OLPX - NASDAQ

Good day, and thank you for standing by. Welcome to the Olaplex Incorporated Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation (ph), there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Allison Malkin of ICR. You may begin.

Thank you, and welcome to the Olaplex second 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 the review of our second quarter performance and highlight the progress we made on our strategic initiatives. Then Eric, will provide additional details, regarding our second quarter and first half financial results 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 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 factor appear 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 forward-looking 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 financial 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 financial measures to the most directly comparable GAAP measures in the company's earnings release. A live broadcast of this call is also available on the Investor Relations section of the company's website at ir.olaplex.com. I will now turn the call over to JuE Wong.

Thank you, Allison, and good morning, everyone. We are pleased to speak to you today to share another period of outstanding performance. Our second quarter results were highlighted by robust sales and profit growth that continued to outpace the overall strength of the U.S. prestige hair care category and beauty industry, capping off a strong first half for OLAPLEX. Net sales increased by 39% in the second quarter and 47% for the first half of the year. Once again, this growth was broad-based, across products, channels, and geographies, reaffirming the benefit of our mutually reinforcing synergistic omnichannel model. Adjusted EBITDA rose 26% from the second quarter last year with an adjusted EBITDA margin of 63% for the second quarter 2022. For the first half of fiscal 2022, adjusted EBITDA grew by 36% to 65% of net sales. The second quarter of 2022 was our fourth quarterly period reporting as a public company, with each quarter delivering industry top-tier net sales growth and profit margin. This reflects the successful execution of our strategy as we lead, shape and define the prestige hair care market with science-based, patent-protected products that are designed to fix real hair problems from the very first use. With a compelling strategy, a strong track record and deep competitive advantages, we believe we are well positioned for future success in a very attractive and resilient category. We believe prestige hair care remains a resilient high growth category with strong long-term tailwinds. We continue to see strength in prestige beauty and the prestige hair care category as consumers are prioritizing their own well-being, even during uncertain times, which is consistent with how the beauty consumer has acted in past downturns. Prestige beauty in the U.S. was the only industry with rising unit sales. Year-to-date across 14 discretionary retail industries tracked by NPD. OLAPLEX remains well positioned to benefit from this consumer behavior given our patent-protected product portfolio, highly efficient and productive innovation model and highly engaged community of stylists and consumers. We are also at an accessible price point within prestige hair care, which combined with our product performance, offers excellent value to the consumer. You can see the evidence of this as we continue to outpace the category. According to the NPD Group retail tracking data, which excludes salon, OLAPLEX's U.S. NPD truck sales were up 54% in Q2 2022 versus Q2 of 2021, as compared to total U.S. prestige hair care category sales up 24% during the same period. We also continue to see a normal level of competitive intensity, which is healthy for a high-growth category. As the creator of the bond-building category and as the only brand using patent-protected Bis-amino technology to truly repair hair bond from the inside out, we stand to gain the most from growing awareness of the category. While we do not expect the category to be immune for potential pressure related to an economic slowdown, we also believe that current sentiment for the category and OLAPLEX remains strong. Based on our June Ipsos brand health survey of U.S. premium hair care consumers, we found that of those respondents who have purchased OLAPLEX in the last 12 months, 55% anticipate greater spend in premium hair care in the next six months versus the last six months as compared to only 8% who said they would spend less. The global prestige hair care category remains in the early stages of long-term growth and OLAPLEX is playing a leading role in developing this market. We are excited about our long-term initiatives to grow awareness, increase penetration in existing channels, growth distribution internationally and expand our portfolio, which only consists of 13 products today, with ample white space for highly incremental future launches. The second quarter saw us advanced on each of these growth initiatives, which we believe positions us well for the second half of the year. To this end, our core remains strong. According to our independent brand health survey, all key metric health study are improved in Q2 as compared to Q1 of 2022, with best-in-class conversion from awareness to purchase intent amongst other prestige hair care brands trend. Our unaided awareness increased 2 points and aided awareness jumped approximately 5 points from first quarter of 2022. In retail, per NPD, OLAPLEX remained the