OLPX - NASDAQ

Greetings, and welcome to the Olaplex Holdings, Inc. Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Michael Oriolo, Head of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to our third quarter fiscal 2025 earnings call. Joining me today are Amanda Baldwin, Chief Executive Officer; and Catherine Dunleavy, Chief Operating Officer and 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 for the 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 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 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 other publicly available information. Furthermore, the information involves assumptions and limitations, and you are cautioned not to give undue weight to these estimates. For today's call, Amanda will start by providing highlights of our third quarter performance and discuss the progress we have made on our strategic areas of focus, then Catherine will discuss our financial results and outlook. Following this, we will turn the call over to the operator to conduct the question-and-answer session. With that, I will now turn the call over to Amanda.

Good morning, and thank you, Mike. We're pleased to share third quarter results that exceeded our expectations. Our team executed well across a range of key initiatives, resulting in improvement in our sell-through trends at the end of the third quarter. This sell-through improvement coincided with the Hair Mask launch and our first fully coordinated 360-degree marketing campaign and demonstrates marked progress in our transformational journey. We remain focused on delivering the annual results we guided to at the outset of the year and building Olaplex for consistent, profitable growth over the long term. Before diving into our strategic progress, here is a summary of our third quarter results. Net sales of $114.6 million, down 3.8% year-over-year, yet better than our expectations, partially driven by earlier timing of shipments. Adjusted EBITDA of $30.8 million, a margin of 26.9%. This exceeded our internal expectations, driven by strong flow-through of our sales beat. Turning to our performance by channel. In professional, net sales grew as we continued to benefit from our strong management of promotions. We outperformed our expectations and are seeing early green shoots in regions where we reset our relationships and are starting to invest in marketing and education, working more closely with our partners overall. Specialty retail sales were down in the quarter as expected. Quarterly sell-through was broadly consistent in the second and third quarters with encouraging improvement exiting Q3, led by recent innovation. Direct-to-consumer sales declined, as expected, following large sales events in the second quarter. However, we outperformed our expectations and saw strong sales momentum coinciding with tentpole events where we have strategically focused our marketing and promotional efforts. Now let me discuss our progress in the execution against our strategic priorities. As we've discussed, we have 3 strategic priorities for 2025: one, generate brand demand; two, harness innovation; and three, execute with excellence. First, generate brand demand. Year-to-date, we have invested significantly in our brand while still generating strong 25.5% adjusted EBITDA margin. We believe these investments are showing early signs of working. In 2025, we set out to build a brand and a marketing engine implemented in 3 stages: first, building the brand baseline; second, creating a brand platform; and third, building an ongoing content engine. In the first half of the year, we focused on the first 2 stages, with our late February brand refresh in the U.S. and the April launch of our new [ Design to Defy ] brand platform. Our recent brand health tracker indicates that this investment has been successful in helping reach our goal of creating the emotional connection that drives lasting brand relevance, resilience, and love. As you may recall, early research conducted when I first joined Olaplex indicated that our brand was seen as effective yet cold and clinical. According to the latest brand health tracker, which we fielded at the end of the quarter, versus the baseline taken before we relaunched the brand, Olaplex is now perceived as more approachable and alluring while retaining its core identity as a scientific and iconic brand. We achieved significant growth across every stage of the brand funnel -- awareness, consideration, Net Promoter Score, and saw important gains across key associations, such as, helps me take great care of my hair and is key to my beauty routine. Increased awareness successfully translated into stronger consideration, including significant lift in both current stated usage and future purchase intent. This is very encouraging as we believe this survey is a leading indicator of future brand