Waldencast plc Price & Performance (WALD)

Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected in or implied by such statements. Additional information regarding these statements appears under the heading Cautionary Note Regarding Forward Looking Statements in the company's earnings release and in the company's filings that it makes with the securities, and Exchange Commission that are available at www.sec.gov and on the investor relations section of the company's website at ir..waldencast.com. And should be read in conjunction with the section entitled Risk Factors in the company's annual report for 2023 on Form 20 F filed with the Securities and Exchange Commission on April 30, 2024. The forward looking statements on this call speak only as of the original date of this call, and we undertake no obligation to update or revise any of these statements. Also, during this call, management will discuss certain non GAAP financial measures. Which management believes can be useful evaluating the company's performance. The presentation of non GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. You will find additional information regarding the definition of these non GAAP financial measures and a reconciliation of these non GAAP to the most directly comparable GAAP measures in the company's earnings release.

With that, let me now turn the call over to Michelle Brissett.

Thank you, Alison, and good morning, everyone. It is a pleasure to be here today and share our fiscal year 2024 financial performance. This has been a year of transformation for our group. One, where we have strengthened our capabilities and celebrated many successes across our brands. Before we start, let's have a look at the health of the beauty market. In the context of an uneven consumer market, beauty remains resilient and has shown consistent growth over the years with expectations of this trend continuing in the future. In 2024, Prestige Beauty grew 7%. While this rate of growth has normalized post the effects of COVID, increase in 2024 is still ahead of historical levels and supported by the same historical trend of premiumization. In the categories where we're present, prestige makeup grew 5% but professional skincare showed a strong growth of 8%, well ahead of prestige skincare at 2%. Once again, the beauty consumer has shown incredible resilience despite external uncertainties. And our industry continues to thrive launching brands and products that increasingly meet consumer needs and desires. We are building a global best in class beauty and wellness platform that creates, acquires, accelerates, and scales the next generation of high growth highly profitable, purchase driven brands.

Simply put, we're capitalizing on the increasing strength of our operating platform, the power of our brands and our proven executional capability, to deliver consistently strong growth at increasing rates of profitability. We expect this to continue to pay dividends as we further drive our operational efficiency and invest in selling and marketing drivers to sustain and accelerate our top line momentum. Today, we have two of the most exciting brands, that are substantially outperforming the market in the two biggest beauty categories. Makeup number one and skincare number two. In The US prestige beauty. Our brands participate in the most attractive subsegments of these two categories. Prestige makeup and professional science led skincare. Their superpower is high consumer affinity and strong brand equity in the respective markets. Amplified by our strong innovation capability and superior returns on business driver investments. [indiscernible] is a cult favorite Gen Z brand that benefits organically for an engaged community due to its cultural relevance and iconic products. It is a leading key makeup brand with 2,800,000 Instagram followers that is growing five times faster than the market. In The US. It is also quickly building a global following with leadership positions in several international markets, demonstrating its universal appeal and efficient expansion potential.

Obagi Medical continues its clear advantage of the number one US physician recommended medical grade skin care plan for top ranked patients' needs. Pigmentation, fine lines and wrinkles, and sagging skin. Leads in the most attractive, fast growing segment of premium skincare. Obagi Medical consistently delivers breaks technology for transformative clinically proven results to answer the needs of physicians and patients alike. Both groups show high loyalty to the brand. The strength of the value brand, which we acquired a big over two years ago, combined with our acceleration of innovation, our efficient investment in business drivers, and our go to market expertise have meaningfully propelled the brand's growth. We're very proud that Oahuwaji Medical the pioneer run of the physician dispense professional skincare industry, is today the fastest growing brand among the top 10 professional skincare brands in The US. And this is only the beginning. As we believe Obagi Medical is perfectly positioned to answer globally the growing consumer need for high performance, effective skincare. While also paving the way for expansion into new categories. At Waldencast, we've built a power and repeatable formula for growth and profitability. What we call the Waldencast flywheel effect. It is simple, yet highly effective model.

But executing it consistently requires deep industry expertise and strong capabilities. It all starts with foundation. Strong brands in high growth, structurally attractive beauty subcategories. Like milk, makeup, and laundry. These are brands that don't just offer great products, they forge deep authentic connections with our communities. Often beyond just functional benefits. And by being part of Waldencast, we gain access to the greater for growth and value creation. Once a brand joins our portfolio, our first priority is driving operational efficiency. With a sharp focus on expanding gross margins. And we do this without compromising. In fact, we aim to enhance consumer perceived product quality and also accelerate innovation. We then reinvest these savings into sales and marketing business drivers, which fuel further top line growth. Further enhancing gross margin and delivering operational leverage by diluting fixed cost to produce robust profit growth. As you will see in this presentation, we have delivered on these objectives in a big way. This holding a flywheel effect is already paying dividends even if we're very much at the beginning of our journey. In fiscal year twenty twenty four, we outpaced the top three best in class competitors and grew three and a half times faster than the average of our peer group.

