Financial Data and Key Metrics Changes - The company reported net revenue of $65.4 million, a decline of 4.1% year-over-year [11] - Adjusted gross profit margin remained strong at 76.4%, an increase of 10 basis points year-over-year [11] - Adjusted EBITDA was $4.4 million, reflecting a margin of 6.7% [11] Performance by Business Line - Milk Makeup experienced a revenue decline of 15.1%, but domestic performance was solid, driven by the successful launch of Hydro Grip Gel Skin Tint [12][13] - Obagi Medical achieved net revenue of $36.2 million, increasing 7.1% from the previous year, despite out-of-stock issues [14] Market Data and Key Metrics Changes - Milk Makeup's U.S. retail sales showed high single-digit growth, particularly due to the launch into Ulta Beauty [12][17] - Obagi Medical's growth was tempered by supply chain issues, but the brand remains the fastest-growing top 10 professional skincare brand [36] Company Strategy and Development Direction - The company aims to strengthen its supply chain and improve flexibility to meet increasing demand [9][20] - Focus on expanding digital channels and retail footprint, with Milk Makeup's entry into Ulta Beauty being a significant step [10][21] - The company is committed to innovation and expanding into new categories while maintaining a disciplined approach to distribution [30][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the beauty market and macroeconomic environment but expressed confidence in achieving annual growth and profitability goals [6][7] - The company expects net revenue growth in the mid-teens and adjusted EBITDA margin in the mid to high teens for the full year [27] Other Important Information - The company is actively addressing supply chain disruptions and has implemented strategic changes to enhance operational efficiency [15][18] - Cash position at the end of Q1 was $10.8 million, with net debt totaling $172.1 million [24][25] Q&A Session Summary Question: Can you expand on the supply chain restructuring for Obagi? - Management indicated that they are working on improving the flexibility and responsiveness of the supply chain to better meet demand [45][46] Question: What is driving the slowdown in the physician channel? - Management clarified that there is no significant slowdown in the physician channel, attributing the decline to less favorable comparisons with the previous year [49][50] Question: Can you provide insights on sell-through trends for Obagi and Milk? - Management noted that Milk Makeup's U.S. retail sales were strong, while Obagi operates on a sell-through basis with no significant discrepancies [54][56] Question: What are the expectations for SG&A as sales grow? - Management expects SG&A to grow in absolute terms but aims for operational leverage, keeping it relatively flat as a percentage of sales [73][74] Question: How is the company addressing tariff impacts? - Management stated that the impact of tariffs is manageable, with low exposure to China, and potential pricing actions are being evaluated [69][71]

Financial Data and Key Metrics Changes - The company reported net revenue of $65.4 million, a decline of 4.1% year-over-year [10] - Adjusted gross profit margin remained strong at 76.4%, an increase of 10 basis points year-over-year [10] - Adjusted EBITDA was $4.4 million, reflecting a margin of 6.7% [10] Business Line Data and Key Metrics Changes - Milk Makeup experienced a revenue decline of 15.1%, but domestic performance was solid, driven by the successful launch of Hydro Grip Gel Skin Tint [11][12] - Obagi Medical achieved net revenue of $36.2 million, increasing 7.1% from the previous year, despite out-of-stock issues [13] Market Data and Key Metrics Changes - The company noted strong growth in attractive channels, including professional, specialty, retail, and online, with expectations for continued momentum [9] - Milk Makeup's U.S. retail sales showed high single-digit growth, particularly due to the launch at Ulta [12][16] Company Strategy and Development Direction - The company is focused on strengthening its supply chain and achieving cost efficiency while enhancing flexibility to meet demand [7][19] - The strategic growth initiatives include expanding Milk Makeup and Obagi Medical brands, driving innovation, and increasing community engagement [5][6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing key drivers such as breakthrough innovation, digital channel expansion, and improved product availability [19][20] - The company remains cautious about the macroeconomic environment, anticipating some pressure from softer consumer sentiment and spending [21] Other Important Information - The company has a cash position of $10.8 million and an additional $22.5 million available on its revolving credit facility [23] - Net debt increased to $172.1 million, primarily due to refinancing costs [24] Q&A Session Summary Question: Can you expand on the supply chain restructuring for Obagi? - Management indicated that the supply chain needs to be more responsive and flexible, with ongoing efforts to streamline operations [42][44] Question: What is driving the slowdown in the physician channel? - Management clarified that the slowdown is not due to fewer visits but rather a lack of tailwinds from the previous year's Amazon business conversion [47][49] Question: Can you provide insights on sell-through trends for Obagi and Milk? - Management noted a significant difference between sell-in and sell-through for Milk, with high single-digit retail sales growth, while Obagi's model is based on sell-through [52][54] Question: What is the expected impact of tariffs on costs? - Management stated that even with potential tariff increases, the impact is manageable due to low exposure to China, with possible low to mid-single-digit price increases being evaluated [64][66] Question: How is SG&A expected to change with sales growth? - Management expects SG&A to grow in absolute terms but with substantial operational leverage, keeping it flattish as a percentage of sales [68][70] Question: What are the marketing investment strategies moving forward? - Management plans to increase investments in top-of-funnel advertising for Milk and expand consumer outreach for Obagi, focusing on long-term competitive advantage [74][75]