Waldencast plc (WALD) Q1 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: strong cost management and improved margins are positive, but declining revenues, increased net debt, and challenges in international sales for Milk Makeup are concerning. The Q&A highlighted operational disruptions and unclear management responses. While optimistic guidance and strategic growth initiatives could support future growth, the current financials and uncertainties balance the overall sentiment to neutral.
Key Financial Performance
Net Revenue $65.4 million, a decline of 4.1% year-over-year due to anniversarying strong growth from last year and a decelerating beauty market.
Adjusted Gross Profit Margin 76.4%, an increase of 10 basis points year-over-year, indicating strong cost management.
Adjusted EBITDA $4.4 million, or a margin of 6.7%, reflecting continued investment in sales drivers.
Milk Makeup Revenue Declined 15.1% year-over-year, impacted by international sales challenges and inventory adjustments, despite strong domestic performance.
Milk Makeup Adjusted Gross Profit Margin 69.5%, a sequential increase of 460 basis points from Q4, but a decrease of 180 basis points year-over-year due to setup costs from the Ulta launch.
Milk Makeup Adjusted EBITDA $4.4 million, with a margin of 14.9% of net revenue.
Obagi Medical Revenue $36.2 million, an increase of 7.1% year-over-year, despite out-of-stock issues in key SKUs.
Obagi Medical Adjusted Gross Profit Margin 82%, an increase of 60 basis points year-over-year.
Obagi Medical Adjusted EBITDA $5.9 million, or 16.3% of net revenue, reflecting increased marketing investment and higher supply chain costs.
Cash Position $10.8 million with an additional $22.5 million available on the revolving credit facility.
Net Debt $172.1 million, an increase from $154.2 million at the end of 2024, primarily due to refinancing costs.
Shares Outstanding 123 million shares as of April 30, 2025.
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Operating Highlights
New Product Launch: Milk Makeup launched Hydro Grip Gel Skin Tint, a gel skin tint that lasts up to 12 hours, generating $18 million in earned media value and sold out shortly after release. Obagi Medical expanded its product line with the launch of Retinol and PHA Refining Night Cream, designed for consumers with lower retinol tolerance.
Market Expansion: Milk Makeup entered Ulta Beauty, with sales beginning in late February, contributing to high single-digit growth in US retail sales. Obagi Medical is expanding its presence internationally and is the fastest-growing top 10 professional skin care brand in 2024.
Operational Efficiency: Waldencast is consolidating third-party logistics providers and optimizing the distribution center network to enhance operational efficiency.
Supply Chain Improvement: The company is working on improving supply chain flexibility to meet increasing demand for its brands.
Strategic Shift: Waldencast is focusing on annual targets for value creation while managing quarterly performance.
Strategic Growth Initiatives: The company aims to strengthen its brands and expand its footprint through innovation and community engagement.
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Risk or Challenges
Supply Chain Challenges: Ongoing restructuring led to supply chain disruptions causing lower fulfillment rates and out-of-stocks on certain key products. The company is consolidating third-party logistics providers and optimizing the distribution center network to enhance operational efficiency.
Competitive Pressures: Milk Makeup's international performance faced tough comparisons to last year due to prior distribution expansion and inventory adjustments by retail partners.
Economic Factors: The company is mindful of the broader macroeconomic environment, expecting pressure from softer consumer sentiment and spending, particularly if tariffs and other factors continue to impact the economy.
Tariff Impact: The majority of the impact from tariffs falls within the cost of goods, with a manageable exposure to China (10% of total cost of goods). The company anticipates a low single-digit percent increase in cost of goods sold for fiscal 2025.
Inventory Management: Milk Makeup experienced stockouts due to demand for Hydro Grip Skin Gel Tint exceeding expectations, with plans to improve inventory position by the end of Q2.
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Guidance & Outlook
Strategic Growth Initiatives: Focus on elevating brands, launching innovation, expanding distribution, and increasing community engagement. Key areas include strengthening supply chain and achieving cost efficiency.
Brand Performance: Milk Makeup and Obagi Medical are positioned for multiyear growth with strong domestic and international presence.
Innovation and Expansion: Milk Makeup's Hydro Grip Gel Skin Tint launch and entry into Ulta Beauty are significant growth drivers.
Supply Chain Transformation: Ongoing restructuring to enhance operational efficiency and support long-term growth.
Revenue Growth: Targeting mid-teens net revenue growth for fiscal 2025.