momentum. In the third quarter, we shifted to executing against the last phase of brand building, developing a consistent, digital-first content engine that supports both the transformational and scientific storytelling behind our core and new product launches. This is critical to amplifying the early indicators we saw in our brand health tracker. This strategic evolution was evident in our marketing campaign surrounding the late August launch of our 2 new hair masks, Rich Hydration Mask and Weightless Nourishing Mask. This was the most integrated product launch in our history, with full 360-degree execution. Simply put, this launch was the first time in which we had the team coordinated and the brand baseline built to execute the right content at the right time in the right place. As I have discussed in prior calls, an essential part of our strategy is clearly explaining and getting credit for the power of our science in a meaningful, compelling way. Our hair mask marketing campaign was anchored in this strategy with content that made our superiority clear and easy to understand for both professionals and for consumers. Our hair masks extend results through 5 washes in a marketplace which is often oriented to instant cosmetic impact, not long-lasting healthy hair results. Across our professional and specialty retail channels, our education materials and visual merchandising provided compelling support for the superiority with microscopic images of hair when using our hair mask versus competitor offerings and with model shots highlighting hair results before use, after a single wash, and after 5 washes. In addition to having the right marketing content rooted in science and product efficacy, our team successfully coordinated the launch with a single big bang approach across all channels, creating initial buzz and a more sustained and measurable impact. First, consistent with our strategy to honor and empower the Pro as the start of our flywheel, we initially launched our masks with pros several weeks before the products were placed on retail shelves. In addition, we launched masks with back bar sizing, which, combined with our recent scalp innovation, allows for a complete root-to-tip service offering for our Pros. By launching with the Pro-first, we reinforced our commitment ensuring professional validation and brought education directly to salons across North America. Secondly, we coordinated a timely and unified launch across PR, influencers, merchandising, and our own channels, great buzz through a disciplined full funnel strategy directed at driving and converting broad awareness down to the point of sale at retail and e-commerce. We implemented a full funnel influencer approach with over 1,000 high-impact and mid-funnel influencers that supported always-on content, combining both education and science storytelling for emotional appeal. We created a high-visibility experiential activation through the [ mask ] market, a pop-up event in New York City, which connected Pros, influencers, media, and consumers during Fashion Week. The event focused on hair innovation and brought hair science to life in an engaging format, featuring interactive stations, hands-on demos, and personalized routines where guests can discover which of Olaplex's 2 breakthrough hair masks is right for them. Ahead of the event, there was a line stretching for multiple city blocks, which speaks to the brand strength of Olaplex. The event generated nearly 700,000 impressions across outlets in only 3 days. We are pleased with the early success of the campaign with both sell-in and sell-through outperforming expectations at key retail partners. Now that we have the 3 foundational pieces of marketing and generating brand demand in place, we will work to refine, optimize, and accelerate our strategy as we move into Q4 and plan for 2026 and beyond. Moving on to our second priority, harness innovation. The successful launch of mask highlights our strategy to create new scientific products that have the potential to change our trajectory. To that end, let me share a bit more about the science that served as the foundation for our fully integrated marketing campaign. Hair masks are intensive conditioning treatments. Adding a hair mask to a routine can provide additional benefits, helping to repair, strengthen, and restore moisture even further than a daily conditioner. Hair masks also represent a meaningful category within hair treatment with strong growth where we have been underpenetrated. Most hair masks on the market only provide immediate gratification. One wash it's in and the next it's washed out. In contrast, our hair masks are formulated with Biomimetic Cuticle Technology and Olaplex's proprietary Bond Building Technology. This technology is designed to repair and seal the cuticle to lock in hydration and strength, protecting the inner hair fiber