number one prestige hair brand in the U.S. in Q2, with seven of the top 10 performing items. In professional per client, OLAPLEX has the top 4 best-selling hair care products sold at salon in the U.S. in Q1 2022, with seven out of the top 10 performance items. In DTC, per an Amazon U.S. report, OLAPLEX had three of the top 10 overall hair care products in Q2. We surpassed 1 billion #olaplex views on TikTok in Q2, reaching 1.1 billion. And our Instagram following rose to approximately 2.3 million with 13.9 million #olaplex user-generated post. Second, we continue to introduce highly incremental and best-in-class innovation. Our No. 9 Bond-Building Nourishing Hair Serum introduced in Q1 act as an anti-damaged hair shield from pollution and heat damage, bringing body, waves and curve membrane retention properties. No. 9 continues to be a strong performer in Q2, achieving number one status within hair serums since launch at Sephora and was cited as the best in-class hair care launch at Ulta Beauty. In June, we launched No. 4C Bond Maintenance Clarifying Shampoo, which removes water, minerals, chlorine, access oil and product built up from the very first use and marks our second highly incremental product introduction for the year. This Clarifying Shampoo launch fills a void in our portfolio, as current OLAPLEX consumers were previously required to go outside of our brand to serve this need. Our Clarifying Shampoo is off to a strong start across salons, online and in specialty retail, starting with Sephora. Third, we continue to drive our synergistic omnichannel model with broad-based success. Our close connection with our community of professional salon stylists and consumers provides us with powerful insights, which we aim to capitalize on to create new opportunities for growth. To this point, at the end of the second quarter, we introduced a new offering in our professional channel, a 1-liter size of our No. 4 Shampoo, No. 4C Clarifying Shampoo and No. 5 Conditioner for use in salons and for sale to consumers through salons exclusively. Liter sizes are extended in the salon industry and as the preferred guide for salons to use at the back part, where there is generally limited space. We expect this offering to help increase penetration with new salons in the U.S. and abroad, helping to raise awareness and trial of our brand. In retail, we continue to build awareness for the brand through our highly successful expansion into Ulta Beauty, Sephora at Kohl's and Douglas in Germany. And in direct-to-consumer, we enhance our own olaplex.com offering with several new capabilities, including the May launch of an upgraded version of our hair diagnostics with more personalized recommendation, the launch of new technologies to drive engagement and conversion like shoppable videos and live streaming and continued expansion of our international digital and dot com in France. In a highlight, from our pure-play e-commerce business, OLAPLEX was the number one hair care brand by sales on Tmall cross-border and the number 12 on Tmall overall for the 618 event in China. Lastly, we continue to prioritize investments to enable our future growth. As we have previously advised, we have and will continue to invest ahead of our growth. We continue to invest in our talent pool, growing our employee base plus 44% since the start of the year, investing in our R&D team and infrastructure where today, it represents 10% of our total of workforce and expanded our research facility on the Pfizer campus in New York. We also continue to invest in marketing, having brought our CMO on in January and she has and will continue to build out our marketing team to drive all funnels of marketing. As a result, we have seen our unaided brand awareness increased 21%, maintaining our number one EMV ranking for the hair category for the first half of 2022 as tracked by Tribe Dynamics. We are one of the fastest-growing beauty brands on TikTok when it comes to engagement and user-generated posts. We continue to be the number one prestige hair care brand on Instagram with the most followers and the largest and growing user-generated content library. By the end of 2022, we expect to begin manufacturing with a new contract manufacturer in Europe to directly supply certain of our core products to that market. We believe this will help reduce transportation costs, shipping time and environmental impact as we continue our efforts to build further resilience in our supply chain, and we continue to advance our ESG initiatives. As a remote company with no direct supply chain operation, we have engaged EcoVadis to help us evaluate the sustainability practices of our suppliers and contract manufacturers, helping us to drive transparency and continuous improvement in our ESG practices. As we approach the one year mark of OLAPLEX being a public company, we are pleased to see our passion and dedication pay off with a consistent industry-leading performance we have experienced through the second quarter, and we truly believe that we remain in the early innings of our growth. We see tremendous future potential for science-based beauty solutions. Through our investments, we are building the capabilities and infrastructure across our organization to enable these growth opportunities. We are grateful to our team and our community of stylists and ambassadors, and we continue to be excited about the incredible opportunities that lie ahead for OLAPLEX. And now, I would like to turn the call over to Eric to review our financials and guidance in more detail.

