Hey, we're going to get started. Really happy to have Olaplex with us today. We have JuE Wong, the company's CEO, and Eric Tiziani, the company's CFO. So let's just start off. I mean, it's been a challenging year, to say the least. So if you could just maybe speak to what has been the greatest hurdles to your performance, but also what's gone better than what you expected over this time? And also, what gives you confidence that you can get to that stabilization in the second half of the year that's embedded in your guidance? Right. Thank you, Lauren, for having us. Thank you to everyone for being here and to the people on the webcast that's listening in. Yes, you're right. It has been a challenging year, but what is, you know, good about it is that we have focused and kind of, like, looked at what is important and what has caused us with this slowdown. We look at the macroeconomics, where some of our stylists are really buying closer to need because their clients are coming in, you know, for longer in between visits. We have seen more competition coming into the space, which is not a bad thing because it raises awareness for the category. We have also seen more promotion activities, and we have traditionally not participated, but we have decided that, you know, very intentionally how we're going to do that. And then finally, there's also misinformation surrounding the brand that we need to address. So all of this has caused a slowdown, but given that we know that this is what's causing it, how are we addressing it? So we are stepping up in sales and marketing. You have heard us said that in 2021, we spent about $20 million, and this year we are budgeting an $80 million-$85 million spend on sales and marketing. And sales and marketing really focus on four key areas. It's a fully integrated marketing programming. Upper funnel, which is all about awareness build. Middle funnel, which is all about consideration, that includes education. And lower funnel, all about conversion, meaning that we want to look, make sure that the customers that engage with us will eventually convert with us. What has... To your next question, what has actually sort of, like, still worked for us and that we are happy that things are continuing in that direction, is that the fact that despite the slowdown, despite the challenges that we are up against, the fact that we are still the top beauty brand and the top hair care prestige brand in all the channels that we operate in. We have brand equity that when our consumers, you know, when we track our brand health, still continues to say it's a brand that they trust, it's a brand that leads with science and technology, and it's a brand that they will recommend to their family and friends. So we feel that all this will help us get into what we call stabilization and then eventually lead us to growth. We're just going to be maniacal in our focus in these key areas and continue to execute against our priority. Okay. Let me talk a little bit about the increased investments that you're making in sales, marketing, education. And like you said, you know, $85 million for 2023, up from the initial expectation of $70 million and $40 million last year. So I guess how are you maybe allocating the investments differently than you did last year? And when should we expect to see the yield and a positive inflection in demand? Because I think, you know, you've been on this path since the start of the year, but we're not really seeing the results in performance. Let me kind of, like, give it a little bit of a timeline dimension. Sure. When we talk about the fully integrated full funnel marketing, a lot of the upper funnel, where... upper funnel really refers to out-of-home advertising, billboards that you see in the five key cities that we focus on, which is the, you know, in Chicago, New York, London, Toronto and L.A. What we have done is that, that started at the end of May, so we will start. That is usually a slower build, so the result of that is going to be a little bit later. But what we have seen is that in the middle funnel, which is education, where we are able to go both online and offline, in store, as well as on our social media platforms, to really educate on not only the product knowledge, but any kind of misinformation around the brand. We have seen a little bit more traction. You saw from our direct-to-consumer when we reported at our August 8 earnings, where it actually has shown, you know, improvements with the digital media that we were directing to olaplex.com. I think, you know, what's going to happen primarily for everyone in this room and everyone listening in yourself, is how are we tracking and measuring the success? We believe that over time we will be better able to share these results, but we are definitely testing, learning, and optimizing. Specifically with media, we can look at the ROAS and also with anything that is with conversion, whether our sampling program is working, our expanded sales team that is in the field is delivering the conversion. All this will help us get to that stabilization situation that we are aiming for. Okay. Can we talk a little bit more specifically with the work you're doing to improve Olaplex's standing with the professional community? I know late last year you had spoken about reinstating the Pro Affiliate Program. Maybe you could describe for more of what that is, and has that been a success to date? Sure. Thanks for that. So the Pro Affiliate program in general is what we allow the professional stylists to be able to tell their clients to buy from our, from Olaplex.com, and for that, they get a commission. We have been very discreet in launching that program. The first time we launched it was during COVID, and the reason why was all the salons were shut down, and there was no means for them to make a living. And we wanted to allow that opportunity where they can direct their clients to us without any kind of promotional activity. They were able to do that and were able to