管理層發言
Greetings, welcome to the Waldencast Fourth Quarter and Fiscal Year 2024 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Allison Malkin with Investor Relations. Thank you, Allison. You may now begin.
Thank you, and welcome to the Waldencast plc fourth quarter and fiscal year 2024 earnings call. Here with me today are Michel Brousset, Founder and Chief Executive Officer; and Manuel Manfredi, Chief Financial Officer. For today's call, Michel will begin with an update on our business and vision and discuss the company's performance within the context of the beauty market. Manuel will follow with a review of the fourth quarter and full year performance and provide our fiscal 2025 outlook. Following this, Michel will share the strategic growth initiatives for our Milk Makeup and Obagi Medical brands. After the prepared remarks, the operator will open the call to take questions. I would like to remind you that management will make certain statements today, which are forward looking in nature, including statements regarding the outlook of Waldencast business and other matters referenced in the company's earnings release that was issued yesterday. 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 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 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 Michel Brousset.
Thank you, Allison 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've 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, the 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%, while 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, purpose-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 being number one and Skincare being number two in U.S. Prestige Beauty. Our brands participate in the most attractive sub-segments of these two categories, Prestige Makeup and professional science-led skincare. Their superpower is high consumer affinity and strong brand equity in their respective markets, amplified by our strong innovation capability and superior returns on business driver investments. Milk Makeup is a cult-favorite Gen Z brand that benefits organically from an engaged community, due to its cultural relevance and iconic products. It is a leading clean makeup brand with 2.8 million Instagram followers that is growing five times faster than the market in the U.S. 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 as the number one U.S. physician-recommended medical grade skincare brand, addressing patients' needs for pigmentation, fine lines and wrinkles, and sagging skin. Obagi Medical consistently delivers breakthrough technology for transformative, clinically proven results to answer the needs of physicians and patients alike. Both consumer groups show high loyalty to the brand. The strength of the Obagi brand, which we acquired a bit 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 Obagi Medical, the pioneering brand of the physician-dispensed professional skincare industry, is today the fastest growing brand among the Top 10 professional skincare brands in the U.S. And this is only the beginning as we believe Obagi Medical is perfectly positioned to address the growing global consumer need for high-performing effective skincare, while also paving the way for expansion into new categories. At Waldencast, we've built a powerful and repeatable formula for growth and profitability, what we call the Waldencast Flywheel Effect. It is a simple yet highly effective model, but executing it consistently requires deep industry expertise and strong capabilities. It all starts with our foundational strong brands in high growth, structurally attractive beauty subcategories like Milk Makeup and Obagi. These are brands that don't just offer great products, they forge deep authentic connections with their communities, often beyond just functional benefits. And by being part of Waldencast, they gain access to even greater opportunities 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. As you will see in this presentation, we have delivered on these objectives in a big way. This Waldencast Flywheel Effect is already paying dividends even if we are very much at the beginning of our journey. In fiscal year 2024, 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 stands 430 basis points above the industry average, giving us 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, Milk Makeup and Obagi Medical, which participate in a limited segment of the vast beauty space. We're aiming to build a multi-brand platform that will encompass over time all strategic key categories, geographies, channels, and 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 fiscal year 2024 results with you today. Our performance continues to reflect the successful execution of our strategy that provides a powerful framework to maximize the inherent strength of our brand Milk Makeup and Obagi Medical. As we have demonstrated this year, our strategy continues to deliver ongoing revenue and profit growth, furthering our commitment to deliver value for our shareholders. Today, I will focus on our adjusted financial measures. You can find a reconciliation to U.S. 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 $72.1 million, representing a robust 29.4% increase in comparable growth, with balanced performance across our brands. Milk Makeup grew 31.9% in the quarter, reflecting channel expansion including initial shipments in support of our recent launch into 600 Ulta Beauty locations and on ulta.com. Obagi Medical delivered 27.7% comparable net revenue growth, fueled by accelerated performance in the U.S. physician-dispensed and e-commerce channel. Adjusted gross profit rose 30.7% to $52.6 million from $40.3 million in the fourth quarter of 2023, and adjusted gross profit margin remained stable at 73% with little change from 73.1% reported in the prior year's fourth quarter. Adjusted EBITDA doubled to $11.2 million from the fourth quarter of 2023, with adjusted EBITDA margin expansion of 530 basis points year-over-year, reaching 15.5%. This notable improvement reflects strong revenue momentum and improved operational leverage, which effectively offsets strategic increased investment in marketing and international capabilities to support future sustainable growth. So our standard fourth quarter results, based 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 reached $273.9 million, a robust 27.5% increase in comparable growth. Next, adjusted gross profit jumped to $203.6 million, up 35.3% from 2023, and adjusted gross profit margin of 74.3%, reflecting a 530 basis point improvement year-over-year. And finally, our adjusted EBITDA delivered stellar growth up 65.1% to $40.3 million. 