Olaplex Holdings, Inc. (OLPX) Earnings Call Transcript & Summary

Okay. We'll go ahead and get started. Good afternoon, everyone. I'm Kate Grafstein from Lauren Lieberman's team. Next up this afternoon, we are pleased to welcome back Olaplex to our conference. Olaplex is in the midst of a multiyear transformation journey that is focused on improving the business in the immediate term while concurrently working to position the company for sustainable long-term success. Here with us today to discuss the execution of Olaplex's strategy and give an update on progress to date, we are pleased to welcome Amanda Baldwin, Olaplex's CEO; and Catherine Dunleavy, Chief Operating and Financial Officer. And one last thing before I turn the stage over, I'll refer you to the disclaimers and the safe harbor statement on the screen. Thank you.

Good afternoon, everyone. Thank you, Kate. It's really terrific to be here. It's my second year at this conference. And this time, alongside our COO and CFO, Catherine Dunleavy, who was just, I think, in a few weeks in last year. And so now we've got her up on stage, which is terrific. It's an incredibly exciting time for us at Olaplex. And I'm really excited to be here today to talk to you a little bit about what we've accomplished over the course of the last 18 months and the forward vision for our business. When I joined Olaplex, I was incredibly impressed by our extraordinary technical foundation, differentiated science leading to truly one-of-a-kind efficacy in our products and the global scale and passionate group of consumers and pros that the product had already reached. As somebody who's been in the beauty industry for 20-plus years now and spent the last 7.5 years before joining Olaplex building a business pretty much from the ground up, I know how incredibly rare this is. I also knew that we had a lot of work to do to harness what this business can truly be and to set it back on the right path. In 2024, my first year leading the team, we made initial strides towards that goal across many of the same pillars that continue to drive us today. I spent a lot of time reconnecting with our PRO community to really learn about their specific needs and their experience with Olaplex and in our lab to better understand what made our science so special and what we needed to do to accelerate our pace of new product introductions. We did bring true Olaplex level innovation to market about a year ago in our new 5L leave-in conditioner and bond shaper technologies and began the early work to engage the beginnings of a marketing engine to tell our story and drive demand for these unique products. I met with many of our business partners across the globe to see firsthand what we needed to change in order to form stronger partnerships and started a critical work stream to strengthen our business processes. Perhaps most importantly, was assembling an incredible executive team and building a strong culture across our organization. I'm incredibly pleased to say that we have a terrific group of leaders now, including Catherine, who are energized by what we are building. Critically, 2024 also included one additional essential work stream, developing a vision and a road map to provide the clarity for what we are building in the long run and the strategy for how we will get there. All in all, we've seen a real shift in our culture towards innovation, creativity, data-driven decision-making and executional excellence. In 2025, we have shifted from planning and making incremental improvements to full force execution. We are pleased that through the first half of the year, we are seeing green shoots that suggest our strategy is driving results with year-to-date sales flat and sell-through improving sequentially, albeit slowly. Before we get into more of the details around our transformation strategy and the progress -- I should be clicking this. I got excited about everything I was sharing. Before we get into more details around our transformation strategy and progress to date, I think it's helpful to ensure that we are all fully grounded in what makes the Olaplex story so unique. In 2014, Olaplex revolutionized the hair care category through the introduction of our patented bond building technology, Bis-amino, and our #1 bond multiplier and #2 bond perfector products. At that moment, Olaplex truly changed the game. I always knew that from the outside, but talking directly with stylists help me understand why. Quite simply, Olaplex science enables their craft. By using our product in their coloring process, a stylist colorist can achieve an otherwise impossible task with their creativity in a way that protects hair and their relationship with their clients. It's this alchemy of the science in the lab and the style of the PRO community that is our reason for being. It's our true north and it's the inspiration for our path forward. Second, I think it's important to take a moment to recognize the broader context in which we operate, which you have on this slide. We're very fortunate to participate in a category that's poised for continued growth. As of February 2025, Euromonitor International forecast premium hair care to grow at a 