Good morning and welcome to Olaplex Inc.'s First Quarter Earnings Conference Call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference is being recorded. I will now turn the call over to Allison Malkin. And Allison you may begin.

Thank you and welcome to the Olaplex first quarter fiscal year 2022 earnings call. With me today are JuE Wong, Chief Executive Officer; and Eric Tiziani, Chief Financial Officer. For today's call, JuE will begin with a review of our first quarter performance and highlight the progress we made on our strategic initiatives. Then Eric will provide additional detail regarding our first quarter performance and fiscal 2022 outlook. Following the prepared remarks, the operator will open the call to take the questions you have for us today. Before we start, I would like to remind you that management will make certain statements today which are forward looking including statements about the outlook of Olaplex's business and other matters referenced in the company's earnings release issued today. 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 factors 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.olaplex.com. 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 in 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 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. A live broadcast of this call, which is accompanied by a slide presentation is available on the Investor Relations section of the company's website at ir.olaplex.com. Please take a moment to log on to the website to view the slides that go along with management's prepared remarks. I will now turn the call over to JuE Wong

Thank you, Allison and good morning everyone. I am delighted to speak to you today. As you can see from our press release, the first quarter marked an excellent start to the year with strong results that were aligned with our goals. With our fiscal year 2022 guidance of 36% net sales growth and 35% adjusted net income growth at the midpoint of our range, we expect to deliver top-tier industry sales growth and profit margins. We are proud that our business outlook has only become more favorable since the time of our IPO last year. This reflects the resilience of our disruptive business model rooted in scienced-based beauty the strength and health of our brand and the sustained positive impact of our competitive advantages. As a pioneer in the skinification of hair, Olaplex continues to lead the market with efficacious patent-protected products backed by science and we attribute our ongoing strength to our ability to improve hair health from the very first use. We have earned both industry and consumer awards for number one selling product across the prestige hair care segments in which we compete. We have an expansive growing community of professional stylists who advocate and educate consumers about the benefits of Olaplex and who we speak to every day. And all of these achievements come when we are still at the very early stages of our business in the fastest-growth category in beauty. You have heard me say this before and it bears reminding, we believe we have only just scratched the surface of our beauty journey. Because hair bonds are hair agnostic, I want to emphasize that repairing, strengthening and protecting hair bonds is foundational for all hair types and for everyone. Olaplex's product assortment includes shampoo, conditioner, hair treatment and styling products that are…

Thanks JuE and good morning everyone. As JuE has mentioned we had a strong start to the year with our competitive moat and successful strategy helping us to deliver top-tier industry net sales growth and profit margins that were aligned with our expectations. And as our guidance suggests we remain positive about our business outlook. Now, turning to our financial results. My remarks will mostly focus on our adjusted results. You can find reconciliation tables to the most comparable GAAP figures in our earnings release, which were also furnished on Form 8-K with the SEC today. Highlights of our first quarter included the following: net sales grew 57.6% and to $186.2 million from $118.2 million during the first quarter last year. Across geographies, the quarter included a 65.1% increase in the U.S., which benefited from new distribution including the introduction to all Ulta doors and ulta.com. Outside the US, net sales rose 45.7%, with noteworthy contributions from Italy and France as well as Germany, which included our retail expansion into Douglas. China also delivered strong growth through cross-border e-commerce albeit on a small base. By channel, professional sales grew 62.6% to $77 million or 41.4% of net sales accelerating from Q4. This channel was particularly strong in the US, UK, Italy and Germany. The affinity for Olaplex continues to grow further demonstrating Olaplex's ability to create the canvas that our professional stylists can use to deliver an exceptional experience for their customers. Specialty retail sales increased 102.5% to $64.3 million or 34.5% of net sales driven by incremental distribution since the year ago quarter, particularly in Ulta, which saw strong replenishment following our Q4 2021 pipeline shipments and the impact of our new product launches. Direct-to-consumer sales rose 15.1% to $44.9 million or 24.1% of net sales. This performance was…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And from JPMorgan we have Andrea Teixeira. Please go ahead. Andrea Teixeira, your line is open. You might be on mute. Okay. We'll go and take the next question from Piper Sandler. We have Korinne Wolfmeyer. Please go ahead.

Hi, good morning everybody, and thanks for taking the question, and congrats on the quarter. So I'd just like to expand a bit on the guidance. Can you just talk a little bit more about the puts and takes here with such a strong start to the year? I guess we were just a bit surprised to not see a raise to guidance here. So if you could just talk through what's all being considered whether it's some of the current macro pressures we're seeing, inflation, et cetera. Just a little bit more color here would be helpful? Thank you.

Hi, Korinne. It's Eric. Happy to take that question. So as mentioned when we introduced that guidance on March 8, a strong Q1 was already part of our assumptions and our Q1 results met our expectations. So we feel like we're right on track. We're pleased to reaffirm our fiscal 2022 guidance, which we feel is very strong. At the midpoints of 36% net sales growth, 35% net income growth and industry-leading profit margins at scale these results project to be in the top tier of the industry. Of course what we think makes us stand out from many high-growth peers across industries is that we're not just high growth, we're extremely profitable with high cash generation and we're in a consumer replenishable category with strong growth tailwinds in 2022 and beyond. We really want to emphasize that. Of course, we'll continue to evaluate fiscal year guidance as the year progresses. But I would just say it's early and we're in a dynamic macro environment so we believe this guidance is appropriate.