sustain at least some income. The second time we implemented that was around about last quarter, Q4, at the beginning of end of Q3, beginning of Q4 last year, and that was because of the macroeconomic conditions, where the slower clients slower to meet and their clients coming in less frequently. That was helpful, but we are mindful about that because we also work with distributors, and we do not want the distributors to kind of think that we are taking customers away from them, but it's adding value. And we had those conversations with our distributors and the beauty supply location prior to launching the program, and they understood what we were doing. So we know that that works. But how you build affinity with a pro and build the love and the respect and the authority with them, it's really the activations that we're putting in. So that includes really more education on and offline, participating in events that are high profile or high activity. For instance, the trade shows and the hair shows, where they are able to come to us and learn more about our brand, and then through those classes, be able to buy their supplies for their salons. We are also looking at expanding our field sales team to include people in the beauty supply locations, because when you do that, you are intercepting at the point of purchase. Then finally, Key Opinion Leader salons. What Key Opinion Leader salons are, they are generally very influential, and they have a lot of reach, because what they say matters to the other stylists in the community. So we've built out a team that can go after these salons, what we call as Key Opinion Leader salons. By doing all that, the pros will see that we're investing in that channel, and the stylists know that they are important to us because they have always been, you know, a key pillar of who we are. Okay, great. Let's talk a bit about international. So international had been one of the key growth drivers you talked about since the IPO. And in near term, my understanding is there's similar challenges as we see in the U.S. and sort of English-speaking countries. But, are the longer-term growth prospects internationally still intact? Yeah. Thank you, Lauren. We absolutely see international growth as a major opportunity for our short, medium, long-term growth potential. And, you know, just to frame it, we're already over, just over 50% of our sales coming from markets outside of the U.S., so this is a proven opportunity. It's not something that we haven't already shown we can do because our technology is truly hair agnostic. We've seen Olaplex brand the products resonate across many different international markets. And the opportunity is both in existing international markets, where we already have some maturity, but still a lot of runway left for further penetration. Think of markets like Western Europe, as well as international markets, where we're really just getting started. You know, we've just entered in the last 18 months or so, you know, we still consider them white space markets. That's a big part around APAC, the Middle East and even Latin America. So we do expect that international growth will even outpace U.S. growth in our long-term growth algorithm. Okay. And how should we think about the margin differential between U.S. and non-U.S. markets? And as international, you said, will be the biggest driver of growth, like, how much of a negative mix impact is that on margins? It's, it's really not a factor of whether it's international or not. And, you know, we go to market internationally, in various ways. We run the business from the U.S. We've been increasingly putting boots on the ground to help manage relationships in different time zones and, and with our distributors in, in those markets. And so the cost structure is actually quite similar. The bigger impact is the channel footprint. So if we're going to start a market, let's say, through the professional channel and then build out beyond the channel, you know, model, then, you know, we've always talked about our, our margin differential between the channels is good, better, best. And, you know, the professional channel has a very good margin. The retail and, and, pure play e-commerce has a better, and then the best is our Olaplex.com. So it's more of a factor of the maturity level of the channel footprint than it is the actual international market. Okay. And also, notwithstanding what you just said, but I'm curious if that changes as you establish a local supply chain in Europe. You know, does that-- how does that impact the profitability over- Yeah. What's the timeline also? Yeah, it's certainly a benefit. So the most recent example of that is the co-manufacturer that we stood up in Europe to produce several of our core items servicing that region of the world. And it significantly reduces the cost we incur on transportation, which would have otherwise been coming from the U.S. And obviously, it's a tailwind to our gross margins in that part of the world. That's the model. And when we see scale at a certain level in different parts of the world, we'll make the decision to continue expanding our manufacturing network to get that production closer to that point of sale. So that's also the proven lever we've already demonstrated. ...And, you know, that's already in place in Europe, and it's what we'll continue to evaluate in other parts of the world. Okay. Let's just discuss also innovation. So I was curious if you could talk a little bit how you've prioritized how to attack the different white spaces, right? So you recently introduced dry shampoo, eyelash, but you've opened up other areas of potential growth over time, including skin, which is something you talked a lot about during the IPO. So how do you prioritize which categories to go after? And maybe on the flip side, are there areas in which you'd rather not participate, and, and why? Right. So a good, a great question. So if you look at our, you know, sort of ability to look at innovations, first of