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 350 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 a disciplined approach to operations. In 2024, we saw a robust adjusted EBITDA to cash conversion ratio of 78.8%, achieved through effective working capital management. The fact that our business model requires relatively low capital expenditures. Let me illustrate this point. Our year on inventory was down 4.7% versus the 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 2024, our cash position was $14.8 million, and we had an additional $30 million available on our revolving credit facility. Our net debt totaled $154.2 million, and for an update on the share count as of February 28, 2025, we had 122.7 million shares outstanding. We're also excited to announce that we have secured a new $205 million five-year credit facility. This facility replaces our current one and includes a $175 million term loan and a $30 million revolving credit facility. We have secured this financing significantly in advance of the July 2026 expiration of our prior facility, and this proactive move provides us with greater financial flexibility and extends our debt maturity profile through 2030. We are pleased with the performance of our brand and business, and we believe that our ongoing growth strategy, coupled with further enhancements to our internal capabilities, position us well to maintain this positive momentum throughout 2025. With this in mind, we anticipate 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 due to the anniversary of the highly successful Milk Makeup product launch from Q1 2024, as well as inventory adjustments 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 of our distribution footprint in the U.S. and internationally, including the launch of Milk 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 drivers.
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 $29.9 million, an increase of 31.9% versus the fourth quarter of 2023. This growth reflected initial shipments to Ulta Beauty in support of the brand's spring 2025 launch. This compensated for a normalization of the market, combined with retailer inventory adjustments, resulting in lower consumption growth than anticipated. Adjusted gross profit margin of 64.9% increased 180 basis points from last year, driven by the positive impact of channel and product mix, as well as margin accretive innovation. Adjusted EBITDA was $4.8 million, representing growth of $3.4 million from adjusted EBITDA of $1.4 million in Q4 2023, 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 2023. For the fiscal year, Milk Makeup generated net revenue of $124.6 million, increasing 24% from 2023. Adjusted gross profit rose 27.4% to $85 million, with gross profit margin expansion of 180 basis points to 68.2%. Adjusted EBITDA rose 58% to $29.1 million from $18.4 million 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 Z, increasingly appealing to Millennials and Haloing into Gen Alpha. Although the brand doesn't really target Gen X. In recognition that younger generations see themselves and their values represented in the brands they use, we unveiled a new brand mantra of Live Your Look, which celebrates 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 segments where our brand mantra, beauty point of view, and products resonate strongly with Millennials and Gen X. Second, continue to launch market-disrupting beauty innovation while expanding into bigger segments such as complexion. And lastly, broaden our footprint by expanding the brand's presence online and offline in both the U.S. and internationally. Now let's do a quick year in review with just a few highlights. In 2024, Milk Makeup delivered strong and consistent results across all key growth strategies. Milk Makeup has expanded its reach and community, achieving a record EMV ranking at number six in February 2024, reaching 1 million followers on TikTok in Q2, and being recognized in 2024 as one of the most powerful beauty brands by Women's Wear Daily in Q3. Closing the year in Q4 at number 14 EMV ranked, with 4.8 billion PR impressions, as well as garnering 28 global beauty awards, netting a huge amount of buzz and support for the brand. Second, Milk Makeup innovation broke all records with the launch of the viral sold-out Cooling Water Jelly Tint, which became the number two biggest beauty launch in the United States in 2024. This came from a relatively small brand in the category, with continuous extensions into lip with Kush lip oils, mascaras with Kush High Roll, a new innovation in PD to Halo Core, and primers with Pore Eclipse and Hydro Grip and Glow. And lastly, Milk Makeup successfully extended its footprint in 2024 internationally in Europe and Asia through its viral launch in Lyko in Scandinavia, Boots in the United Kingdom, and Sephora in India, among others. Looking ahead into 2025, we're doubling down on our three proven growth strategies of innovation, expansion in distribution, and growing brand awareness. An early peek into a couple of 2025 highlights includes our launch of next generation skincare: clinically proven, clean, safe for all skin types