10q10k10q10k.net

What changed in OLAPLEX HOLDINGS, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of OLAPLEX HOLDINGS, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+543 added−533 removedSource: 10-K (2025-03-04) vs 10-K (2024-02-29)

Top changes in OLAPLEX HOLDINGS, INC.'s 2024 10-K

543 paragraphs added · 533 removed · 152 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

38 edited+42 added−36 removed26 unchanged
Biggest changeCurrently, the majority of our salon community is made up of small businesses and a meaningful percentage of our professional hairstylists identify as racial or ethnic minorities. 12 Table of Contents Employees and Human Capital Resources Employees As of December 31, 2023, Olaplex employed 233 employees and leveraged contractors to supplement work in areas such as technology, operations and accounting.
Biggest changeSupporting Small Businesses We are invested in the success of our Pro community as their businesses grow alongside ours. Currently, we believe that the majority of our salon community is made up of small businesses and/or Pros who identify as female, and a meaningful percentage of our Pros identify as racial or ethnic minorities.
The Modernization of Cosmetics Regulation Act (“MoCRA”), signed into law on December 29, 2022, will expand the FDA’s regulatory oversight of cosmetics as its provisions become effective. MoCRA requires, among other things, that manufacturers of 13 Table of Contents cosmetics products report serious adverse events associated with their cosmetic products to the FDA.
The Modernization of Cosmetics Regulation Act (“MoCRA”), signed into law on December 29, 2022, will expand the FDA’s regulatory oversight of cosmetics as its provisions become effective. MoCRA requires, among other things, that manufacturers of cosmetics products report serious adverse events associated with their cosmetic products to the FDA.
In some instances, these laws allow individuals to request access to, or correction or deletion of, their personal information, as well as to opt out of the sale, or sharing for cross-context behavioral advertising purposes, of such information to third parties, or to opt out of the processing of their personal information for targeted advertising or certain automated decision making and profiling activities.
In some instances, these laws allow individuals to exercise certain rights, such as the right to request access to, or correction or deletion of, their personal information, as well as to opt out of the sale, or sharing for cross-context behavioral advertising purposes, of such information to third parties, or to opt out of the processing of their personal information for targeted advertising or certain automated decision making and profiling activities.
Culture We believe our commitment to our heritage in the prestige hair care category and encouragement of our employees to bring their whole self to work has created a culture that is paramount to our success. We are passionate about what we do, how our products impact lives and what our brand means to our community.
Culture We believe our commitment to our heritage in the prestige haircare category and encouragement of our employees to bring their whole self to work has created a culture that is paramount to our success. We are passionate about what we do, how our products impact lives and what our brand means to our community.
In the event the FDA identifies any violation of FDA regulation, the FDA may request or a manufacturer may independently decide to conduct a recall or market withdrawal of product or to make changes to its manufacturing processes, product formulations or labels.
In the event the FDA identifies any violation of FDA regulation impacting the safety of a product, the FDA may request or a manufacturer may independently decide to conduct a recall or market withdrawal of such product or to make changes to its manufacturing processes, product formulations or labels.
In addition, the application, interpretation and enforcement of these laws and 14 Table of Contents regulations are often uncertain, and they may be interpreted and applied inconsistently by different regulators and inconsistently with our current policies and practices.
In addition, the application, interpretation and enforcement of these laws and regulations are often uncertain, and they may be interpreted and applied inconsistently by different regulators and inconsistently with our current policies and practices.
Seasonality Our results of operations typically are slightly higher in the second half of the fiscal year due to increased levels of purchasing by consumers for special and holiday events and by retailers for the end of year holiday selling season.
Seasonality Our revenues typically are slightly higher in the second half of the fiscal year due to increased levels of purchasing by consumers and retailers for the end of year holiday selling season.
It will further require such manufacturers to register their facilities and list their cosmetic products with the FDA, maintain for FDA review records demonstrating adequate substantiation of cosmetic product safety, and comply with Good Manufacturing Practice (“GMP”) regulations for cosmetic products, although the FDA is still developing and promulgating rules and regulations to implement these requirements.
It further requires manufacturers to register their facilities and brands, list their cosmetic products with the FDA and renew these listings annually, maintain for FDA review records demonstrating adequate substantiation of cosmetic product safety, and comply with Good Manufacturing Practice (“GMP”) regulations for cosmetic products, although the FDA is still developing and promulgating rules and regulations to implement these requirements.
Additionally, eight of the eleven members of our board of directors (the “Board of Directors”) identify as female. We know through experience that different ideas, perspectives and backgrounds create a stronger and more creative work environment that can deliver better results.
Additionally, seven of the ten members of our board of directors (the “Board of Directors”) and the majority of our leadership team identify as female. We know through experience that different ideas, perspectives and backgrounds create a stronger and more creative work environment that can deliver better results.
Three of these manufacturers are located in the U.S., one is located in Europe, and one maintains facilities in the U.S. and Europe. Cosway Company Inc. (“Cosway”) manufactures products that accounted for more tha n 61% of our net sales and 32% of our inventory product purchases in 2023 .
Three of these manufacturers are located in the U.S., one is located in Europe, and one maintains facilities in the U.S. and Europe. Cosway Company Inc. (“Cosway”) manufactures products that accounted for 61% of our net sales and 48% of our inventory product purchases in 2024 .
Diversity, Equity and Inclusion We believe it is important that our employees reflect the diversity of our professional hairstylist and consumer communities, and our focus on diversity, equity and inclusion remains a key differentiator in both our consumer strategy and internal culture.
It is important that our employees reflect the diversity of our Pro and consumer communities, and our focus on diversity, equity and inclusion remains a key factor in both our consumer strategy and internal culture.
Our current Olaplex employees include former professional hairstylists whose unique perspectives and insights have helped us better understand our diverse consumer base and what matters to them. As a result of our efforts, we have created a diverse workplace environment where 78% of our employees identify as female and 39% identify as non-white as of December 31, 2023.
Our current Olaplex employees include former Pros whose unique perspectives and insights have helped us better understand our diverse consumer base and what matters to them. As a result of our efforts, we have created a diverse workplace environment where 80% of our U.S.-based employees identified as female and 39% identified as non-white as of December 31, 2024.
In 2023, we sold our products through approximately 60 retailers in more than 20 countries throughout the world. Direct to Consumer Channel Leveraging our Digital Capabilities We sell our products directly to consumers through our branded website, Olaplex.com, and third-party e-commerce platforms, including Amazon and pure play beauty and wellness partners.
In 2024, we sold our products through over 55 retailers in more than 20 countries throughout the world. 11 Table of Contents DTC Channel Leveraging our Digital Capabilities We sell our products directly to consumers through our branded website, Olaplex.com, and third-party e-commerce platforms, including Amazon and pure play beauty and wellness partners.
Professional Channel Rooted in our Professional Hairstylist Community In our professional channel, our products are sold primarily through wholesale beauty supply distributors who then sell those products to professional beauty industry outlets, such as professional beauty supply stores, salons and licensed professional hairstylists, for use in the salon or for professional hairstylists to sell to consumers for use at home.
In our professional channel, our products are sold primarily through beauty supply distributors who then sell those products to professional beauty outlets, such as professional beauty supply stores, salons and licensed Pros, for use in the salon or for Pros to sell to consumers for use at home. In 2024, we sold our products through over 105 professional distributors.
Comprehensive U.S. state privacy laws are also in operation or going into operation in several U.S. states and require many companies that process personal information, including us, to make disclosures to consumers about their data collection, use and sharing practices.
Comprehensive U.S. state privacy laws in a number of U.S. states require many companies that process personal information, including us, to make disclosures to consumers about their data collection, use and sharing practices.
However, fluctuations in net sales in any fiscal quarter may be attributable to a number of other factors, including macroeconomic factors, competitive activity, 11 Table of Contents the level and scope of new product introductions or promotional activities of our customers, which may impact their order placement and receipt of goods.
However, fluctuations in net sales in any fiscal quarter may be attributable to a number of other factors, including macroeconomic factors, competitive activity, the level and scope of new product introductions or promotional activities of our customers, which may impact their order placement and receipt of goods. Competition There is significant competition within each market where our products are sold.
We are subject to federal, state, local and international laws regarding privacy and data protection. Such laws and regulations are evolving and may be subject to significant change.
Many of these laws and regulations are still evolving and being tested in courts. We are subject to federal, state, local and international laws and regulations regarding privacy and data protection. Such laws and regulations are evolving and may be subject to significant change.
We continue to evaluate the impact we have on our environment and communities in an effort to further integrate sustainability and social impact into our strategy and business operations. In 2023 we completed our initial double materiality assessment of various Environmental, Social and Governance factors relevant to the Company.
We continue to evaluate the impact we have on our environment and communities in an effort to further integrate sustainability and social impact into our strategy and business operations. We recently completed a double materiality assessment of various Environmental, Social and Governance factors relevant to us, which will be used to develop our multi-year Environmental, Social and Governance strategy.
We do not have any employees governed by a union. We utilize professional employer organizations (“PEOs”), who serve as the employer of record of our U.S. employees and, depending on the jurisdiction, administer certain of our human resources, payroll and employee benefits functions.
We utilize professional employer organizations (“PEOs”), who serve as our employers of record and, depending on the jurisdiction, administer certain of our human resources, payroll and employee benefits functions.
We also face competition from a number of independent brands. Certain of our competitors also have ownership interests in third parties that are our customers.
Certain of our competitors also have ownership interests in third parties that are our customers.
We believe we have a well-recognized and strong reputation in our core markets and that the quality and performance of our products, our emphasis on innovation, and our engagement with our professional and consumer communities position us to compete effectively.
We believe we have a well-recognized and strong reputation within the beauty industry, from our customers to the end-consumer, and that the quality and performance of our products, our emphasis on science-based innovation, our asset-light operating model, and our engagement with our Pro and consumer communities position us to compete effectively.
Our three sales channels, Professional, Specialty Retail, and Direct-to-Consumer, work together to reinforce relationships with current customers and introduce our products to an expanded potential customer base.
Our three sales channels, professional, specialty retail, and direct-to-consumer (“DTC”), work together to reinforce relationships with current customers and introduce our products to an expanded potential customer base. We seek to build and maintain strong customer relationships globally. Our products are sold in more than 70 countries across the world.
Any practices inconsistent with the Green Guides and Endorsement Guides can result in violations of the FTC Act’s proscription against unfair and deceptive practices. In the European Union, the sale of cosmetic products is regulated under the E.U. Cosmetics Regulation (EC) No 1223/2009, which provides the general regulatory framework for finished cosmetic products placed on the E.U. market.
Any practices inconsistent with the Green Guides and Endorsement Guides can result in violations of the FTC Act’s proscription against unfair and deceptive practices. 14 Table of Contents In the European Union (“E.U.”), the sale of cosmetic products is regulated under the E.U.
These laws and regulations may involve user privacy, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services. Many of these laws and regulations are still evolving and being tested in courts.
We are also subject to a number of federal, state and international laws and regulations involving consumer privacy and data protection, data security, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions and online payment services.
A core tenet of our supply chain strategy is leveraging strong relationships with our manufacturers and logistics partners to create an expansive supply network that is designed to provide ample capacity without requiring significant additional capital investment. Our finished products are manufactured in the U.S. and Europe by five manufacturers.
A core tenet of our supply chain strategy is leveraging strong relationships with our manufacturers and logistics partners to create an expansive supply network that is designed to provide ample capacity without requiring significant additional capital investment. We work closely with our suppliers to ensure that their quality management systems meet applicable quality and regulatory requirements.
In 2023, we sold our products through over 115 professional distributors. Where permitted by law, our international distributors generally may only sell our products to professional beauty industry outlets in specific territories, with some having the exclusive right to sell our products in the territory.
Where permitted by law, our international distributors generally may only sell our products to professional beauty outlets in specific territories, with some having the exclusive right to sell our products in the territory. Our agreements with professional beauty distributors also typically contain minimum purchase and sell-through requirements and prohibit the distributor from selling products deemed competitive with ours.
Competition Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, accessible pricing, brand recognition and loyalty, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities. Our competitors include Estee Lauder, Henkel AG & Co. KGaA, Kao Corporation, L’Oreal S.A. and Unilever.
Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, pricing, brand recognition and loyalty, service to the consumer, distribution, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities. We compete against a number of global and local companies who operate in the prestige haircare category.
Our products are sold in more than 100 countries across the world. A small amount of the Company’s customers have net sales exceeding 10% of total net sales. During the year ended December 31, 2023, two of the Company’s customers represented 21% of the Company’s total net sales, in aggregate.
Certain of our customers accounted for more than 10% of our net sales. During the year ended December 31, 2024, three of the Company’s customers represented 39% of the Company’s total net sales, in aggregate. During the year ended December 31, 2023, two of the Company’s customers represented 21% of the Company’s total net sales, in aggregate.
We are committed to providing comprehensive benefit options that will allow our employees and their families to live healthier and more secure lives. We leverage both formal and informal programs to identify, foster and retain top talent.
We are also committed to providing comprehensive health and wellness benefit solutions that allow our employees and their families to live healthier and more secure lives.
Supply Chain and Global Distribution Network We believe that we have developed a flexible and resilient third-party supply chain that is capable of supporting long-term growth at scale.
Our branded website is where our customers can receive the full OLAPLEX brand experience and is an important educational tool for Pros and our customers to learn about our products. Supply Chain and Global Distribution Network We believe that we have developed a flexible and resilient third-party supply chain that is capable of supporting long-term growth at scale.
Government Regulation Our products are subject to regulation by the Food and Drug Administration (“ FDA”) and the Federal Trade Commission (“FTC”) in the U.S., as well as various other local and foreign regulatory authorities in the countries in which we operate.
We aim to provide development opportunities for our talented workforce through a number of avenues, including on-the-job learning and classroom training, which are further supported by a professional development reimbursement program and an educational assistance plan. 13 Table of Contents Government Regulation Our products are subject to regulation by the Food and Drug Administration (“ FDA”) and the Federal Trade Commission (“FTC”) in the U.S., as well as various other local and foreign regulatory authorities in the countries in which we operate.
Cosmetics Regulation requires the manufacture of cosmetic products to comply with GMPs, which is presumed where the manufacture is in accordance with the relevant harmonized standards. In addition, text, names, trademarks, pictures and figurative or other signs used in the labelling and advertising of cosmetic products cannot imply that these products have characteristics or functions they do not actually have.
In addition, text, names, trademarks, pictures and figurative or other signs used in the labelling and advertising of cosmetic products cannot imply that these products have characteristics or functions they do not actually have. Any product claims in labelling must be capable of being substantiated. The E.U.
Such amendments include notification of cosmetic products made available to consumers in Great Britain to the Office for Product and Safety Standards and the requirement to have a responsible person established in the U.K. We rely on expert consultants, Obelis, for our E.U. and U.K. product registrations and review of our labelling for compliance with E.U. and U.K. regulation.
Cosmetics Regulation has been retained in U.K legislation, subject to certain amendments, and is applicable to Great Britain (England, Scotland and Wales) and Northern Ireland. Such amendments include notification of cosmetic products made available to consumers in Great Britain to the Office for Product and Safety Standards and the requirement to have a responsible person established in the U.K.
We also filed six new patent applications and were issued ten new patents. Our patent portfolio includes families of patents that include approximately 100 granted patents with claims that cover Olaplex's product line and their use and claims that cover other hair care, nail and skincare products and/or their uses that utilize similar mechanisms to Olaplex's proprietary technology.
Our patent portfolio includes patent families with approximately 100 granted patents worldwide that include claims that cover Olaplex's product line and claims that cover other haircare, nail and skincare products that utilize similar mechanisms to Olaplex's proprietary technology. The patents in these families are generally expected to expire between 2034 and 2041, absent any term extension.
