receivable Agreement, which impacts future payments to Pre-IPO Stockholders - Financial statements require management estimates for revenue recognition, loss contingencies, fair value of share-based options, goodwill/intangible assets, and tax expenses[27] - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable quoted prices for similar assets/liabilities), and Level 3 (unobservable inputs)[28][29][30] - The Tax Receivable Agreement requires the Company to pay Pre-IPO Stockholders 85% of the federal, state, or local tax cash savings realized from amortization of intangible assets and capitalized transaction costs existing prior to the IPO[33] - Future payments under the Tax Receivable Agreement could aggregate to $189.3 million, with payments expected to continue through 2041[34] NOTE 3 – NET SALES This note provides a breakdown of net sales by channel and geography, highlighting a slight overall decrease in net sales for the three months ended March 31, 2025 Net Sales by Channel | Net Sales by Channel (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Professional | $34,538 | $38,746 | $(4,208) | (10.9)% | | Specialty retail | $38,553 | $34,432 | $4,121 | 12.0% | | DTC | $23,887 | $25,728 | $(1,841) | (7.2)% | | Total net sales | $96,978 | $98,906 | $(1,928) | (1.9)% | Net Sales by Geography | Net Sales by Geography (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $49,161 | $48,845 | | International | $47,817 | $50,061 | | Total net sales | $96,978 | $98,906 | - No international country exceeded 10% of total net sales for the three months ended March 31, 2025 and 2024[39] NOTE 4 – INVENTORY This note details the composition of inventory, including raw materials and finished goods, and reports on the allowance for excess and obsolete inventory and related write-offs Inventory Composition | Inventory (in $ thousands) | March 31, 2025 | December 31, 2024 | | :----------------------- | :------------- | :---------------- | | Raw materials | $21,709 | $20,440 | | Finished goods | $57,472 | $54,725 | | Total Inventory | $79,181 | $75,165 | - Allowance for excess and obsolete inventory was $15.9 million as of March 31, 2025, compared to $15.7 million as of December 31, 2024[40] - Inventory write-offs for product obsolescence were $1.1 million for the three months ended March 31, 2025, up from $0.9 million for the same period in 2024[40] NOTE 5 – FAIR VALUE MEASUREMENT This note describes the Company's fair value measurements, including details on the 2024 Interest Rate Cap and the classification of financial assets within the fair value hierarchy - The Company entered into a 2024 Interest Rate Cap on May 7, 2024, with a notional amount of $400.0 million (amortizing to $200.0 million on July 31, 2025) at a strike rate of 5.00%, expiring July 31, 2026[43] - The 2024 Interest Rate Cap is classified as Level 2 in the fair value hierarchy, with its fair value determined using a modification of the Black's model[44] Fair Value of Assets | Asset (in $ thousands) | March 31, 2025 (Total) | December 31, 2024 (Total) | | :------------------- | :--------------------- | :------------------------ | | 2024 Interest Rate Cap | $48 | $217 | | U.S. Treasury | $64,740 | $64,742 | | Money market funds | $276,565 | $277,901 | NOTE 6 – GOODWILL AND INTANGIBLE ASSETS This note provides a breakdown of the Company's goodwill and intangible assets, including brand name, product formulations, and customer relationships, along with their respective net carrying amounts and amortization expenses Intangible Assets and Goodwill | Intangible Assets (in $ thousands) | March 31, 2025 (Net Carrying Amount) | December 31, 2024 (Net Carrying Amount) | | :------------------------------- | :----------------------------------- | :------------------------------------ | | Brand name | $752,925 | $762,444 | | Product formulations | $89,044 | $91,318 | | Customer relationships | $39,146 | $39,809 | | Software | $5,719 | $5,978 | | Total finite-lived intangibles | $886,834 | $899,549 | | Goodwill | $168,300 | $168,300 | Amortization Expense | Amortization Expense (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Patented formulations | $2,392 | $2,187 | | Brand name and customer relationships | $10,182 | $10,182 | | Software | $711 | $1,107 | | Total amortization expense of other intangible assets | $10,893 | $11,289 | NOTE 7 – ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES This note details the components of accrued expenses and other current liabilities, including sales tax, professional fees, payroll, and advertising, showing a decrease in total liabilities Accrued Expenses and Current Liabilities | Accrued Expenses (in $ thousands) | March 31, 2025 | December 31, 2024 | | :------------------------------ | :------------- | :---------------- | | Sales tax payable | $1,277 | $6,273 | | Accrued professional fees | $5,004 | $3,649 | | Payroll liabilities | $4,156 | $6,405 | | Accrued freight | $1,915 | $2,541 | | Accrued advertising | $4,627 | $5,267 | | Deferred revenue | $839 | $877 | | Income tax payable | $0 | $1,447 | | Accrued promotional allowance | $1,506 | $5,381 | | Other accrued expenses and current liabilities | $3,306 | $3,799 | | Total accrued expenses and other current liabilities | $22,630 | $35,639 | NOTE 8 – LONG-TERM DEBT This note outlines