Our adjusted gross margin starts 430 basis points above the industry average. Even as the ability to reinvest in high ROI business drivers that fuel further growth. As a result, despite making significant investments in the group's capabilities, we achieved a strong operational leverage. Expanding our adjusted EBITDA margin significantly to reach 14.7% in 2024. So where are we today and what comes next? Our platform today has two brands make makeup on Obagi Medical, which participate in a limited segment of the vast, vast, vast beauty space. We're aiming to build a multi brand platform that will encompass over time all strategic key categories, geographies, channels, price points. We're just getting started. Let me now turn the presentation over to Manuel to review our financial results and outlook. Thank you, Michel. Good morning, everyone.

So, I'm pleased to share our fourth quarter and our fiscal year 2024 results with you today. Our performance continues to reflect the successful execution of our strategy. And provides a powerful framework to maximize the inherent strength of our brands. Mill Makeup and Obagi Medical. As we have demonstrated this year, our strategy continues to deliver ongoing revenue and profit growth, and further our commitment to deliver value for our shareholders. Today, I will focus on our adjusted financial measures You can find a reconciliation to U. GAAP financial measures in our press release issued yesterday and also in the appendix to this morning's presentation. So now let's delve into the highlights of our fourth quarter performance. Net revenue reached $72,100,000 and represented a robust 29.4% increase in comparable growth, which balanced performance across our brands. [indiscernible] grew 31.9% in the quarter, reflecting channel expansion, including initial shipments in support of our recent launch in 600 Ulta Beauty locations and on ulta.com. Obalje Medical delivered 27.7% net revenue growth fueled by accelerated performance in The U. S. Physician dispense and e commerce channel. Adjusted gross profit rose 30% to $52,600,000 from $40,300,000 in the fourth quarter of twenty twenty three, and adjusted gross profit margin remained stable at 73%, with little change from 73.1% reported in prior year's fourth quarter.

Adjusted EBITDA doubled to $11,200,000 from the fourth quarter of twenty twenty three with adjusted EBITDA margin expansion of five thirty basis points year over to reach 15.5%. This notable improvement reflects strong revenue momentum [indiscernible] improved operational leverage which effectively offsets strategic increased investment in marketing and international capabilities to support future sustainable growth. So our outstanding fourth quarter results beat on the strong momentum we saw throughout the year. Leading to an exceptional fiscal year 2024 performance. To this end, let me dive into the highlights of the year. First, net revenue that achieved $273,900,000 a robust 27.5% increase in comparable growth Next, adjusted gross profit. That jumped to $203,600,000 up 35.3% from 2023 and adjusted gross profit margin of seventy four point three percent five thirty basis point improvement year over year and finally, our adjusted EBITDA [indiscernible] stellar growth up 65.1%, to $40,300,000 This adjusted EBITDA was driven by strong sales and improved gross margin, which more than offset our increased investment in support of our growth. This growth adjusted EBITDA margin to 14.7%, marking a three fifty basis point increase from 11.2% in 2023. These results demonstrate the power of our strategy, our brands and our teams.

Now, one of the strengths of our business is our ability to efficiently convert our adjusted EBITDA into cash. This is largely due to our asset light business model, combined with disciplined approach to operations. In 2024, we saw a robust adjusted EBITDA to cash conversion ratio of 78.8%. This was achieved through effective working capital management. The fact that our business model requires relatively low capital expenditures. Let me illustrate this point. Our year end inventory was down 4.7% versus prior year. And while accounts receivable grew 19.7%, that growth is well below our revenue increase. Now, it's important to note that currently a significant portion of our cash is being used to cover non recurring expenses. That are associated with the ongoing regulatory investigation that we have previously disclosed. We expect that once this matter concludes, we will see an increase in our cash generation, which will allow us to further strengthen our financial position and improve our overall capital structure. Now let's take a look at our financial position. At the end of twenty twenty four, our cash position was $14,800,000 and we had an additional 30,000,000 available on our revolving credit facility. Our net debt totaled $154,200,000 And for an update on the share count, as of 02/28/2025, we had 122,700,000.0 shares outstanding.

