Waldencast plc(WALD) - 2024 Q3 - Earnings Call Transcript

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]