6% to 7% CAGR from 2024 to 2028. In fact, premium hair care represents only 20% of the overall hair care market in 2024 according to Euromonitor. In contrast, premium is estimated to represent an average of approximately 47% of the market across color cosmetics, fragrance and skin care. That's a big delta, especially when you consider the incredible emotional and social significance hair has across cultures. As such, we believe that hair care is in the early innings of premiumization. But as a category creator, Olaplex is well placed to drive and benefit from this potential. In addition to the macro momentum in prestige hair have been tuned into another evolution that's shaping the consumer industry. Beauty, health, wellness, they're all converging and consumers around the world care now more than ever about what they put in, on and around their bodies. This has been evolving for several years now with the U.S. wellness economy reaching $1.8 trillion according to the Global Wellness Institute. And I believe we're just getting started. According to our research, healthy hair is by far the #1 consumer goal in our category and the #2 driver of reviews in the hair care category overall. For Olaplex, delivering healthy hair and scalp health are the #1 driver of positive sentiment across our own brands reviews. We believe that our original technology and positioning allow us to focus on a uniquely important white space of highly efficacious hair care that's not just about band aiding or extreme damage repair, but about actually improving the health of the hair from the inside out. And aligning Olaplex with this message broadens our reach of our potential consumers as well as the use cases for our products. With this background in mind, we built our strategy based on 3 pillars: the first pillar is to move beyond our origins, damage repair and the bond building category we created in order to grow our addressable market and position Olaplex as a solution for everyday foundational hair health. What we heard clearly from our brand perception study with consumers and with Pros is that they loved Olaplex. They saw a strong solution for extreme situations, but not always an everyday choice. In order to grow our TAM and our future potential, we have shifted our product development and our messaging to build upon our original science and broaden PRO and consumer perceptions of our brand and the market we can go after. We can still solve the unsolvable, as we like to say, but we belong in everyone's everyday routine as well. The second pillar of our strategy is in honoring and empowering the PRO as a start of the flywheel of our business. The PRO is a powerful distribution channel as well as what I call the muse for everything that we do. Without them, our formulas are incredible science, but it's in the chair that they truly come to life. Let's give you a little sense of what that means for our Pros. Let's hear from a few of our global ambassadors. [Presentation].

So I've gotten to know [ Naima, Haley and Jenna ], all incredibly well over the past 18 months. They are true joys to be around and like the stylists that i encounter, they're incredible artists, entrepreneurs and central to our strategy because of both the scale of this channel as well as the impact that it has on consumer perceptions and desirability of our brand. So why is the PRO so important? In addition to the $19 billion that consumers spend on prestige hair retail, consumers spend nearly $200 billion on hair salon services as estimated by Euromonitor and Fortune Business Insights, respectively. Secondly, as a part of our brand perception study, we ask premium hair care consumers about the role that their stylist plays for them. 88% of consumers say that if they are pleased with the results of a product that a stylist uses, they are more likely to purchase it. 2/3 usually discover a new hair care product from their stylist and over half of consumers believe that a professional hair care products are more effective than the ones sold only in stores. A lot of brands would be very envious of this heritage. The salon and stylists are not only a critical revenue-generating platform, but also fuel for our brand in a way that very few others can benefit from. In just a little bit, I'll dive in deeper to all we are doing to reconnect with this incredibly important part of our business. And last but not least, the third pillar of our strategy is what I like to call adding emotion to the potion. While our products have always created fans based on their efficacy, we saw in our research that we were lacking an emotional connection that drives lasting brand relevance, resilience and love. What and how we market is critical as we enter into our next phase of the business to build a true brand with a capital B, which we'll also talk more about today. In conclusion, our vision is to create a foundational health and beauty company powered by breakthrough innovation that starts with and inspired by the professional. Combining breakthrough innovation that continues to push the premium hair care industry forward with brand storytelling anchored in the PRO with powerful emotional resonance and relevance