We're also excited to announce that we have secured a new $2.00 5,000,000 five year credit facility. This facility replaces our current one includes $175,000,000 term loan and a $30,000,000 revolving credit facility. We have secured this financing significantly in advance of the July 2026 expiration of our product facility. And this proactive move provides us with greater financial flexibility and extends our debt maturity profile through 02/1930. We are pleased with the performance of our brand and business. And we believe that our ongoing growth strategy coupled with further enhancement to our internal capabilities position us well to maintain this positive momentum throughout 2025. With this in mind, anticipate a strong performance for the full year 2025, and we expect to deliver net revenue growth in the mid teens. Additionally, we expect adjusted EBITDA margin to further expand into the mid to high teens. Now, I would like to share some perspective on the quarterly phasing of revenue. For the first quarter, we expect our net revenue to be relatively flat, [indiscernible] From Q1 twenty twenty four. As well as inventory adjustment in some of our retail partners. Following the first quarter, net revenue growth is expected to accelerate progressively driven by our strong innovation pipeline and the continued expansion in of our distribution footprint, in The U. S. And internationally.

Including the launch of film makeup at Ulta, Beauty in March 2025. And with this, let me now turn the call over to Michel to cover our brand performance and strategic growth driver.

Thank you, Manuel. Let's now look at the performance by brand, starting with milk makeup. In the fourth quarter, Milk Makeup generated net revenue of 29,900,000.0 an increase of 31.9% versus the fourth quarter of twenty twenty three. This growth reflected initial shipments to Ulta Beauty in support of the brands spring twenty twenty five launch. This compensated for a normalization of the market combined with retailer inventory adjustments resulted in lower growth in consumption than anticipated. Adjusted gross profit margin of 64.9% increased 180 basis points from the last year driven by the positive impact of channel and product mix. As well as margin accretive innovation. Adjusted EBITDA was $4,800,000 representing growth of 3,400,000.0 from adjusted EBITDA of $1,400,000 in Q4 twenty twenty three. Demonstrating the success of our Waldencast flywheel Adjusted EBITDA margin expanded 1,000 basis points to 16.1% from 6.1% in the fourth quarter of twenty twenty three. For the fiscal year, milk makeup generated net revenue of hundred and 24,600,000.0, increasing 24% from 2023. Adjusted gross profit rose 27.4% to $85,000,000 with gross profit margin expansion of 180 basis points to 68.2%. Adjusted EBITDA rose 58% to $29,100,000 from $18,400,000 in 2023, with adjusted EBITDA margin expanding 500 basis points to 23.3% of net revenue from 18.3% in 2023.

Our vision for Milk Makeup is for the brand to be the number one beauty choice of the next generation. It is already a cult beauty brand among Gen C, increasing in millennials and haloing onto GelAlpha.

Also, the brand really target gels. In recognition that younger generations see themselves and their values represented in the brands they use, we unveiled a new brand mantra of list your look.

Which is a celebration of individuality and self expression. It is not how consumers wear their makeup. It's what they do in it that matters.

Our growth strategy has consistently focused on three pillars.

First, expand our brand and community reach by broadening brand awareness, strengthening our core loyal Gen Z audience, and welcoming new audience where our brand mantra beauty point of view, and products resonated strongly as with Minedians and Gen X. Second, continue to launch market disrupting beauty innovation was expanding into bigger segments such as complexion, And lastly, broaden our footprint by expanding the brand's presence online and offline, both in The US and internationally.

Now let's do a quick year end review with just a few highlights.

In 2024, Milk makeup delivered strong and consistent results across all key growth strategies. Sales makeup has expanded its reach and community by reaching a record EMB ranking at number six in February 2024, reaching 1,000,000 followers in TikTok in q two being called in 2024, one of the most powerful beauty brands that women's wear daily in q three, and closed in the year in q four at number 14 EMV rank and 4,800,000,000 peer impressions. As well as garnering 28 global beauty awards. Netted a huge amount of buzz and support for the brand. Second wheel makeup innovation broke all with the launch of a viral sold out cooling water gelatin which became the number two biggest beauty launch in The United States in 2024. And these coming from a relatively small brand in the category. And continuous extension into lip [indiscernible] mascaras with Kush high roll, a new innovation NPD to halo core and primers with Pore Eclipse and Hydro Grip and Glow. And lastly, MilkMaker successfully extended its footprint in 2024. Internationally, in Europe and Asia, through its viral launch in vehicle and Scandinavia, both in The United Kingdom and Sephora in India among others. Looking ahead into 2025, we're doubling down our three proven growth strategies innovation, expansion in distribution, and growing brand awareness.

An early peek into a couple of 2025 QHAIN lightness. Let's start with innovation.

First, our launch of next generation skincare.