for anytime and anywhere, done of course the Milk Makeup way. On the back of a record-breaking launch of Cooling Water Jelly Tint in 2024, Milk Makeup introduced in February Jelly skincare, the first jelly serum stick, mess-free with good-for-you ingredients for the juiciest skin ever. It comes in two variants: Cooling Water Jelly Eyes 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 on Gen Z, and entering an incremental category: skincare. In March, Milk Makeup launched their foray into the significant complexion market—a Skin Tint like no other that lasts for up to 12 hours. Housed in the brand's cold hydro franchise, Hydro Grip Gel Tint is perfectly positioned to win new customers in a category that is substantial, has high loyalty, and over-indexes to an incremental target audience of millennials. The product, showing early signs of tremendous success, boasts a 4.7-star review on Sephora.com, a 96% recommendation rate, and 34,000 likes leading to a 3.88 million earned media value accounting. Another highlight for 2025 is the much-anticipated expansion of our U.S. distribution for the first time since launching Milk Makeup in 2016. Starting on March 2, 2025, Milk Makeup will expand into more than 600 Ulta doors and online in the United States. This significant strategic expansion was much awaited and requested by Ulta guests. Our partnership with Ulta, the largest specialty beauty retailer in the U.S., with over 1,400 stores, 500 Ulta Beauty at Target locations, and 44 million loyalty members, is perfect for reaching a whole new set 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, recording net revenue of $42.2 million in Q4, representing comparable growth of 27.7% from Q4 2023. This growth was driven by the success of our expansion strategies focusing on introducing blockbuster innovations, accelerating growth in our physician dispense channel, and expanding our consumer reach with high-impact marketing. Adjusted gross profit totaled $33.2 million, with adjusted gross margin contracting 130 basis points to 78.7% from 80% in Q4 of last year. We planned 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, discontinuing some lower-margin products. Strong sales growth, combined with significant growth in adjusted gross profit dollars, more than offset increased investment in business drivers, leading to an adjusted EBITDA of $9.8 million, representing a 23.7% increase from Q4 2023. Adjusted EBITDA margin was 23.3%, compared to an adjusted EBITDA margin of 24.5% in the fourth quarter of 2023. Now looking at the fiscal year, Obagi Medical delivered net revenue of $149.3 million, representing comparable growth of 30.7% from fiscal 2023. Adjusted gross profit rose to $118.6 million, representing 39.4% of net revenue versus $83.7 million, or 71.2% of net revenue in fiscal 2023. This growth led to adjusted EBITDA of $30.5 million, a 46.4% increase from fiscal 2023, with adjusted EBITDA margin expanding to 20.4% from 17.7% in 2023. Obagi Medical's vision is to be the number one physician-dispensed dermatological brand in the world. We are today already the leading U.S. physician-recommended brand for the 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 in this global vision of number one in the world. In the U.S., as we mentioned earlier, Obagi was the fastest-growing top 10 professional skincare brand in 2024, showing the potential and ability to grow domestically as we expand internationally. Our growth strategy has consistently focused on three pillars: doubling down on dermatological brand DNA starting with a brand refresh from packaging to campaigns, embracing our medical heritage in a modern twist that resonates strongly with physicians and consumers alike. We will keep driving cutting-edge, science-backed innovation aimed at delivering unmatched transformative solutions, supported by a robust pipeline of global products with market-leading clinical data. And finally, we will grow brand awareness and footprint, helping more consumers learn about Obagi Medical both domestically and internationally to fuel our physician-centered ecosystem. In 2024, Obagi Medical delivered strong and consistent results across all key brand strategies. Just a few highlights: Obagi Medical reinforced its dermatological brand DNA by signing Dr. Suzan Obagi as the brand's Medical Director, focusing on physician needs at the heart of our innovation and education, affirming our thought leadership in leading trade shows such as IMCAS in Paris and AAD in the U.S. Over the second half, our revamped brand identity started cascading into the world through our packaging upgrade, celebrating the power of our brand, and enriching our visual identity. Obagi Medical accelerated innovation with a series of successful launches aimed at both consumers and the professional skincare medical community, most notably the Daily Hydro Drops ICE, which became the number one direct-to-physician sales volume in Q2 2024, and the blockbuster ELASTIDERM Lift Up & Sculpt Facial Moisturizer and ELASTIDERM Advanced Filler Concentrate, marking Q4 as the biggest ELASTIDERM franchise quarter ever. As for brand awareness, in Q4 2024, Obagi became the third fastest-growing EMV total beauty brand, closing the year as the fastest-growing brand in EMV compared to its competitive set at 85%, gathering organic support from professional and skincare influencers in the U.S. and globally, with over 50 worldwide publications praising us. And in 2025, Obagi Medical is further elevating its new brand identity and visibility with visuals that celebrate transformative skincare results in dermatology-centered executions across multiple touchpoints, both online and offline, driving awareness and educating consumers about the brand. Obagi Medical expanded the Suzan Obagi MD collection with groundbreaking new products, including the Super Antioxidant Serum and Moisture Restore Hydration Replenishing Cream, designed with the incremental needs of in-office patients in mind, inspired by Dr. Suzan Obagi's insights. These products aim to be complementary to the existing portfolio, providing multilayer hydration and replenishment while delivering medical-grade defense against oxidative stress. These new launches showcase promising results, and we'll have more to share on our next call. To conclude, we're very pleased to share a strong performance across both brands, reflecting the increasing desirability, relevance, and awareness of our Obagi Medical and Milk Makeup brands. 