is critical to getting back to growth. As mentioned earlier, in 2025, we have shifted from the essential work to develop these pillars to the actions that will support them and to the actual work of getting it done. We have 3 priorities, which we believe will position us to achieve our financial goals and advance our strategy as a foundational health and beauty company. First, generate brand demand. We have an elevated -- we have elevated our visual identity while executing a 360-degree marketing plan that drives demand and honors and services the PRO and continues to build a full funnel marketing efforts to drive demand. Second, harness innovation. We have a future pipeline of innovation that is grounded in foundational hair health and leverages our strength in product development processes to continue to introduce breakthrough science while expanding our product portfolio, thus reaffirming Olaplex as a revolutionary hair health authority from root to tip. And third, equally important is execute with excellence. Our organization has shifted from planning for the future to the ongoing processes, data and rhythms of implementation. Day in and day out, we focus on continuing to evolve and refine our operational and strategic processes, realign our international partnerships and drive efficiencies across the organization to provide the fuel to support our growth. We're in the midst of a multipronged transformation that is worth recognizing is neither fast nor linear. That being said, I'm encouraged by our progress and our solid first half results as well as our vision for the future. Generating brand demand requires building a brand and a marketing engine, which I view as being implemented in 3 stages: building a brand baseline, creating a brand platform and building an ongoing content engine. So let's jump in so that you can get a better understanding of how this might all play out in the marketplace. In February, we introduced refreshed brand visuals in the U.S. that aim to reflect who we are today, a brand rooted in science, guided by professionals and built for foundational hair health and playing in a premium category that deserves and demands an elevated look and feel. So here are some images of our new look in the U.S., which also feature a revamped website designed to elevate storytelling, education and commerce. We rolled out refreshed in-store visual merchandising at key retail and PRO partners, launched a revitalized social media strategy and enhanced our presence at professional trade shows with upgraded booth designs and engagements. Our new visuals are elevated, dynamic, relatable, showing texture and warmth as a place that is a special bond between the client and the stylist that has always been a part of our story. We aim to show science in a technology forward and approachable way. In April, we moved to the brand platform stage of our development with the launch of Design to Defy. As a guide for our future brand-building efforts, this platform and its tagline, a healthy foundation for endless possibilities, captures our history and looks forward towards our future with a philosophy of innovation, creativity and confidence. This effort launched in an advertising campaign and film featuring actress and Bridgerton Star, Nicola Coughlan, creative entrepreneurial and media personality, Jenna Lyons; and Olympian, Sprinter and Hurdler Sydney McLaughlin-Levrone, along with our personal hair stylist, each of whom was an Olaplex ambassador. This platform is a longer-term investment for which early indicators are encouraging. To give you a little flavor of our launch, here is our storytelling vignette, featuring our ambassadors and their clients. [Presentation]

So this was really the first full fledged campaign for this brand. We launched it across full funnel media, including out-of-home, connected TV, social, experiential activation. KPIs were very positive with increased share of voice, social mentions up 35%, social impressions up 140% and an improvement in our Google search volume. But it was just the beginning. Building on these efforts, beginning in June, we entered the last and ongoing phase of a brand marketing excellence, which is connecting the full funnel storytelling into a continuous loop from brand building to conversion. We launched our Endless Summer endless possibilities campaign, which focused on our top-selling Olaplex #6 and #7 products both of which are key staples to fight the frizz and create the shine and sheen prevalent in summertime hair across the globe. We connected the campaign with a high visibility cultural moment through our Olaplex Summer Soireé bringing together Olaplex global brand ambassador, Tracy Cunningham with truly real-life best friends from the TV show White Lotus, Leslie Bibb and Michelle Monahan, who showcased Olaplex product line they used to maintain healthy hair during extensive filming in Thailand. The Soireé garnered over 1 billion impressions and secured coverage across more than 14 stories, including 2 national broadcast segments. Importantly, this Soireé was launched with a more full funnel content engine focused on personalized digital content at scale in an effort to bring