Clinically proven, clean, safe for all skin types for anytime, and anywhere. Don't, of course, milk makeup way.

On the back of our record breaking launch of cooling water gelatins in 2024, milk makeup introduced in February jelly skincare. The first Jelly Zero Stick. Mess free, good for you ingredients, for the juices skin ever. It comes in two variants, cooling water jelly ice and watermelon jelly glow, bringing hydration and glow in a unique and desirable format. It is perfect for recruiting new consumers further building our stronghold in Gen c and entering an incremental category. Skincare. And in March, Milk Makeup launched their foray into the big complexion market. A skin tint like no other.

Skin tint that won't quit.

Building on the insight that most existing skin tints or tinted moisturizers don't last, thereby causing dissatisfaction with consumers. Milk Makeup launched the first gel skin tint that is long wear, for up to twelve hours. House in the brand's cold hydro franchise, Hydro Grip gel tint is perfectly positioned to win new consumers in a carrier that is big a high loyalty, and over indexed to an incremental target audience of millennials. And it is the first step of unlocking a complexion opportunity, The biggest prestige makeup category with 4047% of the face category and a staple in consumer's top three makeup products it is a key category to win to build the brand to the next level. And milk makeup Hydro Grip skin tint with skin care benefits is well positioned to win in a category where 94% of consumers use makeup with skincare benefits. Now it is only launched two weeks ago, but is showing early signs of a viral success. With a 4.7 star review on Sephora.com, 96% recommended, and 34,000 loss with a 3,880,000.00 earned media value on account.

Now another highlight for 2025 is, of course, the much anticipated expansion of our US distribution for the first time since we launched Milk Makeup in 2016. Starting the March 2, note makeup expanded into more than 600 Ultadors and online in The United States. [indiscernible] very important strategic expansion was much awaited and requested by Ulta guests. We believe Ulta, the largest specialty beauty retailer in The U. S, with more than 1,400 stores 500 Ulta Beauty at Target location, 44,000,000 loyalty members, is a perfect partner to allow us to reach a whole new sets of consumers for the brand.

This new retail partner is quite additive and complements our strong Sephora distribution.

Now for milk makeup, let's review our high performance skincare brand, Obagi Medical. Obagi Medical continued its excellent performance regarding net revenue of $42,200,000 in Q4. Representing comparable growth of 27.7% from Q4 twenty twenty three.

This growth was driven by the success of our expansion strategies focusing on introducing blockbuster innovation accelerating growth in our physician dispense channel, and expanding our consumer reach with high impact marketing. Adjusted gross profit totaled $33,200,000 with adjusted gross margin contracting 130 basis points to 78.7% from 80% in Q4 of last year. We plan this reduction in gross margin in the quarter in order to drive future operational efficiency. As we continue to work on streamlining our product portfolio by discontinuing some products at lower margins. The strong sales growth combined with significant growth in adjusted gross profit dollars more than offset increased investment in business drivers leading to adjusted EBITDA of $9,800,000 representing a 23.7% increase from q four twenty twenty three. Adjusted EBITDA margin was 23.3% and compared to an adjusted EBITDA margin of 24.5% in the fourth quarter of twenty twenty three. Now, looking at the fiscal year, Obagi Medical delivered net revenue of $149,300,000 representing comparable growth of 30.7% from fiscal twenty twenty three. Adjusted gross profit rose to $118,600,000 to 79.4% of net revenue versus 83,700,000.0 or 71.2% of net revenue in fiscal twenty twenty three. This growth led to adjusted EBITDA of 30,500,000.0 a 46.4% increase from fiscal twenty twenty three with adjusted EBITDA margin expanding to 20.4% from 17.7% in 2023.

Ovidia's medical vision to be the number one physician dispenser pathological brand in the world. We are today already the leading US physician recommended brand for top three concerns representing two thirds of in office skincare sales namely pigmentation, fine lines, and wrinkles, and sagging skin loss of elasticity. That is a reason to believe on this global vision of number one in the world. And in The US, Obagi, as we mentioned earlier, was the fastest growing top 10 professional skincare brand in 2024. Showing the potential and ability to still grow domestically as we expand internationally. Our growth strategy has consistently focused on three pillars. Double down on their pathological brand DNA, starting with a brand refresh from packaging to campaigns with a look and feel that reinvents our medical heritage in a modern twist that harmonizes the brand execution and resonates even more strongly with physicians and consumers alike. Keep driving cutting edge science backed innovation. The reason for why biomedical to deliver a much targeted transformative solutions. With a robust pipeline of global products with a market leading clinical data to support. And grow brand awareness and footprint, making more consumers aware of Obalgymedical domestically and internationally to fuel our physician centric ecosystem.

