Hair care company Olaplex (NASDAQ:OLPX) announced better-than-expected revenue in Q4 CY2024, but sales fell by 9.8% year on year to $100.7 million. The company’s full-year revenue guidance of $420.5 million at the midpoint came in 4.4% above analysts’ estimates. Its non-GAAP profit of $0.01 per share was in line with analysts’ consensus estimates.
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Olaplex (OLPX) Q4 CY2024 Highlights:
- Revenue: $100.7 million vs analyst estimates of $88.07 million (9.8% year-on-year decline, 14.4% beat)
- Adjusted EPS: $0.01 vs analyst estimates of $0 (in line)
- Adjusted EBITDA: $17.49 million vs analyst estimates of $11.57 million (17.4% margin, 51.1% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $420.5 million at the midpoint, beating analyst estimates by 4.4% and implying -0.5% growth (vs -7.8% in FY2024)
- Operating Margin: 3%, down from 15.4% in the same quarter last year
- Market Capitalization: $914.8 million
Amanda Baldwin, OLAPLEX’s Chief Executive Officer, commented: "I am pleased with our end to the year with our fourth quarter results ahead of the expectations we shared in November. During 2024 we laid a critical foundation for our business and brand transformation and I remain confident and optimistic about the strategies put in place as we step into a meaningful year ahead for the business."
Company Overview
Rising to fame on TikTok because of its “bond building" hair products, Olaplex (NASDAQ:OLPX) offers products and treatments that repair the damage caused by traditional heat and chemical-based styling goods.
Personal Care
While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $422.7 million in revenue over the past 12 months, Olaplex is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
As you can see below, Olaplex struggled to generate demand over the last three years. Its sales dropped by 10.9% annually, showing demand was weak. This is a rough starting point for our analysis.
This quarter, Olaplex’s revenue fell by 9.8% year on year to $100.7 million but beat Wall Street’s estimates by 14.4%.
Looking ahead, sell-side analysts expect revenue to decline by 5.2% over the next 12 months. While this projection is better than its three-year trend, it's tough to feel optimistic about a company facing demand difficulties.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Olaplex has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging an eye-popping 34.6% over the last two years.
Key Takeaways from Olaplex’s Q4 Results
We were impressed by how significantly Olaplex blew past analysts’ EPS expectations this quarter. We were also excited its operating profit outperformed Wall Street’s estimates by a wide margin. Lastly, the company's full-year revenue guidance exceeded expectations. Zooming out, we think this was a good quarter with some key areas of upside. The stock traded up 10.2% to $1.51 immediately after reporting.
Olaplex may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.