In 2023, approxima tely 45% of our net sales were generated in the U.S. and approximately 55% of our net sales were international, based on the shipping address on record for the customer purchasing our products. However, the majority of net sales are transacted in U.S. Dollars, our functional and reporting currency.
During the year ended December 31, 2022, one customer represented 16% of the Company’s total net sales. In 2024, approximately 50% of our net sales were generated in the U.S. and approximately 50% of our net sales were international, based on the shipping address on record for the customer purchasing our products.
Any additional patents that grant from pending applications in this patent family would also be expected to expire in 2035. For more information, see “Risk Factors— Risks Related to Intellectual Property Matters.” Commitment to Social and Environmental Consciousness We believe our responsibility extends beyond our products that contribute to healthier hair.
For more information, see “Risk Factors - Risks Related to Intellectual Property Matters” included in Part I, Item 1A of this Annual Report. Commitment to Social and Environmental Consciousness We believe our responsibility extends beyond our products.
We seek to register our OLAPLEX mark in all jurisdictions where we do business. In addition, as of December 31, 2023, we owned over 160 issued patents worldwide, including 16 U.S. patents, and over 42 pending patent applications worldwide. During the year ended December 31, 2023, we filed 115 new trademark applications and were granted 69 new trademark registrations.
We also have other trademark registrations and pending trademark applications for certain of our product names and tag lines. In addition, as of December 31, 2024, we owned over 170 issued patents worldwide, including 16 U.S. patents, and over 32 pending patent applications worldwide.
The team is led by a diverse group of six individual volunteers across different departments and tenures. Compensation and Benefits The core objective of our compensation program is to provide a package that will attract, motivate and reward exceptional employees.
Compensation and Benefits Our compensation philosophy is to provide a combination of compensation and benefits that attract, retain and motivate talented employees. Our compensation philosophy is informed by the market and tied to the delivery of results.
Removed
ITEM 1. BUSINESS Company Overview OLAPLEX is an innovative, science-enabled, technology-driven beauty company. Since our inception in 2014, we have focused on delivering effective, patent-protected and proven performance in the prestige hair care category. We offer science-backed solutions that are designed to improve hair health and are trusted by stylists and consumers.
Added
ITEM 1. BUSINESS Company Overview OLAPLEX is a foundational health and beauty company powered by breakthrough innovation that starts with and is inspired by the professional hairstylist (“Pro”).
Removed
We identify our consumers’ most relevant hair care concerns in collaboration with our passionate and highly engaged community of professional hairstylists and consumers and strive to address them through our proprietary technology and innovation capabilities. Our Products OLAPLEX disrupted and revolutionized the prestige hair care category by creating the bond-building space in 2014.
Added
Our products are designed to enable Pros and their clients to achieve their best results, and to provide consumers with a holistic hair regimen that starts by establishing a foundation for healthy hair.
Removed
We have grown from an initial offering of three products sold exclusively through the professional channel to a broader suite of products offered through the professional, specialty retail and Direct to Consumer (“DTC”) channels that have been strategically developed to address three key uses: treatment, maintenance and protection.
Added
In 2014, OLAPLEX revolutionized the haircare category through the introduction of our patent-protected bond-building technology, Bis-aminopropyl diglycol dimaleate (“Bis-amino”), in our No. 1 Bond Multiplier® and No. 2 Bond Perfector® products.
Removed
Our current product portfolio is comprised of seventeen unique and complementary products specifically developed to provide a holistic regimen for hair health. Additionally, we recently expanded into our first hair care adjacent market with LASHBOND ® Building Serum, our eyelash enhancing serum formulated to promote the appearance of thicker, longer, stronger, full volume lashes.
Added
This new two-part salon treatment allowed Pros around the world to repair disulfide bonds deep inside the hair that are broken during chemical services (such as coloring, perming and straightening). Later in 2014, OLAPLEX launched an at-home version of this signature bond-building treatment, No. 3 Hair Perfector®, allowing consumers to achieve the benefits of OLAPLEX beyond the salon.
Removed
Our proprietary, patent-protected ingredient, Bis-aminopropyl diglycol dimaleate (“Bis-amino”), serves as a key differentiator in our ability to create trusted, high-quality products. Underpinning our product range is a portfolio of more than 160 worldwide patents which protects our proprietary technology.
Added
By the end of 2015, OLAPLEX products were sold globally, demonstrating the resonance of the product and brand proposition around the world. From our original three bond-building products, we expanded to a range of products suitable across hair types for use in the salon and at home.
Removed
Our patent claims are broadly drafted and include claims covering applications across adjacent categories in hair care and also other categories such as skin care and nail health.
Added
Since our inception, we have focused on delivering patent-protected technology and proven performance in the prestige haircare category. OLAPLEX has evolved from a handful of products capable of treating severely damaged hair to a broader range designed to provide healthy hair from root to tip.
Removed
Professional Products Our current professional hair health platform consists of four products that can be purchased and applied only by professional hairstylists: No. 1 Bond Multiplier ® , No. 2 Bond Perfector ® , Olaplex ® 4-in-1 Moisture Mask and Olaplex ® Broad Spectrum Chelating Treatment.
Added
Our products are designed to repair damage associated not only with chemical and thermal processes, but also everyday causes of damage such as pollutants, environmental factors, heat styling and blow drying, and mechanical friction, such as hair brushing and the use of hair ties.
Removed
These products often serve as an introduction to our brand and a gateway to the remainder of our products that can be used both at home and in the salon.
Added
We identify our Pros’ and consumers’ most relevant haircare concerns and strive to address them through our proprietary technology and innovation capabilities. We believe that recommendations from Pros is a leading source of trusted information for consumers when they make haircare decisions.
Removed
Retail Products Our current retail hair health platform consists of fourteen products that can be purchased by consumers, through their professional stylist, retail partners or directly through Olaplex.com. for at home use, or by professional hairstylists for use in the salon.
Added
In addition, Pros are influenced by the brands and products that their clients ask for and discuss on social media. This recommendation flywheel powers our synergistic omnichannel strategy. Our Products OLAPLEX’s products are designed to provide a holistic hair health regimen, from root to tip.
Removed
These include: No. 0 Intensive Bond Building™ Hair Treatment, No. 3 Hair Perfector ® , No. 4 Bond Maintenance ® Shampoo, No. 4P Blonde Enhancer™ Toning Shampoo, No. 4C Bond Maintenance ® Clarifying Shampoo, No. 4D Clean Volume Detox Dry Shampoo, No. 5 Bond Maintenance ® Conditioner, No. 5P Blonde Enhancer™ Toning Conditioner, No. 6 Bond Smoother ® , No. 7 Bonding Oil™, No. 8 Bond Intense™ Moisture Mask, No. 9 Bond Protector™ Nourishing Hair Serum, Olaplex ® Volumizing Blow Dry Mist and our first hair adjacency product LASHBOND ® Building Serum. 9 Table of Contents Our Channels We believe that a key differentiator of OLAPLEX is our synergistic omnichannel strategy.
Added
From our origins of creating the bond-building space, our product portfolio has expanded to 23 products that support the hair health needs of our Pro and consumer communities. We seek to develop science-based and technology-forward products that service foundational hair health.
Removed
Our agreements with professional beauty distributors also typically contain minimum purchase and sell-through requirements and prohibit the distributor from selling products deemed competitive with ours. Specialty Retail Channel Focused on Reaching Consumers Our specialty retail customers include specialty retailers with online and/or brick and mortar presences.
Added
Recognizing that hair health starts inside the hair, we developed our patent-protected bond-building technology, Bis-amino, which works on the molecular level to repair the hair’s disulfide bonds. Leveraging our Bis-amino technology, our two-part salon and at home bond-building treatments are complete bond builders that can repair all three main chemical bonds deep inside the hair: hydrogen, ionic and disulfide bonds.
Removed
Innovation We believe that one of the key differentiators of our business is a powerful innovation platform. We conduct research in our OLAPLEX laboratory and employ a dedicated in-house research and development team, which includes scientists, product and packaging innovation specialists, and regulatory and compliance experts.
Added
In 2024, we introduced the first in-salon service for repairing and shaping curls with another first to market innovation - our patent-protected OLAPLEX Bond Shaping Technology™ - a proprietary peptide that penetrates deep into the hair to strengthen, rebuild, and reform curl-shaping disulfide bonds.
Removed
We also incorporate feedback from our community of professional hairstylists and consumers to better understand their respective needs. These insights, combined with the efforts of our in-house research and development team, independent third party laboratory testing, and real-world salon testing, create a virtuous feedback loop.
Added
We strive to continue to break ground in the prestige haircare category with our Pro-first and consumer-centric innovation strategy, and we expect to launch at least two to three products annually over the coming years. We intend to focus on developing or acquiring proprietary new technologies, building on existing technology platforms, and exploring adjacent categories in haircare and other categories.
Removed
We develop our products in our laboratory and in partnership with national co-manufacturers, universities, and biotech companies to remain on the cutting edge of beauty technology.
Added
Our innovative products and in-salon treatments are complemented by our broader product portfolio that seeks to provide a holistic healthy hair regimen by furthering its strength and elasticity, shine and sheen, smoothness and anti-frizz, softness and moisturization and shape retention and integrity.
Removed
As our business continues to grow globally, we intend to focus on developing proprietary new technologies, improving existing products and exploring adjacent categories in hair care and other categories. 10 Table of Contents We do not perform, nor do we commission any third parties on our behalf to perform, testing of our products or ingredients on animals.
Added
We believe that our product offerings support our interconnected Pro and consumer communities and create demand for our products across our omnichannel distribution network. In the Salon Pros are the heart of our brand. Consumers rely on trusted professional hairstylists to address their hair health needs, from bond repair and beyond.
Removed
Our principal research and development center is located in the U.S. See “Item 2. Properties”. Marketing Our strategy to market and showcase our products begins with our omnichannel platform across the professional, specialty retail and DTC channels. In our professional channel, we market our products using educational seminars on our products’ application methods and consumer benefits.
Added
Our Pro-only treatments and salon products allow our Pros to provide technical services that achieve a better end result and enable those styles supported by a base of healthy hair. To align with their in-salon technical services, Pros can select differentiated at-home solutions to enable their clients to maintain healthy hair between salon visits.
Removed
We have a dedicated portal on our website for professional customers to purchase and learn more about our products and have developed a mobile app for our professional community that serves as a resource on our brand and products and offers us the opportunity to more directly engage with professional hairstylists about our products.
Added
Further, Pros can select customized OLAPLEX wash care routines for their clients, allowing clients to take the products used at the salon home to use in the shower.
Removed
In addition, we use professional trade advertising, social media and other primarily digital marketing to communicate to professional hairstylists and consumers the quality and performance characteristics of our products.
Added
Finally, Pros introduce clients to our styling products, allowing clients to enhance their hair style at home. 9 Table of Contents At Home Our consumers rely on our at-home products to support their hair health routine. Our at-home product regimen starts with our products aimed at creating a foundation of healthy hair.
Removed
In our specialty retail channel, we support our authorized retailers to drive in-store and e-commerce sales of our products, and we work with them to ensure the optimal presentation of our products in their stores or on their e-commerce sites.
Added
Next, consumers can customize their own wash care routine by selecting specialized wash care products based on their hair health needs. Finally, our differentiated after shower and styling products allow consumers to amplify their results.
Removed
Advertising activities, in-store displays and online navigation are designed to attract new consumers, build demand and loyalty and introduce existing consumers to other product offerings. Our marketing efforts also benefit from cooperative advertising programs, loyalty programs, and sampling programs with some retailers.
Added
Consumer interest in and familiarity with OLAPLEX products drives conversations with their professional hairstylists regarding our products and brand, contributing to the interconnectedness of these communities in creating a healthy hair regimen. Our Brand OLAPLEX is a foundational health and beauty company inspired by the Pro and powered by breakthrough innovation.
Removed
In our DTC channel, our digital first approach to performance marketing is designed to offer best-in-class customer experience on Olaplex.com, from improving load times and site navigation to enhancing digital brand assets and improving the check-out experience, all of which is designed to increase brand awareness, site traffic and conversion.
Added
Our marketing strategy seeks to celebrate the passion and creativity of our Pros, as well as our breakthrough scientific innovations and technologies. Our marketing model is focused on elevating our brand and implementing a 360 degree, full funnel marketing strategy that is tailored to the unique characteristics of our omnichannel platform.

… 36 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

30 edited+305 added−3 removed12 unchanged
Biggest changeWe frequently use third-party digital and social media platforms to raise awareness of our brand and engage with our professional hairstylist and consumer communities. We also partner with brand ambassadors and brand advocates who promote and market our products, participate in product launches, engage with our professional hairstylist and consumer communities and educate them about our products.
Biggest changeWe frequently use third-party digital and social media platforms to raise awareness of our brand and engage with our Pro and consumer communities, including through advocacy from our brand ambassadors and influencers.
In addition, as we expand into adjacent or other categories, we have faced, and will continue to face, different and, in some cases, more formidable competition.
As we expand into adjacent or other categories, we have faced, and will continue to face, different and, in some cases, more formidable competition.
Negative commentary or false statements disseminated by others about the brand, the safety and efficacy of our products, our brand ambassadors and brand advocates and other third parties who are affiliated with us have been, and may in the future be, posted on social media platforms.
Negative commentary or false statements disseminated by others about our brand, the safety and efficacy of our products, our brand ambassadors, influencers, and other third parties who are affiliated with us have been, and may in the future be, posted on social media platforms.
If we are unable to cost-effectively develop and continuously improve our consumer-facing presence on existing, evolving or new digital and social media platforms, including adapting to changing algorithms or other developments in such platforms that are outside of our control, our ability to acquire new and retain existing customers and consumers may suffer, and we may not be able to provide a convenient and consistent experience to our professional hairstylists and consumers across sales channels.
If we are unable to cost-effectively develop and continuously improve our consumer-facing presence on existing, evolving or new digital and social media platforms, including adapting to changing algorithms or other developments in such platforms that are outside of our control, our ability to acquire new and retain existing customers and consumers may suffer, and we may not be able to provide a convenient and consistent experience to our Pros and consumers across sales channels.
Any loss of confidence on the part of our customers or consumers in the safety or quality of our products, including the ingredients used in our products, whether actual or perceived, or inclusion of ingredients that are regulated in certain jurisdictions, could harm our brand image and reputation and could cause consumers to choose other products.
Any loss of confidence on the part of our customers or consumers in the quality, efficacy or safety of our products or the ingredients used in our products, whether actual or perceived, or inclusion of ingredients that are regulated in certain jurisdictions, could harm our brand image and reputation and could cause consumers to choose other products.
In addition, our ambassadors or advocates could engage in behavior or use their platforms in a manner that reflects poorly on our brand or is in violation of applicable platform terms of service, laws or regulations, including with respect to product or marketing claims.
In addition, our brand ambassadors or influencers could engage in behavior or use their platforms in a manner that reflects poorly on our brand or is in violation of applicable platform terms of service, laws or regulations, including with respect to product or marketing claims.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial also may materially and adversely affect our business, prospects, operating results or financial condition. See “Special Note Regarding Forward-Looking Statements” elsewhere in this Annual Report.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial also may materially and adversely affect our business, prospects, operating results or financial condition. See “Special Note Regarding Forward-Looking Statements” of this Annual Report.
In addition, certain of our competitors have ownership interests in third parties that are customers of ours, and, as 15 Table of Contents a result, such customers may have an interest in promoting theses competing brands over our products. Our inability to continue to compete effectively would have an adverse effect on our business, financial condition and results of operations.
In addition, certain of our competitors have ownership interests in third parties that are customers of ours, and, as a result, such customers may have an interest in promoting theses competing brands over our products. Our inability to continue to compete effectively would have an adverse effect on our business, financial condition and results of operations.