Thank you, JuE, and good morning, everyone. We believe our strong Q2 performance is a testament to the attractiveness of the prestige hair care category, our proven strategy and the stellar execution capabilities of our team. As we look ahead, we are reaffirming our fiscal year 2022 guidance range, which remains top tier in our industry. In Q2 2022, net sales increased 38.6% to $210.9 million, driven once again by broad-based growth across channels, geographies and products. I will note that Q2 net sales included approximately $10 million in shipments that we believe were made in advance of the price increase implemented on July 1. Excluding the $10 million in shipments, our Q2 net sales were in line with our original expectations for the quarter. By geography, the U.S. led our growth with a 41.3% increase with broad based strength across channels. International sales were also strong, rising 35.2%, with strong contributions from Italy, Germany, France, Canada and our emerging cross-border e-commerce business in China. By channel, professional sales grew 32.7% increasing to $105.5 million. As JuE mentioned, this was aided by the long planned launch of our new 1-liter offerings with those launch shipments happening in Q2 for the U.S. Specialty retail sales increased 68.5% to $64.2 million, aided by incremental distribution since the year ago quarter, particularly in Ulta as well as from Sephora at Kohl's and Sephora Europe. Direct-to-consumer sales rose 19.3% to $41.2 million. This level of growth was consistent with our expectations as we noted on our Q1 call that we were seeing the trend of more consumers shopping in physical retail and in salons, which we can continue to capture due to the strength of our omnichannel model. Moving down the income statement. Adjusted gross profit margin was 75.2%, declining 550 basis points from 80.7% in Q2 2021. The contraction in gross margin rate was driven by logistics and input cost headwinds, which drove 330 basis points of the decline with the product and channel mix accounting for the remainder. That mix impact included the pipeline fill of our 1-liter size offering. While 1-liter carries a higher margin than the 2-liter, the overall mix shift to professional caused by the sell-in lowered our overall gross margin. We expect the introduction of the 1-liter to be highly incremental to sales over time as it is often the preferred solution for the professional community, making that the strong ROI and part of our plan to build awareness and increase penetration of salons worldwide. We expect gross margin to improve in half two 2022 versus Q2 2022 as a result of the approximately 5.5% average price increase taken on July 1 as well as from the moderation in logistics and input cost pressures that we are seeing versus earlier in the year. Adjusted SG&A increased 42.1% to $24.4 million from $17.2 million in Q2 2021. The $7.2 million increase in adjusted SG&A from prior year reflects investments made to support the long-term growth of our business, including a $2.4 million increase in sales and marketing expense, a $2.4 million increase in workforce expansion, a $1.9 million increase in public company costs and a $0.5 million increase in distribution and fulfillment costs related to the increase in product sales volume. Adjusted EBITDA grew 26.2% to $133.1 million from adjusted EBITDA of $105.5 million in the 2021 second quarter. Adjusted EBITDA margin was 63.1% compared to adjusted EBITDA margin of 69.3% in the 2021 second quarter. Adjusted net income increased 35.5% year-over-year to $98.8 million or $0.14 per diluted share from $72.9 million or $0.11 per diluted share in the 2021 second quarter. Adjusted net income benefited from lower interest expense year-over-year, resulting from our first quarter debt paydown and refinance. Now turning to the balance sheet. Inventory at the end of Q2 2022 was $140.3 million compared to $98.4 million at year-end 2021 and $117.5 million at the end of Q1 2022. We have strategically maintained a higher level of inventory months on hand to support the growth in our business, compensate for longer transit times overseas and to help mitigate macro supply chain risks. We remain comfortable with our inventory position and our ability to meet future demand. Turning to cash flow. We once again generated strong cash from operations of $128 million and ended the quarter with $198 million in cash and equivalents. Long-term debt, net of current portion and deferred fees, was $657 million. Now turning to our outlook. We are reaffirming our fiscal year 2022 guidance for net sales of $796 million to $826 million, an increase of 36% at the midpoint; adjusted EBITDA in the range of $504 million to $526 million, an increase of 26% at the midpoint; and adjusted net income in the range of $363 million to $379 million, an increase of 35% at the midpoint. We would also like to provide the following comments related to guidance. The fiscal year 2022 guidance range implies a half two net sales growth range of plus 22% to plus 31% as we anniversary tougher comps from 2021 new product launches and the pipeline inventory we shipped to Ulta in Q4 2021. The approximately plus 5.5% average price increase we implemented at the start of the third quarter was contemplated in our reaffirmation of guidance that was provided during our first quarter earnings call in May. In addition, as I mentioned, Q2 included a sales benefit of approximately $10 million from orders placed in advance of the price increase, which we believe would have typically occurred in Q3. This impact was primarily in our professional channel. Finally, given the impact of current interest rates on our floating rate debt, we currently expect interest expense to be approximately $42 million for the year, up from our previous expectation of $40 million. In summary, second quarter represented another excellent performance. We are operating in a resilient high growth category, we have a proven strategy, strong track record of execution and significant growth opportunities in front of us. And finally, we remain confident in our outlook and believe the best is yet to come for OLAPLEX. This concludes our prepared remarks. We will now turn the call back over to the operator for questions. Operator?

