OLPX - NASDAQ

Good morning. Joining me today are J.P. Bilbrey, Interim Chief Executive Officer; and Eric Tiziani, Chief Financial Officer. 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 filings the company 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 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. Additionally, during this call, management will refer to certain data points, estimates and forecasts that are based on industry publications or other publicly available information as well as our internal sources. The company has not independently verified the accuracy or completeness of the data contained in these industry publications and any other publicly available information. Furthermore, this information involve assumptions and limitations, and you are cautioned not to give undue weight to these estimates. With that, I will turn the call over to J.P. Bilbrey.

Thank you, Patrick, and good morning, everyone. It’s a pleasure to be with you today. I joined Olaplex’s executive chair in July 2023 because I saw an innovative company with a special brand. A leader in the attractive high growth and resilient Prestige Hair Care category, offering product differentiated by patented technology that delivers superior performance. Since joining the company, I have been spending my time digging in to the business, trying to better understand both our strengths and our areas of opportunity. For this process, I've developed a stronger understanding odds and appreciation for the competitive differentiators that make Olaplex unique. I have conviction in the potential for long-term growth and the opportunity to create significant long-term value. The passion of our loyal base of professional stylists and consumers is strong. I see significant opportunity for consistent, sustained growth as we evolve out portfolio with new technology leading innovation and build our business in attractive geographies and I believe our advantage business model will allow us to continue to deliver top tier profitability and cash generation. That being said, the business has faced several headwinds over the past year, including our own execution in the face of increased competition.I believe though that we're at a pivotal point in the company's evolution and the next phase of growth for Olaplex. It requires a different level of focus and improvement in brand building capabilities. My goal is to enable a path to long-term profitable growth and make the company stronger ensuring we have the right structure, tools, and operating systems in place to achieve our goals.To that end, I've been focused on leading 3 key initiatives since I've joined Olaplex. First, I've been overseeing the redesign of our integrated business planning processes to improve forecast innovation delivery and overall business performance management. Next, we're enhancing and investing in our insights and analytics capabilities, which I believe will give us the tools to invest more thoughtfully in our brand and distribution channels and become a more customer and consumer focused organization. And third, I've been managing the execution of our omnichannel strategy, seeking to reassert our position professional channel and ensure that the stylists are at the center of our brand.In addition to these initiatives, we reviewed and assessed our organizational capabilities to determine what we need for long term success and recently announced a leadership transition. We are very excited that Amanda Baldwin will join Olaplex as our next Chief Executive Officer by mid-December, bringing significant leadership and expertise in the beauty industry to the company.Amanda has spent the last 7 years as CEO of Supergoop, the leading SPF Skincare brand where she has led the company through significant growth. Prior to Supergoop, Amanda served as a Senior Vice President at L Catterton, a Global Consumer Focused Investment Fund, collaborating with management teams across the portfolio with a particular focus on the beauty sector and she previously led the omnichannel marketing strategy of Dior Beauty and held several positions at Clinique.She's an accomplished beauty executive. Amanda has deep experience with building Prestige brands and her mix of strengths across marketing, partnering with customers, product and team development, make her the ideal person to position Olaplex for long-term success. Until Amanda joins the company, I have the privilege to serve as interim CEO. My priority is to ensure that we remain focused on delivering our operating plans which starts with achieving stabilization in our sales trend in the second half of 2023. Our third quarter results and our 2023 guidance support our belief that we're making progress on that goal and in a moment, Eric will provide more details on those results. In summary, Olaplex is driven by great science and we see untapped opportunity for growth as we innovate, drive our existing channels and expand in to new geographies. We identified and are implementing changes that we believe will powerfully unlock the high potential of the Olaplex brand and I'm excited and look forward to partnering with Amanda, the board, and the entire Olaplex team to capitalize on these opportunities. With that said, I'll now pass it over to Eric to report on our progress towards stabilization, the execution of our priorities, our third quarter results and our outlook for the remainder of 2023.