the Company's long-term debt, primarily from the 2022 Term Loan Facility, including outstanding amounts, interest rates, and a significant voluntary principal repayment made post-period end Long-Term Debt Details | Long-Term Debt (in $ thousands) | March 31, 2025 | December 31, 2024 | | :---------------------------- | :------------- | :---------------- | | 2022 Term Loan Facility | $654,750 | $656,438 | | Debt issuance costs | $(5,616) | $(5,976) | | Current portion | $(6,750) | $(6,750) | | Long-term debt, net | $642,384 | $643,712 | - The interest rate on outstanding debt under the 2022 Term Loan Facility was 7.9% per annum as of March 31, 2025[51] - On May 1, 2025, the Company voluntarily repaid $300.0 million of outstanding principal on the 2022 Term Loan Facility using available cash on hand, without prepayment penalties[54] - Interest expense for the three months ended March 31, 2025, was $13.7 million, compared to $14.5 million for the same period in 2024[52] NOTE 9 – INCOME TAXES This note explains the Company's effective tax rate, which significantly increased to 47.2% in Q1 2025 due to discrete tax expenses and lower book income - The Company's effective tax rate was 47.2% for the three months ended March 31, 2025, significantly higher than 25.3% for the same period in 2024[59] - The higher effective tax rate in Q1 2025 was primarily due to discrete tax expenses for changes in prior year estimates, write-off of deferred tax assets, and forfeitures of non-qualified stock options and restricted stock units, exacerbated by lower book income[60] NOTE 10 – EQUITY This note details the issuance of common stock during the three months ended March 31, 2025 and 2024, resulting from the exercise of stock options and vesting of restricted stock units - During the three months ended March 31, 2025, the Company issued 1,485,913 shares of common stock (692,681 from stock options, 793,232 from RSU vesting)[62] - During the three months ended March 31, 2024, the Company issued 551,742 shares of common stock (225,566 from stock options, 326,176 from RSU vesting)[62] NOTE 11 – RELATED PARTY TRANSACTIONS This note discloses related party transactions, specifically payments to Pacvue Corporation for digital media services and the absence of payments under the Tax Receivable Agreement - Payments to Pacvue Corporation (affiliated with Advent International, a majority stockholder) were de minimis in Q1 2025, down from $0.2 million in Q1 2024, for digital media services[63] - No payments were made pursuant to the Tax Receivable Agreement during either the three months ended March 31, 2025, or 2024[64] NOTE 12 – COMMITMENTS AND CONTINGENCIES This note outlines ongoing legal proceedings, including a securities class action and derivative actions, and states that potential losses are not probable or reasonably estimable at this time - A putative securities class action (Lilien v. Olaplex Holdings, Inc. et al.) is ongoing, with the court denying the Company's motion to dismiss and setting a trial for October 2025[67] - Two purported derivative actions (Ciuf o v. Dagousset, et al. and Hutchinson v. Advent International Corporation, et al.) are stayed pending resolution of the Lilien action[68][69] - A product liability complaint (Albahae, et al. v. Olaplex Holdings, Inc., et al.) was dismissed, and the remaining plaintiff voluntarily dismissed claims without prejudice; no re-filing as of the report date[70] - Any potential loss associated with these pending legal proceedings is not probable or reasonably estimable at this time[71] NOTE 13 – NET INCOME PER SHARE This note presents basic and diluted net income per share, along with the weighted average common shares outstanding and details on anti-dilutive shares excluded from calculations Net Income Per Share Data | Net Income Per Share | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------- | :-------------------------------- | :-------------------------------- | | Basic EPS | $0.00 | $0.01 | | Diluted EPS | $0.00 | $0.01 | | Weighted average common shares outstanding – basic | 664,685,462 | 660,821,930 | | Dilutive common equivalent shares | 1,775,252 | 2,743,361 | Anti-dilutive Shares Excluded | Anti-dilutive Shares Excluded | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Stock options | 8,891,906 | 8,455,797 | | RSUs | 10,964,556 | 5,943,682 | | SARs | 39,555 | 234,990 | NOTE 14 – SEGMENT REPORTING This note clarifies that the Company operates as a single reportable segment, with performance assessed by the CEO based on net income across three sales channels - The Company operates as a single reportable segment, managing its business based on three sales channels: professional, specialty retail, and direct-to-consumer (DTC)[74] - The Chief Executive Officer, as the chief operating decision maker (CODM), assesses the Company's performance based on net income[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Olaplex's financial condition and results of operations for the three months ended March 31, 2025, discussing company overview, strategic priorities, business environment, detailed financial performance, liquidity, and critical accounting estimates Company Overview Olaplex is a foundational health and beauty company known for its patent-protected bond-building technology, operating