2024 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, and Milk Makeup grew five times the overall beauty market rate, while Obagi Medical is the fastest growing of the top 10 professional skincare brands in the U.S. Importantly, we're just getting started, and we believe our company is poised for long-term profitable growth through the growth engine we have built with our Waldencast Flywheel—a 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. I will now turn the call over to the operator to conduct the question-and-answer session.
分析師問答
Thank you. The first question comes from Susan Anderson with Canaccord Genuity. Please go ahead with your questions.
Hi, good morning. Alec Legg 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.
Yes, of course. Alec, how are you? Thank you for joining us. 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 is on the base. And the second thing, as we have mentioned during the call, a bit of adjustment of retail inventory 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 jellies. As we look forward, in the case of Milk, we are only just at the beginning of the year; Skin Tint, which is our innovation, is just hitting now as well as the Ulta launch. So we expect a strong acceleration throughout the year on a sequential basis in the case of Milk. In the case of Obagi, we expect substantial growth coming from our physician dispense business, as well as our digital channels and international. We are very confident in the acceleration, the sequential acceleration through the year. We have a very specific issue in Q1: a base being very strong with the launch of jellies and some adjustments of inventory due to consumption in Q1.
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 the first quarter? And then also, it sounds like the fourth quarter had the pipe into Ulta. Are you able to provide some color on how much that benefited Milk in the fourth quarter? Thank you.
Yes, we don't disclose specific numbers behind them, as you can imagine, for competitive reasons. But I think you're right: we have a bit of an effect also. We launched—we filled the pipe of Ulta the end of last year in preparation for launches this year. So when you pipe into a customer, you're piping a number of months into customers. As a consequence, when you start consumption in Q1, you don't really get a substantial amount of repetition orders. We're only a few weeks in, but we're very, very pleased with the launch at Ulta. In the case of jellies, 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 a—jellies was quite a substantial launch.
The next questions are from the line of Jonna Kim with TD Cowen. Please proceed with your questions.
Thank you for taking my question. This first one is 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 about the physician dispense channel, if you're seeing any sort of softness in consumer, or are you still seeing the resilience of the consumer in that channel? Thank you so much.
Thank you, Jonna. So the marketing is, as 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 spend. Our model, as we indicated, is one that drives operational efficiency, gross margin, and reinvest that into business. So we expect to continue to do that on both brands. In terms of what is different, in the case specifically of Milk to start with, we are getting to a scale on that brand, especially with the launch of Ulta in the U.S., where you should expect to see a broadening of the type of marketing we do. If you think about Milk, how it's— the marketing of 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 the regional exclusivity of Sephora, then shifting to a more influencer-based strategy and boosting user-generated influencer-based marketing. We will enhance and complement that with some broader, more paid brand campaigns allowing us to reach more consumers. In the case of Obagi, we've been doing a great job to drive the brand. We are very proud of Obagi being the fastest-growing professional brand out of the top 10 brands in the market. With innovation, it's a great brand with great products, where marketing support can accelerate efficiently. What's been done in '24, which we will do more this year, is taking the brand from a marketing standpoint outside of the doctor's office, advertising directly to consumers to drive them to discuss with their physician about options for great transformative skincare results. So you will see more of that in the year. In the case of the DTP channel, as we saw in the presentation, it continues to perform strongly albeit it’s normalizing a bit from low double-digits, roughly 11-12% growth in prior years to the latest data we have around plus 8% on the channel. There's a bit of normalization in that channel, but the channel remains strong. The important aspect is that we're seeing two substantial effects that play well to our business. One is a premiumization of the channel, with continued consumer demand for higher performance products which align with our launches. The second is the important trend of the confluence of beauty, aesthetics, and wellness. When we bought Obagi and focused on it, we identified this trend as something that could propel us through the years—this blend of science-based skincare with all its benefits, influencing procedures and many of our products supporting post-procedure treatment.