Social media and other consumer-oriented technologies has increased the speed and reach of information dissemination, and our target consumers often act on such information without further investigation into its accuracy.
Social media and other consumer-oriented technologies have increased the speed and reach of information dissemination, and our target consumers often act on such information without further investigation into its accuracy.
Even if we are successful in anticipating consumer needs and preferences, our ability to timely and adequately respond to those needs and preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products and maintain our distinctive brand identity as we expand the range of products we offer.
Even if we are successful in anticipating consumer needs and preferences, our ability to timely and adequately respond to those needs and preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality products while maintaining our distinctive brand identity as we expand the range of products we offer.
If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, and the trading price of our common stock could decline. Some of the following risks and uncertainties are, and will be, exacerbated by any worsening of the global business and economic environment.
If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, and the trading price of our common stock could decline. Some of the following risks and 15 Table of Contents uncertainties are, and will be, exacerbated by any worsening of the global business and economic environment.
Risks Related to Our Business The beauty industry is highly competitive, and if we are unable to compete effectively, our business, financial condition and results of operations could be adversely affected. We face increased competition in the beauty industry from companies throughout the world, including multinational consumer product companies and new independent beauty brands.
The beauty industry is highly competitive, and if we are unable to compete effectively, our business, financial condition and results of operations could be adversely affected. We face vigorous competition in the beauty industry from companies throughout the world, including multinational consumer product companies and new independent beauty brands.
Sales of new products would be affected by our ability to execute our marketing strategies, inventory management by our retail customers, and by product shortages or limitations in retail display space by our retail customers.
Sales of new products are affected by our ability to execute our marketing strategies, inventory management by our retail customers, and product shortages or limitations in retail display space by our retail customers.
Our continued success depends on our ability to anticipate, gauge and react in a timely, effective manner to changes in consumer tastes for hair care and other beauty products and attitudes toward our industry and brand.
Our continued success depends on our ability to anticipate, gauge and react in a timely, effective manner to changes in consumer preferences for prestige haircare and other beauty products and attitudes toward our industry and brand.
Our failure to anticipate and effectively respond to changing consumer preferences and trends in the market for our products or to effectively introduce new products in our traditional product categories, new products in adjacent or other categories or innovations on existing products that appeal to consumers, or the introduction by our competitors of similar products in a more timely fashion, could lead to, among other things, lower sales, excess inventory or inventory shortages, markdowns and write-offs and diminished brand loyalty, and our business, financial condition and results of operations could suffer.
Our failure to effectively respond to changing consumer preferences and market trends or to effectively introduce new products in our traditional product categories, new products in adjacent or other categories or innovations on existing products, could lead to, among other things, lower sales, excess inventory or inventory shortages, markdowns and write-offs and diminished brand loyalty, and our business, financial condition and results of operations could suffer.
The acceptance of new product launches and other product innovations may not be as high as we anticipate due to factors including lack of acceptance of the products themselves, the price of the products or the strengths of our competitors.
The acceptance of new product launches and other product innovations may not be as high as we anticipate due to factors including lack of acceptance of the products themselves, the price of the products or the strengths of our competitors, including their ability to introduce similar products in a more timely fashion.
In addition, our brand and reputation could be adversely affected if we engage in discounting or promotional activities that negatively impact consumers’ perceptions of the prestige nature of our products.
In addition, a failure to deliver innovative and high-quality products could tarnish our public image, and our brand and reputation could be adversely affected if we engage in discounting or promotional activities that negatively impact consumers’ perceptions of the prestige nature of our products.
The plaintiffs alleged that certain ingredients used in some Company products had purportedly caused irritation or posed a hazard to consumers, and that the Company engaged in misrepresentation with respect to those products. For more information, see “
The plaintiffs alleged that certain ingredients used in some Company products had purportedly caused irritation or posed a hazard to consumers, and that the Company engaged in misrepresentation with respect to those products. For more information, see “Legal Proceedings” included in Part I, Item 3 of this Annual Report.
Our ability to compete depends on a number of factors, including the continued strength of our brand and quality of our products, our ability to attract and retain key personnel, the success of our marketing and innovation strategies, our ability to execute our strategic plan, the successful management of new product introductions and innovations, the influence of our brand ambassadors and brand advocates, the efficiency of our third-party manufacturing facilities and distribution network, our relationships with our key customers and professional hairstylists, and our ability to maintain and protect our intellectual property and other rights used in our business.
Our ability to compete depends on a number of factors, including the continued strength of our brand and quality of our products, our ability to attract and retain key talent, the success of our marketing and innovation strategies, our ability to execute our 16 Table of Contents strategic plan, the successful management of new product introductions and innovations, the efficiency of our third-party manufacturing facilities and distribution network, the effectiveness of our omnichannel distribution model, our relationships with our key customers and Pros, our ability to maintain and protect our intellectual property and other rights used in our business, and our ability to leverage new or advancing technologies such as AI.
Further, new product innovation may place a strain on our employees and our financial resources, including incurring expenses in connection with product innovation, development and marketing that are not subsequently supported by a sufficient level of sales.
Further, new product innovation may place a strain on our employees and our financial resources, including incurring expenses in connection with product innovation, development and marketing that are not subsequently supported by a sufficient level of sales. As part of our ongoing business strategy, we may continue to expand our product launches into adjacent categories in haircare and other categories.
However, our brand development strategies and investments may not increase the recognition of our brand or increase revenues.
However, our brand development strategies and investments may not increase the recognition of our brand or increase revenues, or such benefits may take longer to materialize than anticipated.
In addition, our ability to launch new products would be limited by delays or 16 Table of Contents difficulties affecting the ability of our suppliers or manufacturers to timely manufacture, distribute and ship new products or displays for new products.
In addition, our ability to launch new products would be limited by delays or difficulties affecting the ability of our suppliers or manufacturers to procure raw materials, comply with quality standards and timely manufacture, distribute and ship new products or displays for new products, including as a result of regulations in the relevant jurisdictions.
Some of our competitors have greater resources than we do and may be able to better respond to changing business and economic conditions and compete in distribution channels or territories where we are less represented.
As a result, these companies may be able to better respond to changing business and economic conditions and compete in distribution channels or territories where we are less represented.
Maintaining, promoting and positioning our brand depends largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality products. Our brand and reputation are adversely affected by negative publicity, and a failure to deliver innovative and high-quality products would also tarnish our public image.
Maintaining, promoting and positioning our brand depends largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality products. Our brand and reputation have been adversely affected by negative publicity, or misinformation that is outside of our control.
We must continually work to maintain and enhance the recognition and reputation of our brand, develop, manufacture and market new products, maintain and adapt to existing and emerging distribution channels, successfully manage our inventories and modernize and refine our approach as to how and where we market and sell our products.
We must continually work to maintain and enhance the recognition and reputation of our brand; develop, manufacture and market new products; stay ahead of technology trends by developing or acquiring novel technology; successfully manage our inventories; and maintain and adapt to existing and emerging distribution channels and marketing platforms.
Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, accessible pricing, brand recognition and loyalty, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities. It is difficult for us to predict the timing and scale of our competitors’ actions in these areas.
Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, pricing, brand recognition and loyalty, service to the consumer, distribution, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities. In addition, small independent companies continue to enter the market with new brands and customized product offerings.
Our ability to maintain relationships with our existing ambassadors and advocates and to identify new ambassadors and advocates is critical to expanding and maintaining awareness of our brand and our customer and consumer base. As our market becomes increasingly competitive and as we expand internationally, recruiting and maintaining new ambassadors and advocates may become increasingly difficult and costly.
Our ability to maintain relationships with our existing brand ambassadors and influencers and to identify new brand ambassadors and influencers is critical to expanding and maintaining awareness of our brand and our customer and consumer base.
This could negatively affect our ability to compete with other companies and result in diminished loyalty to our brand and decreased sales. The use of social media by us, our brand ambassadors, our brand advocates and our consumers carries the risk that our image and reputation could be negatively impacted.
The use of social media by us, our brand ambassadors, influencers, and our consumers carries the risk that our image and reputation could be negatively impacted.
This risk is increased by the use of digital and social media by consumers and the speed by which information and opinions are shared.
Consumer tastes and preferences cannot be predicted with certainty and can change rapidly. The use of digital and social media by consumers and the speed by which information and opinions are shared increases this risk.
Our new products and innovations on existing products may not receive the same level of consumer acceptance as our products have in the past. Consumer tastes and preferences cannot be predicted with certainty and can change rapidly.
Our new products and innovations on existing products may not receive the same level of consumer acceptance as our products have in the past. These 17 Table of Contents risks have been and may continue to be exacerbated by the current macroeconomic environment, which has led to shifts in consumer spending habits and confidence.
Removed
We have made significant investments in sales and marketing, including investments designed to enhance our educational efforts, increase our interactions with our professional hairstylist and consumer communities, and attract new customers and consumers, and we expect to continue to make significant investments to promote our brand and our products.
Added
Risks Related to Our Business Our success depends, in part, on the effectiveness and successful implementation of our business transformation plan. Our future growth and revenue depend upon the effectiveness and successful implementation of our business transformation plan, including our strategic priorities.
Removed
As part of our ongoing business strategy, we may continue to expand our product launches into adjacent categories in hair care and other categories.
Added
Our transformation plan has resulted in and is expected to continue to result in changes to business priorities and operations, marketing and brand strategies, capital allocation priorities, and operational and organizational structure, as well as increased demands on management.
Removed
These risks have been and may continue to be exacerbated by the current macroeconomic environment. Consumer spending habits and confidence have shifted and may continue to change in light of inflationary pressures and other risks described elsewhere in this “Risk Factors” section. Our success depends, in part, on the quality, efficacy and safety of our products.
Added
Achieving our transformation plan may require investment in new capabilities, products, talent, third party service providers, infrastructure, technologies and markets, as well as in efforts to enhance our brand, our presence amount the Pro community and our market penetration.
Added
These investments may not be successful, and they may also result in short-term costs without associated current sales and, therefore, may be dilutive to our earnings. Further, such investments may result in loss of customers, reduced sales volume, higher than excepted costs, loss of key personnel, and other negative impacts on our business.
Added
Implementation of our transformation plan may take longer than anticipated.
Added
The failure to realize anticipated benefits of our business transformation plan or any delay in realizing such benefits, which may be due to our inability to execute plans, delays in the implementation of our plans, global or local economic conditions, competition, changes in the beauty industry and the other risks described herein, could have an adverse effect on our business, financial condition and results of operations.
Added
Our work to realign our international distributor network has reduced net sales in the short term, and we may not achieve the expected benefits of this realignment initiative in the timeframe we anticipate, if at all. Our investments in sales and marketing, including our new visual identity and brand marketing strategy, may not result in increased brand awareness and revenue.
Added
In addition, we need to continue to attract, develop and retain qualified executives and employees to successfully implement our transformation plan. We have experienced executive and employee turnover as we have worked to implement the initiatives we believe are required to achieve our strategic objectives.
Added
We may not be able to successfully retain and develop existing talent and identify, hire and integrate new talent, which may result in weaknesses in our infrastructure and operations, risks that we may not be able to comply with legal and regulatory requirements, and loss of employees and reduced productivity among remaining employees.
Added
Our growth has in the past, and may in the future, strain our ability to effectively manage our operations, as it may require us to expand our management team and our sales, marketing, innovation, manufacturing, logistics, distribution, and information technology functions, including with respect to use of new or advancing technologies such as artificial intelligence (“AI”).
Added
Ineffective execution to support growth could result in, among other things, product delays or shortages, operating errors, outages, inadequate customer service, inappropriate claims or promotions by our marketing team or brand representatives and governmental inquires and investigations, all of which could harm our revenue and ability to generate sustained growth and result in unanticipated expenses.
Added
Expansion into new international markets or within existing markets may create operating difficulties in managing our business across numerous jurisdictions and ultimately may not be successful, which could result in slower revenue growth, higher operating costs and lower margins than anticipated and could impair our ability to enter into additional new markets or attract new customers.
Added
Many multinational consumer product companies market and sell their products under multiple brands and have greater financial, technical or marketing resources, longer operating histories, greater brand recognition or larger customer bases than we do.
Added
It is difficult for us to predict the timing and scale of our competitors’ actions and their impact on the industry or on our business.
Added
Failure by us or the third parties with whom we do business to comply with laws, regulations, ethical, social, product, labor and environmental standards could also jeopardize our reputation. We have made significant investments in sales and marketing, including our new visual identity and brand marketing strategy.
Added
This could negatively affect our ability to compete and result in diminished loyalty to our brand and decreased sales. Further, any disruptions to the social media channels that we use for marketing could adversely affect our business, financial condition and results of operations.
Added
As our market becomes increasingly competitive and as we expand internationally, recruiting and maintaining new brand ambassadors and influencers may become increasingly difficult and costly.
Added
From time to time, consumers may prioritize spending in other categories of prestige beauty products in which we do not participate, such as skincare or color cosmetics, which may negatively impact growth in the prestige haircare category and decrease demand for our products.
Added
Our success depends, in part, on the quality, efficacy and safety of our products.
Added
While the plaintiff’s claims were dismissed without prejudice in July 2023, we may be subject to additional claims in the future, whether from those plaintiffs or other consumers.
Added
Claimants may allege that our products fail to meet quality or manufacturing specifications and standards, violate applicable laws or regulations, contain contaminants or other harmful ingredients, include inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances or for persons with health conditions or allergies, or cause adverse reactions or side effects, or that our product claims, instructions or marketing are false and misleading.
Added
Product-related claims or class action lawsuits increase our costs and could divert the attention of our management, which could adversely affect our business and financial results.
Added
In addition, concerns regarding the safety or quality of our competitors’ products could reduce consumer demand for our own products if consumers view such concerns to be similar or representative of the broader product category. As we continue to offer an increasing number of new products, our product-related claims risk may increase.
Added
In the event that claims are brought against us in the future, our insurance policies may not cover any or all of the resulting financial losses and the broader damage to our reputation that such claims may cause. Any claims brought against us may be subject to policy exclusions or exceed our existing or future insurance policy coverage of limits.
Added
In addition, we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage in the future.
Added
If our products are found or believed to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of our brand could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business. 18 Table of Contents If we are unable to accurately forecast customer and consumer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.
Added
While we devote significant attention to forecasting efforts, the volume, timing, value and type of the orders we receive are inherently uncertain. Historical growth rates, trends and other key performance metrics may not predict future demand or growth.
Added
Our business and our ability to forecast demand is affected by, among other things, general economic and business conditions in the U.S. and in our international markets, public and consumer preferences, changes in buying patterns of retailers and consumers, customer confidence in future economic conditions, inventory management of customers, and competition in the beauty industry and the actions of our competitors.
Added
A portion of our expenses are fixed and cannot be adjusted even during periods when revenue is unexpectedly lower, which leads to lower profits. Any failure to accurately predict demand for our products or expenses could cause our operating results to be lower than expected, which could adversely affect our financial condition.
Added
We base our current and future inventory needs and expense levels on our operating forecasts, forecasts of expected future purchasing activity from certain of our customers and our own estimates of future demand.
Added
Failure to accurately forecast demand for new or existing products has resulted in, and may in the future result in, inefficient or excess inventory supply or increased costs. For example, we experienced a slowdown in sales momentum during fiscal year 2023, in part due to inventory rebalancing across certain of our customers.
Added
Inventory levels in excess of customer demand has resulted in inventory write-downs or write-offs and may result in the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and prestige nature of our brand.
Added
Further, lower than forecasted demand may result in excess manufacturing capacity, increased inventory storage expenses and reduced manufacturing efficiencies, which would result in lower margins.
Added
Conversely, if we underestimate customer demand, our manufacturers and suppliers may not be able to deliver products to meet our requirements, and we may incur higher costs in order to secure the necessary production capacity or additional or expedited shipping.