Thanks, J.P. and good morning, everyone. Last quarter, we communicated that stabilizing our sales trends in the second half of 2023 was a top goal. We believe our Q3 results delivered solid progress against that goal. Our demand trends are stabilizing suggesting that our increased investment in the business is yielding positive results.I'd also like to share the following commentary on the progress we've made. First, aggregated sell-out sales dollars remained relatively consistent sequentiallyin Q3 with Q2 sell-out on an absolute dollar basis. This is a key metric we're tracking in terms of what we mean when we say stabilizing the demand trend. Second, there was little difference this quarter between our reported net sales decline of minus 30% versus prior year and the sell-out trend in our key accounts, which was down 28% versus prior year. As we continued the glide path to right size customer inventory levels for current levels of demand. As mentioned last quarter, we believe the months on hand inventory position at our major accounts on our core items remain in a good position. Next, olaplex.com performance remains strong, posting a second consecutive quarter of positive year-over-year growth. This channel has benefited from our increased marketing investment, particularly in upper funnel activations. In that regard, we continue to measure positive impressions of the brand from the Strength Starts Inside campaign with notable campaign lifts in brand awareness, consideration and affinity, and a more than $3 million increase in earned media value since the start of campaign. We believe this is cause for optimism for the broader business. Additionally, we increased our activations in the professional channel during the third quarter and have already observed positive early indicators from this work. With a holistic approach to increase our visibility with stylists and demonstrate our commitment to their success we implemented increased sampling programs, in-person and virtual evets, trade media placements, visual merchandising updates, and participation in key promotions. We recognize that there is more work ahead to further deepen engagement with the pro community. However, from these early days of these efforts, we are encouraged that our actions appear to be resonating and lastly, brand health metrics on Olaplex among Prestige Hair Care consumers, as tracked by third parties, remain strong and consistent with prior months. According to our external brand tracker, we are ranked Number 1 or tied for Number 1 for 10 of the top 17 premium hair care equities, including best for my hair, makes hair healthier, highest quality products and scientifically proven to benefit hair. In support of our stabilization goal for the balance of 2023, we also continue to deliver against the key priorities we establish our reset. These include accelerating investment in sales and marketing, increasing and evolving our educational assets and reasserting our position with our pro and Specialty Retail partners. Let me now walk you through the progress we made on these initiatives during the third quarter. Starting with sales and marketing, year-to-date, we have invested approximately $54 million and with one quarter remaining in the year, we now expect our marketing investment for 2023 full year inclusive of sampling and certain sales and marketing payroll to be in the range of $80 million to $82 million, compared to our previous expectations of $80 million to $85 million. This year, we have deployed a more balanced full funnel marketing strategy with a test, learn, and optimize approach to our spending. This quarter, we invested further in our full funnel Strength Starts Inside creative campaign that kicked off in June. Based on our marketing mix modeling analysis, we were able to shift more of this investment into our best performing content in our best performing marketing channels, namely digital, social and connected TV elements. We also made the choice to re-phase some of these planned investment from the third quarter in to the fourth quarter where we believe it will have a bigger impact around key buying moments for our stylists and consumers. We have also consistently spoken about the importance of the earned media value metric in our marketing efforts, which we believe provides a multiplier effect on the value of our marketing spent. We are pleased to report that in the third quarter, we regained the position as the Number 2 earned media value hair care brand in the U.S. and exited the quarter inSeptember as the Number 1 earned media value haircare brand according to Tribe Dynamics. This position was bolstered by the launch of a global creative social media campaign designed to reassert Olaplex's authority in science and technology. The campaign generated significant buzz on social channels and in media coverage, with more than 40 million views and impressions of the campaign and nearly 80 million views of the campaign's hashtag on TikTok. Moving to our education efforts. We continue to distribute new core education content focused on our science, provide more efficient and easier to use education materials for our US and international business partners and actively correct any mentions of misinformation on our brand in the market. In addition, as a reminder, we recently established an internal field sales and education team. Resources deployed against our Specialty Retail and professional channels in the U.S. We