all, we have a focus and a priority to make sure that we have a 72-month rolling pipeline for innovation. And how our innovation gets informed is that we have a transformation team that really spies the market, spies the opportunities, the segments, you know, where we have permission to play and win. So that data-driven decision making really helps us really be more informed. And then we now have built out an R&D facility that really is world-class, as far as I'm concerned. I've been in five other companies with, you know, on an emerging category. It is a 60,000 sq ft space on the Pfizer campus, which is on the border of New York and New Jersey. What is exciting about a facility like that is we can formulate, we can do clinical testing, and we can batch. When we can do those kind of batch testing, you now attract world-class scientists who wants to collaborate with us. So that helps us with our innovation, whether it's on the technology front or participating in segments that are market. Yes, you've heard us, you know, talk about at the, even at the IPO, saying that our technology, the system nanotechnology, has applications in other categories of beauty, including skincare. And while we have gone into an adjacency like lash, I think given that this is our reset year, we really want to focus hard on getting ourselves back to a stabilized situation and then looking at growth. While we know our technology has those applications, we can always have an opportunity to go into that direction, but until we get our business stabilized, I think that is where your fourth—your last question on that is, you know, why don't we want to get there sooner? That's really the reason why. It's not because we don't think our technology can compete toe-to-toe. On the contrary, we have done testing on our technology, and it is truly a really game changer when it comes to other adjacency category, just as you have seen in LASHBOND. I think time will tell, but what is more important for us as a team is to focus on the present and making sure that we get this business to a good place, then we can build off even more. You know, being a more resilient and a stronger foundation, Olaplex is definitely even better for us. Okay, great. So, I mean, one of the questions we've had in that vein is how Olaplex and the sort of regimen-based approach would fare in a recessionary environment. And so while we're, I guess, not technically in a recession, there's segments of the U.S. population that certainly are experiencing, you know, what would feel like a recession. So, and then there's the question of what's still to come. So on your earnings call last month, you did call out several factors impacting your performance, but macro actually, interestingly, wasn't one of them. So I was just wondering if you're seeing any impact from lower basket size, less frequent purchasing, things that maybe would... you could presumably say would be tied to the macro. Right. So yeah, we have shared that, you know, the buy frequency by the professional stylist has somewhat of an impact because, you know, that is also ultimately determined by the clients coming in on, you know, let's say they used to come in at 6-7 weeks color their hair. Even by extending it by a week, by extrapolation, you can see the impact. But what is, I think, good about the offerings and the innovations that we put through, both for the professional community as well as for the end consumers, is that for the professional community, they know they have products and SKUs that we launch that truly is exclusively exclusive, what we call the back bar. The back bar is by prescription only. So when you're doing a service and you're mixing in the Olaplex prescription product, you are—that product is never going to be sold at retail. So that gives them a lot of sort of incentive to stay, you know, with us. But at the same time, our education and the ability to really show them how they can use the product to elevate their artistry and elevate the experience for their end, for their clients. The other thing is for the consumers, we have constantly launched products through our transformation tools, kind of information and data that they feed into us, that are non-cannibalizing, and they actually add value to the offering so that we can recruit new customers to the, to, to the brand. I'll give you a very specific example. We now have almost five shampoo SKUs in our offering, yet not one of them cannibalize each other. We have a daily use shampoo, we have a clarifying shampoo, we have a purple shampoo, and then we have a dry shampoo. So if you think about it, all these new shampoos in the mix does not take a customer that's already using us away. In fact, it allows them to buy deeper into the offering, but also attract new customers into the mix. And when you do that, it actually helps with the stylist professional community, because that gives them another avenue to retail our products to their clients. Okay. I guess, what would you say is more important or achievable in a tough consumer environment? Is it getting more consumers to shop, to participate in Beauty Olaplex, building, and like building awareness, or is it increasing the penetration with existing consumers? Right. So that's two things we have to do. One is the longer build with the professional in bringing them back into the fold and giving them the reason to continue with Olaplex, is longevity for us in terms of amplification of, how they see us and how to communicate and advocate for us with their clients. And that's because studies upon studies have shown, including our own independent research, shows that more than 60% of end consumers would rather take a recommendation on their hair care from their hair professionals than anyone else. Not a TikTok influencer, not a celebrity, not any kind of media person. Layer on top of that, what is interesting is that when a stylist recommends that product, it allows us to understand what exactly, you know, are they looking for. So