In 2024, Obagi Medical delivered strong and consistent results across all key brand strategies. Just a few highlights. Obagi Medical doubled down on its dermatological brand DNA by signing Doctor. Susan Obaji as the brand's medical director. Putting physician needs at the heart of our innovation and education as well as affirming our thought leadership in leading trade shows such as Incas in Paris and AAD in The US. Over the second half, our revamped prompt identity started cascading into the world through our packaging upgrade, all in and celebrating the power of our brand [indiscernible] sizes in a more relevant look. As well, as our new visual identity. Obagi Medical accelerated innovation with a range of successful launches aimed at both consumers and the professional skincare medical community. Most notably daily HydroRob's Eyes, which became the number one direct to physician sales in volume in Q2 twenty twenty four, and the blockbuster elasti derm lift up and scald facial Moisturizer and Elastiderm Advanced Filler Concentrate. Which led Q4 being the biggest Elastiderm franchise quarter ever. As for brand awareness, Obagi Medical in q four twenty twenty four became the number three fastest growing EMV total beauty brand until 2024 as the fastest growing brand in EMV versus its competitive set at plus 85%.

Was gathering inorganic cold social following from professional and skin influencers in The US and globally, with more than 50 worldwide publications and editors' law. And in 2025, Obagi made a is taking its new brand identity and disability further. Visuals that celebrate the transformative skincare results the brand in an ownable and dermatologically centered executions across multiple touch points in office, and outside the office. In real life, I mean, online driving awareness with consumers and education to guide them into the brand and into practitioners' offices. Obagi Medical expanded the Susan Obagi MD collection with groundbreaking new products. Including the super antioxidant serum, and the moisture restore hydration replenishing cream. Two, clinically backed innovations inspired by in office patients needs identified by doctor Susan Obadiah are designed to be incremental and complementary to existing portfolio. Moisture Restore provides medical grade multilayer moisture through a unique combination of hydrators that deliver multilayer hydration and replenishment to boost skin barrier. Whilst super antioxidant serum delivers medical grade defense against oxidative stress thanks to a potent antioxidant complex that works even on sensitive skin and is a perfect alternative to those who do not tolerate well vitamin C. Both have launched in February, and their results are promising.

I will have more to share on the next call. To conclude, we're very pleased to share our strong performance across both brands. Reflecting the increasing desirability relevance, and awareness of our Obagi medical and milk makeup brands. Twenty twenty four was a transformative year that saw us deliver revenue growth that was three and a half times better than the average of our peer group. Adjusted gross margin that is 430 basis points better than the average of our peers. Milk makeup grew five times the overall beauty market rate. And Obagi Medical is the fastest growing of the top 10 professional skincare brands in The US. Importantly, we're just getting started, and we leave our company's fought poised for long term profitable growth through the growth engine we have built with our Waldencast flywheel. This magical combination of highly expert and motivated talent with a highly efficient growth and profitability engine that will only get stronger as we add new brands to the group. Thank you for listening, and I will now turn the call over to the operator to conduct a question and answer session. Operator, Thank you. We'll now be conducting a question and answer session To allow as many as possible to ask questions today, we ask that you please limit yourself to one question and one follow-up.

You may re then re queue for any additional questions. Thank you. The next question today comes first question comes from the line of Susan Anderson with Canaccord Genuity. Please proceed with your questions. Hi, good morning. Alex on for Susan. Just a question on the guide for the year. So I know first quarter was guided flattish, but then that accelerates to the year. Can you kind of give us some details on the cadence of innovation and what gives you the confidence that you can get sales to accelerate through the year? Thank you.

Yeah, of course, Alex. How are you? You for joining us. We are, I mean, our guidance is fairly clear. We're very confident on the growth on both fronts. In a very clear acceleration. Q1 is particularly in the case of milk, there's an effect of two things. Number one, the anniversary of jellies. Which was a really blockbuster launch last year, that it's on the base. And the second thing, as we have mentioned during the call, a bit of adjustment of retail inventory adjustment by retailers and just a general market that as you know has been normalizing and getting softer.

So retailers have adjusted inventory a bit. The vast majority of effect in Q1 is really the anniversary of of Jellies. As we look forward in the case of milk, we're only just at the beginning of the year Skin Tint, which is our innovation is just hitting, I mean, our big innovation and the rest it's not just the kinting, but the rest of our innovation is hitting only now. As well as the Ulta launch is hitting only now.