Adjusted EBITDA Margin: Expecting adjusted EBITDA margin in the mid to high-teens.
Cost of Goods Sold: Anticipating low single-digit percent increase in cost of goods sold for fiscal 2025.
Cash Position: Cash position of $10.8 million with an additional $22.5 million available on revolving credit.
Debt Position: Net debt totaled $172.1 million, reflecting refinancing costs.
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Shareholder Return Plan
Cash Position: At the end of the first quarter, our cash position was $10.8 million and we had an additional $22.5 million available on our new revolving credit facility.
Net Debt: Our net debt totaled $172.1 million compared to $154.2 million at the end of 2024.
Shares Outstanding: As of April 30, 2025, we had 123 million shares outstanding.
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Key Q&A
Q:Can you expand upon the supply chain restructuring for Obagi and how you plan to improve operations?
A:We are at the beginning of setting up a successful platform. We need to strengthen the flexibility and responsiveness of our supply chain, which currently has long lead times and is inflexible. We've streamlined our warehousing from two steps to one to improve responsiveness, but this transition caused some disruption in Q1.
Q:Can you discuss the slowdown you saw in the physician channel?
A:We didn't see a slowdown in the physician channel. The slowdown in Obagi is mainly due to the lack of tailwinds from our Amazon business compared to last year, not a decrease in demand or physician visits.
Q:Could you provide more color around the sell-through trend versus sell-in just on Obagi and Milk?
A:For Milk, we have a big difference between sell-in and sell-out due to timing dynamics. In the EU, we see pressure on retail sales. For Obagi, there's no difference as we book net sales once sold to physicians.
Q:What is your pricing strategy given the tariff dynamics?
A:We are monitoring tariffs and believe we can manage any potential increases with low to mid-single price increases. Our exposure to China is low, so we don't see tariffs as material or unmanageable.
Q:Can we expect SG&A to remain flattish as sales grow?
A:We expect SG&A to grow in absolute value but with substantial operational leverage, meaning it will grow slower than sales. We will continue to invest more in marketing, especially for Milk and Obagi.
Q:Are you seeing a new customer base at Ulta?
A:We are pleased with early results at Ulta, focusing on incrementality and productivity. We are evaluating further expansion within Ulta but are being disciplined in distribution expansion.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the specifics of the supply chain restructuring timeline and the exact impact of tariffs on pricing strategy. Additionally, there was a lack of clarity on the potential for new retail partnerships for Milk.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Grip Gel
Malkin Partner
Manuel
Milk Obagi
Officer Chief
Partner ICR
Ulta Beauty
action
addition
brand Milk
brand footprint
brand launch
chain transformation
change
comparison
confidence
cost good
digit sale
exposure China
fulfillment rate
increase basis
increase cost
launch Hydro
launch Ulta
margin increase
network
news
party logistics
product availability
sale brand
supply chain
tariff
WALD Transcript
Waldencast plc (WALD) Q1 2025 Earnings Call Transcript
Unknown5-14
The earnings call presents a mixed picture: strong cost management and improved margins are positive, but declining revenues, increased net debt, and challenges in international sales for Milk Makeup are concerning. The Q&A highlighted operational disruptions and unclear management responses. While optimistic guidance and strategic growth initiatives could support future growth, the current financials and uncertainties balance the overall sentiment to neutral.
Waldencast plc (WALD) Q4 2024 Earnings Call Transcript
Positive3-19
The earnings call reflects strong financial performance with significant revenue and profit growth, despite challenges in the competitive and economic landscape. Management's confidence in innovation and market strategy, particularly with new product launches, suggests positive future prospects. The new credit facility enhances financial flexibility, and the shareholder return plan remains stable. Although there are concerns about regulatory expenses and supply chain issues, the overall sentiment is positive, likely leading to a stock price increase.
Waldencast plc (WALD) Q4 2024 Earnings Call Transcript
Neutral3-19
Waldencast plc. (WALD) Q3 2024 Earnings Call Transcript
Positive11-23
The earnings call presents strong financial performance with significant revenue and EBITDA growth for both Milk Makeup and Obagi Medical. Despite a slight decline in Milk Makeup's gross margin, the overall financial health is robust, supported by improved operational efficiencies. The Q&A highlights optimism in innovation and minimal tariff impact, with plans to manage gross margins effectively. While management avoided specific details on brand awareness, the overall sentiment remains positive due to strong growth metrics and strategic initiatives, suggesting a likely positive stock price movement in the short term.
WALD Report
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