Certainly. [Operator Instructions] And our first question will come from Dara Mohsenian of Morgan Stanley. Your line is open.

Hey. Good morning, guys.

Good morning.

So just given the state of the consumer is more in question here with macro pressures, can you give us an update on revenue growth trends sequentially towards the end of Q2 on an underlying basis, so stripping out the impact of the timing shift with pricing more on an underlying basis and perhaps revenue trends so far in Q3? And just in general, an update on how you think about the potential for weaker consumer spending in general to impact prestige hair care in your business, specifically now that we have three months of additional information on the consumer here relative to your comments on the Q1 call. Thanks.

Thanks, Dara. I'll take that first part of the question on the trends we saw in sales through the second quarter. And then JuE, I think you wanted to take Dara's other questions. So Dara, on the sales trends through the second quarter, backing out the $10 million that we referenced related to the price increase, we saw consistent strength across channels throughout the quarter, so nothing really to remark on there.

Right. And then, Dara, on your question on the consumer sentiment, the beauty resilience. I mean you've heard us said in our prepared remarks that while the category for prestige hair grew at 24% in Q2, OLAPLEX was up 54% during the same time period. We have also seen NPD reporting that prestige beauty was the only industry with rising unit sales and they tracked us across 14 discretionary retail industries so it is pretty impressive to see that beauty held on and held on really well. And one data point that was also in the NPD report was that average household income earning more than $100,000 is actually now 47% of the beauty shopper base. And if you look at that, that's an increase of about 3 share points in 2020 versus 5 share points over 2019. And we feel like all of this really drives home the point that consumers will prioritize their own well-being because primarily what is happening is beauty is that little luxury that can help them feel better about themselves.

Great. Thanks.

Thank you.

And our next question will come from Andrea Teixeira of JPMorgan. Your line is open.

Thank you. Good morning. So I was wondering, if you can give us an idea of Specialty Retail like-for-like, as you extrapolate the -- obviously, the new distribution. And also related to that, I think you -- Eric, you called out the negative mix impact of having growth in professional this quarter. So I guess one of the things that I've been getting feedback from the buyer side is that margins obviously came in soft. As you parse out like the price increases in July, 5.5% and then normalizing with seasonality and having that build through, should we expect margins to recover? And then I'll have a follow-up question on the top line. Thank you.

Thanks, Andrea. I'll take that second part of the question first, which is around gross margin. And you're absolutely right. So last quarter on our call, we talked about the fact that we're seeing worsening cost inflation as well as mix impacts that we were expecting in the second quarter and the gross margin in the second quarter would be lower than the first. That's exactly what you've seen play out here. We also talked about the fact that we are taking mitigating actions to offset that and give us the ability to reaffirm our fiscal year profit guidance, and that's also exactly what's playing out here. So the combination of the average 5.5% price increase that we took in July, the moderation of input cost inflation that we're seeing in the back half of the year versus the first half of the year, part of that is market-driven, part of that is also our own actions with our suppliers. And lastly, part of it is just that normalization of mix. We do expect gross margin in the back half to be improved versus what we saw in the second quarter, still pressured versus last year but improved versus the second quarter. And all consistent with our reaffirmation of fiscal year EBITDA guidance and net income guidance as well. And on...

Yeah. So…

Yes, go ahead, JuE, on specialty retail.

Yeah. I was just going to answer your question on -- regarding distribution. I mean, if you saw what we presented in Q1, we advised that we've just gotten into the full distribution with Ulta of 1,300 doors, both salons and retail. It is performing better than expected, 25% of services at their salon use OLAPLEX. We are now in full fleet in Sephora, which is close to or up to 800 doors where we are actually kind of leading and defining and shaping that prestige hair category for Sephora in Europe. We just launched, as you have heard from us in Q1, again, 200 doors at Douglas, and we are maintaining our number two hair brand status. So all this just means that we want to continue to be bigger, fewer and better in terms of how we approach our distribution and how we partner up because if you are the number one hair care brand and then move on to the top 5 and 10 beauty brands, we do believe that this will continue to bode well for us in terms of partnership, and we are confident that as we continue to do this we will see material growth to our omnichannel regardless of how the consumers decide to shift or move from one channel to the next.