believe building this capability in house is both more cost effective and provides even better control of training on the Olaplex brand. Feedback from our Specialty Retail partners has been very positive as we have displayed our commitment to expanding our reach and support of the in-store experience. Another reset priority is reasserting our position with the professional and Specialty Retail channels. In addition to the increased proactivations that I mentioned earlier, we are collaborating with our Specialty Retail partners by participating in their high-profile category marketing events ensuring that we deploy a balanced approach to our promotional strategy and analyze the activities to measure success. We also leveraged the insight and capabilities of our Specialty Retail customers and executed targeted CRM activations with one recent campaign delivering millions of impressions, very high ROAS that exceeded industry benchmarks and a strong number of new users to Olaplex and we continue to deliver against our enhanced sampling program this year, with data revealing that our samples continue to convert at top tier levels in the industry. Now turning to our financial results for the third quarter. Net sales declined 30% year-over-year to $123.6 million in line with our expectations. By channel, as compared to the third quarter of 2022, professional channel sales declined 23.3% to $48.3 million. Specialty Retail sales decreased 41.8% to $43.2 million. Our Direct-to-Consumer channel sales were down 18.2% to $32.1 million. As we had signaled last quarter, the sequential absolute dollar increase in Q3 net sales of $124 million versus Q2 net sales of $109 million was largely driven by the sell-in of our 2023 holiday kits in the pro and Specialty Retail channels. The sequential absolute dollar decrease for DTC from the second quarter to third quarter was primarily related to the Q2 sell-in for a major customer promotion that occurred in July. By geography, in the third quarter, the U.S. declined 30.9% compared to a year ago and international was down 29% year-over-year. The decline in international was driven by the UK, Canada, and Australia, partially offset by gains from our growing distribution in Southeast Asia, the Middle East, and Latin America. Moving down the P&L, adjusted gross profit margin was 69.7%, down 5.40 basis points from 75.1% in the third quarter of 2022. Approximately 320 basis points is related to promotional allowance, 290 basis points to higher inventory obsolescence reserve and 70 basis points from inflation on product costs. These more than offset the 160 basis point benefit primarily from lower warehouse and distribution costs. Adjusted SG&A grew 18.8% to $33.7 million from $28.4 million a year ago. The $5.3million increase in adjusted SG&A from prior year is primarily the result of a $3.4 million increase in sales and marketing expense as well as an increase in payroll attributable to workforce expansion and other related expenses. Adjusted EBITDA declined 49.5% to $51.5 million versus $102 million in the third quarter of 2022. Adjusted EBITDA margin was 41.7% compared to 57.8% a year ago. Adjusted net income decreased 54.5% year-over-year to $33.4 million or $0.05 per diluted share from $73.3 million or $0.11 per diluted share in the 2022 third quarter. Now turning to our balance sheet. Inventory at the end of the third quarter was $112.8 million, down from $128.5 million at the end of the second quarter reflecting good progress against our goal to lower our inventory towards our target range for months on hand. Turning to cash flow. During the first nine months of 2023, we generated $128.5 million in cash from operations. We are generating healthy cash flow through our highly profitable business model, and as we improve our working capital position, primarily through lower inventory. We ended the quarter with $429.6 million in cash and equivalents, up $51.2 million from the end of Q2. This cash is generating interest income at annual rate of above 5%. Long-term debt net of current portion and deferred fees was $650.4 million. Now turning to our financial outlook, for fiscal year 2023 we now expect net sales in the range of $450 million to $460 millionversus our previously reported range of $445 million to $465 million. Adjusted EBITDA in the range of $166 million to $174 million compared to our previously reported range of $161 million to $176 million and adjusted net income in the range of $100 million to $108 million versus our previously reported range of $96 million to $108 million. For the year, we assume adjusted gross margins in the range of 70.5% to 71%. In the medium term, we remain confident that we can return closer to our historical adjusted gross margin levels in the mid 70% range. We continue to assume net interest expense to be approximately $40 million and an adjusted effective tax of approximately 20% for the year. In conclusion, we believe the third quarter represented good progress against our goal to stabilize the demand trend in the second half of 2023 and we are pleased to update the annual guidance range for this year. We continue to believe our company will once again achieve consistent profitable growth as we invest in foundational capabilities, leverage our patented technology and powerful community of advocates and implement our strategic initiatives. This concludes our prepared remarks. We will now turn the call back over the operator for questions.