through a synergistic omnichannel model - Olaplex is a foundational health and beauty company powered by breakthrough innovation, starting with and inspired by professional hairstylists[79] - The company revolutionized haircare in 2014 with its patent-protected bond-building technology, Bis-aminopropyl diglycol dimaleate, expanding to 25 products[80][81] - Olaplex employs a synergistic omnichannel model, leveraging professional, specialty retail, and direct-to-consumer (DTC) channels[82] Our Strategy Olaplex's 2025 strategic priorities focus on generating brand demand through marketing, harnessing innovation in hair health, and executing with excellence by optimizing operations and partnerships - Strategic priorities for 2025 include generating brand demand through elevated visual identity, 360-degree marketing, and enhancing Pro community presence[83][84] - Harnessing innovation by building a future pipeline grounded in foundational hair health, expanding beyond damage repair to strength, elasticity, shine, smoothness, softness, and shape retention[85] - Executing with excellence by evolving operational and strategic processes, realigning international distribution, enhancing partnerships, and using data-driven insights for growth[86] Business Environment & Trends The Company monitors an unpredictable global macro-economic environment, including risks of recession, inflationary pressures, competitive products and discounting, and currency volatility - The Company monitors an unpredictable global macro-economic environment, including risks of recession, inflationary pressures, competitive products and discounting, and currency volatility[87] - Increased competitive activity and discounting have been observed in the prestige haircare category[88] - Olaplex believes its brand reputation, product quality, science-based innovation, asset-light operating model, and engagement with Pro and consumer communities position it to compete effectively[88] Results of operations This section provides a detailed analysis of Olaplex's financial performance for the three months ended March 31, 2025, covering net sales, cost of sales, operating expenses, and net income Consolidated Results of Operations | Metric | Three Months Ended March 31, 2025 (in $ thousands) | % of net sales (2025) | Three Months Ended March 31, 2024 (in $ thousands) | % of net sales (2024) | | :------------------------------------ | :--------------------------------------------- | :-------------------- | :--------------------------------------------- | :-------------------- | | Net sales | $96,978 | 100.0% | $98,906 | 100.0% | | Cost of sales | $29,622 | 30.5% | $27,563 | 27.9% | | Gross profit | $67,356 | 69.5% | $71,343 | 72.1% | | Operating expenses | $58,880 | 60.7% | $51,726 | 52.3% | | Operating income | $8,476 | 8.7% | $19,617 | 19.8% | | Net income | $465 | 0.5% | $7,746 | 7.8% | Net Sales Total net sales decreased by 1.9% due to lower consumer demand, partially offset by new product launches and customer acquisitions Net Sales by Channel Performance | Net Sales by Channel (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Professional | $34,538 | $38,746 | $(4,208) | (10.9)% | | Specialty retail | $38,553 | $34,432 | $4,121 | 12.0% | | DTC | $23,887 | $25,728 | $(1,841) | (7.2)% | | Total Net sales | $96,978 | $98,906 | $(1,928) | (1.9)% | - Total net sales decreased 1.9% primarily due to a lower level of consumer demand, partially offset by product launches and new customers[90] Cost of Sales and Gross Profit Cost of sales increased by 7.5%, leading to a 5.6% decrease in gross profit and a 2.6 percentage point reduction in gross profit margin Cost of Sales and Gross Profit Analysis | Metric (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Cost of sales | $29,622 | $27,563 | $2,059 | 7.5% | | Gross profit | $67,356 | $71,343 | $(3,987) | (5.6)% | | Gross profit margin | 69.5% | 72.1% | -2.6 pp | | - Cost of sales increased primarily due to product mix and $1.1 million in inventory write-offs for product obsolescence in Q1 2025 (vs. $0.9 million in Q1 2024)[91] Operating Expenses Total operating expenses increased by 13.8%, driven primarily by higher advertising and marketing expenses and increased legal and professional fees Operating Expenses Breakdown | Metric (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Selling, general, and administrative | $47,987 | $40,437 | $7,550 | 18.7% | | Amortization of other intangible assets | $10,893 | $11,289 | $(396) | (3.5)% | | Total operating expenses | $58,880 | $51,726 | $7,154 | 13.8% | - The increase in selling, general and administrative expenses was primarily driven by a $4.8 million increase in non-payroll advertising and marketing expenses and $2.2 million in legal and professional fees[93] Interest Expense, Net Net interest expense decreased by 6.4% due to lower interest rates during the three months ended March 31, 2025 Net Interest Expense Analysis | Metric (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Interest expense | $13,725 | $14,504 | $(779) | (5.4)% | | Interest income | $(5,952) | $(6,203) | $251 | (4.0)% | | Interest expense, net | $7,773 | $8,301 | $(528) | (6.4)% | - Net interest expense decreased due to lower interest rates during the three months ended March 31, 2025, compared to