Added
An inability to meet customer demand could result in reputational harm and damaged customer relationships and have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Added
The illegal distribution and sale by third parties of counterfeit versions of our products or the unauthorized diversion by third parties of our products could have an adverse effect on our net sales and a negative impact on our reputation and business. Third parties illegally distribute and sell counterfeit versions of our products.
Added
We believe these counterfeit products are inferior to our authentic products and could pose safety risks that our authentic products would not otherwise present to consumers. Consumers could confuse counterfeit products with our authentic products, which could damage or diminish the image, reputation and value of our brand and cause consumers to refrain from purchasing our products in the future.
Added
Products sold to professional salon distributors are meant to be sold to and used exclusively by salons and salon professionals or sold exclusively to the retail consumers of these salons. Our products have been and may continue to be sold to sales outlets other than the intended salons and salon professionals, such as to general merchandise retailers or unapproved outlets.
Added
Diverted products sold in such unapproved outlets may be old, damaged or otherwise adulterated or may impact consumers’ perceptions of the prestige nature of our products.
Added
Diversion may result in lower net sales of our products if consumers purchase diverted products or choose to purchase products manufactured or sold by our competitors because of any perceived damage or diminishment to the image, reputation or value of our brand resulting from such diversion.
Added
Further, diversion impacts our ability to maintain the price integrity of our brand, which may lead to a decrease in customer confidence in our brand. We depend on a limited number of customers for a large portion of our net sales. Certain of our customers accounted for more than 10% of our net sales.
Added
During the year ended December 31, 2024, three of the Company’s customers represented 39% of the Company’s total net sales, in aggregate. We expect that certain of our largest customers will continue to account for a substantial portion of our net sales for the foreseeable future.
Added
We could be adversely impacted by the loss of a significant customer, a shift in the level of support for our brand by any of these customers, or any significant decrease in sales to these customers, including as a result of the restructuring or bankruptcy of one of our customers, consolidation among such customers, retail store closures, decrease in consumer demand or other factors.
Added
Any of these occurrences could reduce our net sales and operating income, lead to a decrease in customer confidence in our brand and cause a loss of other customers, and therefore could have an adverse effect on our business, financial condition and cash flows.
Added
We may be affected by changes in consumer shopping preferences, shifts in distribution channels and changes in the salon and retail environments. From time to time, our financial performance in certain of our distribution channels may fluctuate relative to others, and our international sales strategy may prioritize certain channels based on the market dynamics in a particular jurisdiction.
Added
If such a situation persists or one or more channels fails to perform as expected, there could be an adverse effect on our business.
Added
Fluctuations in our distribution channels may have a greater impact on us than on companies that sell their products under multiple brands or that have larger product portfolios across different channels. 19 Table of Contents Our professional channel is impacted by decreased consumer demand for salon treatments and changes to the salon environment, and our Pro customers have limited their product supply when demand for salon treatments has decreased.

… 258 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+8 added−6 removed5 unchanged
Biggest changeAn increasing portion of our global information technology infrastructure is cloud-based and in partnership with industry-leading service providers. We believe this approach enables a high-performance platform to support current and future requirements and enhances our scale and flexibility to respond to the demands of the business by leveraging advanced and leading-edge technologies.
Biggest changeWe believe this approach enables a high-performance platform to support current and future requirements and enhances our scale and flexibility to respond to the demands of the business by leveraging advanced and leading-edge technologies. We recognize that technology presents opportunities to build a competitive advantage, and we continue to invest in new capabilities across various aspects of our business.
The Audit Committee has delegated oversight of risks related to information security, cybersecurity, and data privacy and protection to its Information Security Subcommittee, which meets at least twice a year with our Senior Vice President, Information Technology and other members of our IT department to discuss our cybersecurity profile and related risks, as well as to discuss updates on relevant developments in the cybersecurity threat environment.
The Audit Committee has delegated oversight of risks related to information security, cybersecurity, and data privacy and protection to its Information Security Subcommittee, which meets at least twice a year with senior members of our cybersecurity team to discuss our cybersecurity profile and related risks, as well as to discuss updates on relevant developments in the cybersecurity threat environment.
We have established internal policies and procedures for cybersecurity risk management and incident response management that are based on industry standard cybersecurity frameworks, and we provide regular training to our employees regarding evolving cybersecurity threats and risk management. Our cybersecurity team is primarily responsible for identifying, evaluating and responding to risks from cybersecurity threats.
We have established internal policies and procedures for cybersecurity risk management and incident response management that are based on industry standard cybersecurity frameworks, and we provide regular training to our employees regarding evolving cybersecurity threats and risk management.
Such efforts, however, subject us to increased cyber risk, as these investments are subject to cyberattacks, business disruptions and other risks described in “Risk Factors – Risks Related to Information Technology and Cybersecurity.” We have adopted processes designed to identify, assess and manage material risks from cybersecurity threats.
Such efforts, however, subject us to increased cyber risk, as technology investments are subject to cyberattacks, business disruptions and other risks described in “Risk Factors – Risks Related to Information Technology and Cybersecurity” included in Part I. Item 1A of this Annual Report. We have adopted processes designed to identify, assess and manage material risks from cybersecurity threats.
We rely on the information systems of third-party vendors, including our cloud vendors, for various functions of our business, including manufacturing, sourcing, distribution, sales and marketing.
Such procedures include the involvement of senior members of our cybersecurity team and other senior leaders across various functions. We rely on the information systems of third-party vendors, including our cloud vendors, for various functions of our business, including manufacturing, sourcing, distribution, sales and marketing.
ITEM 1C. CYBERSECURITY Information technology supports all aspects of our business, including operations, marketing, sales, order processing, production and distribution networks, retail and professional hairstylist customer experience, consumer experience, finance, business intelligence, and product development. We continue to maintain and enhance our information technology systems, cybersecurity infrastructure and customer and consumer experiences in alignment with our long-term strategy.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Information technology supports all aspects of our business, including operations, marketing, sales, order processing, production and distribution networks, retail and Pro customer experience, consumer experience, finance, business intelligence, and product development.
Although we have experienced cybersecurity incidents in the past, as of the date of this report, cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected the Company, including its business strategy, results of operations or financial condition.
Although we have experienced cybersecurity incidents in the past, as of the date of this report, we have not identified cybersecurity threats that have materially affected or are reasonably likely to materially affect our operations, business strategy, results of operations or financial condition.
As part of our company-wide enterprise risk management process, we conduct a comprehensive annual enterprise risk assessment that includes evaluation of cybersecurity risks and development of risk mitigation response plans.
As part of the Company’s enterprise risk management process, we conduct a comprehensive annual enterprise risk assessment that includes consideration of cybersecurity risks in conjunction with other Company risks. Our cybersecurity team further evaluates cybersecurity risks and develops risk mitigation response plans.
The incident response team determines appropriate containment, eradication and recovery procedures based on the type of incident and recommends any corrective actions to the cybersecurity team following the resolution of the cybersecurity incident. Cybersecurity incidents are reported to our Board of Directors, our Audit Committee or its Information Security Subcommittee as appropriate based on the nature of the incident.
The Information Security Subcommittee reports to the Audit Committee following each subcommittee meeting, and the Audit Committee reports to our Board of Directors. Pursuant to our incident management procedures, cybersecurity incidents are reported to our Board of Directors, our Audit Committee or its Information Security Subcommittee as appropriate based on the nature of the incident.
In addition, as part of our new vendor onboarding procedures, we review proposed new vendors’ cybersecurity and data protection practices and collaborate with such vendors to align their cybersecurity platforms with our expectations. 33 Table of Contents Our Audit Committee assists the Board of Directors in its oversight of our policies, procedures and practices with respect to risk management and mitigation, including risks related to information security, cybersecurity, and data privacy and protection.
In addition, as part of our new vendor onboarding procedures, we review proposed new vendors’ cybersecurity and data protection practices and certifications and collaborate with such vendors to align their cybersecurity platforms with our expectations.
Removed
We recognize that technology presents opportunities to build a competitive advantage, and we continue to invest in new capabilities across various aspects of our business.
Added
We continue to maintain and enhance our information technology systems, cybersecurity infrastructure and customer and consumer experiences in alignment with our long-term business strategy. An increasing portion of our global information technology infrastructure is cloud-based and is built and maintained in partnership with industry-leading service providers.
Removed
Our cybersecurity team is led by our Senior Vice President, Information Technology, who has an undergraduate degree in electronic and communications engineering and over 20 years of experience in information technology, including cybersecurity risk management.
Added
We also maintain cybersecurity insurance coverage that is intended to address certain costs that we may incur in the event that we experience a cybersecurity incident. Our cybersecurity team is primarily responsible for identifying, evaluating and responding to risks from cybersecurity threats.
Removed
The Information Security Subcommittee reports to the Audit Committee following each subcommittee meeting, and the Audit Committee reports to our Board of Directors.
Added
The incident response team determines appropriate containment, eradication and recovery procedures based on the type of incident and recommends any corrective actions to the cybersecurity team following the resolution of the cybersecurity incident. Our cybersecurity incident management procedures also include a framework to assess whether a cybersecurity incident is material and subject to SEC reporting requirements.
Removed
Despite our continuing efforts, our cybersecurity platform may not prevent breaches or breakdowns of our or our third-party service providers’ information technology systems, particularly in the face of continually evolving cybersecurity threats and increasingly sophisticated threat actors.
Added
Despite our continuing efforts, we may face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect our operations, business strategy, results of operations, or financial condition.
Removed
A cybersecurity incident may materially affect our business, results of operations or financial condition, including where such an incident results in reputational, competitive or business harm or damage to our brand, lost sales, reduced demand, loss of intellectual property rights, significant costs or the Company being subject to government investigations, litigation, fines or damages.
Added
For more information, see “Risk Factors – Risks Related to Information Technology and Cybersecurity” included in Part I, Item 1A of this Annual Report. 34 Table of Contents Governance Our Audit Committee assists the Board of Directors in its oversight of our policies, procedures and practices with respect to risk management and mitigation, including risks related to information security, cybersecurity, and data privacy and protection.
Removed
For more information, see “Risk Factors – Risks Related to Information Technology and Cybersecurity.”
Added
At the management level, our cybersecurity team is led by the head of our information technology team, who is responsible for assessing and managing material risks from cybersecurity threats, including the prevention, mitigation, detection, and remediation of cybersecurity incidents, and is a member of our incident response team.
Added
Our cybersecurity team has relevant academic degrees, multiple certifications, and real-world experience managing cybersecurity incidents and risks. The head of our information technology team has over 20 years of experience in information technology and cybersecurity, including previous employment as the chief information officer of multiple entities.
Added
Our broader cybersecurity team includes specialists that collectively have over 50 years of experience in information technology and/or cybersecurity and is supported by independent contractors. Our cybersecurity team works collaboratively to identify, assess and manage cybersecurity incidents and risks and implements and maintains centralized cybersecurity practices in coordination with senior leadership and cross functionally with other teams across the Company.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−4 removed0 unchanged
Biggest changeAs of January 2024, we also lease one office space of approximately 10,000 square feet in New York, which will provide meeting space and office space for employees who choose to collaborate in person from time to time. The lease term for this office space ends on June 14, 2026. We believe these arrangements support our current needs. ITEM 3.
Biggest changeWe also lease one office space of approximately 10,000 square feet in New York, which provides meeting space and office space for employees who choose to collaborate in person from time to time. The lease term for this office space ends on June 14, 2026.
ITEM 2. PROPERTIES We do not own any real property. We lease one facility of approximately 11,000 square feet in New York that we use for research and development activities. The lease term for this facility ends on September 30, 2030. Our employees work remotely, from home or at shared co-working office spaces.
ITEM 2. PROPERTIES We do not own any real property. We lease one facility of approximately 12,000 square feet in New York that we use for research and development activities. The lease term for this facility ends on September 30, 2030.
Removed
LEGAL PROCEEDINGS We have, and may in the future, from time to time, become involved in litigation or other legal proceedings incidental to our business, including litigation related to intellectual property, regulatory matters, contract, advertising and other consumer claims.
Added
Our employees work from our research and development facility, from our New York office space, at shared co-working office spaces, or remotely.
Removed
In addition, we believe that protecting our intellectual property is essential to our business and we have in the past, and may in the future, become involved in proceedings to enforce our rights.
Removed
Regardless of outcome, litigation (including the litigation referenced below) can have an adverse impact on our reputation, financial condition and business, including by utilizing our resources and potentially diverting the attention of our management from the operation of our business.
Removed
For detail on certain legal proceedings, see “Note 14 - Contingencies - Pending Legal Proceedings” included in the Notes to the Consolidated Financial Statements included in Part II, Item 8. Financial Statements of this Annual Report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 34 Table of Contents PART II

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+1 added−291 removed0 unchanged
Biggest changeThird parties have alleged, and in the future may allege, that our products infringe, misappropriate or otherwise violate their intellectual property rights, and we may become involved in litigation or other disputes relating to intellectual property used in our business.
Biggest changeIn addition, we believe that protecting our intellectual property is essential to our business and we have in the past, and may in the future, become involved in proceedings to enforce our rights.
Risks Related to Legal and Regulatory Matters Disputes and other legal or regulatory proceedings could adversely affect our financial results. From time to time, we may become involved in litigation, other disputes or regulatory proceedings in connection with or incidental to our business, including litigation related to intellectual property, regulatory matters, contract, advertising, product-related and other consumer claims.
ITEM 3. LEGAL PROCEEDINGS We have, and may in the future, from time to time, become involved in litigation or other legal proceedings incidental to our business, including litigation related to intellectual property, regulatory matters, contract, advertising and other consumer claims.
Regardless of the final resolution, such proceedings may have an adverse effect on our reputation, brand, financial condition and business, including by utilizing our resources and potentially diverting the attention of our management from the operation of our business. See “Item 3.
Regardless of outcome, litigation (including the litigation referenced below) can have an adverse impact on our reputation, financial condition and business, including by utilizing our resources and potentially diverting the attention of our management from the operation of our business.
Removed
Item 3. Legal Proceedings .” While the plaintiff’s claims were dismissed without prejudice in July 2023, we may be subject to additional claims in the future, whether from those plaintiffs or other consumers.
Added
For detail on certain legal proceedings, see “Note 14 - Commitments and Contingencies” included in the Notes to the Consolidated Financial Statements included in Part II, Item 8. Financial Statements of this Annual Report. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 35 Table of Contents PART II
Removed
Such claimants may assert that our products fail to meet quality or manufacturing specifications and standards, violate applicable laws or regulations, contain contaminants, include inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances or for persons with health conditions or allergies, or cause adverse reactions or side effects, or that our product claims, instructions or marketing are false and misleading.
Removed
Product-related claims or class action lawsuits increase our costs and could divert the attention of our management, which could adversely affect our business and financial results. As we continue to offer an increasing number of new products, our product-related claims risk may increase.
Removed
Our insurance policies may not cover any or all of the resulting financial losses or broader damage to our reputation.
Removed
If our products are found or believed to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of our brand could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business.
Removed
Our success depends, in part, on our ability to execute our long-term strategic plan. Our future growth and revenue depend upon our ability to successfully implement our long-term strategic plan. Achieving our long-term strategic plan will require investment in new capabilities, products, technologies and emerging markets, as well as in efforts to increase recognition of our brand and market penetration.
Removed
These investments may not be successful, and may also result in short-term costs without associated current sales and, therefore, may be dilutive to our earnings.
Removed
Our growth has in the past, and may in the future, strain our ability to effectively manage our operations, as it requires us to expand our management team, sales and marketing, product development and logistics and distribution functions.
Removed
Growth may require us to further upgrade our management information systems, internal processes and procedures and technology, including with respect to use of new or advancing technologies such as artificial intelligence (“AI”).