Thank you. We will now be conducting a question and answer session. [Operator Instructions]. Our first question comes from the Susan Anderson with Canaccord Genuity.

Good morning. It's Alec Legg on for Susan. Just on the sell-outs, you mentioned it was starting to stabilize and are down 28% compared to 26% in the first half. I guess, can you talk about the exit rate of the sell-outs in the quarter?Just how the retailers are feeling about stocking levels and then maybe any incremental details on a unit basis just to kind of account for the promotional levels too.

Thank you. Hey, Alex, it's Eric here. Thanks for the questions.So yes, first I would just say, again, we're pleased with Q3 results delivery in line with our expectations, the sharpening of our guidance for the year, which we believe show good progress against this goal of stabilization.What do we mean by stabilization, one of the ways in which we've been talking about that is looking at absolute sell-out dollars, trending over time and stabilizing that trend and what we saw in the end of third quarter was good progress against that so stabilizing the sell-out trend versus Q2 was relatively the same in absolute dollars versus Q2 and to your separate question, we saw sell-out and sell-in trends, very similar. So we believe that we're passed and through the customer inventory rebalancing that we've experienced as a headwind earlier this year and that our key customers, our core items are all at healthy levels of inventory and weeks on hand. So, that's the key.The stabilization is the absolute dollar trend being relatively flat in the third quarter versus the second quarter happens to be a -28% sell-out trend in the third quarter and on a unit basis that was the last part of your question, we actually saw our average price tick up a bit in the third quarter versus the second quarter. As we continue to be less promotional on average than the rest of the category, but we are participating in some promotional events that we think are important for our customers, for our stylists and our consumers, especially when we see an opportunity to do that strategically and to acquire new customers, but not more promotional in the third quarter than previously and less than the category average.

Thanks. And then just on the overall operating or EBITDA margins, I guess, how are you thinking about balancing the gross margins of operating costs as you ramp up marketing?And then like you said, compete with other brands when it comes to promotions?

Sure. Well, let me start with gross margin.We know, and we've stated we've been dealing with some headwinds this year on gross margin, particularly around the actions we're taking on excess inventory levels on our side and in some cases promoting through, some of the slower moving items of excess inventory at our customers.Those are the big headwinds we've been dealing with in gross margin this year.We still believe as we've stated, that as we get through those headwinds, we see gross margin returning to that mid-70s range that we've been at historically and that will continue to support the investment levels that we want to put elsewhere in the P&L. We talked about as a priority this year in 2023, increasing our sales and marketing investments to get our message out.To be proactive about the Olaplex message, building awareness, building brand equity, really building the brand and we've been following through on that priority this year and we'll continue to do so. We we're measuring.We've talked about this as a test, learn, and optimize approach to our sales and marketing, and we're very much using the data and using the ROI analytics to direct that spend where we think it can perform the best for the brand.We see that in the upper funnel with our Strength Starts Inside campaign. We've been partnering with an analytics firm on at the marketing mix modeling around that and as we mentioned in the call, we use that information toredirect some of that spend to the best performing assets in the best performing channels. And we certainly also see it in our lower funnel marketing spend.So some of our performance marketing, whether it be in olaplex.com and some of our e-commerce platforms and retailer.com where we get very strong ROI and ROAS metrics as well.

That's very helpful. Thank you.

Our next question comes from the line of Rob Ottenstein with Evercore ISI.

Great thank you very much and appreciate you doing this call and bringing Amanda on. Look forward to meeting her soon.So the two questions, one, can you give us an update on where the social media buzz is, your ability to monitor it and counteract it and whether you see that still as a drag on the business now or is that dissipating in your view?And then second, perhaps go into a little bit more detail on what's going on salons, why this deep decline still and whether you have any kind of readout on the sell-out usage on the stylist level?