the same period in the previous year[94] Other (Income) Expense, Net Other (income) expense, net, increased by 118.8% primarily due to foreign currency transaction gains driven by the performance of the U.S. dollar Other (Income) Expense Analysis | Metric (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Other (income) expense, net | $(178) | $947 | $(1,125) | 118.8% | - Other (income) expense, net, increased primarily due to foreign currency transaction gains driven by the performance of the U.S. dollar[95] Income Tax Provision The income tax provision decreased by 84.1%, but the effective tax rate significantly increased to 47.2% due to discrete tax expenses and lower book income Income Tax Provision Analysis | Metric (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | $ Change (in $ thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | :------- | | Income tax provision | $416 | $2,623 | $(2,207) | (84.1)% | | Effective tax rate | 47.2% | 25.3% | +21.9 pp | | - The effective tax rate for Q1 2025 was higher than the statutory rate of 21% primarily due to discrete tax expenses for a change in prior year estimates, write-off of deferred tax assets, and forfeitures of stock options/RSUs, impacting lower book income[97] Financial Condition, Liquidity and Capital Resources This section discusses Olaplex's financial position, cash flow generation, liquidity, debt obligations, and capital resources, including the 2022 Credit Facility and Tax Receivable Agreement Overview The Company's primary cash sources are product sales, while uses include working capital, operating costs, capital expenditures, and debt servicing, with anticipated lower cash generation and increased legal costs - Primary recurring source of cash is the collection of proceeds from product sales[99] - Primary use of cash is for working capital, operating costs (employee-related, marketing, fulfillment, overhead, innovation), capital expenditures, and debt servicing[100] - The Company expects to generate less cash from operations in the current year compared to the prior year, as it funds working capital needs for business growth[100] - Anticipates increased legal costs associated with the Lilien federal securities class action litigation[100] Cash Flows Net cash used in operating activities was $2.9 million in Q1 2025, a significant decrease from the prior year, while investing and financing activities also used cash Cash Flow Summary | Cash Flows (in $ thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash (used in) provided by operating activities | $(2,917) | $43,707 | | Net cash used in investing activities | $(996) | $(1,084) | | Net cash used in financing activities | $(1,161) | $(1,517) | | Net (decrease) increase in cash and cash equivalents | $(5,074) | $41,106 | - Net cash used in operating activities was $2.9 million in Q1 2025, primarily reflecting net income of $0.5 million and a $21.4 million decrease from changes in operating assets and liabilities[105] - Net cash used in investing activities was $1.0 million in Q1 2025, primarily for software purchase and development[107] - Net cash used in financing activities was $1.2 million in Q1 2025, consisting of $1.7 million in principal payments for the 2022 Term Loan Facility, partially offset by $0.5 million from stock option exercises[108] Liquidity and Capital Resources As of March 31, 2025, Olaplex had a total liquidity position of $730.9 million, including cash and available borrowing capacity, which management believes is sufficient for future needs - As of March 31, 2025, the Company had $580.9 million of cash and cash equivalents and $150.0 million of available borrowing capacity under the 2022 Revolver, totaling a liquidity position of $730.9 million[102] - Including working capital (excluding cash and cash equivalents) of $57.4 million, the total liquidity position was $788.3 million[102] - Management believes current cash, cash equivalents, and cash generated from operations will be sufficient to meet anticipated operating costs, debt payments, working capital needs, and capital expenditures over both the short and long term[110] 2022 Credit Facility As of March 31, 2025, outstanding debt under the 2022 Credit Agreement was $654.8 million, with the Company in compliance with all covenants, and a $300.0 million principal repayment made post-period - As of March 31, 2025, outstanding indebtedness under the 2022 Credit Agreement was $654.8 million, with $6.8 million classified as current[112] - The interest rate on outstanding amounts under the 2022 Term Loan Facility was 7.9% per annum as of March 31, 2025[113] - The Company was in compliance with all affirmative and negative covenants under the 2022 Credit Agreement as of March 31, 2025, and December 31, 2024[114] - On May 1, 2025, the Company voluntarily repaid $300.0 million of outstanding principal on the 2022 Term Loan Facility using available cash on hand[117] Tax Receivable Agreement Obligations The Company is obligated to pay Pre-IPO Stockholders 85% of tax cash savings from intangible asset amortization, with future payments potentially aggregating to $189.3 million through 2041 - The Company is required to pay Pre-IPO Stockholders 85% of the federal, state, or local tax cash savings realized from the amortization of intangible