Removed
It also requires us to obtain sufficient 17 Table of Contents raw materials and manufacturing capacity and additional operational capabilities and facilities to warehouse and distribute our products, particularly as we continue to expand internationally.
Removed
Ineffective execution to support growth could result in, among other things, product delays or shortages, operating errors, outages, inadequate customer service, inappropriate claims or promotions by our marketing team or brand ambassadors and governmental inquires and investigations, all of which could harm our revenue and ability to generate sustained growth and result in unanticipated expenses.
Removed
Expansion into new international markets may create operating difficulties in managing our business across numerous jurisdictions and ultimately may not be successful, which could result in slower revenue growth, higher operating costs and lower margins than anticipated and could impair our ability to enter into additional new markets.
Removed
In addition, we need to continue to attract and develop qualified management personnel to sustain growth. If we are not able to successfully retain and develop existing personnel and identify, hire and integrate new personnel, our business, financial condition and results of operations would be adversely affected. We have expanded our operations rapidly since our inception in 2014.
Removed
Our historical growth should not be considered as indicative of our future performance. If we are unable to accurately forecast customer and consumer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.
Removed
We base our current and future inventory needs and expense levels on our operating forecasts, forecasts of expected future purchasing activity from certain of our customers and our own estimates of future demand.
Removed
To ensure adequate inventory supply, we must be able to forecast inventory needs and expenses and place orders sufficiently in advance with our manufacturers and suppliers based on our estimates of future demand for particular products.
Removed
Failure to accurately forecast demand for new or existing products has resulted in, and may in the future result in, inefficient or excess inventory supply or increased costs. For example, we experienced a slowdown in sales momentum during the second half of 2022 and fiscal year 2023, in part, due to inventory rebalancing across certain of our customers.
Removed
Inventory levels in excess of customer demand has resulted in inventory write-downs or write-offs and may result in the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and prestige nature of our brand.
Removed
Further, lower than forecasted demand may result in excess manufacturing capacity, increased inventory storage expenses and reduced manufacturing efficiencies, which would result in lower margins.
Removed
Conversely, if we underestimate customer demand, including as a result of unanticipated growth and the launch of new products, our manufacturers and suppliers may not be able to deliver products to meet our requirements, and we may incur higher costs in order to secure the necessary production capacity or additional or expedited shipping.
Removed
An inability to meet customer demand and delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, prospects, results of operations, financial condition and cash flows.
Removed
While we devote significant attention to forecasting efforts, the volume, timing, value and type of the orders we receive are inherently uncertain. Historical growth rates, trends and other key performance metrics may not predict future growth.
Removed
Our business and our ability to forecast demand is affected by general economic and business conditions in the U.S. and customer confidence in future economic conditions, and our ability to forecast demand will be increasingly affected by conditions in international markets as we continue to expand internationally.
Removed
A portion of our expenses are fixed, and as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in net revenues. Any failure to accurately predict demand for our products or expenses could cause our operating results to be lower than expected, which could adversely affect our financial condition.
Removed
The illegal distribution and sale by third parties of counterfeit versions of our products or the unauthorized diversion by third parties of our products could have an adverse effect on our net sales and a negative impact on our reputation and business. Third parties illegally distribute and sell counterfeit versions of our products.
Removed
We believe these counterfeit products are inferior to our authentic products and could pose safety risks that our authentic products would not otherwise present to consumers. Consumers could confuse counterfeit products with our authentic products, which could damage or diminish the image, reputation and value of our brand and cause consumers to refrain from purchasing our products in the future.
Removed
Products sold to professional salon distributors are meant to be sold to and used exclusively by salons and salon professionals or sold exclusively to the retail consumers of these salons. Our products have been and may continue to be sold to sales outlets other than the intended salons and salon professionals, such as to general merchandise retailers or unapproved outlets.
Removed
Diverted products sold in such unapproved outlets may impact consumers’ perceptions of the prestige nature of our products. Further, in some instances, these diverted products may be old, damaged or otherwise adulterated.
Removed
Diversion may result in lower net sales of our products if consumers purchase diverted products or choose to purchase products manufactured or sold by our competitors because of any perceived damage or diminishment to the image, reputation or value of our brand resulting from such diversion.
Removed
We depend on a limited number of customers for a large portion of our net sales. We expect that certain of our largest customers in 2023 will continue to account for a substantial portion of our net sales for the foreseeable future.
Removed
The loss of a significant customer, a shift in the level of support for our brand by any of these customers, or 18 Table of Contents any significant decrease in sales to these customers, including as a result of the restructuring or bankruptcy of one of our customers, consolidation among such customers, retail store closures, decrease in consumer demand or other factors, could reduce our net sales and operating income, lead to a decrease in customer confidence in our brand and cause a loss of other customers, and therefore could have an adverse effect on our business, financial condition and cash flows.
Removed
We may be affected by changes in consumer shopping preferences, shifts in distribution channels and changes in the salon and retail environments. Our omnichannel sales platform consists of our Professional, Specialty Retail and Direct-To-Consumer channels.
Removed
From time to time, our financial performance in certain of these channels may fluctuate relative to others, and our international expansion strategy may prioritize certain of these channels based on the market dynamics in a particular jurisdiction.
Removed
If such a situation persists or one or more channels fails to perform as expected, there could be an adverse effect on our business. Our Professional channel depends on our engagement with professional hairstylists and our reputation and brand image within the professional hairstylist community.
Removed
Negative perceptions of our brand by the professional hairstylist community have had an adverse effect on our Professional channel. In addition, our Professional channel is impacted by consumer demand for salon treatments and changes to the salon environment, and our professional hairstylist customers have limited their product supply when demand for salon treatments decreases.
Removed
Further, there may be consolidation of the salon market. If consolidation leads to customers gaining purchasing power, we may need to reduce the cost of our products, which would have an impact on our earnings. Consolidation among our customers may also increase the risk of customer concentration.
Removed
In addition, consumer preferences have and may continue to shift with respect to retail traffic in brick and mortar stores. Further, any consolidation or liquidation in the retail trade may result in us becoming increasingly dependent on key retailers and could result in an increased risk related to the concentration of our customers.
Removed
A severe, adverse impact on the business operations of our customers could have a corresponding material adverse effect on us. Our products generally rely on a single or a limited number of manufacturers.
Removed
The loss of manufacturers or shortages in the supply of raw materials or finished products could harm our business, prospects, results of operations, financial condition and cash flows. Our products generally rely on a single or a limited number of manufacturers.
Removed
We acquire raw materials, components and packaging from third-party suppliers, and our finished products are manufactured by five third-party manufacturers. One company, Cosway, manufactures products that accounted for more than 61% of our net sales and 32% of our inventory product purchases in 2023.
Removed
While we have engaged and expect to continue to engage additional third-party manufacturers, engaging a new manufacturer involves risks and costs, including additional due diligence, investment and oversight, and may not ultimately be successful. Any new manufacturer may not have the same capacity to provide us finished product as our current manufacturers provide us.
Removed
The failure to secure sufficient manufacturing capabilities from third parties could have a material adverse effect on our business, financial condition and results of operations. A principal raw material for our products is our patented ingredient, Bis-amino. The other primary raw materials used in our products include essential oils and specialty ingredients.
Removed
In the past, we have been able to obtain an adequate supply of our essential raw materials, and we currently believe we have an adequate supply for virtually all components of our products, including Bis-amino.
Removed
However, we have encountered and may in the future encounter supply issues with raw materials due to increases in global demand and limited supply capacity, or other supply disruptions, as well as fluctuations in the cost of raw materials.
Removed
Sustained increases in raw material costs or other inflationary pressures in the future may have an adverse effect on our ability to maintain current operating margins.
Removed
Further, while we attempt to reduce our exposure to fluctuations in the price of raw materials through contractual arrangements with our suppliers, we may not accurately forecast prices and therefore may at times pay more than prevailing market rates.
Removed
If any of our third-party suppliers cease to perform their obligations under our current contractual arrangements or terminate such arrangements, we may need to find alternative sources of supply, and these new manufacturers or suppliers may have to be qualified under applicable industry, governmental and Company-mandated vendor standards, which can require additional investment and be time-consuming.
Removed
In addition, if we experience supply shortages, price increases, quality control concerns, disruption in transportation, warehousing or other necessary services, or regulatory impediments with respect to raw materials, ingredients, components or packaging we use for our products, we may need to seek alternative supplies or suppliers.
Removed
We cannot guarantee that we would be able to establish alternative relationships on similar terms, without delay or at all, or that any alternative supplier would be of comparable quality.
Removed
We also may be required to reformulate or substitute ingredients in our products, including due to shortages of specific raw materials in order to meet demand, and these reformulated products may be more expensive to procure or less effective than current formulations and could harm our brand and reputation.
Removed
If we are unable to successfully respond to such issues, our business, financial condition and results of operations would be adversely affected. 19 Table of Contents A disruption in our operations could adversely affect our business, financial condition and results of operations. Our finished products are manufactured in the U.S. and Europe, with a substantial portion manufactured in California.
Removed
Any interruptions in operations at these locations could result in our inability to satisfy demand. A number of factors could damage or destroy the manufacturing equipment or our inventory of components, supplies or finished goods, cause substantial delays in manufacturing, supply and distribution of our products, result in the loss of key information and cause us to incur additional expenses.
Removed
These factors include industrial accidents, natural disasters, strikes and other labor disputes, availability of natural resources, political crises, such as terrorist attacks, war and other geopolitical instability, capacity constraints, equipment or technology malfunctions or failures, disruptions in ingredient, material or packaging supply, disruptions in supply chain or information technology, loss or impairment of key manufacturing sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, inflationary pressures, licensing requirements and other regulatory issues, pandemic related shut downs and other external factors over which we have no control.
Removed
We have experienced increased input costs for warehousing, transportation and raw materials as a result of global supply chain disruption and inflationary pressures, as well as increased wage rates. Sustained increases in these costs or other inflationary pressures in the future may have an adverse effect on our ability to maintain current levels of operating margin.
Removed
The occurrence of any such events could have an adverse effect on our business, financial condition and results of operations. Our business interruption insurance may not cover losses in any particular case, and insurance may not be available on commercially reasonable terms to cover certain of these catastrophic events or interruptions.
Removed
In addition, regardless of the level of insurance coverage, any disruption that impedes our ability to manufacture our products in a timely manner could adversely affect our business, financial condition and results of operations. We rely on third-party global service providers to deliver our products to customers, including directly to consumers.
Removed
Our ability to receive inbound inventory efficiently and ship products to customers may be negatively affected by factors beyond our and these providers’ control, including pandemic, weather, fire, flood, power loss, earthquakes, acts of war or terrorism or other events specifically impacting our service providers, such as labor disputes, cyberattacks, financial difficulties and system failures.
Removed
We are also subject to risks of damage or loss during delivery by our shipping providers. We have in the past experienced, and may in the future experience, shipping delays for reasons outside of our control.
Removed
If we are not able to negotiate acceptable pricing and other terms with our third-party shipping, warehousing and distribution providers, or if these providers experience performance problems or other difficulties in processing our orders or timely delivering our products to customers, our customers could become dissatisfied and cease buying products from us, which could negatively impact our results of operations.
Removed
We are subject to risks related to the global scope of our operations. Our products are sold in more than 100 countries around the world, with approximately 55% of our net sales in 2023 generated outside the U.S.
Removed
In addition, certain of our products are manufactured in Europe, and we have key third party operational facilities located outside the U.S. that warehouse and/or distribute goods for sale throughout the world.
Removed
Our global operations are subject to many risks and uncertainties, including: • fluctuations in foreign currency exchange rates and the relative costs of operating in international jurisdictions; • local civil unrest, political instability or changes in diplomatic or trade relationships, such as geopolitical tensions between the U.S. and the People’s Republic of China; • foreign or U.S. laws, regulations and policies, including restrictions on trade, immigration and travel, operations, and investments; disputes with third parties arising from such laws, regulations or policies; currency exchange controls; restrictions on imports and exports, including license requirements; tariffs; sanctions; and taxes; • inflation and other macroeconomic factors in certain of our international markets; • lack of well-established or reliable legal and administrative systems in certain of our international markets; and • social, economic and geopolitical conditions, such as a pandemic, terrorist attack, war or other military action, including the current conflicts between Russia and Ukraine and in the Middle East.
Removed
These risks could have an adverse effect on our business, including our ability to capitalize on growth in new international markets and to maintain the current level of operations in our existing international markets. Our success depends, in part, on our key personnel.
Removed
Our success depends, in part, on our ability to retain our key personnel, including our executive officers and senior management team. Transitions in our senior management or the unexpected loss of one or more of our key employees could adversely affect our business.
Removed
Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. To support our continued growth, we must effectively integrate, develop, motivate and manage new employees in our 20 Table of Contents fully remote working environment.
Removed
To attract top talent, we may need to increase our employee compensation levels to remain competitive in attracting and retaining talented employees. Competition for these employees can be intense. We may not be able to attract, integrate or retain qualified personnel in the future, and our failure to do so could have an adverse effect on our business.
Removed
Our business has historically been influenced by seasonal trends common to traditional retail selling periods, and the results of our operations typically are slightly higher in the second half of the fiscal year due to increased levels of purchasing by consumers for special and holiday events and by our customers for the end of year holiday selling season.
Removed
Higher sales during the third and fourth quarters may cause our working capital needs to be greater during the second and third quarters of the fiscal year. However, fluctuations in net sales in any fiscal quarter may be attributable to a number of other factors.
Removed
Adverse events that occur during the second half of the fiscal year may negatively impact our net sales during such period and have had and may in the future have a disproportionate effect on our operating results for the entire fiscal year.
Removed
Furthermore, our limited operating history and rapid growth in recent years may obscure the extent to which seasonality trends have affected and may continue to affect our business.
Removed
Accordingly, yearly or quarterly comparisons of our operating results may not be useful, and our results in any particular period will not necessarily be indicative of the results to be expected for any future period. Risks Related to Information Technology and Cybersecurity We rely on the use of our, and our third-party service providers’ information technology.
Removed
Any significant failure, inadequacy, interruption or data security incident impacting our information technology and websites, or those of our third-party service providers, could have an adverse effect on our business, prospects, results of operations, financial condition or cash flows.
Removed
We increasingly rely on information technology systems to process, transmit and store electronic information, including on our e-commerce website and other platforms and applications. Our ability to effectively manage our business and coordinate the manufacturing, sourcing, distribution, sale and marketing of our products depends on the reliability and capacity of these systems.
Removed
The failure of our information technology systems or those of our vendors and service providers to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in integrating new systems would adversely affect our business operations.
Removed
Our information technology systems and those of our vendors and service providers may be susceptible to outages due to fire, floods, power loss, telecommunications failures, hardware failures, user errors, breaches and cybersecurity threats including ransomware and other events.
Removed
These outages could disrupt our general corporate functions and the manufacturing and distribution operations of our third-party vendors and could cause information, including data related to customer or consumer orders, to be lost or delayed, reduce demand for our products and cause our sales to decline.

… 215 more changes not shown on this page.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−1 removed5 unchanged
Biggest changeThe following graph and accompanying table compare the total stockholder return on the Company’s common stock with the cumulative total return of the Nasdaq Composite and the S&P Consumer Staples Index.
Biggest changeThe following graph compares the total stockholder return on the Company’s common stock with the cumulative total return of the Nasdaq Composite and the S&P Consumer Staples Index.
Dividends We do not currently anticipate paying any dividends on our common stock and currently expect to retain all future earnings for use in the operation and expansion of our business. We may reevaluate our dividend policy in future.
Dividends We do not currently anticipate paying any dividends on our common stock and currently expect to retain all future earnings for use in the operation and expansion of our business. We may reevaluate our dividend policy in the future.