and extending results through 5 washes, actually improving hair health over time versus simply band-aiding it. This is clearly very powerful science that can enable the highest quality products and demonstrates our overall product philosophy to ensure we are truly improving hair over time. Beyond strong initial sell-in and sell-through trends, we have seen very positive consumer response with 4.7 star review average and strong reception from both new and existing customers with many mask customers being new to the brand according to our internal DTC data. In fact, of 2025 product launches, we have the top 3 selling prestige hair products in both dollar and unit sales for the third quarter of 2025 per Circana data. In addition, with product development, one must always be building for the future. Over the last year, we have created an innovation team and cross-functional processes that we believe set the stage for a robust and consistent forward-looking pipeline with a cohesive launch calendar. These changes have enabled us to launch 6 new innovative products this year, including our 2 new hair masks. We are additionally encouraged as we look at what we are building for the long term. During this quarter, we announced the acquisition of Purvala Bioscience. Purvala seeks to develop transformative bio-inspired technologies with applications across health and beauty industries. What we've accomplished to date has already left a meaningful impact on our industry. And we believe that with Purvala, we have the potential to create the next generation of disruptive science-backed product innovation alongside our patent-protected Bond Building Technology, Bis-Amino. With only approximately 30 SKUs focused within prestige hair care and our expectation to launch 2 to 3 meaningful innovations annually, we see large white space potential for Olaplex, and we look forward to sharing our upcoming innovations along the way. Lastly, our third strategic priority, execute with excellence. We've been working hard to improve our focus and speed of execution through streamlined processes and clear KPIs. We know that when we streamline processes and achieve those KPIs, we drive results. For example, as we started to discuss in our last call, our education and sales teams have doubled down on reconnecting with the Pro via Blitz program, which has been expanded to 3 additional cities: Los Angeles, Chicago, and Dallas in the quarter. Our data tells us that the sell-through in cities where we have done a Blitz is on average at least mid-teens percentage higher in the 2 months following the Blitz versus the 2 months prior and also outperforming control markets. We look forward to expanding this effort. In addition, in preparation for the fourth quarter, we reorganized and increased our field sales team with improved coverage in key geographic markets, optimized our accountability and reporting metrics, and refined our event execution process to drive experiential moments in store, all with the ultimate goal of driving sell-through results. Our second key focus with this priority has been executing a globally aligned go-to-market strategy designed to focus our investments on the countries we believe offer the greatest growth potential while ensuring brand execution is consistent around the world. This strategy follows a 3-tiered approach with: one, partner-led priority markets; two, direct investment markets; and three, light-touch partner markets. We are already making tangible progress across each. In partner-led priority markets, our global sales and education teams have begun visiting and reengaging directly with key partners. In the quarter, our teams visited partners in Japan, the Nordics. and Germany. Our sales leaders are also working closely with our partners on goal setting, future planning, and setting measurable objectives and KPIs. This focus and increased partnership is already bearing fruit with our key partners, aligning on joint business plans and making investments alongside us as they are inspired by what they see as a positive change in how we are working together and are leaning in on our transformation. We are also seeing positive signs in direct investment markets. In the U.K., where we realigned our teams with clear KPIs and invested more in marketing, our sales are outperforming broader international trends. In summary, we are encouraged by the execution of our Bonds and Beyond strategy to date and believe the sequential improvement in KPIs since our first coordinated large-scale 360-degree marketing campaign and product launch, traction in our international realignment, and future R&D investment provide optimism for Olaplex's future. We are pleased to reiterate annual guidance. And with that, I'll turn it over to Catherine to walk through more of our third quarter results and the outlook for the fourth quarter. Catherine?