these products to life for the everyday consumer. As we move into the second half of the year, we'll continue to focus on the third phase of brand building, developing a consistent digital-first content engine. This will support both the transformation and scientific storytelling behind our core product and new product launches as well as entering the key holiday season. Now underlying each step of brand building, we have achieved thus far in 2025 has been our focus on honoring and empowering the PRO as the start of the flywheel of our business. In the first quarter of 2025, we were joined by a new Head of Education and have since built out our team and added to our talent as well as split our education and sales functions to allow more focus and creation of clear, measurable KPIs. We updated our education materials in line with our new branding, simplified copy and usage instructions. These important changes have allowed us to start an essential part of our strategy, which I have been discussing since very early on, explaining and getting credit for the power of our science. We've enhanced our presence at key trade shows, including ABS and Premier Orlando, which we had multiple days of classroom education. In our recent earnings call, I discussed our launch of the new market blitz strategy, so that our team can also connect directly with the PRO and Olaplex dedicated environments. We started in 3 initial cities, including our first debut in Canada. All at these ticketed events we host upwards of 100 guests from top salons in the region, providing education from our Olaplex ambassadors and the focus on transformational qualities that our brand and our products have for their clients and their business overall. To give you a little flavor for what these events are really like, here is another video. [Presentation]

So again, these are all first for us as a brand. And I think you can really get a sense of what Olaplex and the community for the PRO means in these situations. And then our sales and education teams connect with the attendees after the event to talk about the breadth of the line figure out how to have them carry it in their salon, making sure they have the right detailed education on how to use the products. And this is early on. We're pleased by what we've seen. I've been to one of them myself. I'm going to a few more this fall. We really get a sense of what the energy is in the room, and we're excited to continue to build this out in 2025 into 2026 and beyond. According to all of our ongoing surveys, PROs are excited by our programs that we're putting into place and we are becoming a more trusted partner. This gives us confidence in our strategy and the ultimate potential for this important channel. Our second priority is to harness innovation. The core of the Olaplex brand is an R&D engine that powers high-impact innovation and products that are often leaders in their subcategories. When I joined, one of the first things we did was to create an innovation team and processes to build a product pipeline and go-to-market strategy around differentiated science-led innovation. We expanded the footprint of our laboratory, enabling our Chief Science and Research Officer and the R&D team to iterate more efficiently and effectively on new technologies. We believe this sets the stage for a robust and consistent forward-looking pipeline with the cohesive launch calendar. As we plan our innovation going forward, we intend to leverage our 10-plus years of experience developing breakthrough innovation to further foundational hair health and build on our bond building damage repair legacy. Our long-term goal is to have 2 to 3 strategic product launches annually, each supported by consumer education, stylist engagement and omnichannel marketing activation. To provide context on the progress we've already made during the first half of 2025, we accelerated our new product development efforts, launching 3 new innovations compared to only 1 in the first half of 2024. In late February, we launched our scalp longevity treatment, which is shown on the left side of the page. This innovation is perfectly aligned with our mission of improving foundational hair health. Quite simply, healthy hair starts with the scalp. Our R&D led us to an advanced understanding of the science of a healthy scalp and how to treat it through a holistic approach that not only addresses accelerated scalp aging but also balances the scalp microbiome and strengthens the Scalp barrier by relinking the disulfide bonds and the surface of the scalp. Olaplex's original patent was not only for the hair but also covers the scalp, allowing us once again to take a unique approach to address a crucial element in overall hair health. This is a great example of our entry into a new category where we are pushing the frontier of science, one of the fastest growing niches in premium hair care. Building on this, we also just launched our PRO exclusive scalp servers. Those are the little modules at the end. While overall, this category is in early stages, the launch is strategically important as we focus on the PRO and our journey from damage repair to overall hair health. This is an