Holders As of February 23, 2024 , there were 24 registered holders of our common stock.
Holders As of February 26, 2025, there were 24 registered holders of our common stock.
Removed
This graph and table (i) cover the period from September 30, 2021 (the date of the initial listing of our common stock on the Nasdaq Global Select Market) to December 31, 2023 on a quarterly basis, (ii) assume a $100 investment on September 30, 2021, and (iii) assume reinvestment of dividends, if any. 35 Table of Contents Company/Index 09/30/2021 12/31/2021 03/31/2022 06/30/2022 09/30/2022 12/31/2022 03/31/2023 06/30/2023 09/30/2023 12/31/2023 Olaplex Holdings, Inc. $ 100.00 $ 118.90 $ 63.80 $ 57.51 $ 38.98 $ 21.27 $ 17.43 $ 15.18 $ 7.96 $ 10.37 NASDAQ Composite $ 100.00 $ 108.45 $ 98.42 $ 76.33 $ 73.19 $ 72.44 $ 84.59 $ 95.43 $ 91.49 $ 103.89 S&P Consumer Staples $ 100.00 $ 112.86 $ 110.76 $ 104.96 $ 97.37 $ 109.03 $ 109.21 $ 108.99 $ 101.79 $ 106.68
Added
This graph (i) covers the period from September 30, 2021 (the date of the initial listing of our common stock on the Nasdaq Global Select Market) to December 31, 2024 on a quarterly basis, (ii) assumes a $100 investment on September 30, 2021, and (iii) assumes reinvestment of dividends, if any.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

58 edited+33 added−39 removed38 unchanged
Biggest changeOperating Expenses (in thousands) For the Year Ended December 31, 2023 2022 $ Change % Change Selling, general, and administrative expenses $ 168,942 $ 113,877 $ 55,065 48.4 % Amortization of other intangible assets 41,468 41,282 186 0.5 % Total operating expenses $ 210,410 $ 155,159 $ 55,251 35.6 % Selling, general and administrative expenses increased primarily due to an increase of $37.1 million in investments in sales and marketing, $8.7 million related to the combination of a one-time former distributor payment, professional expenses, and legal settlement costs, payroll expenses of $6.1 million driven by workforce expansion, $2.9 million of CEO transition and other organizational realignment costs, and increased employee benefit costs of $2.7 million.
Biggest changeOperating Expenses (in thousands) For the Year Ended December 31, 2024 2023 $ Change % Change Selling, general, and administrative expenses $ 181,685 $ 168,942 $ 12,743 7.5 % Amortization of other intangible assets 43,669 41,468 2,201 5.3 Total operating expenses $ 225,354 $ 210,410 $ 14,944 7.1 % The increase in selling, general and administrative expenses was primarily due to an increase of $7.2 million in payroll costs driven by merit increases and organizational realignment costs, $3.9 million in non-payroll related advertising and marketing expenses, $3.3 million in distribution and fulfillment costs and $2.1 million in technology investments, partially offset by a decrease of $5.9 million in legal and professional fees during the year ended December 31, 2024 . 40 Table of Contents Interest Expense, Net (in thousands) For the Year Ended December 31, 2024 2023 $ Change % Change Interest expense $ 59,585 $ 57,954 $ 1,631 2.8 % Interest income (25,379) (18,828) (6,551) 34.8 Interest expense, net $ 34,206 $ 39,126 $ (4,920) (12.6) % Interest expense for the year ended December 31, 2024 increased as compared to the previous year due to fluctuations in interest rates.
Updates to our blended state tax rate, allocation of U.S. versus foreign sourced income and changes in tax rules on the amortization and depreciation of assets may significantly impact the established liability and changes would be recorded to other (expense) income in the period we made the determination.
Updates to our blended state tax rate, allocation of U.S. versus foreign sourced income and changes in tax rules on the amortization and depreciation of assets may significantly impact the established liability and changes would be recorded to other (expense) income in the period we made the determination.
Business Environment & Trends We continue to monitor the effects of the global macro-economic environment, including the risk of recession, inflationary pressures, competitive products and discounting, currency volatility, high interest rates, social and political issues, geopolitical tensions and regulatory matters.
Business Environment & Trends We continue to monitor the effects of the global macro-economic environment, including the risk of recession, inflationary pressures, competitive products and discounting, currency volatility, high interest rates, tariffs, social and political issues, geopolitical tensions and regulatory matters.
Changes in the utilization of the Pre-IPO Tax Assets will impact the amount of the liability that will be paid pursuant to the Tax Receivable Agreement. Changes in the utilization of these Pre-IPO Tax Assets are recorded in income tax expense (benefit) and any changes in the obligation under the Tax Receivable Agreement is recorded in other income (expense).
Changes in the utilization of the Pre-IPO Tax Assets will impact the amount of the liability that will be paid pursuant to the Tax Receivable Agreement. Changes in the utilization of these Pre-IPO Tax Assets are recorded in income tax expense (benefit) and any changes in the obligation under the Tax Receivable Agreement is recorded in other (income) expense, net.
The Company is required to pay a commitment fee of 0.25% to 0.50% per annum on unused commitments under the 2022 Revolver based upon our First Lien Leverage Ratio (as defined in the 2022 Credit Agreement). Critical Accounting Policies and Estimates Our consolidated financial statements included elsewhere in this Annual Report have been prepared in accordance with GAAP.
The Company is required to pay a commitment fee of 0.25% to 0.50% per annum on unused commitments under the 2022 Revolver based upon our First Lien Leverage Ratio (as defined in the 2022 Credit Agreement). Critical Accounting Estimates Our Consolidated Financial Statements included elsewhere in this Annual Report have been prepared in accordance with GAAP.
In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will be our ability to continue providing innovative products to our customers and consumers and manage production and our supply chain. 2022 Credit Facility On February 23, 2022, Olaplex, Inc., an indirect wholly owned subsidiary of Olaplex Holdings, Inc., together with Penelope Intermediate Corp. acting as the parent guarantor, entered into the 2022 Credit Agreement, by and among Olaplex, Inc., Penelope Intermediate Corp, Goldman Sachs Bank USA (“Goldman Sachs”), as administrative agent (the “Administrative Agent”), collateral agent and swingline lender, and each lender and issuing bank from time to time party thereto (the “Lenders”).
In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will be consumer demand for our products and our ability to continue providing innovative products to our customers and manage production and our supply chain. 2022 Credit Facility On February 23, 2022, Olaplex, Inc., an indirect wholly owned subsidiary of Olaplex Holdings, Inc., together with Penelope Intermediate Corp. acting as the parent guarantor, entered into the 2022 Credit Agreement, by and among Olaplex, Inc., Penelope Intermediate Corp, Goldman Sachs Bank USA (“Goldman Sachs”), as administrative agent (the “Administrative Agent”), collateral agent and swingline lender, and each lender and issuing bank from time to time party thereto (the “Lenders”).
The preparation of financial statements requires us to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. We evaluate our accounting policies, estimates and judgments on an on-going basis.
The preparation of financial statements requires us to make estimates and assumptions about future events that affect amounts reported in our Consolidated Financial Statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. We evaluate our accounting policies, estimates and judgments on an ongoing basis.
In connection with the Reorganization Transactions, on September 30, 2021, we recognized a liability of $232.9 million for the payments to be made under the Tax Receivable Agreement, which is accounted for as a reduction of additional paid-in capital on our consolidated balance sheet.
In connection with the Reorganization Transactions, on September 30, 2021, we recognized a liability of $232.9 million for the payments to be made under the Tax Receivable Agreement, which is accounted for as a reduction of additional paid-in capital on our Consolidated Balance Sheets.
As a result, changes in tax law, and in particular the federal and state tax rates applicable to U.S. corporations, the tax rules on the amortization and depreciation of assets, and our split of U.S. to foreign income may materially impact the timing and amounts of payments by us to the Pre-IPO 44 Table of Contents Stockholders pursuant to the Tax Receivable Agreement.
As a result, changes in tax law, and in particular the federal and state tax rates applicable to U.S. corporations, the tax rules on the amortization and depreciation of assets, and our split of U.S. to foreign income may materially impact the timing and amounts of payments by us to the Pre-IPO Stockholders pursuant to the Tax Receivable Agreement.
We have developed a synergistic omnichannel model that leverages the strength of each of our channels and our strong digital capabilities that we apply across our sales platforms. Our professional channel serves as the foundation for our brand. Through this channel, professional hairstylists introduce consumers to our products and, we believe, influence consumer purchasing decisions.
We have developed a synergistic omnichannel model that leverages the strength of each of our channels and our strong digital capabilities, which we apply across all of our sales platforms. Our professional channel serves as the foundation for our brand. Through this channel, Pros introduce consumers to our products and, we believe, influence consumer purchasing decisions.
Assumptions and approach used: The Tax Receivable Agreement liability is based on current tax laws and the assumption that the Company and its subsidiaries earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement.
Tax Receivable Agreement The Tax Receivable Agreement liability is based on current tax laws and the assumption that the Company and its subsidiaries earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement.
As of December 31, 2023, the Company had $150.0 million of available borrowing capacity under the 2022 Revolver .
As of December 31, 2024, the Company had $150.0 million of available borrowing capacity under the 2022 Revolver .
The 2022 Credit Agreement also includes 43 Table of Contents reporting, financial and maintenance covenants, including a springing first lien leverage ratio financial covenant. The Company was in compliance with these affirmative and negative covenants on December 31, 2023. Substantially all the assets of the Company constitute collateral under the 2022 Credit Agreement.
The 2022 Credit Agreement also includes reporting, financial and maintenance covenants, including a springing first lien leverage ratio financial covenant. The Company was in compliance with these affirmative and negative covenants on December 31, 2024. Substantially all the assets of the Company constitute collateral under the 2022 Credit Agreement.
On August 11, 2022, the Company entered into an interest rate cap transaction in connection with the 2022 Term Loan Facility, with a notional amount of $400.0 million, in order to limit its exposure to potential increases in future interest rates related to the 2022 Term Loan Facility.
In order to limit its exposure to potential increases in future interest rates related to the 2022 Term Loan Facility, on August 11, 2022, the Company entered into an interest rate cap transaction in connection with the 2022 Term Loan Facility, with a notional amount of $400.0 million, which expired on July 31, 2024.
The Company’s effective tax rate for the year ended December 31, 2023 was lower than the statutory tax rate of 21% primarily due to the FDII deduction and the non-taxable income associated with the Tax Receivable Agreement, partially offset by the effect of state and local income taxes.
For the year ended December 31, 2023, the effective tax rate was lower than the U.S. federal statutory tax rate primarily due to the FDII deduction and the non-taxable income associated with the Tax Receivable Agreement, partially offset by the effect of state and local income taxes.
The interest rate on outstanding amounts under the 2022 Term Loan Facility was 9.0% per annum as of December 31, 2023. We have not drawn on the 2022 Revolver as of December 31, 2023. The 2022 Term Loan Facility is repayable in mandatory quarterly installments equal to $1.6 million, with the balance payable at maturity.
The interest rate on outstanding amounts under the 2022 Term Loan Facility was 8.0% per annum as of December 31, 2024. We have not drawn on the 2022 Revolver as of December 31, 2024. The 2022 Term Loan Facility is repayable in mandatory quarterly installments equal to $1.7 million, with the balance payable at maturity.
(2) The 2022 Term Loan Facility is subject to variable interest rates. The interest rate on borrowings under the 2022 Term Loan Facility was 9.0% as of December 31, 2023. Assumes annual interest rate of 9.0% on the 2022 Term Loan Facility over the remaining term of the loan.
(2) The 2022 Term Loan Facility is subject to variable interest rates. The interest rate on borrowings under the 2022 Term Loan Facility was 8.0% as of December 31, 2024. Assumes annual interest rate of 8.0% on the 2022 Term Loan Facility over the remaining term of the loan.
Capital expenditures typically vary and are currently limited, and future capital expenditure requirements depend on strategic initiatives selected for the fiscal year, including investments in infrastructure, expansion into new national and international distributors and expansion of our customer base.
Capital expenditures typically vary and are currently limited, and future capital expenditure requirements depend on strategic initiatives selected for the fiscal year, including investments in infrastructure and expansion of our customer base.
Financial Statements of this Annual Report for additional information. (4) Purchase obligations are commitments for contracted services and include non-cancelable payments. (5) Does not reflect any borrowings under the 2022 Revolver. As of December 31, 2023, we had no outstanding borrowings under the 2022 Revolver.
Financial Statements of this Annual Report for additional information. (4) Purchase obligations are commitments for contracted services and include non-cancelable payments. (5) As of December 31, 2024, we had no outstanding borrowings under the 2022 Revolver.
A considerable portion of our operating income is related to sales to customers outside of the U.S.; however, the majority of our bank deposits are held within the U.S. As of December 31, 2023, we had $466.4 million of cash and cash equivalents.
A considerable portion of our operating income is related to sales to customers outside of the U.S.; however, the majority of our bank deposits are held within the U.S. As of December 31, 2024, we had $586.0 million of cash and cash equivalents.
If actual or expected future returns and discounts were significantly greater or lower than the accrual for the allowance we had established, we would record a reduction or increase to net sales in the period in which we made such determination.
If actual or expected promotional allowances were significantly greater or lower than the accrual for the allowance we had established, we would record a reduction or increase to net sales in the period in which we made such determination.
During the fourth quarters of 2023, 2022 and 2021, the Company recognized other income of $7.4 million, $3.1 million and $3.6 million, respectively, for a reduction to the liability for the Tax Receivable Agreement resulting primarily from an update to the blended state income tax rate and a decrease in the effective federal tax rate used to measure the obligation.
During the fourth quarters of 2024, 2023 and 2022, the Company recognized other expense of $3.9 million and other income of $7.4 million and $3.1 million, respectively, for a change to the liability for the Tax Receivable Agreement resulting primarily from an update to the blended state income tax rate and a change in the effective federal tax rate used to measure the obligation.
The Company has designated the interest rate cap as a cash-flow hedge for accounting purposes. See “Note 9. Long-Term-Debt – Interest Rate Cap Transaction” to our Consolidated Financial Statements included in Item 8. Financial Statements of this Annual Report for additional information.
The Company has designated the interest rate caps as a cash-flow hedge for accounting purposes. See “Note 6 - Fair Value Measurement” and “Note 9 - Long-Term-Debt – Interest Rate Cap Transactions” to our Consolidated Financial Statements included in Item 8. Financial Statements of this Annual Report for additional information.
Liquidity and Capital Resources Requirements Based on past performance and current expectations, we believe that our cash, cash equivalents and cash generated from operations will be sufficient to meet anticipated operating costs, required payments of principal and interest, working capital needs, ordinary course capital expenditures, and other commitments for at least the next 12 months.
Liquidity and Capital Resources Requirements Based on past performance and current expectations, we believe that our cash, cash equivalents and cash generated from operations will be sufficient to meet anticipated operating costs, required payments of principal and interest, working capital needs, ordinary course capital expenditures, and other commitments over both the short term (the next twelve months) and long term.
We also are mindful of inflationary pressures on our consumers, and are monitoring the impact that increasing inflationary pressures may have on consumer spending and preferences and inventory rebalancing at our customers in an increasingly competitive industry.
We also are mindful of inflationary pressures on our consumers amidst an increasingly competitive industry, and we are monitoring the impact that consumer confidence may have on consumer spending at our customers.
The maturity date of the 2022 Term Loan Facility is February 23, 2029. The maturity date of the 2022 Revolver is February 23, 2027. As of December 31, 2023, the Company had outstanding indebtedness under the 2022 Credit Agreement of $663.2 million, of which $6.8 million was classified as current.