Our next questions are from the line of Ashley Helgans with Jefferies. Please proceed with your questions.
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 in Ulta? Thanks.
Yes, I mean as we all know, the macro environment is changing and it's interesting and exciting every week, it seems. That said, as we highlighted, the beauty consumer, the beauty industry remains resilient; consumers continue to increase their spending year-over-year, albeit with some normalization. The drivers of that consumption have remained quite steady for decades, which is the premiumization of consumers and their desire for higher-performing products. That's why premium beauty is performing better than mass. This desire for continuous premiumization with higher performance and quality levels aligns perfectly with our brands. Additionally, beauty serves as both a need and a want category, allowing consumers to indulge in small luxuries at times to feed consumption. Overall, in a changing macro environment, the beauty consumer remains very resilient, albeit with some normalization. It's also important to note that compared to larger companies in the space, we're relatively less exposed to fluctuations in geographic markets like China. Hence, the beauty markets in which we operate remain resilient. In terms of the Ulta launch for Milk, the brand is on fire and continues to gain momentum. Yes, there are adjustments suggested in our guidance for Q1 due to specific annualization issues and some retail adjustments, but the overall consumer demand for our brands remains extremely strong. The early results of the launch are evidence of this: 2024 results already demonstrate the brand is growing ahead of the market, gaining more consumers and momentum, with increasing EMV and industry recognition. Even our early results for key launches have been progressing well. The Skin Tint, in particular, is a significant entry in the market, allowing us to participate in the largest complexion category, which benefits from high loyalty and repeat purchases, propelling both growth and profitability.
The next questions are from the line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.
Yes, hi. Thank you. I just want to 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 skincare, correct? So there's a separate skincare product that will be shelved near the color products like in Sephora and Ulta, is that the plan?
Yes, Linda, you're right. There are two launches: the Skin Tint and a jelly skincare product. They will be shelved on the same displays in both Ulta and Sephora. The skincare launch, leveraging the successful jelly technology, includes two new skincare products. Both types fit into the Ulta and Sephora landscape as potential stars. The Skin Tint is positioned as particularly strategic for penetrating the foundation category and expanding our reach. So, yes, there is potential for expansion beyond the 600 Ulta doors, depending on its success. However, it is essential for us to maintain a focus on productivity in each store. We aim to collaborate closely with Ulta to ensure high productivity and maintain brand exclusivity while offering opportunities for future growth. And no, we are not in Ulta at Target.
Yes, for operating cash flow, our CapEx in 2024 was $2.9 million.
The 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 the Milk launch at Ulta. As 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 delayer that outlook for flat year-over-year. How much of that is a function of the growth deceleration, which we of course are seeing across the industry, versus the retail inventory correction, which eventually normalizes? And then given the changing growth dynamics within the category, can you just talk about how you're adjusting your strategy given the new growth dynamics? Thank you.
Thank you, Olivia. Just again on Q1, the deceleration is a combination of two components. One is not really an absolute value deceleration. We have a very big launch in the case of jellies last year, which explains most of the differences in index compared to the prior year. We've seen retailers adjusting some of their inventory, contributing to this pattern. With that being a backdrop, we remain optimistic about the year ahead, and our growth will be driven by executing our renovation plans and expanding into Ulta.
Yes, for logistic reasons, we split the Ulta shipping. Some was completed in Q4, and part has been shipped in Q1 this year.
Thank you. At this time, we've reached the end of the question-and-answer session. I'd now turn the floor back over to Michel Brousset for closing remarks.
Well, thank you very much for joining us. As you can see from the presentation, we are very, very bullish about the prospects of the company's growth and advancing in profitability. Our flywheel is working and performing very, very well. We continue to be excited about the prospects of both our makeup brand and Obagi, both in the U.S. and internationally. Thank you very much, and I appreciate you 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.