Absolutely. Thanks for the questions. First, on what we call the social media buzz, I would break this into two parts.One, just sentiment about the brand, right? We've talked about some of the misinformation in the past and that negative media and some sentiment in the first quarter of the year and we've really seen the sentiment improve and pick up and mentions negative mentions in social media drop pretty significantly as we've traversed through the year and as we've been investing to drive that narrative and correct misinformation in the market.So we've seen good progress there and the second part I would use to answer that question is what we talked about earlier in the call around earned media value.So this is an area that we've been investing in and we believe the big multiplier on our own marketing investment.We talked about how we've returned to the Number 2 position in earned media value in the haircare category in the U.S. in the third quarter and actually exited the quarter Number 1 on the back of a really successful campaign we had. So we're seeing good progress there. That's part of what we're talking about when we say we're making good progress on stabilization.And your second question was about the pro channel and again, last call, we talked about this area where we going to accelerate our investments in the balance of 2023. We've done that. We believe we're seeing green shoots from that and those activities resonate with the stylist community as well. The sell-out trend in Pro has been very similar to the trend we've seen elsewhere in the business, particularly similar to what we've seen in Specialty Retail.If I think about the third quarter and the stable trend we've seen frankly as we traverse through the quarter, if anything we saw Pro actually pick up a little sequentially as the quarter went on as those investments took hold.So we're quite pleased to see that as well.

Our next question comes from the line of Olivia Tong with Raymond James.

My first is just around what you're seeing in terms of the key drivers of the sequential improvement in dollars in Q3 and if we back into Q4, it looks like it doesn't necessarily continue in 4Q. I imagine that the holiday sell-in was part of that.If you smooth that out, if you could talk about the sequential trends that you're expecting, and then also in terms of exit rate on consumption, if you could talk to October trends, what you're seeing so far, and then just generally your view on what stabilization looks like over the next 12 months.

Thanks, Olivia. Absolutely. So, I'll start with this question around the progression through Q3 and Q4. And I'll startby maybe just talking about sell-in in the third quarter and then I'll talk about sell-out.So in terms of our net sales or what we call sell-in performance, Direct-to-Consumer have the strongest performance then followed by Pro and Retail in the third quarter when you look at those net sales declines.From a sell-out perspective in the third quarter, again, Direct-to-Consumer was the strongest and then Pro and Retail were actually quite similar in the sell-out decline trend.So let me explain why, what are the differences there? First of all, in Direct-to-Consumer, it's worth noting that the sell-out was better in the U.S. Our own olaplex.com, we talked about that growing again for a second consecutive quarter versus prior year. And even customers like Amazon, on the back of the investments we've been putting into that part of the business.Our DTC business was a little bit weaker internationally as we've held back on some investments to manage some of the market dynamics there. So just thought it would be helpful to give that additional color on Direct-to-Consumer.In Pro, as I just mentioned earlier, actually the cadence through the quarter is actually a slight improvement as we exited Q3 on the back of the investments we put in place there and in retail, we sold in less holiday kits into the Specialty Retail channel in the third quarter of this year versus the third quarter of last year.That's appropriate. That's to measure it with the other trends we've seen in the business and that's the reason why the sell-in or the net sales decline on Specialty Retailis a little bit worse in the third quarter than the sale out.So then you asked about what does that mean as we go into Q4, it's actually a very similar trend.When we say Q3 was within our expectations and good progress on stabilization that's exactly what we're saying about the projection we've made for Q4, as implied in this guidance.So yeah, there's a little bit of noise, quarter-to-quarter sell-inversus sell-out, but absolutely the guidance we provided implies and assumes a similar stable seasonally adjusted trend for the business in the fourth quarter and lastly, you asked about, what does stabilization look like for us over the next 12 months? It's continuing to follow through with all the priorities we've talked about. We're going to keep on investing against the business.We're going to keep on measuring that learning from it and optimizing that investment in a balanced way, not just lower funnel marketing, but the upper funnel marketing that we've been putting in place. That's really about the brand building we want to do here and we know that's going to take time.That takes time to fully have its impact on the business. So over the next 12 months, we expect to see even more impact from that as those investments have had some time to take root with our consumers, with our stylists. So, we'll say it again,top priority for the back half of this year has been stabilization of the demand trend. We believe this call and this update shows really good progress against that goal and that's going to set us up to a return to growth, a long-term profitable growth for this business that we know we can achieve.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

Hi, good morning, everyone. As you think about the expense structure of the business, Eric, and obviously the marketing investment this year, over next year or 2025, what is the expense structure of the business?How do you look at the puts and takes and what could be seen as a steady state and also on new products how are you thinking about new products going forward and timing?