So we expect a strong acceleration throughout the year on a sequential basis in the case of the case of Merck. In case of Obagi, I mean, Obagi is pretty strong growth overall. Coming, and we expect substantial growth coming our physician dispense business as well as our digital channels and international. So we are very confident in the acceleration, the sequential acceleration through the year. We have a very specific issue of in Q1 Of A Base Being Very Strong With The Launch Of Jellies And Some Adjustments Of Inventory Due To Consumption In Cuba?

Thanks, Michel. And just a quick follow-up if you're able to answer. Are you able to quantify the boost that Jellies gave in first quarter? And then also, it sounds like fourth quarter had the pipe into Ulta. Are you able to provide some color on how much that benefited milk in fourth quarter? Thank you. [indiscernible] we don't disclose the specific numbers of behind them as you can imagine for for competitive reasons. But I think you're right. We have a bit of an effect also [indiscernible] we launched filled the pipe of Ulta at the end of the year of year in preparation for the launch of this year. So when you pipe into a customer, you're piping a number of months [indiscernible] you don't really get a substantial amount of replenishment orders We're only a few weeks in, but we're very, very pleased with the launch at at Ulta. And in the case of JELI's, as I said, it accounts for the majority of the difference between the Q1 versus Q1 index from one to the other. So it's Genisk was a quite, quite substantial launch.

Thanks. It looks really good at Ulta. I'll turn it back. Thank you.

The next questions are from the line of Jonah Kim with TD Cowen. Please proceed with your questions.

The first one is on on marketing as you continue to invest this year across both brands? What might be different from last year? Or the same? And just any details around how you're thinking about allocating the spend as you ramp up your marketing campaigns And then a follow-up, just curious on the physician dispense channel, if you're seeing any sort of softness in consumer or are you still seeing the resilience of in that channel? Thank you so much.

Thank you, Jonah. So, marketing is as you know, we've discussed before, we expect to continue to accelerate our marketing investment into the business both in absolute value as well as a percent [indiscernible] Our model, as we indicated, is one that where we drive operational efficiency and gross margin and reinvest that into business drivers. So we expect to continue to do that on both fronts. Terms of what is different, I think in the case specifically of MYC to start with, we are getting to a scale on that brand, especially in the context of the launch of All Time in U. S. Where we you should expect to see and you are probably starting to see already a broadening of the type of marketing with them.

If think about milk, how it's the marketing milk has evolved over the years, it came from a very organic following just people naturally discovering the brand, talking to their friends about it and organically building the brand side by side with regional exclusivity of Sephora, then shifting to a more influencer based and boosting unit user generated influencer based marketing. And what we were doing doing today is more of that and now enhancing and complementing that with some broader more paid brand campaign that will allow us to reach more and more consumers with that. It's a natural evolution of kind of a growing brand and one that is getting to a size that is starting to be significant, particularly in the context of the new launch at adult.

In the case of Obagi, you've seen already this year I think, of of what we've been doing to drive the brand. We are as I said, we're very proud that Obagi is the fastest growing professional brand out of the top 10 brands in the market. This is brand that we've demonstrated that with InnoAsia, it's a great brand with great products of this innovation and the market support we are giving can accelerate very efficiently. And what we've done in '24 which we'll do more this year, is taking the brand from a marketing standpoint outside of the doctor's office and advertising to consumers directly in presenting the benefits of Obagi and asking them to come discuss with their physician about the different options that they have for great transformative skincare results. So you will see more of that in the year. In the case of the DTP channel, the DTP channel as we saw, as you saw in the presentation continues to perform very strongly, albeit normalizing a bit from kind of low double digits, call it 11%, 12% growth in prior years, to latest data we have around plus 8% on the channel. So it's a little bit of normalization that channel, but the channel remains very strong.

And what is important in the channels that we're seeing two effects that are substantial that play very well to our business. One is a premiumization of the channel, continued desire for more and more levels of performance and that are supported by the launches we we are doing. And second, a very important trend that goes beyond the channel, but it brings people into a channel, which is the confluence of beauty, aesthetics, wellness. So when we bought Obagi, and and and focus on Obagi, this was one of the trends we identified as something that would propel us through the years, which is this confluence of these science based Stinger, but not only Stinger, this confluence of beauty, aesthetics and wellness in which more and more procedures and different procedures are being supported by skincare and many of our products within Obagi support post procedure treatment.

Thank you very much for the color. Our next questions are from the line of Ashley Helgans with Jefferies. Please proceed with your question.

Hi, thanks for taking our questions.