Thank you, Amanda, and good morning, everyone. We delivered strong results this quarter with both top and bottom line performance ahead of our expectations. We are making decisive progress on stabilizing the business and are well positioned to deliver on the commitments we set out at the beginning of the year. Third quarter net sales were $114.6 million, a 3.8% decrease year-over-year, which outperformed our expectations across channels. We are encouraged that our sell-through trends continued to improve, especially in the last weeks of the quarter. Consistent with our practice throughout the year, I will review both our third quarter and year-to-date performance. We believe looking at year-to-date results is helpful to understand the progress made in our transformation given the significant changes underway and potential variability in quarterly net sales metrics. By channel, professional increased 5.3% year-over-year in the quarter to $44.5 million, with net sales increasing 1.8% year-to-date. This growth is driven by our strong management of promotions. We are also seeing benefits from our strategic initiatives. In North America, we drove growth in independents, which helped offset softness in larger national chains. Our Blitz strategy successfully drove sales acceleration in those markets where we have led events, as Amanda discussed earlier. Internationally, we saw select partners respond positively to our reinvestment and increased partnership. As mentioned earlier, in the third quarter, we made tangible progress on realigning our international markets. This caused revenue shifts across channels, which served as a tailwind to professional or serving as a headwind to retail. Specialty retail declined 13.5% year-over-year in the quarter to $36.9 million with net sales decreasing 6.8% year-to-date. We believe inventory levels at our key customers are in a healthy position. Direct-to-consumer declined 2.9% year-over-year to $33.3 million in the quarter, with net sales increasing 1.6% year-to-date. As expected, the third quarter experienced headwinds following the large sales events in 2Q. Our strategic shift from always-on to timed promotions led to strong performance in tentpole moments with key partners. For example, during a key customer's event in July, 4 of our featured SKUs were the #1 ranked items in their respective categories, with nearly 60% of customers during that period identifying as new Olaplex users. Year-to-date by region, U.S. net sales were down approximately 4%, with international sales up approximately 2%. These year-to-date trends were largely driven by third quarter results, with international outperforming expectations, including continued benefit from the impact of better management of promotions. We saw better-than-expected trends in select regions, specifically in our direct investment markets, where we have refocused our commercial investments and intensified joint business planning. U.S. net sales remained down as we continued to focus on sequentially improving sell-through. Adjusted gross profit margin for the quarter was 71.5%, up 70 basis points year-over-year, as lower margin on new products that have not yet reached full production scale or efficiency was more than offset by margin expansion stemming from our improved promotional experience. Year-to-date adjusted gross profit margin is 72.2%, flat year-over-year. Adjusted SG&A was $51.3 million for the quarter and $150.0 million year-to-date, an increase of $29.7 million year-over-year. This increase is aligned with our strategic priorities and primarily reflects investment in sales and marketing, which increased $6.2 million year-over-year in the quarter and approximately $20.8 million year-to-date. Adjusted EBITDA was $30.8 million for the quarter, representing a 26.9% margin. This compares to 37.5% margin in the third quarter of 2024. Year-to-date adjusted EBITDA is $81.0 million, representing a 25.5% margin, compared to 34.8% in the prior year. This year-over-year change reflects the strategic investments in marketing and people we are making to position our business for sustainable long-term growth. Turning to a review of cash flow and balance sheet. We generated positive operating cash flow again in the third quarter, reflecting strong management of our working capital and the power of our asset-light business model even as we invest for growth. We ended the quarter with cash and cash equivalents of $286.4 million and debt of $352.1 million. Inventory was $73.3 million, down approximately $12.6 million from $85.9 million in the third quarter of fiscal year 2024. We feel good about the composition and content of our inventory in both our warehouses and at our key retail partners and continue to carefully manage stock levels in support of new product launches and refreshed merchandising. We are pleased to maintain our full year 2025 guidance. We expect net sales in the range of minus 3% to plus 2% versus fiscal year 2024, adjusted gross margin between 70.5% and 71.5%, and adjusted EBITDA margin of 20% to 22%. This guidance assumes no material impacts from tariffs as we believe we are minimally exposed, although the trade environment remains fluid. Our outlook considers earlier timing of sales that benefited the third quarter, and we are mindful of the uncertain macro backdrop into holiday. As we continue to execute our globally aligned go-to-market strategy in international, we expect revenue shifts across channels. We believe that this will particularly benefit professional while serving as a headwind to retail. In DTC, we balanced optimism for our holiday plans with weakening consumer sentiment. Additionally, we are cognizant of some planned industry destocking, which we are proactively managing, and which we expect will particularly pressure DTC. I'd like to close with a quick summary of our progress and strategic context as we move to close 2025. Our results this quarter, outperforming expectations in sales and profitability, aren't just financial metrics. They are tangible indicators of our strategy in action. Our strategic execution is beginning to work. The successful fully integrated launch of our new hair masks demonstrated that we can execute a coordinated 360-degree go-to-market strategy. This launch is a model for how we will drive brand execution going forward and the early impact on sell-through is encouraging. The foundation for growth is strengthening. We've made foundational investments to transform how the market perceives Olaplex. We believe this brand building is a leading indicator of future momentum. Our harness innovation priority is accelerating. We believe that the acquisition of Purvala Bioscience and the success of masks are the early stages of us building the next generation of disruptive science-backed innovation. We are not just managing the business, we are working to rebuild for long-term consistent and profitable growth. Our operating discipline, demonstrated by strong cash flow and margin management even amid strategic investments, gives us confidence in the ability to deliver on our full-year forecast and, more importantly, to position Olaplex as a strategic leader for years to come. Operator, we're now ready to take questions.