that, to me, is an important piece of the ecosystem of the professionals coming to us. But in terms of end consumer, that's important, like retaining them, reclaiming the lapsed customers and also acquiring new customers is just as important because they are the ones that will drive interest of the brand to the stylists. Because 90% of the stylists in the U.S., at least, and in majority of the world, are what we call single payroll entity. So they don't have any money to market themselves. They need the brand to drive clients to them. So I would say the two-pronged approach, the longevity piece as well as the newness piece, to also reclaim lapsed customers. That's the number one reason why people move away from Olaplex when questioned. It's never that, "Oh, the product does not work for me anymore," or, "I don't believe in Olaplex." It's usually: "I'd like to try something new." So which means that we are still top of mind, which means that they are still in the category, and we can bring them back into the fold. The only thing I'd add there is, in this macro environment, we're trying to remove the barriers, whether it's for trial or expanding the regimen. So that's why sampling is so important for us to, you know, take a consumer that hasn't tried one of our styling products, let's say, and put a sample in their hands. Or to attract new consumers, it's why we put trial kits out there, you know, at the right value proposition for someone to enter into a brand. Okay, great. So let's maybe switch gears to some financial questions. So Eric, and Jue, you're welcome to answer. So on the earnings call last month, you'd mentioned that your inventory position at key accounts was in a much better spot going into the second half of this calendar year. So should we expect that the destocking dynamic is largely behind you in Q3? Is that fair? Yes, I think exactly, as we said on the earnings call, you know, just to take one step back, after a period of very fast growth in a more uncertain supply chain environment, our customers were holding higher levels of inventory to support that growth. And just because that was the macro dynamic that was coming, right? They were holding more months on hand. You know, over the past several quarters, we've been going through an inventory rebalancing headwind as our own growth, you know, momentum slowed, and we're in a more stable supply chain environment. So a customer that may have been holding four months on hand decided to hold three months or two and a half months, et cetera. We believe that at our key customers on our core items, we enter into the second half in a much better position. We have access to that data. Our planners are working with their planners at the accounts to be able to say that, and therefore, we do feel like we're in a better position going into the second half. It is dynamic. We have no control over a customer that says, "You know what? I can even go further. I'm going to hold a month and a half on hand." So those are always factors, but we're in a much better position. Okay, great. And then, last quarter, direct-to-consumer sales were much stronger than we'd anticipated, in terms of shipments that had a major customer promotion in July, which presumably was Prime Day. So I know you'd mentioned that sales will decline on a sequential basis just due to that. But is there anything else you'd share in terms of how much of an impact that's had on second quarter results and how sales are trending on brand.com? Yeah. So I would just say, that had more of an impact on the absolute dollar sales in the direct-to-consumer channel in the second quarter versus the third quarter than the growth trend, because it's the same event that we did the prior year as well. So that's more of a comment on the sequential dollar progression as we go through the year. And in that sense, the trend that we started to see in the second quarter, where direct-to-consumer, and just for everyone, that's both our own.com as well as pure play e-commerce retailers like Amazon, was much stronger. That's one of the green shoots that we pointed to, to say, you know, stabilization is our goal in the second half of the year, and this is one of the reasons to believe, because our investments are very much funneling into that channel. And so that includes, within what we call direct to consumer, our Olaplex.com business actually growing. And you know, we believe Q2 is a good demonstration of that, and that's a reason to believe the second half will follow with similar trends. Okay. Eric, when you talk about gross margins returning to the mid-seventies level in the medium term, can you just walk through some of the moving pieces that bring us back to that level? Yeah. Three drivers. From where we are right now, which is right around 70, you know, how are we gonna get back into the mid-70s range? One is we are still sitting on higher levels of our own inventory than we've targeted for ourselves. So there's some elements to that, that we're in warehousing space that, you know, that cost can come down. And, you know, back to leverage impact as well as we return to growth. So that's one driver. The second one is, as we've been dealing with that excess inventory, we've taken some provisions for obsolescence. We took $3.5 million charge in the second quarter. That's an example of a headwind related to that that goes away over time, or at least normalizes over time, and that's material. And the third one is actually mix. You know, as we talked about earlier, you know, the margin differential across our channels and, you know, direct to consumer is, as we expect that to continue to grow, relatively fast, relative to other channels, that has a positive mix impact on the business as well. So that's why we have a belief that we'll see gross margins normalize at that level in the medium term. Okay. And, I'm just curious, you know, what level of sales growth do you need to have more favorable operating leverage both to the P&L? Well, there's