So curious if you could talk a little bit about the macro environment and consumer health you have embedded for the guide for the year. And then any other initial takeaways you can share on milk as it's now officially an Ulta? Thanks. [indiscernible] Mean, we all know, the macro environment is is changing, and and it's interesting and and exciting. Every week seems like That said, as we highlighted, the beauty consumer, the beauty industry remains very resilient with consumers, continue to to to increase their dollar spent year over year albeit with a level of normalization. Now the drivers of that consumption remain frankly the same that they have been for frankly decades, which is the premiumization of consumers, people's desire for higher and higher levels of performance, and that's why premium beauty, generally speaking, is performing ahead of of of mass, and this is bizarre for continuous our for precision immunization, higher levels of performance, higher levels of quality, for which our brands are very well positioned. As well as the reality of Beauty being an expandable consumption category. In which it's is as much a need category as a want category. And that allows consumers importantly these small luxuries or small splurges of time that feed consumption.

So overall, in the context of a kind of changing macro environment, the beauty consumers remain very, very resilient. Albeit with some normalization. It's important to know that for us, relative to other companies, in the space, larger companies in the space, we're relatively less exposed to variations in geographic ups and downs as in China and other places. So at least the markets in which we compete from a beauty standpoint remain very, very resilient.

And just go back to your question. You wanted some comments on milk, specifically in in what regard?

Oh, just any initial takeaways on consumer demand as officially rolled out into Ulta stores?

Well, it's it's it's as I mentioned, I mean, the brand is on fire. And continues to be on fire. And yes, there is this guide that we've given them them on Q1 because of a very specific amortization of issues on the base, and there is a little bit of retail adjustment. But the overall demand for the brands is extremely strong.

As evidenced for the early results first you saw the 2024 results. I mean, the brand is growing substantially ahead of the market, gaining more consumers, gaining momentum. Growing in EMV, getting more and more awards, becoming one of the you know, by industry sources, one of the powerful brands in in the industry.

But even our early results, now that we are starting to activate behind all time skin care, we are very, very pleased with the progress on both those big key launches. And just a word on the skin too, because it's an important launch that I want to make sure everybody fully appreciates. The importance of the Skin Team is not just a simple additional innovation. It allows us to enter the largest category in The U. S. Of complexion, many consumers, even though it's a skin tin, many consumers and you see reviews are calling it even a foundation because of its buildable characteristics. It allows us to participate in a massive, massive market that is not only big, but importantly, has very high degree of loyalty and very high degree of repeat. So building another franchise in a business that has high repeat, high loyalty is very strategic and very important because it propels, again, propels the business not just in terms of growth, but also profitability because the repurchase is quite important. We don't have to have to try trial and recruit consumers like that. So we have two very important initiatives running Q1, Scheme, for all the reasons I said, and in Sevii and Jean the launch of all this, not just expansion of the footprint. [indiscernible] a lot more consumers that today are not reached by Sephora.

They just simply shop at Sephora, they'll have a shop at Sephora at Toast Line. So we're very, very pleased with the evolution of those two things. And lastly, vis a vis the Ulta launch, I'm Sephora, we believe that the launch of ESET is very incremental. Lots of new consumers, but there is obviously a natural level of cannibalization between Ulta and Sephora. That is going to be part of the first quarters as we ramp up Ulta and you know, we moved the exclusivity out of out of Sephora into Ulta. So there's a natural cannibalization and a bit less support when it comes from Sephora to the brand in the short term. But overall, the move is net net quite incremental. We have the same space at Sephora, have the same stores, etcetera. But there's just a natural shift towards for some consumers. [indiscernible] But net net is a quite incremental incremental business.

The next questions are from the line of Linda Bolton Weiser with D. A. Davidson. Please proceed with your questions.

Yes, hi, thank you.

So I I just wanna make sure I understand. Sorry if I missed the details, but on milk, there's a skin tint launch, which is for the complexion category, and then there's a skin care launch. Is that correct? So there's like a separate skincare. And is the skincare okay, and is the skincare product going to be shelved right near the color products like in Sephora and Ulta? Is that is that the the plan?

Yes, Linda. You're right. There's two launches, Skin Tint [indiscernible] What we've done and they will be shelved on the same fixture in both old town Sephora, the skincare launch, which you may have seen and we announced as part of we reviewed here, is taking the breakthrough technology of GELIs and that form that Galenic that was highly appreciated, and launching two new skincare products.

And those two new SKINKR products have that same configuration that are part of the launch. [indiscernible] And they're both performing very well [indiscernible] highlighting it being the most kind of strategic, if you want, because it allows us to penetrate the foundation category, complexion category.

Okay, gotcha. And then in terms of the [indiscernible] is there the potential to go beyond 600 doors if it's successful? And also, are you in any of the target stores?