The maturity date of the 2022 Term Loan Facility is February 23, 2029. The maturity date of the 2022 Revolver is February 23, 2027. 43 Table of Contents As of December 31, 2024, the Company had outstanding indebtedness under the 2022 Credit Agreement of $656.4 million, of which $6.8 million was classified as current.
In addition, as of December 31, 2023, we had borrowing capacity of $150.0 million under our 2022 Revolver, providing us with a liquidity position of $616.4 million plus $90.7 million of working capital excluding cash and cash equivalents for a combined $707.1 million total liquidity position.
In addition, as of December 31, 2024, we had borrowing capacity of $150.0 million under our 2022 Revolver, providing us with a liquidity position of $736.0 million plus $39.1 million of working capital excluding cash and cash equivalents for a combined $775.1 million total liquidity position.
Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, accessible pricing, brand recognition and loyalty, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities.
Competition in the beauty industry is based on a variety of factors, including innovation, product efficacy, pricing, brand recognition and loyalty, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce initiatives, sustainability and other activities. We have seen increased competitive activity including discounting in the prestige haircare category.
As a result of the activity described above regarding Net sales and Cost of sales, our gross profit margin decreased from 73.8% for the year ended December 31, 2022 to 69.5% for the year ended December 31, 2023.
As a result of the activity described above regarding net sales and cost of sales, as well as due to product mix, our gross profit margin decreased to 69.2% for the year ended December 31, 2024 from 69.5% for the year ended December 31, 2023.
Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the “Special Note Regarding Forward-Looking Statements” section and in the “Risk Factors” section in this Annual Report. Company Overview OLAPLEX is an innovative, science-enabled, technology-driven beauty company.
Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the “Special Note Regarding Forward-Looking Statements” section and in the “Risk Factors” section in this Annual Report.
For discussion of our results of operations for our fiscal year 2022 versus our fiscal year ended December 31, 2021, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2023.
For discussion of our results of operations for our fiscal year 2023 versus our fiscal year ended December 31, 2022 (“fiscal year 2022”), see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for our fiscal year 2023, filed with the U.S.
The following table sets forth our consolidated statements of operations data for each of the periods presented: 2023 2022 2021 (in thousands) % of Net sales (in thousands) % of Net sales (in thousands) % of Net sales Net sales $ 458,300 100.0 % $ 704,274 100.0 % $ 598,365 100.0 % Cost of sales: Cost of product (excluding amortization) 131,323 28.7 177,221 25.2 116,554 19.5 Amortization of patented formulations 8,345 1.8 7,500 1.1 7,989 1.3 Total cost of sales 139,668 30.5 184,721 26.2 124,543 20.8 Gross profit 318,632 69.5 519,553 73.8 473,822 79.2 Operating expenses: Selling, general, and administrative 168,942 36.9 113,877 16.2 98,878 16.5 Amortization of other intangible assets 41,468 9.0 41,282 5.9 40,790 6.8 Total operating expenses 210,410 45.9 155,159 22.0 139,668 23.3 Operating income 108,222 23.6 364,394 51.7 334,154 55.8 Interest expense (57,954) (12.6) (43,953) (6.2) (61,148) (10.2) Interest income 18,828 4.1 2,775 0.4 — — Other income (expense), net Loss on extinguishment of debt — — (18,803) (2.7) — — Tax receivable agreement liability adjustment 7,404 1.6 3,084 0.4 3,615 0.6 Other income (expense), net 220 — (2,256) (0.3) (1,012) (0.2) Total other income (expense), net 7,624 1.7 (17,975) (2.6) 2,603 0.4 Income before provision for income taxes 76,720 16.7 305,241 43.3 275,609 46.1 Income tax provision 15,133 3.3 61,169 8.7 54,825 9.2 Net income $ 61,587 13.4 $ 244,072 34.7 $ 220,784 36.9 39 Table of Contents Fiscal year 2023 compared to fiscal year 2022: Net Sales We distribute products in the U.S. and internationally through professional distributors in salons, directly to retailers for sale in their physical stores and e-commerce sites, and DTC through sales to third party e-commerce customers and through our Olaplex.com websites.
The following table sets forth our Consolidated Statements of Operations data for each of the periods presented: For the year ended December 31, 2024 2023 2022 (in thousands) % of Net sales (in thousands) % of Net sales (in thousands) % of Net sales Net sales $ 422,670 100.0 % $ 458,300 100.0 % $ 704,274 100.0 % Cost of sales: Cost of product (excluding amortization) 121,038 28.6 131,323 28.7 177,221 25.2 Amortization of patented formulations 9,342 2.2 8,345 1.8 7,500 1.1 Total cost of sales 130,380 30.8 139,668 30.5 184,721 26.2 Gross profit 292,290 69.2 318,632 69.5 519,553 73.8 Operating expenses: Selling, general, and administrative 181,685 43.0 168,942 36.9 113,877 16.2 Amortization of other intangible assets 43,669 10.3 41,468 9.0 41,282 5.9 Total operating expenses 225,354 53.3 210,410 45.9 155,159 22.0 Operating income 66,936 15.8 108,222 23.6 364,394 51.7 Interest expense 59,585 14.1 57,954 12.6 43,953 6.2 Interest income (25,379) (6.0) (18,828) (4.1) (2,775) (0.4) Other expense (income), net Loss on extinguishment of debt — — — — 18,803 2.7 Tax receivable agreement liability adjustment 3,915 0.9 (7,404) (1.6) (3,084) (0.4) Other expense (income), net 1,903 0.5 (220) — 2,256 0.3 Total other expense (income), net 5,818 1.4 (7,624) (1.7) 17,975 2.6 Income before provision for income taxes 26,912 6.4 76,720 16.7 305,241 43.3 Income tax provision 7,390 1.7 15,133 3.3 61,169 8.7 Net income $ 19,522 4.6 % $ 61,587 13.4 $ 244,072 34.7 % 39 Table of Contents Fiscal year 2024 compared to fiscal year 2023: Net Sales We distribute products in the U.S. and internationally through professional distributors in salons, directly to retailers for sale in their physical stores and e-commerce sites, and DTC through sales to third party e-commerce customers and through our Olaplex.com websites.
We expect that future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets could aggregate to $198.2 million over the 12-year remaining period under the Tax Receivable Agreement. Payments under the Tax Receivable Agreement, which began in fiscal year 2022, are not conditioned upon the parties’ continued ownership of equity in the Company.
We expect that future payments under the Tax Receivable Agreement relating to the Pre-IPO Tax Assets could aggregate to $189.3 million, with payments expected to continue through 2041. Payments under the Tax Receivable Agreement, which began in fiscal year 2022, are not conditioned upon the parties’ continued ownership of equity in the Company.
We evaluated the development and selection of our critical accounting policies and estimates and believe that the following items are critical accounting estimates, as they (1) involve a higher degree of judgment or complexity and (2) are most significant to reporting our results of operations and financial position.
We believe that the following items are critical accounting estimates, as they (1) involve a higher degree of judgment or complexity and (2) are most si gnificant to reporting our results of operations and financial position. The following critical accounting estimates reflect the significant estimates and judgments used in the preparation of our Consolidated Financial Statements.
The carrying value of inventories is reduced for any excess and obsolete inventory. Assumptions and approach used: Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and the age of inventory.
Inventory Excess and obsolete inventory reductions are determined based on assumptions about future demand and sales prices, estimates of the impact of competition, and the age of inventory.
The decrease in the effective federal tax rate was due to an increase in the portion of federal taxable income that is eligible for the FDII deduction. The adjusted liability as of December 31, 2023 is recorded as $198.2 million, of which $185.5 million was recorded in long term liabilities and $12.7 million was recorded in current liabilities.
The change in the effective federal tax rate was due to a change in the portion of the federal taxable income that is eligible for the FDII deduction. The adjusted liability as of December 31, 2024 was recorded as $189.3 million, of which $177.5 million was recorded in long term liabilities and $11.8 million was recorded in current liabilities.
See “Note 10 - Income Taxes” in Item 8 of this Annual Report. New Accounting Pronouncements See “Note 2 - Summary of Significant Accounting Policies” in Item 8 of this Annual Report for information regarding new accounting pronouncements. 47 Table of Contents
New Accounting Pronouncements See “Note 2 - Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in Item 8. Financial Statements of this Annual Report for information regarding new accounting pronouncements. 48 Table of Contents
Fluctuations in working capital are primarily caused by customer demand of our product, timing of when a retailer rearranges or restocks our products, timing of inventory purchases, and timing of our payables and expenses.
We also utilize cash for strategic investments. Fluctuations in working capital are primarily caused by customer demand for our products, timing of when a retailer rearranges or restocks our products, timing of inventory purchases, and the amount and timing of our payables and expenses, including to implement our business transformation plan.
Net sales declined primarily in the United States, the United Kingdom, and Canada, partially offset by increases in the Middle East and in Latin America.
Net sales declined primarily in certain markets in Western Europe, partially offset by increases in the United States, Canada and Eastern Europe.
We expect that future payments under the Tax Receivable Agreement relating to the Pre-IPO tax assets could aggregate to $198.2 million over the 12-year remaining period under the Tax Receivable Agreement.
We expect that future payments under the Tax Receivable Agreement relating to the Pre-IPO tax assets could aggregate to $189.3 million, with payments expected to continue through 2041.
The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. With respect to the critical accounting policies, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations.
With respect to t he critical accounting estimates, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above.
Income Tax Provision (in thousands) For the Year Ended December 31, 2023 2022 $ Change % Change Income tax provision $ 15,133 $ 61,169 $ (46,036) (75.3) % The Company’s effective tax rate was 19.7% for the year ended December 31, 2023, as compared to 20.0% for the year ended December 31, 2022.
Income Tax Provision (in thousands) For the Year Ended December 31, 2024 2023 $ Change % Change Income tax provision $ 7,390 $ 15,133 $ (7,743) (51.2) % The Co mpany’s effective tax rate was 27.5% for the year ended December 31, 2024, as compared to 19.7% for the year ended December 31, 2023.
Different timing rules apply to payments under the Tax Receivable Agreement to be made to holders that, prior to the completion of the IPO, held stock options (collectively, the “Award Holders”).
Congress is considering a significant number of changes to U.S. tax laws, which may impact our payment obligations to Pre-IPO Stockholders under the Tax Receivable Agreement. 44 Table of Contents Different timing rules apply to payments under the Tax Receivable Agreement to be made to holders that, prior to the completion of the IPO, held stock options (collectively, the “Award Holders”).
Cash Flows The following table summarizes our cash flows for the periods presented: For the Year Ended December 31, (in thousands) 2023 2022 Net cash provided by (used in): Operating activities $ 177,532 $ 255,324 Investing activities (3,614) (2,682) Financing activities (30,326) (116,222) Net increase in cash $ 143,592 $ 136,420 Operating Activities The decrease in net cash provided by operating activities for the year ended December 31, 2023 was primarily a result of a decrease in net income of $182.5 million, changes in working capital and adjusting items to Operating Cash Flows to reconcile to Net income from operations, and increases in inventory obsolescence, write-offs and disposal adjustments of $7.0 million.
Cash Flows The following table summarizes our cash flows for the periods presented: For the Year Ended December 31, (in thousands) 2024 2023 Net cash provided by (used in): Operating activities $ 143,068 $ 177,532 Investing activities (4,891) (3,614) Financing activities (18,610) (30,326) Net increase in cash $ 119,567 $ 143,592 Operating Activities Net cash provided by operating activities was $143.1 million for the year ended December 31, 2024, primarily reflecting our net income of $19.5 million, net of non-cash cost items and changes in operating working capital.
Financial Condition, Liquidity and Capital Resources Overview Our primary recurring source of cash is the collection of proceeds from the sale of our products to our customers, including cash periodically collected in advance of delivery or performance.
Financial Condition, Liquidity and Capital Resources Overview Our primary recurring source of cash is the collection of proceeds from the sale of our products to our customers, including cash periodically collected in advance of delivery or performance. 41 Table of Contents Our primary use of cash is for working capital and payment of our operating costs, which consist primarily of employee-related expenses as well as general operating expenses for marketing, fulfillment costs of customer orders, overhead costs, innovation, capital expenditures and debt servicing.
See “Liquidity and Capital Resources Requirements – Credit Facility” for additional information on our outstanding debt. Interest income for the year ended December 31, 2023 increased as compared to the previous year due to increasing interest rates and additional investments in highly liquid investments with a maturity of three months or less.
See “Liquidity and Capital Resources Requirements – 2022 Credit Facility” included in Part II, Item 7 of this Annual Report for additional information on our outstanding debt. Interest income for the year ended December 31, 2024 increased as compared to the previous year due to additional investments driven by an increase in cash and cash equivalents throughout the year.
As a result, in certain circumstances, the payments we are required to make under the Tax Receivable Agreement could exceed the cash tax savings we actually realize. 45 Table of Contents Contractual Obligations and Commitments The following table summarizes our material cash requirements from known contractual and other obligations as of December 31, 2023 (in thousands): Total Less Than One Year 1-3 Years 3-5 Years More Than Five Years 2022 Term Loan Facility debt (1) $ 663,188 $ 6,750 $ 13,500 $ 13,500 $ 629,438 Interest on 2022 Term Loan Facility debt (2) 304,179 60,484 118,140 115,846 9,709 Related party payable pursuant to the Tax Receivable Agreement (3) 198,171 12,675 26,765 30,343 128,388 Purchase obligations (4) 14,080 4,121 8,242 1,717 — Operating lease liabilities 3,157 370 1,173 839 775 Total contractual obligations (5) $ 1,182,775 $ 84,400 $ 167,820 $ 162,245 $ 768,310 (1) 2022 Term Loan Facility debt payments include scheduled principal payments only.
As a result, in certain circumstances, the payments we are required to make under the Tax Receivable Agreement could exceed the cash tax savings we actually realize. 45 Table of Contents Contractual Obligations and Commitments The following table summarizes our material cash requirements from known contractual and other obligations as of December 31, 2024 (in thousands): Total Less Than One Year 1-3 Years 3-5 Years More Than Five Years 2022 Term Loan Facility debt (1) $ 656,438 $ 6,750 $ 13,500 $ 636,188 $ — Interest on 2022 Term Loan Facility debt (2) 216,512 52,753 103,873 59,886 — Related party payable pursuant to the Tax Receivable Agreement (3) 189,311 11,842 25,159 25,063 127,247 Purchase obligations (4) 45,521 38,909 6,612 — — Operating lease liabilities 2,993 716 1,003 917 357 Total contractual obligations (5) $ 1,110,775 $ 110,970 $ 150,147 $ 722,054 $ 127,604 (1) 2022 Term Loan Facility debt payments include scheduled principal payments only.
Investing Activities The Company’s investing activities during the years ended December 31, 2023 and 2022 included purchases of property and equipment, patents and software. 42 Table of Contents Financing Activities Our financing activities for the year ended December 31, 2023 primarily consisted of cash outflows for payments on our long-term debt, payments to our pre-IPO stockholders pursuant to our Tax Receivable Agreement, and payments related to shares withheld and retired to cover the tax withholding obligations for options exercised, partially offset by cash received by the Company from stock option exercises.
Net cash used in financing activities was $30.3 million for the year ended December 31, 2023, primarily consisting of $16.5 million of payments pursuant to our Tax Receivable Agreement, $10.3 million of payments related to shares withheld to cover the 42 Table of Contents tax withholding obligations for options exercised and $8.4 million of principal payments for the 2022 Term Loan Facility, partially offset by proceeds of $5.0 million from stock option exercises.
The decrease in the effective federal tax rate was due to an increase in the portion of federal taxable income that is eligible for the foreign derived intangible income (“FDII”) deduction. Other income, net increased primarily due to a decrease in foreign currency transaction losses driven by the performance of the U.S. dollar.