[Operator Instructions] And the first question comes from the line of Susan Anderson with Canaccord Genuity.

Nice job on the quarter. I wanted to maybe ask about -- I think you guys mentioned some orders were pulled into the third quarter. Was that across both spec retail and professional? And then I think the reiteration of the guide implies a pretty wide range for fourth quarter. I think previously you expected the fourth quarter to be up high single. But I guess with that pull forward now, should we expect anything different for fourth quarter? And I have a quick follow-up.

This is Catherine. Thank you for the call and the question. We are pleased to be able to reaffirm our guidance for the third consecutive quarter. And as you know, we really plan our business on an annual basis, and we're laser-focused on delivering our commitments as we enter the fourth quarter. And we think we're in a strong position to do exactly that. As you think about the fourth quarter, we feel great about what we can control. We have strong plans for the holiday season, and we did see encouraging sell-through trends and positive consumer and partner response to our marketing activations and innovations. Our improved execution, as we talked about, particularly in masks, allows us to harness our innovation. And again, we feel really great about the things that we can control. A few factors that are impacting our fourth quarter thinking is: one, the macroenvironment. Consumer sentiment is increasingly uncertain as we head into the critical holiday season. Consumers seem to be shopping around big events, but are more discerning at other times. Timing shifts, as I mentioned, we did see some earlier-than-expected shipments in the third quarter, which we think could impact the fourth quarter. It's not like we saw one big order that said this is the holiday shipment and it was a pull-in, we didn't. It was that these orders came in, in September that we thought might come in, in October. To the extent that it's timing depends on how our sell-through goes throughout the quarter, in particular, holiday. And then as I mentioned, we're also navigating some industry destocking that we expect to pressure fourth quarter, particularly in our DTC channel. However, it's important to note that inventory is in a very healthy position we believe, and with our sell-through trends, we're in a great position to deliver the year. So year-to-date sales, this is the way that we encourage everybody to think about it, are down about 1% for the year, right in line with the midpoint of our annual guidance range. And again, we're focused on delivering the guidance that we've happily reaffirmed.

And then I just want to follow up maybe on the Purvala acquisition. Not sure if you could give more color, just about how you're thinking about their molecules and how they fit with Olaplex, whether that's in hair or another area of beauty. I believe you already utilize some of them. So I guess just curious when do you think in terms of timing you will start to see some new products with these molecules roll out.

Susan, it's Amanda. Thank you for the question. So I'll try to give a little bit of color, but as I'm sure you can appreciate where our future innovation is going is something that we'll share as it emerges as we did with mask in this quarter. But look, I think the thing to understand about us is that we are really focused on how do we continue to deliver science-backed breakthrough products. Bis Amino is an incredible technology. It's one that still stands on its own and is certainly above the pack in terms of what it can do in terms of relinking disulfide bonds. But there are other things that we hope to be able to do that require different technology. So there'll probably be a balance, I would say, and there'll be certain things in every formula that's unique that we'll be able to scramble and bring to the market as fast as humanly possible. [ Harnessing ] innovation means moving quickly. And there are some things that will take longer. And I've spent a lot of time personally with our chief scientists. I've met the folks that are working on these technologies. They spend a lot of time just really understanding what we can do. And I think that a strong innovation platform has both immediacy to it as well as things that are bigger bets that take time. So you'll see, I think, both from us going forward, and we'll continue to report out on that and certainly highlight as we're using the technology where it's coming through so that people understand.

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

This is Lillian on for Olivia. I just wanted to ask a bit about the holiday setup. What are you hearing from retailers? And then just any color on what you can share on sell-in or sell-through expectations would be helpful. And then just how are you approaching holiday marketing this year? Are there any changes from prior years?

I think we're still in the midst of that as we anticipate the holiday coming up in really the next few weeks. So what I would say is that our marketing organization is ready. And as we highlighted, and we were talking about the mask that we really have started to hit our stride in terms of our ability to deliver the right content at the right place at the right time. So we're excited about those pieces of our marketing strategy starting to hit the market really as we speak. So it's too soon to say anything more than that. But it is an important part of the Olaplex brand is selling during holiday. It's always something that I've thought of as a real sign of our strength as a brand is our giftability and the desirability during this time of year is quite unique, I think, for a hair care product. You usually see a lot of momentum in other categories. So look, I think that this is one that we'll all be watching. And I think that's why we kept our guidance as it is. And as Catherine said, left ourselves flexibility for what we do expect to be an important promotional period in the category.

And then just as a follow-up, I'm wondering if you could add any color on the overall promotional environment across key channels right now. Are you seeing any more aggressive discounting from peers or retailers and just how you're positioning yourself within that backdrop?

We're obviously watching everything that [indiscernible]. And there's a lot that comes in Black Friday, Cyber Monday that we're several weeks away from, but we're certainly ready to take things as we see them unfold in the market. And it was a position that we took last year as well at this time was to make sure that we were ready to read and react to what's happening.