assets and capitalized transaction costs existing as of the IPO date[118] - Future payments under the Tax Receivable Agreement relating to Pre-IPO tax assets could aggregate to $189.3 million, with payments expected to continue through 2041[119] Contractual Obligations and Commitments There were no material changes to the Company's contractual obligations since the filing of its 2024 Form 10-K - There were no material changes to the Company's contractual obligations since the filing of its 2024 Form 10-K[120] Critical Accounting Estimates This section outlines critical accounting estimates, focusing on the annual impairment evaluation of goodwill and the key assumptions used in its fair value assessment Goodwill Goodwill is evaluated for impairment annually, with the latest assessment as of October 1, 2024, concluding no impairment, though future changes in market conditions could necessitate a charge - Goodwill is evaluated for impairment annually during the fourth fiscal quarter, or more frequently if circumstances indicate impairment[122] - A quantitative assessment as of October 1, 2024, concluded that the fair value of the reporting unit exceeded its carrying value by approximately 19%, resulting in no impairment of goodwill[123] - The fair value was estimated using income and market approaches, with key assumptions including a projected terminal growth rate of 3.0% and an estimated weighted-average cost of capital of 11.0%[124] - The Company continues to monitor all assumptions and may be required to record a goodwill impairment charge in the future due to changes in market conditions or interest rates[126] Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to Olaplex's market risk exposures or management of market risk from those disclosed in its 2024 Form 10-K - No material changes to market risk exposures or management of market risk from those disclosed in the 2024 Form 10-K[127] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that Olaplex's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures Management, under the supervision of the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025 - Management, under the supervision of the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[129] Changes in Internal Control Over Financial Reporting There were no material changes in internal control over financial reporting during the quarter ended March 31, 2025 - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[130] Part II. OTHER INFORMATION Item 1. Legal Proceedings Olaplex is involved in various legal actions, including intellectual property and consumer claims, which can adversely impact its reputation and financial condition, with details in Note 12 - The Company is involved in litigation or other legal proceedings incidental to its business, including related to intellectual property, regulatory matters, contract, advertising, and other consumer claims[132] - Litigation can have an adverse impact on the Company's reputation, financial condition, and business, including by utilizing resources and diverting management attention[132] - For detailed information on certain legal proceedings, refer to 'Note 12 - Commitments and Contingencies - Pending Legal Proceedings' in the financial statements[133] Item 1A. Risk Factors An investment in Olaplex common stock involves risks, with a detailed discussion available in 'Item 1A. – Risk Factors' of the 2024 Form 10-K - An investment in the Company's common stock involves risks[134] - For a detailed discussion of the risks affecting the business, refer to 'Item 1A. – Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2024[134] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities or use of proceeds for the period covered by this Quarterly Report on Form 10-Q - No unregistered sales of equity securities or use of proceeds to report[135] Item 3. Defaults Upon Senior Securities This section confirms that there were no defaults upon senior securities to report for the period covered by this Quarterly Report on Form 10-Q - No defaults upon senior securities to report[136] Item 4. Mine Safety Disclosures This item is not applicable to Olaplex Holdings, Inc., as its operations do not involve activities related to mine safety - This item is not applicable to the Company[137] Item 5. Other Information During the three months ended March 31, 2025, no director or officer of the Company adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[138] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, executive officer certifications, and Inline XBRL documents for financial data - Exhibits include corporate governance documents (Restated Certificate of Incorporation, Bylaws) and certifications from the Principal Executive Officer and Principal Financial Officer[139] - The filing also includes Inline XBRL documents for the instance, schema, calculation, definition, label, and presentation linkbase[139] Signatures The Quarterly Report on Form 10-Q is duly signed by Olaplex Holdings, Inc.'s CEO and COO/CFO as of May 8, 2025, affirming compliance with the Securities Exchange Act of 1934 - The report is signed by Amanda Baldwin, Chief Executive Officer, and Catherine Dunleavy, Chief Operating Officer and Chief Financial Officer[144] - The signing date for the report is May 8, 2025[144]