The increase in liability in respect of the Tax Receivable Agreement resulted primarily from an update to the blended state income tax rate. Other expense (income), net increased primarily due to foreign currency transaction losses driven by the performance of the U.S. dollar.
As such, our three business channels consist of professional, specialty retail and DTC as follows: (in thousands) For the Year Ended December 31, 2023 2022 $ Change % Change Net sales by Channel: Professional $ 180,084 $ 300,472 $ (120,388) (40.1) % Specialty retail 135,079 235,310 (100,231) (42.6) % DTC 143,137 168,492 (25,355) (15.0) % Total net sales $ 458,300 $ 704,274 $ (245,974) (34.9) % Total net sales declined 34.9% for the year ended December 31, 2023 compared to the same period in 2022, primarily attributed to a lower level of demand and customer inventory rebalancing, particularly within the professional and specialty retail channels.
As such, net sales by our three sales channels consisting of professional, specialty retail and DTC were as follows: (in thousands) For the Year Ended December 31, 2024 2023 $ Change % Change Net sales by Channel: Professional $ 145,327 $ 180,084 $ (34,757) (19.3) % Specialty retail 142,307 135,079 7,228 5.4 DTC 135,036 143,137 (8,101) (5.7) Total net sales $ 422,670 $ 458,300 $ (35,630) (7.8) % Total net sales decreased 7.8% for the year ended December 31, 2024 compared to the same period in 2023, primarily attributed to a lower level of demand.
In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. More information on the Company’s significant accounting policies can be found in the footnotes to our audited consolidated financial statements included in “Note 2 - Summary of Significant Accounting Policies” in Item 8 of this Annual Report.
More information on the Company’s significant accounting policies can be found in the footnotes to our audited Consolidated Financial Statements included in “Note 2 - Summary of Significant Accounting Policies” in Item 8 of this Annual Report. 46 Table of Contents Revenue Recognition In the normal course of business, we offer various incentives to customers such as sales discounts and other incentives and allowances, which give rise to variable consideration.
Since our inception in 2014, we have focused on delivering effective, patent-protected and proven performance in the prestige hair care category. OLAPLEX disrupted and revolutionized the prestige hair care category by creating the bond-building space in 2014.
Since our inception, we have focused on delivering patent-protected technology and proven performance in the prestige haircare category. From our origins of creating the bond-building space, our product portfolio has expanded to 23 products that support the hair health needs of our Pro and consumer communities.
We believe we have a well-recognized and strong reputation in our core markets and that the quality and performance of our products, our emphasis on innovation, and our engagement with our professional and consumer communities position us to compete effectively. 2023 Financial Summary • Net sales decreased 34.9% to $458.3 million for the year ended December 31, 2023 from $704.3 million for the year ended December 31, 2022.
We believe we have a well-recognized and strong reputation within the beauty industry, from our customers to the end-consumer, and that the quality and performance of our products, our emphasis on science-based innovation, our asset-light operating model, and our engagement with our Pro and consumer communities position us to compete effectively. 38 Table of Contents Results of operations for the years ended December 31, 2024, 2023 and 2022 Set forth below are our results of operations for our fiscal year ended December 31, 2024 (“fiscal year 2024”) compared to our fiscal year ended December 31, 2023 (“fiscal year 2023”).
Cost of Sales and Gross Profit (in thousands) For the Year Ended December 31, $ Change % Change 2023 2022 Cost of sales $ 139,668 $ 184,721 $ (45,053) (24.4) % Gross profit $ 318,632 $ 519,553 $ (200,921) (38.7) % Our cost of sales decreased primarily due to declining product sales for the year ended December 31, 2023.
Cost of Sales and Gross Profit (in thousands) For the Year Ended December 31, $ Change % Change 2024 2023 Cost of sales $ 130,380 $ 139,668 $ (9,288) (6.7) % Gross profit $ 292,290 $ 318,632 $ (26,342) (8.3) % Our cost of sales decreased primarily due to a decrease in product sales and a decrease in write-offs for product obsolescence for the year ended December 31, 2024 as compared to the previous year.
For the year ended December 31, 2022 the effective tax rate was lower than the U.S. federal statutory tax rate primarily due to the FDII deduction and excess tax benefits associated with share-based compensation, partially offset by the effect of state and local income taxes. 41 Table of Contents Tax Receivable Agreement The liability under the Tax Receivable Agreement is based on current tax laws and the assumption that we and our subsidiaries will earn sufficient taxable income to realize the full tax benefits subject to the Tax Receivable Agreement.
The Company’s effective tax rate for the year ended December 31, 2024 was higher than the statutory tax rate of 21% primarily due to the unfavorable impact of non-deductible share-based compensation, the effect of state income taxes, the non-deductible expense associated with the Tax Receivable Agreement and the effect of those items on the lower book income for the year ended December 31, 2024, partially offset by the increased foreign derived intangible income (“FDII”) deduction.
If actual conditions are less favorable than those previously estimated by management, additional inventory write-downs could be required.
If actual conditions are less favorable than those previously estimated by management, additional inventory write-downs could be required. We do not believe a 10% change in the demand assumptions used in calculating our inventory reserves would have a material effect on our net earnings or the reported carrying value of our inventory.
Other Income (Expense), Net (in thousands) For the Year Ended December 31, 2023 2022 $ Change % Change Loss on extinguishment of debt $ — $ (18,803) $ 18,803 (100.0) % Tax receivable agreement liability adjustment 7,404 3,084 4,320 140.1 % Other income (expense), net 220 (2,256) 2,476 (109.8) % Total other income (expense) , net $ 7,624 $ (17,975) $ 25,599 (142.4) % For the year ended December 31, 2023, total other income (expense), net increased $25.6 million compared to the year ended December 31, 2022, primarily due to the $18.8 million loss on extinguishment of debt associated with our 2020 Credit Agreement debt refinancing that occurred in 2022.
Other Expense (Income), Net (in thousands) For the Year Ended December 31, 2024 2023 $ Change % Change Tax receivable agreement liability adjustment $ 3,915 $ (7,404) $ 11,319 152.9 % Other expense (income), net 1,903 (220) 2,123 965.0 Total other expense (income), net $ 5,818 $ (7,624) $ 13,442 176.3 % For the year ended December 31, 2024, total other expense (income), net increased $13.4 million compared to the previous year, primari ly due to expense of $3.9 million resulting from an increase to the liability in respect of the Tax Receivable Agreement, compared to a benefit of $7.4 million recognized for the year ended December 31, 2023.
Our specialty retail channel works to increase awareness of, and education for, our products and expand consumer penetration. Our DTC channel, comprised of Olaplex.com and sales through third-party e-commerce platforms, also provides us with the opportunity to engage directly with our consumers to provide powerful feedback that drives decisions we make around new product development.
Our specialty retail channel allows us to build our brand by reinforcing our relationship with current consumers and accessing new consumers . Our DTC channel, comprised of Olaplex.com and sales through third-party e-commerce platforms, further broadens our access to consumers, while allowing us to directly engage with and educate consumers through our owned platforms.
Removed
We have grown from an initial assortment of three products sold exclusively through the professional channel to a broader suite of products offered through the professional, specialty retail and Direct to Consumer (“DTC”) channels that have been strategically developed to address three key uses: treatment, maintenance and protection.
Added
Company Overview OLAPLEX is a foundational health and beauty company powered by breakthrough innovation that starts with and is inspired by the Pro. Our products are designed to enable Pros and their clients to achieve their best results, and to provide consumers with a holistic hair regimen that starts by establishing a foundation for healthy hair.
Removed
Our patent-protected bond-building technology relinks disulfide bonds in human hair that are destroyed via chemical, thermal, mechanical, environmental and aging processes. Our current product portfolio comprises seventeen unique, complementary products, specifically developed to provide a holistic regimen for hair health.
Added
In 2014, OLAPLEX revolutionized the haircare category through the introduction of our patent-protected bond-building technology, Bis-aminopropyl diglycol dimaleate (“Bis-amino”), in our No. 1 Bond Multiplier® and No. 2 Bond Perfector® products.
Removed
Additionally, we recently expanded into our first hair care adjacent market with LASHBOND ® Building Serum, our eyelash enhancing serum formulated to promote the appearance of thicker, longer, stronger, full volume lashes. The strength of our business model and ability to scale have created a compelling financial profile.
Added
This new two-part salon treatment allowed Pros around the world to repair disulfide bonds deep inside the hair that are broken during chemical services (such as coloring, perming and straightening). Later in 2014, OLAPLEX launched an at-home version of this signature bond-building treatment, No. 3 Hair Perfector®, allowing consumers to achieve the benefits of OLAPLEX beyond the salon.
Removed
Strategic Pillars We are focused on executing against our key strategic pillars that we believe will support our long-term growth. These include igniting our global brand, disrupting with innovation, amplifying channel coverage and charting new geographies. These key strategic pillars are supported by our efforts to build capabilities and infrastructure that we believe will enable our aspirations.
Added
By the end of 2015, OLAPLEX products were sold globally, demonstrating the resonance of the product and brand proposition around the world. From our original three bond-building products, we expanded to a range of products suitable across hair types for use in the salon and at home.
Removed
Igniting our Global Brand We believe we have built one of the most powerful brands in the prestige hair care category. We plan to continue growing awareness of our global brand, in an effort to deepen connections with existing customers as well as reach new audiences. We will also continue to invest in enhancing our brand equity.
Added
Our Strategy In 2025, we are focused on the following three strategic priorities. Generate Brand Demand Our marketing strategy seeks to celebrate the passion and creativity of our Pros, as well as our breakthrough scientific innovations and technologies. We are focused on elevating our visual brand identity and communicating the unique benefits of Olaplex products to Pros and consumers.
Removed
Our marketing model remains focused on implementing high return on investment, performance marketing activities aimed at fueling growth. Key levers of our marketing include organic social media activations, strategic paid media, education and training regarding our brand, community engagement with our professional hairstylists, influencer partnerships, and retailer activations such as sampling and in-store events.
Added
We seek to implement a 360-degree full funnel marketing approach to generate consumer demand, leveraging a creator-led point of view and product messaging that focuses on healthy hair from root to tip. We aim to execute on our Pro-first strategy by improving education, enhancing our presence among the Pro community, and elevating our Pro brand ambassadors and influencers.
Removed
Disrupting with Innovation We believe we have a strong pipeline of disruptive innovation that leverages our science-based technology and patented Bis-amino ingredient. We plan to launch two-to-four products annually over the next three years. To support this pipeline, we intend to continue to invest in research and development to strengthen our internal innovation capabilities.
Added
Harness Innovation We seek to build a future pipeline of innovation that is grounded in foundational hair health. We are focused on continuing to innovate beyond damage repair to unlock what we believe are key signs of healthy hair: strength and elasticity, shine and sheen, smoothness and frizz control, softness and moisturization, and shape retention and integrity.
Removed
We recently entered into our first hair care adjacent category and remain excited about the opportunity to further grow where our technology can serve as a foundation for entry that we believe is supported by consumer trust in our brand.
Added
We seek to continue to introduce breakthrough science while expanding our product portfolio and reinvigorating our signature products to drive overall brand demand. Execute with Excellence 37 Table of Contents We will continue to evolve and refine our operational and strategic processes, realign our international partnerships and seek efficiencies across our organization in support of growth.
Removed
Amplifying Channel Coverage In our professional channel, we have undertaken efforts to support and reassert strong relationships with the professional hairstylist community and maintain brand awareness by increasing our field support efforts, deepening partnerships with distributors and customers, and refreshing educational content. We are also pursuing opportunities to further penetrate premium and prestige salons.
Added
We have evolved our integrated business planning process and strategic planning procedure. We are currently in the process of realigning our international distribution network, and we are focused on enhancing our ongoing international partnerships and introducing and executing regional specific strategies to service our customers.
Removed
In specialty retail, we are enhancing visual merchandising in stores, investing in brand store pages online and 37 Table of Contents deploying targeted communications intended to enable new customer acquisition. For our DTC business, we are evolving the digital experiences on Olaplex.com and third party e-commerce websites.
Added
We will continue to use data, insights and a results-oriented mindset as we look to grow our brand and business in the future.
Removed
On Olaplex.com, we expect to continue to invest in site enhancements and more advanced personalization efforts. Charting New Geographies We believe there is substantial opportunity to grow globally. Our priority international regions are currently key markets in Europe and Asia.
Added
Securities and Exchange Commission (the “SEC”) on February 29, 2024.

… 50 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−1 removed2 unchanged
Biggest changeA hypothetical 50 basis point decrease in interest rates would result in a decrease to the fair value of the interest rate cap of approximately $0.5 million. Inflation Inflationary factors such as increases in the cost to produce our products and overhead costs have adversely affected, and may continue to adversely affect our operating results.
Biggest changeInflation Inflationary factors such as increases in the cost of sales for our products and overhead costs may adversely affect our operating results. The impact of inflation on product costs and operating expenses, such as marketing and labor, subsided during 2024 compared to 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks arising from transactions in the normal course of our business. This includes risk associated with interest rates, our interest rate cap, inflation and foreign exchange.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks arising from transactions in the normal course of our business. This includes risk associated with interest rates, the 2024 Interest Rate Cap, inflation and foreign exchange.
We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our consolidated financial statements. 48 Table of Contents
We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our Consolidated Financial Statements. 49 Table of Contents
Sustained increases in warehousing costs, transportation costs, wages and raw material costs, or other inflationary pressures in the future, may have an adverse effect on our ability to maintain current levels of gross profit margin if the selling prices of our products do not increase with these increased costs, or if we cannot identify other cost efficiencies.
Increases in warehousing costs, transportation costs, labor costs and raw material costs, or other inflationary pressures, may have an adverse effect on our ability to maintain current levels of gross profit margin if the selling prices of our products do not increase with these increased costs, or if we cannot identify other cost efficiencies.
Based on our December 31, 2023 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would have caused an increase or decrease in interest cost related to our 2022 Term Loan Facility of approximately $6.6 million over the next 12 months.
As of December 31, 2024, we had $656.4 million of outstanding variable rate loans under the 2022 Term Loan Facility. Based on our December 31, 2024 variable rate loan balances, an increase or decrease of 1% in the effective interest rate would cause an increase or decrease in interest cost of approximately $6.6 million over the next 12 months.
The fair value of the interest rate cap recorded in other assets at December 31, 2023 was $2.4 million. A hypothetical 50 basis point increase in interest rates would result in an increase to the fair value of the interest rate cap of approximately $0.6 million.
A hypothetical 50 basis point increase in interest rates would result in an increase to the fair value of the 2024 Interest Rate Cap of approximately $0.4 million. A hypothetical 50 basis point decrease in interest rates would result in a decrease to the fair value of the 2024 Interest Rate Cap of approximately $0.1 million.
Interest Rate Cap On August 11, 2022, we entered into an interest rate cap transaction (the “interest rate cap”) in connection with the 2022 Term Loan Facility, as more fully described in “Note 9 - Long Term Debt” in the Item 8 of this Annual Report.
On May 7, 2024, we entered into the 2024 Interest Rate Cap in connection with the 2022 Term Loan Facility, with a notional amount of $400 million at a strike rate of 5.00%, as more fully described in “Note 6 - Fair Value Measurement” in Item 8. Financial Statements of this Annual Report.
We use the interest rate cap to add stability to interest expense and to manage our exposure to interest rate movements. The fair value of the interest rate cap is measured at the end of each reporting period using observable inputs other than quoted prices.
We use the 2024 Interest Rate Cap to add stability to interest expense and to manage our exposure to interest rate fluctuations. The fair value of the 2024 Interest Rate Cap recorded in other assets at December 31, 2024 was $0.2 million.
Removed
As of December 31, 2023, we had $663.2 million of outstanding variable rate loans under the 2022 Term Loan Facility.

Other OLPX 10-K year-over-year comparisons