express service designed to drive stylist revenue efficiently. In May, in the middle, we launched #4 and 5FINE, a wash care system tailored to the needs of fine hair. Our existing #4 and 5 were the top-selling prestige shampoo and conditioner in the U.S. in 2024, according to Circana data. And we had heard feedback from our pros and our community that there was an opportunity to develop a second formula specifically designed for the needs of fine hair. These formulas address the top 2 concerns of these consumers, strength and volume. According to Circana, on both dollar and unit sales, Olaplex's #5 bond maintenance conditioner and #4 bond maintenance shampoo with the #1 and #2 hair launches in 2025 in the prestige beauty space. As of our second quarter call, we had seen sequential improvement in sell-through in Wash Care overall, which is encouraging. In addition to the recent PRO exclusive launch, in our recent call, we said we were planning to launch additional innovation across all channels this fall. Well, it is out now. Just last week, we introduced 2 new hair mask, rich hydration mask and weightless nourishing mask. Adding a hair mask to your routine can provide additional benefits that deeply penetrate the hair, helping to repair, strengthen and restore moisture even further than your daily conditioner. This is a meaningful category within hair treatment with a strong growth where we have been underpenetrated. What is unique about our approach is that as with everything we do, we've taken the inside-out point of view, so we don't just make the hair look better for a moment as is common in our category. Both masks are formulated with Biomimetic cuticle technology and Olaplex proprietary bond building technology. This technology repairs and seals the cuticle to lock in hydration and strength, protecting the inner hair fiber and extending results through 5 washes. This compares to the competition, which only provides immediate gratification, 1 wash, you wash it out. Our goal is to improve hair health, not just for today, but over the long run. As we look beyond 2025, we're excited about the pipeline we are building, focusing on developing breakthrough innovations and capturing new consumers and categories. Last week, we also announced the acquisition of Purvala Bioscience. This marks our first acquisition since the business was launched over 10 years ago. Purvala seeks to develop transformative bio-inspired technologies with applications across the health and beauty industries. What we've accomplished to date has already left such a meaningful impact on our industry. And we believe that with Purvala, we have the potential to create the next generation of disruptive science-backed product innovation alongside our patent-protected bond building technology [bzamino]. With fewer than 30 SKUs in our current lineup, we remain confident that we have substantial white space for expansion, and we look forward to sharing our innovations along the way. And to discuss our last and third priority of the year, I'm going to turn things over to Catherine, who has been just an incredible partner since she joined a year ago. I think she's going to that.

I'll just stay here. It's confortable. Thanks, Amanda. So our last priority is execute with excellence, and this one is particularly near and dear to my heart as the COO and CFO, not that I'm picking favorites, they're all important. But this one, we're doing a lot of different things in -- I'll focus on 2 areas today, which is streamlining, modernizing our business processes and executing a globally aligned go-to-market strategy. First, streamlining and modernizing our business processes. What does this mean? Well, in order to build a best-in-class business, we first have to have the right people in the right positions. So you heard Amanda talk a little bit about the excellent leadership team he's put in place. We have also added great positions in education, in data analytics and finance, creative and sales. We are working diligently to improve our internal processes and tools. For example, in the second quarter, we stood up an AI-supported demand planning tool. We also added new data science capabilities across the organization. And while we're still testing and they're learning, the AI machine is still learning, initial indicators are very positive, and we're excited about what these tools can provide for the business overall. We're also enhancing the visibility across the organization as we launched dynamic sales dashboards to better track sales and sell-through on a weekly, daily basis so that we can better read and react what's happening in the market. We have made key changes to properly set up our international business for success. We opened an office in London in the first quarter, as you may know. And now we are reorganizing our international teams by key geographies and key accounts. We're implementing similar processes to those which have worked in North America internationally in order to do things like joint business planning, and we have specific KPIs by market. And we've implemented self-service portals, for example, for our distributors to help us exchange information and marketing assets, et cetera. I think that it's important as we think about international to first start with the understanding that we are already a large global brand. 