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01/11 11:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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