Again, I would just say that our focus has been stabilization of the trend in the balance of 2023 and investing in our sales and marketing with this test, learn, and optimize approach which we believe is really helping drive that stabilization of the demand trend and setting us up for the right foundation, the right capabilities and poised for return to growth in future.We're not going to comment here on what that investment level looks like in 2024 or 2025. We intend to come out with our 2024 guidance at the right time that would, by precedent beyond our next call, our Q4 results call and we look forward to sharing more at that time.In the meantime, we're going to continue to invest behind the brand where we see opportunities and the other part of your question was new products where we still believe this is one of the big reasons that we have such, such big opportunity ahead of us.We remain and we still have a quite a limited assortment. If you know, when you compare us to other Prestige Hair Care brands, in the category.We're pleased with the new products that we've been launching, even in 2023, our LashBond, our Dry Shampoo, most recently our Purple Conditioner, these are all new segments for the Olaplex brand and therefore, we believe are adding some incrementality to the business and we're really excited. We've always talked about having a strong pipeline, a multiyear pipeline, and we look to continue launching new highly incremental science-driven technology-driven differentiated products to the category for many years to come.So that's certainly what we expect to be a tailwind for growth in the business in the future.

Our next question comes from Korinne Wolfmeyer with Piper Sandler.

I guess just to piggyback off of that last question, around the innovation pipeline.I mean, historically I guess in the past couple of quarters, you've talked about maybe some slower uptake of those newer products. Can you discuss what you've seen with those new launches here in this quarter?And what you're doing to help the uptake of new product launches be a little bit stronger, if that's really going to be a key driver going forward?

Absolutely.Like I said, we're pleased with the performance of these new products. When we look at how they're performing within their segments in the category, they are up there top 5 typically in terms of top 5 selling SKUs within that segment.Not all these segments are the same size, some are a little bit smaller than others, but we're happy with how they're performing within those segments and we believe they're also helping to develop the market to actually drive further growth in the category and for our customers in those segments.What I would say is, as the overall Olaplex brand has faced the headwinds that we've talked about throughout the year, our innovations have also felt that that halo of headwinds across the brand.So still performing well in the relative context, but let's say not as big as some of our innovations in the prior year just as, you know, the entire brand has faced those headwinds.What are we doing? We're getting better and better with each launch at execution and with the marketing plans and 360 marketing campaigns we're putting behind those launches. I think an important thing to note here is our plans are going to be not to launch and then move on.We also want to continue supporting those new products in year two, in year three to make sure we see them become long lasting, sustainable parts of the portfolio. That's always been a key element of our innovation strategy and so for that last part of your question, I would say hey, it's going to be that year two support and finding those additional moments to activate against the launches that we've had, for example in 2023 and that's our plan.

Got it. Very helpful and then if I could just touch on the DTC segment again, I know we touch on this briefly earlier in the Q&A, but you know, the DTC in the olaplex.com was positive and it seems like you know, where there were some quarterly dynamics that caused, you know, the overall DTC weakness.As we think about Q4 and then even into the early part of 2024, is it reasonable to think that that segment could return to positive growth as olaplex.com is delivering positive growth or is it there still some other dynamics going on that would cause it to still be negative?

Yeah. I would just say similar to the entire business focuses on stabilization and then returning to growth. Just as a reminder for everyone, when we talk about our Direct-to-Consumer channel, we're talking about olaplex.com in the U.S. and around the world, as well as Pure Play e-commerce retailers like in Amazon, doesn't include retailer.com, like a sephora.com or ulta.com that gets captured in our Specialty Retail sales. So I would just say, we continue to see relative strength inDirect-to-Consumer, in large part because of the investments we've been putting not only in the lower funnel against that channel but also as we think about the upper funnel investments we've made the Strength Starts Inside campaign, that's pointing consumers to learn more about the brand, to go to olaplex.com and we really believe this is one of those green shoots we're seeing from the investments we've made that are driving the stabilization and even in olaplex.com's case already driving year-over-year growth again.So there's a little bit of noise in sell-in andsell-out, as you mentioned, and as I talk through earlier, but we continue to see this channel having relative strength and that being very, very promising for the momentum we're building.

Our next question comes from the line of Sylvania Chaudhary [ph] with JP Morgan.