50% of our revenue is international. And when we travel internationally, we're met with great enthusiasm. People are rooting for Olaplex, our brand resonates across the globe. It is something that we do not take for granted. But we have work to do to really execute an aligned global go-to-market strategy. First, we have completed our evaluation stage, pretty much what we did last year. What's happening in each country, in each geography, in each neighborhood in some cases. And we grouped our markets into 3 different categories. First, partner-led. These are markets where they're sizable markets. We've established 1 big partner who is almost going to be like an Olaplex employee. And we're going to partner together to have dedicated support from our team and theirs, including talent resources to ensure long-term success. Second, we have direct investment markets. In these top priority markets, we've already identified a -- we already have a strong professional and retail presence. We're taking a more hands-on approach here. We plan to directly manage key aspects of the business and invest in such areas as marketing and education. And third, lighter touch markets. In markets where 1 of the above 2 don't work. We have partnered with multiple distributors, and we'll be providing them the tools they need to be directly successful. We expect that this tiered approach will allow us to focus the investments in countries that we believe will drive the greatest growth potential and provide the right tools and direction for them while allowing us to maintain the consistency around the globe. So that's really exciting. When is all this going to show up in our financial results. Well, we delivered a solid start to the first half of the year. We delivered first half net sales of $203 million, which is approximately flat year-over-year with a strong adjusted EBITDA margin of 24.7% even as we've made significant investments in marketing and people to drive sustainable long-term growth. Turning to cash flow and our balance sheet. We have a healthy business model that generates cash with a strong balance sheet as we ended the second quarter with approximately $289 million of cash and $352 million of debt. Year-to-date, we had generated $18 million of cash from operations with limited CapEx needs due to our light -- asset-light business funnel. With the strength of our business model in April, we paid down $300 million of debt, unlocking an estimated $20 million of annual interest rate savings. This reinforces our commitment to capital discipline and balance sheet optimization. And inventory remains in good shape, ending to the second quarter inventory was about $78.3 million, down approximately $22 million from $100.2 million at the end of last year. And then as we look forward to the rest of 2025, we have recently maintained our fiscal year guidance which reflects our performance in the first half and acknowledges that our trends are improving, albeit at a slow pace. We expect net sales in the range of minus 3% to plus 2% versus fiscal year 2024. Adjusted gross margin between 70.5% and 71.5% and adjusted EBITDA margins of 20% to 22%. This guidance assumes no material impact from tariffs as we believe we are minimally exposed, although the trade environment remains fluid. And as you think about the back half of 2025, we currently expect second half net sales dollars to be more weighted towards the fourth quarter. Based on all the improved processes and progress we've made in our transformation that we've discussed today, we're actively working to best align to flow of our product and the timing of our key initiatives with the customer needs. And we have developed a more structured cadence to our campaigns and to our innovation calendar. And as a result, the third quarter net sales are expected to decline by high single digits year-over-year, offset by strong high single-digit net sales growth in the fourth quarter. So overall, we are encouraged by our year-to-date results and the team remains focused on driving sustainable improvements aimed at laying a strong foundation for the future, while we deliver on the commitments we set at the beginning of the year. And with that, I think I'll hand it back to you, Amanda.

I'll wrap it up quickly. Needless to say, we've accomplished a lot. We're definitely a different company today with a clearer vision improved innovation engine, new articulation of our brand, talented organization, correcting and executing the strategy that is expected to maximize our competitive strengths. We're encouraged by the progress of science for year-to-date. And at the same time, we recognize that there remains more work ahead as we balance improving the business in the immediate term with simultaneously positioning Olaplex for sustainable long-term success. We believe that 2025 marks the beginning of a bright new future for Olaplex. And it's the next chapter as the foundational health and beauty company, and we look forward to keeping everyone posted along the way. Thank you.