not a magic number there- Yeah. in the sense that the fixed costs, which, you know, which fall into cost of goods and fall into gross margin, are largely related to warehousing costs, so any growth is gonna help. And then the other factor is the inventory coming down. When you look at our SG&A, it's largely a corporate cost, which already are, you know, very efficient- Yeah. and we intend to keep them efficient, even while we invest in parts of the SG&A. And so, you know, modest growth even create leverage opportunities on the P&L structure. Okay, great. And then just last question on this topic was promotional activity. So should promotional activity remain elevated, and does that impact the timeline for getting back to that mid-seventies? So I would say that we strategically have maintained a position that we're not gonna over promote the brand. That's not good for the equity of the brand. But we are going to participate in you know, key customer tentpole events that are strategic for us, that attract new customers, that we can gain information along with our partners to retarget those customers as well. That's a normal level of promotion. Even if it's less than a lot of our peers, we consider that a normalized level of promotion, activity moving forward. The only bit that's, let's say, yet to normalize, is, let's say we have an item at a customer that's in an excess inventory position, and we need to promote through that a little bit. You know, that's a little bit of what we're experiencing in 2023, that is a tailwind once we get past that hump as well. Okay. And then just on the topic of sales and marketing investments, I know this year, like I said, $80 million-$85 million, about 18% of sales. How should we think about spend levels going forward? You know, should we assume there's always de-leveraging on this line item to, you know, continue to fuel the sales growth? Yeah, not necessarily. So, I mean, even to just take a step back on the P&L structure. So, you know, we're around $500 million in sales business with gross margins in the 70s%. You know, with the current level of marketing investment in the mid- to high teens%, which is much more competitive in our peer set. And then a very efficient other SG&A structure to get to our EBITDA margins in the high 30s%. We feel, you know, very good about that investment level this year. We're focused on using that investment to stabilize the business and create this inflection point back to growth. We're focused on testing, learning, and optimizing, as Jue, you said earlier. It's too early for us to say whether that's, you know, gonna go up a little bit or down a little bit as a percentage of sales in 2024 and beyond. We start from a very attractive financial model and profile that we think is sustainable. Okay. When you gave the initial guidance in February, you discussed 2023 as a reset year, and Jue referenced that again earlier today. But as the year has unfolded, but it's taken longer to see sales stabilize. So is this still the right way to think about it? You know, could the reset probably continue into, to next year? I mean, I think let's look at it this way: We want to work towards stabilization, right? I think that's really what's going to be the key factor for us. Everything that we are implementing and putting in place really helps us get there, because especially when we are able to measure anything that is measurable and track, we can feel very comfortable to... You know, I mean, Eric will give us permission to spend deeper into it, and if it's not, Eric is gonna tell us, "Look, this is insane." You know, like, "Do you want to relook at something?" On the upper funnel, we are going to still put our, our, our, you know, our focus on it, because that is building brand awareness. When we look at our brand health tracker, aided awareness is higher, but unaided awareness is still about 15%, which means that 85% of the people don't even know who we are. So there's a lot of runway for us to help, you know, us to be more aware and then really have people consider and engage with us and eventually convert them. Okay. Just in our final minutes, I'd just be curious to hear from you both, what does success look like for each of you? And we're hopefully sitting here, you have this in your calendar for next year, right? So what does success look like a year from now? I think first and foremost, we are able to come here and show you that, look, the business has stabilized. We are on, you know, a quarter and quarter healthy, you know, sort of trajectory. Very important, how for us to get there is that we need to make sure that our core competence continues to be strong, which means it's our stylist community that continues to see the best fruits of our investment behind them and behind the category. That our core SKUs continue to resonate and be the best in class, because we have seen them continue to be, you know, the top SKUs in the business and in the channels that we operate in. Definitely, you know, our innovation. Our innovation is to halo our core and then be able to also share with you that the culture that we have, that our people are motivated, that they are inspired to continue to deliver, because we continue to invest behind them. Yeah, and I'll just say, delivering what we've said we intend to deliver, you know, this time next year, which is first, stabilization and then an inflection point back to growth. You know, come back to the financial profile of this business, which is very profitable, generates a lot of cash. We have incredibly engaged consumer and stylist base. We have excellent partnerships with our key accounts and distributors. You know, we get this business back to growth this time next year, and, and there's a tremendous value creation opportunity, we believe. Okay, great. We'll wrap there. Thank you so much for being here this year. We're gonna go to a breakout session, but please join me in thanking Jue and Eric for being here. Thank you. Thank you very much.