Thank you.

From Cowen we have Jonna Kim. Please go ahead.

Thank you. Just on the second quarter, it's also up against a pretty difficult comparison especially in professional and retail channels. How should we think about the growth in the second quarter as we think about the rebound in the professional channel and then you are opening more store obviously in retail channels? So just curious on your thoughts there. Thank you very much.

Hi, Jonna. I'm happy to take that one as well. As JuE mentioned and I mentioned through the earlier remarks this is the beauty of our omnichannel model. We're there to meet our consumer wherever she or he is shopping. And so we are expecting continued broad-based growth across channels overall growth to be within our fiscal year range. And within that, we mentioned that we are seeing this shift of the consumer behavior to physical stores and to salons, even as they continue to use direct-to-consumer for convenience. And we expect that trend to continue in Q2. So broad-based growth across all three channels with a bit of rebalancing to pro and retail.

Got it. Thank you.

And we'll go ahead and try from JPMorgan, Andrea Teixeira again.

Hi. Good morning, everyone. This is Drew Levine on for Andrea. Thank you for taking the question and apologies about before. So I just wanted to ask about the state of the consumer. I think JuE mentioned in the prepared remarks and in the release, that premium hair care has been resilient through economic cycles. So just curious, I guess what you're seeing today, how that's informing the guidance. And any sort of historical learnings from the industry on changes in consumer behavior, whether consumers buy less, but stick with the brand, maybe shift channels from salons? Just anything there would be helpful. Thank you.

Thank you. Let me take this call. This is JuE and happy to address this. It's a great question, because what we are seeing is that Eric has mentioned, the beauty category especially in hair is very resilient. We continue to see really strong growth across, not only the prestige hair category, but also in beauty. And the market, because it's resilient, even with the economic downturn and the pandemic, we are still seeing demand for our product because it is a replenishable. And you heard Eric talked about it as well as in our prepared remarks, the beauty of our omnichannel which is both synergistic and reinforcing is that it allows the consumers to really find us whenever and however and wherever they want to. And so as COVID restrictions are lifted, we are seeing the ebb and flow where they are able to go to a salon for in services as well as to retail for in-store experience and then lean in on DTC for convenience. So we continue to benefit from the consumers wherever they want to find ourselves. Hopefully, that answers your question.

Thank you. Please stand by for just a moment. Okay. From Raymond James, we have Olivia Tong. Please go ahead.

Great. Thanks. I have a couple of questions, hopefully relatively easy to fire out. But first in terms of the new products that you've introduced, are you attracting new consumers, or is it more widening penetration amongst your existing Olaplex users? And then just following up on the question around macro sensitivity, your consumer base is probably more reflective of a wider base of income levels than the average prestige brand. So just wondering if you see any differentiation in terms of purchasing activity or engagement up and down the income level chain with respect to your consumers. You have such a large and engaged social media community. What are they saying to you? And then just lastly, on competition. Obviously, competition has increased fairly dramatically over the last 12 months. Just your view in terms of the competitive set and how it's changed? Thank you.

Thanks, Olivia for the question. Let me take this and I'll break it down. I'll start with No. 9. What we are finding is, as you can appreciate, every time we launch a product we try to make sure that it addresses a concern. That is through the continuous feedback loop, that we get not only from our consumers but especially, from our professional set. So No.9 really showcases the skinification of hair because it uses really great and proven skincare ingredients in the product. And we have been able to see that we are recruiting new customers. And that's the only reason, why you can continue to see we are a top performer at Sephora, with the introduction of No.9. As I've mentioned in my prepared remarks, we were the top 15 SKU at BSG in March where we were only there for three days. And then in April, we jumped to the top three selling SKU. So No.9 is definitely performing well for us. And on olaplex.com, what we are finding is No. 9 is actually being part of a purchase set that when people are buying No. 9, they will also buy other products from within our line. So that is very encouraging. The other question that you asked about is, the income levels. Because it is a replenishable, we find that we are also an affordable luxury product. And as a result, consumers when we look at brand health survey, has consistently said that, this is a product that they truly do not want to give up because they trust it and it delivers on performance. Again, very encouraging data point. And then finally, on competition. You've heard us say this before, we are happy with the competitive nature of this category and this is one reason, why the category is growing as fast. You've seen from NPD reporting beauty in general grew 19% in Q1, and prestige hair care grew 32%. And what this tells you is as more consumers are aware, of prestige hair care and what it can deliver understanding that if they're using great skin care, it can translate to hair care it would just lift the category that much. And given that OLAPLEX, is leading defining and shaping the prestige category, we will win especially when the consumers are searching and looking for high-performance patent-protected and science-backed products.

Thank you. And we will now turn it back to JuE Wong for closing remarks.

Well, thank you, again. I know that this is a little bit shorter given, that we are doing -- Eric and I will be talking to you a couple of times later this week. But we look forward, to talking and speaking with you in our upcoming investor conferences, and when we report second quarter results in August. Thank you everyone.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.