Thank you for our questions. In yourprepared remarks you mentioned participating in some promotional events where you see an opportunity to acquire new customers and participation in key promotions more.Can you just add more color, especially, as previously the company's stance was not too keen on promotions and also more on a broader level, how has your marketing plans overall changed on a with the change in management.

Thank you so much for the question. So let me tackle the promotionality question first.This is very consistent with what we've talked about in the past, really, in that it is not our strategy to over promote the Olaplex brand. We don't think that's right for the equity of the business.When you look at the data, we continue to promote less than the category average, but we do see important moments and events with our customers, stylists and consumers, where we think it strategically the right thing to do to participate. We've been pretty consistent about that throughout the course of the year.We're seeing good results when we participate in those events and we're often just looking for the angles,how do we make this as strategic as possible? How do we drive new customer acquisition?How do we drive further penetration through the regimen to make sure that that we're using that as a way for consumers and stylists to buy deeper into the regimen as well and we're pleased with those results so far and we can expect to continue that. In terms of any changes to our marketing investment or strategy with a change of management, as J.P. mentioned earlier, Amanda Baldwin, we're so excited that she's going to be joining the company in the middle of December.She has incredible experience in building brands and in driving marketing capabilities and we are really excited about what Amanda is going to be bringing onto this business as well.So that's not a change in our marketing strategy quite yet, but I'll just point to the comments I made earlier about testing and learning and optimizing. We are using our marketing mix modeling analytics to optimize and shift our spend as we go.So in our Strength Starts Inside campaign, we noticed that certain assets were performing better than others and marketing channels were performing better than others.We were able to take that information anddeploy that into how we want to invest that money in the fourth quarter.

Thank you. Our last question is from Jonna Kim with TD Cowen.

Hi, it's Tom Nass on for Jonah. Thanks for the question.Can you talk a little bit more about the dynamics you're seeing in market share trends and the competitive landscape and then just how does this play into your expectations for the balance between domestic and international growth ahead?And then lastly, if you could just provide an update on what you're seeing in terms of growth of the overall Prestige Haircare category.

Thanks, Tom. Great question.So let me start with market share trends. Very consistent. When we talk about stabilization of the sell-through trend, it quite naturally translates to relative stabilization of our market share trends as well that’s what we saw in third quarter versus second quarter, is that market share largely, stabilized and steadied out and that's the right base, right? The idea is you stabilize the demand trend here with a very healthy foundation for the business and then return it to growth.We think there's tremendous opportunity for value creation on that path. So market shares stabilizing. Between Domestic and International, you saw in the third quarter similar sales declines between the U.S. and International what we've said in the past is consistent again here in that some of our bigger international markets English speaking markets, the UK, Canada, Australia, have followed a similar trend, and similar headwinds, frankly, to what we've seen in the U.S. Now, that means we're also starting to see similar stabilization trends in those markets as we've also selectively increased our investments in those markets whether it be in PR or in some of upper funnel marketing investments that we've made in the UK and Canada specifically. Aside from that, what we're seeing is growth and really promising green shoots in some other international markets that we've talked about previously. Southeast Asia, the Middle East, cross borderecommerce in China and France and the Nordics in Europe as well.These are all markets that are smaller for us today but we believe we're seeing some really promising, momentum that is going to certainly pay dividends for us in the future.And last but not least, you asked about the category. We continue to see Prestige Hair Care globally as a very attractive and resilient category and it's continued to grow.That's continued to grow strongly in the U.S. We expect that to continue, frankly, in the fourth quarter and into 2024 and beyond as well.Yes, there's a little bit of a segmentation there front of Salon. So the pro-channel has been a little bit more challenged with macro pressures, but retail and Direct-to-Consumer have fared quite resiliently in 2023 and we expect that to continue. So we are in a very attractive category. We are focused on stabilization and doing all the right things to put the right foundation in place to return this business to very profitable growth.

Thank you. We have reached the end of Q&A session. I'll turn the call back over to Eric Tiziani for closing remarks.

Thank you very much.Thank you everyone for joining us today on the call. We appreciate your continued interest in the Olaplex business. Please reach out if you have any questions and we look forward to speaking to all of you again very soon. Thanks again. Have a great day.