The next question comes from the line of Jonna Kim with TD Cowen.

Just first one around investments. Obviously, you've made nice progress there. But as you think about next year, how much more investment do you need to make? And what are some of the areas that's left? And I would love to hear just more about your pricing strategy as you think about next year, how you're thinking about the pricing structure across your product portfolio.

As we talked about a couple of things with respect to the investments that we continue to have incredibly strong margins despite the fact that we have invested significantly behind our brand this year. There's a couple of things that came through in the quarter this morning that we're talking about that I think are important to reflect upon versus what we were just talking about, which is really our own executional ability to actually get out there with what we call a big bang approach to a launch. And we really saw that we were able to do that [ mask ] and we were able to deliver against the sales for a product like that. So as we see those 3 critical pieces of a brand come into place as we really entered into this year, and I'm excited to be at the place where we're exiting it with all the pieces of the puzzle in place where we have the right brand baseline, we have our brand platform, we have our content engine. Now we're going to get into the place where it's test, learn, iterate, refine, maximize, accelerate, and every situation will be unique. So that's really where I would say at this point is really where we're focused from a marketing point of view. The other thing that is worth highlighting is the brand health tracker results. Those were something that we've been eagerly awaiting because there's marketing investments that are immediate and there's marketing investments that are, as we've always guided to, in this transformation that we're spending and investing and building for the long run. And brands aren't built overnight. Olaplex had an extraordinary foundation of science. We needed to build a brand around it. And so we've made those long-term decisions and those long-term investments. The best indicators on those, and folks along the way have said, what are you going to look for, Amanda, to know if you've pointed the ship in the right direction. And seeing those brand health tracker results was really exciting and rewarding for us as an organization to see that the things that we knew we needed to move the needle on, that we needed to move off of a brand that had extraordinary efficacy but wasn't necessarily connecting in an emotional way, that we really moved the needle there, that we moved our needle across the brand funnel. We continue to be #1 in EMV. We have these things that really point to a very strong and resilient brand that's being built here. So as we get into 2026, a lot is going to be focused on how do we build on the successes that we've seen thus far.

Yes. I'll just add a couple of things to that. In 2025, we've made significant strategic investments to establish the foundation for the business's long-term success. And these investments, combined with our enhanced executional excellence, allows us to better harness both our marketing spend and the power of our science-based innovation. And as Amanda just said, we have clear and positive signs of traction. So while we're pleased with these signals that our investments are working, I do want to emphasize that we're still in the midst of a multiyear transformation. We continue to rigorously collect data and the learnings to inform our path forward. And we're gaining a much clearer perspective on the appropriate organization and the investment base for future years, but we're not yet prepared to define that base. But as we've consistently stated, our focus remains on building for the long term, committed to achieving our 2025 guidance of 20% to 22% adjusted EBITDA, generating strong cash flow, and executing the transformation that positions the company for really long-term, sustainable, profitable growth.

The next question comes from the line of Javier Escalante with Evercore ISI.

I do appreciate a [ deliberate ] approach that you are taking to improve fundamentals and also that you exceeded internal expectations. But can you please provide a sense of your sell-out ideally in the U.S. and internationally? How do retail sales compare sequentially versus Q2 and the broader hair care market, if you can help us understand market share dynamics in a bigger picture way? And then I have a follow-up for Amanda.

I think what we indicated this morning is that second and third quarter had relatively consistent sell-through trends and that the launch of the rich hydration and weightless nourishing masks were ahead of our expectations. And so we're very pleased with that and how that [Technical Difficulty] for the future. The prestige hair care market is a very strong market. This is a market that continues to grow in the low-single digit -- sorry, the mid- to high-single digits, and I think is really poised for a lot of future momentum. So we're really excited about the category that we're playing in and our future and ability to continue to harness the growth that the consumer is seeing in that category. So that's what I would say on that topic at this point.

So basically, if the category is growing mid-to high-single digits, your sellout is lagging that, right?

That's correct.

And relative to, say, the market share trends that you saw, say, in Q2, how all these initiatives and the new products and the increased marketing, how does it look in Q3 relative to Q2? Because it feels that there is a disconnect. And I understand that there is a lot of things that are happening and they will take time to play out. But it's just trying to understand whether -- what gives you the confidence that your market share that you are going to -- when you are going to grow in line with the category then?