And in terms -- and that's helpful, JuE, but in terms of like how the stores, if there is -- have you seen any cannibalization from the existing stores as you roll out into more Ultas, into more Sephoras within the same geography or are all of this just [Technical Difficulty] awareness to the brand on a like-for-like basis, on a same-store sales basis

That's a good question. So if you look at the NPD Q2 reporting that we just shared, it does show that while the category over all channels other than salons because NPD does not report salon distribution so it is specialty retail, it is DTC. The overall prestige hair care category grew 24% and we grew 54%. Therefore, you can tell that ultimately, what it means is that our growth is sustainable and therefore, our distribution is also very complementary.

Thank you very much. I’ll pass it on.

Thank you. And our next question will come from Lauren Lieberman of Barclays. And Lauren, your line is open.

So the growth in the U.S. this quarter was obviously very strong in terms of percentage growth year-over-year. But in terms of dollars, the business looks like it was flat sequentially with the first quarter. So just really wondering how we should be thinking about kind of phasing of growth in the U.S.? Are you starting to see some slowdown in Sephora as Ulta has been, as you just said, ahead of plan? And Sephora also bringing another brands in prestige hair care. So curious and folks and like the aggregate picture of U.S. performance sequentially and how to think about growth?

Yeah. Hi, Lauren. I'll take that. So we're obviously really happy with our growth in the U.S. of 41% in the second quarter. I understand what you're saying that the absolute dollars were pretty constant from Q1 to Q2, but we expect the U.S. and international to continue growing in a balanced way. So what we're seeing is broad-based growth. And you all know that in our long-term growth strategy, we see even more wide space and opportunities internationally. So over the longer arc, we expect international to grow very nicely for us. While we continue to grow in the U.S., we expect it to remain balanced.

Okay. And then I was just curious, if you think about that international rollout and Western Europe is a big part of the story and will be certainly longer term. But as we're dealing with this real dramatic pinch on consumer wallets, does that impact at all your decision on the pace with which to move internationally? Are you seeing any sort of -- and maybe it's still early, but buying patterns for consumers in a market like Western Europe where maybe they're buying one or two elements of the regimen, for example, like not using the shampoo and conditioner but using the mask. Just curious how the consumer environment may be impacting your approach to that international rollout, at least over the next couple of quarters or whatever it may be.

I'll take that question. Yes. I mean one of the things that we do know is that we have just started really rolling out into what we call larger chain stores because up until then, we were in professional hair salons establishing our credibility and our authority. And as you saw that when we started rolling out in Sephora Europe and Douglas, we are now leading that category. So what we are doing is that we are doing exactly what we have done in the U.S., that same playbook where we want to get deeper with each of our trade partners, our retail partners so that we can help with programming and initiatives and merchandising to really help the consumers to understand exactly what the regimen or what products would be doing for them. If you look at what is happening, as any time that OLAPLEX gets into a market, the prestige hair category gets more awareness. And when that happens, that category also grows. So we feel very confident that given our authority that we have established with Pro, now that retail is expanding distribution but not in a pace that we have no control over, we feel like the message and the awareness will continue to accelerate. And when that happens, it will bode very well with how we continue to educate and merchandise and partner with those retailers.

Okay. That makes a ton of sense. And I'm sorry, if I can sneak in one more, Eric. We did notice the inventory levels move higher. We've seen that with a lot of companies this quarter just given inflation, but I was just curious if you're happy with the level of inflation -- excuse me, of inventory, if that's related to kind of product rollout timing or how we should think about that if sales growth kind of slows from here just given the macro?

Yeah, absolutely. We're happy with the level and quality of the inventory we have on hand. It's been a big part of our strategy to maintain excellent customer service, which we've been able to do over the past several years. And that means we made a strategic decision to hold more months on hand of inventory. We made that decision way back in the middle of last year. It served us very well. That's exactly what we're continuing to do here. And that month on hand level of inventory remains pretty stable.

Okay. Great. Thanks. I’ll pass it on. I appreciate it.

Thank you. And our next question will come from Jason English of Goldman Sachs. Your line is open.

So I heard you loud and clear on the $10 million pipeline fill -- or it's not pipeline fill, buy-in ahead of price increase in pro. But you also mentioned a pipeline fill for the 1-liter product. Was that also a transitory boost to professional sales this quarter? And should we also expect it to be an overhang as that channel looks to run through that inventory in the third or fourth quarter?