So the short answer is the potential. Yes, there's [indiscernible] That said, what really is important to us and has always been important is to limit distribution of the branch.

We are very focused on productivity per store. And when we develop the list in combination with Ulta, wanted to not go into full distribution from the beginning of a small hour request to not go into full distribution as we collaborate with Ulta quite closely to ensure that we have very, very high productivity on a per door basis. Makeup is a productivity gain, the as I said many times before, the the fastest way to to ruin the long term profitability of our own is makeup runners, is to expand distribution to SaaS. So yes, there is that potential, and and we believe that as we continue to grow grow the brand and we continue to grow grow the brand awareness of the brand, we should never have distribution running ahead of brand awareness. And awareness and growth, and as a consequence, we're quite focused on that. And no, we are not in Alta at Target. Okay.

And then just in terms of I was wondering sorry if you this already I missed part of the call but do you have an operating cash flow and a capital spending number for 2024.

Yes. We do. You will have it as part of the twentieth.

Okay.

You can't give us the number. Will have the you will have the the the full financials. I can I mean, Manuel can comment a little bit what we share in the presentation in terms of cash flow?

Okay. Hi, Linda.

So yes, I mean our CapEx last year [indiscernible] provided and it is $2,600,000 was our CapEx in 2024. 2.9. Sorry. 2.9 or 2.6.

Thank you.

Next question is from the line of Olivia Tong with Raymond James. Please proceed with your questions.

Great. Thank you.

First question is just a clarification first on on milk. The milk launch at Ulta. Are you expand into Ulta, are you losing any space at Sephora?

No. We're not. Okay.

Easy enough. And then can you help us on Q1 just to layer that outlook for flat? Year over year, how much of that is a function of the growth deceleration, which we, of course, seeing across the industry.

Versus the retail inventory correction, which eventually normalizes. And then given that changing growth dynamics within the category, can you just talk about how you're adjusting your strategy given the new growth dynamics. Thank you.

Thanks, Olivia. Just again on Q1, the deceleration is two components. One, it's not a really a I would say, it's not really an absolute value or sort of deceleration. What we have is just a simply a very, very big launch in the case of Jellies in the base of Q1 that explains the vast majority of the of the index, if you want, versus the base. We had a very big launch I mean, I've mentioned this in the past. I've been in this industry for over thirty years. Launches at Jelly don't come across very soon. So that was a very, very big launch that we have have to anniversary And the second thing is retail inventory And adjustment retail inventory as a question of two things. The market is in tougher. For everybody, and I think retailers as a consequence of these normalization after a very buoyant last few years have adjusted a bit of inventory. And as a consequence, in that adjustment of inventory, [indiscernible] in our sales. So that's [indiscernible] So Sorry. Ronald, are you Yes, ma'am. Sorry.

Got this we got Manuel disconnected. So you wanna put it on mute? Yeah. I'm back. Sorry.

Got disconnected. Sorry about that. We we had Emmanuel disconnected from the call. So sorry. Going back, Olivia. So in Q1, the vast majority of the the issue is this anniversary of Jelly, which was a very, large launch. There's some retail inventory adjustments, a slowdown of the overall market and of course, impact to a little bit more on our consumption. Which is how we guide in Q1, but we as I said, we're confident on the acceleration through the year. In terms of how are we adjusting, the reality is that the market is a point of information for us. It's but it's not what guides our strategy. What guides our strategy is because we're relatively small into this market, our opportunities for growth are only limited by our ability to innovate, to create great compelling business propositions like Jellies, like Skin Tint, expanding our distribution, executing that well like Ulta, So we believe that our growth prospects are a little bit independent not fully independent, but for the most part, of the realities of the market. And so our growth prospects remain very strong. We have a sequential progression on the year after anniversary Angeli's as the execution of renovation plans as well as our expansion into all top of milk comes into Got it.

And then, just one last point clarification. Was all the sell in for Ulta in the December? Or did any of that trickle into the March? [indiscernible] Yes.

So we with with the the for logistic reasons, we split the 5% Ulta. So part was shipping in Q4. And part is being shipped in Q has been shipped in Q1 this year.

Got it.

Thank you.

You're welcome.

Thank you. At this time, we've reached the end of the question and answer session. I'd now like to turn the floor back over to Michel Proussette for closing remarks.

Well, you very much for joining us.

As you can see from the presentation on our sentiment, we are very, very bullish about the prospects of the company's growth. And advancing in profitability. Our flywheel is working is performing, very, very well.

And we continue to be very excited about the prospects of both make make up brands and Obagi both in The U. S. And international. So thank you very much, and I appreciate you guys being with us today.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.