I think at this point, what I'd really again highlight is what we talked about with performance around the mask that we were very pleased that those are ahead of expectations on both sell-in and sell-through, that we have very strong indicators in our brand health tracker, that we're making investments that will pay off over the long run, that our innovation and plans for the future continue to be strong. We're in the middle of a transformation, as I've indicated from the very beginning. These things are not linear, and they're not overnight. But again, I want to really reiterate today that we're really pleased with the progress that we've made. We feel really good about where we're going, that we've got the right strategy in place, and we're just going to keep at it and keep chipping away at all the things that need to get done.

And Amanda, if you can expand on the strategy by looking into retail channels, Amazon continues gaining market share. You have a big business there. And at the same time, there has been a lot of entries in premium beauty, premium Amazon beauty by Estée Lauders and the likes. So how that alters your equation? Because it feels as if you have been focused on retailers that are losing market share.

We have a 3-pronged distribution strategy that I think is very strong and one of the things that I was excited to be able to -- when I came to Olaplex, I thought that we had the right distribution strategy and a really strong portfolio of different places where the product is available. What we've done as an organization is really pivot to -- focus on the Pro at the start of that flywheel, and you're seeing evidence of the strength in that strategy and where we're really Pro-first and Pro-early, and focused on how the Pro gives us credibility that other brands wouldn't necessarily have when they're in retail or DTC is really, really important and something that sets us apart. We think that there is a real exciting role for retail. It gives us reach. It gives us credibility in a different way when your product is on those shelves. And obviously, DTC is a huge global and growing platform for the category as a whole. It isn't about one or the other. It's really about where we want to get over time is growing the pie and growing the visibility of our brand. And I think we have incredibly strong partnerships that allow us to do that.

[Operator Instructions] And the last question will come from the line of Ashley Helgans with Jefferies.

This is [ Brian ] on for Ashley. On the sales guide, I know you reiterated, but I was curious if you could unpack any more dynamics that might be evolving under the hood in terms of your expectations for domestic and international or any other color there?

Thanks for the question. So we primarily think about our business on a consolidated basis where sales are down just 1% year-to-date. That's the best measure of our transformation progress given all the numerous revenue dynamics. There's a bit of divergence in the third quarter between our U.S. and our international sales, and I can share a little bit more about that with you. International outperformed our expectations due to strong execution. Our partners showed up with significant enthusiasm, I think, in the third quarter, driving, again, outperformed expectations. This, we think, could have been some timing of the orders that I mentioned earlier that we saw some October orders shift into September, but the extent will be based on how the sell-through plays out through the rest of the fourth quarter. Targeted investments that we've made internationally have started to pay off. Though much of our transformation is focused on the U.S., we are seeing early signs of success of our focused international investments. We've established closer, more direct partnerships, including increased joint business planning, and we're really seeing some positive green shoots and early results there. And I've mentioned this before, improved promotional management. We have implemented better promotional discipline across the board. And this is across the board, but some of that impacted the international channels a bit more in this period. And in the U.S., we are seeing sell-through that is improving, but it is not yet positive. And so that is some of the dynamics between U.S. and international. In short, international reflects strong channel execution and timing of partner orders. In the U.S., it's primarily a function of the timing of us changing our sell-through trends. It just takes time, but we're confident in our strategy, both U.S. and international.

And just one quick follow-up. Could you talk a little bit more about what innovation or marketing campaigns are driving the most new customer acquisition and engagement for you?

So the marketing campaign that was really the focus of the third quarter was the campaign on our 2 masks that we launched at the end of August. As we indicated this morning, we did see some nice new customer pickup on our DTC channel where we get that information directly. And I think that every innovation, like I said before, has different pieces of the strategy. This is certainly one where we're delivering unique science into a category that is one where there are -- there is competition, we're really outcompeting in terms of the efficacy of our product as well as the marketing strategy that is talking about that efficacy. So you have to have product that works, but also an ability to story-tell around it. And that's really where we're seeing a nice balance in how we've come to market on these products, in particular this quarter. That was really the focus for our marketing efforts.

At this time, we will not be taking any more questions. And I'd like to turn the floor back to Amanda Baldwin for closing remarks.

Again, thank you, everybody, for your questions this morning. We always appreciate it and wishing everyone a great close to the year.