Hi, Jason. Yes. There was some additional pipeline related to the 1-liter offering in pro in the U.S. And yes, for those two reasons you might expect to see quarterly phasing for professional will be a little bit lighter in the third quarter and then better in the fourth quarter for those specific reasons. I'll just note, though, even without those impacts, we're seeing good momentum and strength in our professional business globally and in the U.S. It's on a little bit of a lag, but we monitor our client data here to watch what's happening with the category and our own business, and we continue to outpace the category handsomely in terms of our sales growth in U.S. pro versus the total market.

That's encouraging. And do you think that's because you're gaining more distribution or is it just sell-through or attach rate within the salons where you already exist?

Both, absolutely both. So we're continuing to increase penetration. That's a big part of the strategy behind 1-liter offering as well, getting into new stylist's hands and into new salons. But per usual, we're also seeing those stylists that have adopted the brand in year two, year three continuing to increase their purchase rate as well. So a little bit of both.

Very encouraging. And like Lauren, I'm going to try to squeeze in with third one real quick. She referenced sequential growth or not lack of sequential growth in U.S. retail. DTC, we also saw a sequential dip despite prime day coming in June and 618 arguably being, it sounds like a much bigger event for you this year than last. Did you ship that in the prior quarter? Is that why we see a sequential dip or is there something else offsetting what I think would be sequential growth from both of those events?

No. The direct-to-consumer sales and growth, the 19% growth we had in the second quarter was consistent with our expectation. And really the signal that we sent on our last call, which was this consumer behavior shifting to physical retail and salons, any sell-in for prime day was included in the quarter. I'll just remind you that our business in cross-border e-commerce, while emerging really exciting, remains pretty small in the grand scheme of things.

Yeah. Make sense. Thanks a lot. I’ll pass it on.

Thank you. And our next question will come from Korinne Wolfmeyer of Piper Sandler.

Hi. Good morning. Thanks for taking the questions. So kind of a follow-up on that last one. On some of those big selling events you saw more recently on Amazon and Nordstrom. I'm curious generally, how did those go? And what kind of insights were you able to gather from those events, whether -- was it from a reaction to the pricing or some of the kits you offered? Just any color there would be helpful. Thanks.

Thanks, Korinne. I'll take that question. So on the -- whether it's Nordstrom, whether it's Amazon, what we do is we do it very strategically. And as you are aware, we have in traditional, not participate in Amazon Prime, but we also have started this year to look at Amazon advertising. And because it was such a tight process where we can actually say all things being equal, we did Amazon advertising. If we ran a prime programming that was very small, we wanted to see whether the advertising really had any impact. And the insight on that was, there was a solid impact that will increase in verified purchase reviews, which was very important in the scheme of our ranking from our consumers. And because of the insight, we now have an opportunity to say, do we want to do more advertising with Amazon? So that was the reason why we looked at the Amazon initiative. When it comes to Nordstrom activation, VIP activation with Sephora, these are consistent with our strategy of years past and we will continue to discuss during market weeks and meetings with those retailers to see what makes most sense, so that we serve our customers, at the end of it, what they want to get from those retailers specifically with OLAPLEX as well.

Helpful. And then can you just expand a bit more on the consumer reaction to the pricing increase? Have you seen any sort of impact to demand from this or has it been pretty well received? And then on the offering of some of the kits, we've seen a lot more kits be offered amongst the retailers recently. Can you just talk about your strategy on that [Technical Difficulty] you should expect to see a lot more going forward? Thank you.

Yeah. Great question, Korinne. Let me start with the price increase. We are confident that our price increase is still at the right time and at the right price point, primarily because we are an entry-level prestige price brand plus the fact that we don't do anything without making sure that we run the analysis and also do the research. And in this case, we actually with our transformation team conducted an independent market research which supports us that our products actually could command even a higher price. But we took that pricing on the back of knowing that we wanted to maintain the entry-level prestige price point. And then while its early days, we are not seeing any pushback. In fact, we have had retailers who came told us they were glad that we did it. So that's the first point. On your question on kits, I can't speak for everyone else, but on our end, every kit that we put out has a purpose whether it's for trial and then for consumers to then buy into the full line or whether it is an anniversary kit or holiday kits that we are anniversary-ing. So we don't just put up kit because we want to or need to, we put them out because we serve the purpose to acquire new customers and then to eventually convert them.

Thank you.

I would now like to turn the conference back to JuE Wong, CEO for closing remarks.

Well, thank you, everyone. It's exciting to have our fourth quarter reporting with all of you, and thanks for your participation. Thanks for the questions, and we look forward to seeing you at the next earnings call. Thank you.