- Comparable Growth: 25.7% year-over-year for Q2 2024, up from 21% in Q1 2024.
- Net Revenue: $63.3 million for Q2 2024.
- Adjusted Gross Profit: $47.5 million for Q2 2024.
- Adjusted Gross Margin: 75.0%, a 650 basis point increase from Q2 2023.
- Adjusted EBITDA: $6.3 million for Q2 2024, up $2.4 million from Q2 2023.
- First Half Net Revenue: $131.6 million, a 23.1% increase from the first half of 2023.
- First Half Adjusted Gross Profit: $99.5 million, a 36.4% increase from the first half of 2023.
- First Half Adjusted Gross Margin: 75.6%, an 890 basis point increase from the first half of 2023.
- First Half Adjusted EBITDA: $17.7 million, a 27.2% increase from the first half of 2023.
- Milk Makeup Q2 Net Revenue: $28.7 million, a 20% increase year-over-year.
- Milk Makeup Q2 Adjusted Gross Margin: 69.7%, a 360 basis point increase from Q2 2023.
- Milk Makeup Q2 Adjusted EBITDA: $5.7 million, a 48% increase year-over-year.
- Milk Makeup First Half Net Revenue: $63.2 million, a 20.8% increase year-over-year.
- Milk Makeup First Half Adjusted Gross Margin: 70.6%, a 460 basis point increase year-over-year.
- Milk Makeup First Half Adjusted EBITDA: $15.7 million, a 23.4% increase year-over-year.
- Obagi Medical Q2 Net Revenue: $34.6 million, a 30.9% increase year-over-year.
- Obagi Medical Q2 Adjusted Gross Margin: 79.3%, an 850 basis point increase from Q2 2023.
- Obagi Medical Q2 Adjusted EBITDA: $6.5 million, a 55.4% increase year-over-year.
- Obagi Medical First Half Net Revenue: $68.4 million, a 25.4% increase year-over-year.
- Obagi Medical First Half Adjusted Gross Margin: 80.3%, a 1290 basis point increase year-over-year.
- Obagi Medical First Half Adjusted EBITDA: $13.2 million, a 37.1% increase year-over-year.
- Cash and Cash Equivalents: $19.7 million as of June 30, 2024.
- Net Debt: $155 million as of June 30, 2024.
Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Waldencast PLC (WALD, Financial) reported a robust 25.7% year-over-year comparable growth in Q2 2024, exceeding the 21% growth in Q1.
- Milk Makeup grew three times faster than the US prestige makeup market in the first half of 2024.
- Obagi Medical outperformed the US prestige skincare market by a factor of 5x in the first half of 2024.
- Adjusted gross profit margin increased significantly by 650 basis points to 75.0% in Q2 2024.
- Waldencast PLC (WALD) maintained a double-digit adjusted EBITDA margin, positioning well to meet annual profitability goals.
Negative Points
- Both Milk Makeup and Obagi Medical experienced out-of-stocks in key products due to higher-than-expected consumer demand.
- Despite strong growth, the company faced challenges with inventory management, particularly with new product launches.
- There is still work to be done in strengthening and realigning the international distribution network for Obagi Medical.
- The company has not yet reached its long-term marketing investment levels, indicating further spending may be required.
- Operational efficiency improvements are still needed to fully optimize gross margins, particularly for Milk Makeup.
Q & A Highlights
Q: Can you talk about the promotional environment and what you expect going forward? Also, any color on the innovation pipeline for the second half?
A: Our brands are relatively unexposed to promotional fluctuations. Obagi Medical runs standardized promotions, and Milk Makeup has seen a flat promotional environment. Innovation is a key driver, and we are excited about the upcoming innovations in the second half.
Q: What do you see as steady state revenue growth and EBITDA margin expansion opportunities?
A: We expect high growth, well ahead of market growth, and continued EBITDA margin expansion. Our structural economics are comparable or superior to best-in-class beauty companies, driven by strong gross margins and reinvestment into business drivers.
Q: Can you discuss the competitive environment for Milk and Obagi, and the impact of out-of-stocks?
A: The beauty market is competitive, but our focus is on creating compelling consumer propositions. Out-of-stocks were a headwind in Q2, but most issues are now resolved, particularly for Milk Makeup's jellies and Obagi's key products.
Q: Are the advertising and promotional spending levels where you want them to be for each brand?
A: We have significantly increased marketing investments and expect to continue doing so. We follow a strong ROI mindset and believe there is still room for growth in marketing support for both brands.
Q: How is Obagi's international distribution structured, and are there concerns about inventory levels in distributor channels?
A: Obagi uses its own subsidiary in Southeast Asia and distributors elsewhere. We closely monitor sell-in, sell-through, and sell-out metrics and have no concerns about excess inventory in distributor channels.
Q: What are the drivers of the strong gross margin expansion and international growth for Milk and Obagi?
A: For Obagi, gross margin expansion is driven by favorable channel mix and operational efficiency. Milk's gross margin improvement is due to operational efficiency. International growth for Milk is driven by productivity and modest distribution expansion, while Obagi's growth is supported by a mix of internalized and distributor models.
Q: How do you plan to manage the growth and profitability of Milk Makeup and Obagi Medical?
A: We focus on operational efficiency, innovation, and strategic investments in marketing and sales. This approach drives top-line growth, gross margin expansion, and ultimately, profitability.
Q: What are the key strategic priorities for Obagi Medical?
A: Our strategy includes strengthening our professional dermatological skincare brand's DNA, accelerating science-backed innovation, and growing brand awareness and footprint both domestically and internationally.
Q: How do you see the future growth potential for Milk Makeup and Obagi Medical?
A: Both brands have substantial runway for growth. Milk Makeup is expanding its global presence and product offerings, while Obagi Medical is focusing on innovation and international expansion, particularly in Southeast Asia.
Q: What are the main challenges and opportunities you foresee for Waldencast in the near future?
A: The main challenges include managing inventory levels and navigating competitive markets. Opportunities lie in leveraging our strong gross margins, expanding our international footprint, and continuing to innovate and invest in our brands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
