Obagi Medical Products — Investor Presentation (March 2012)
29 slides from Obagi Medical Products's investor presentation, Mar 13, 2012
Slide 1: Obagi: Strategic Direction Information Meetings
Obagi: Strategic Direction Information Meetings Welcome to the Obagi Transformation We’ve been transforming women’s skin for more than 20 years. Now it’s our turn.
Slide 2: Safe Harbor
SAFE HARBOR Today’s presentation contains forward-looking statements that can be identified by the use of forward looking terminology such as the words "believes," "expects," "may," "will," "should," "potential," "anticipates," "plans," or "intends" and similar expressions. Such forward-looking stat
Slide 3: Business Overview
BUSINESS OVERVIEW
Slide 4: Obagi Medical Products: Who We Are
Obagi Medical Products: Who We Are • Founded in 1997 • Headquarters: Long Beach, CA • Employees: 199, including 141 in Sales & Marketing • Accounts: Estimated ~ 12,500 physicians in U.S. • Profitable, positive cash flow business • Specialty pharmaceutical company that develops, markets and sells pro
Slide 5: Obagi's Existing Addressable Market
• Segment: Medical care providers, spas/skin salons and specialty retail stores • 2010 combined market: $900 million+ 1 • Sector: OMPI participates almost solely in the medical care provider channel - $303 million in 2011 1 • Segment CAGR: 7.1% 2006 to 2011 • OMPI CAGR: 8.0% (includes 1.0% negative
Slide 6: Obagi Maintains Leading Brand Recognition
Estee Lauder Laura Mercier Chanel Clinique Dior Kate Sommerville Lancõme Oil of Olay L’Oreal Cetaphil Dove Clearasil Neutrogena Aveeno St. Ives Clean & Clear Obagi Kinerase LaMer SkinCeuticals MD Forte La Roche Posay Kiehl’s SkinMedica NeoStrata Murad Preuage LaPraine (spa) (medical) Dermalogica Gly
Slide 7: Obagi's Market-Leading Products
• OMPI: leader overall in the segment, and also in a number of sub-categories • Nu-Derm: leading brand in the entire segment, with 20% of all revenues • ELASTIderm: leading eye treatment, 20% of sub-segment • CLENZIderm: leading acne treatment dispensed by physicians, more than 30% of sub-segment Ob
Slide 8: Obagi's Core Business is Robust
Obagi’s Core Business is Robust • The Obagi brand value and goodwill is reflected in the Company’s strength and stability • Products are accepted as clinically proven and effective by medical professionals and by consumers • Physician-dispense model enabled OMPI to compete and win in a market target
Slide 9: Obagi Transformation: Expanding the Addressable Market
OBAGI TRANSFORMATION: EXPANDING THE ADDRESSABLE MARKET
Slide 10: Leveraging Strength of Obagi's Brand to Capitalize on Global Online Communities
• In the new global consumer community, strong brands have extraordinary opportunities • Social media brings consumer behaviors and preferences visible to the masses (Facebook, Twitter, 4Square, etc.) • Virtual communities are fast becoming the biggest factor in consumer purchasing decisions • In a
Slide 11: Evolving Obagi's Channel Strategy to Accelerate Growth
• OMPI’s true revenue potential is bottled up: – In the US alone, at least 60 million women represent potential Obagi customers – However, at any one time, there are only approximately 500,000 active Obagi end-users • Yet, 400,000 web searches for Obagi occur each month • Obviously, there is a disco
Slide 12: Potential New Market Opportunity
Potential New Market Opportunity • Physical limitations vs. virtual limitlessness – Currently, business is 100% wholesale; customer is exclusively a reselling physician – Revenues are bounded on the upside due to inventory purchasing requirements placed upon physicians – Physicians are rarely willin
Slide 13: Building an e-Commerce and Fulfillment Operation
Building an e-Commerce and Fulfillment Operation • Moving forward with innovation, creativity and vision • Obagi-owned online pharmacy and fulfillment operation will set ourselves apart in our industry by combining – A dominant brand with prescription components, built on – An ability to engage (in
Slide 14: Creating a Dominant New Channel
• Obagi’s new online pharmacy and fulfillment capability is not just a marginal add-on to the existing business • Building a worldwide, Obagi-branded online community to bring together in one place existing end-users, physicians and millions of prospective new customers • A place to share informatio
Slide 15: Targeting New End Users and High Opportunity Consumers Through e-Commerce
High Opportunity Consumers Shopping Online Offline Brands Clothing/Accessories Cars Technology Obagi is… • Strong and powerful • Fixes problems • Somewhat exotic • Flawless skin Angelina Jolie Celebrities Targeting New End Users and High Opportunity Consumers Through e-Commerce
Slide 16: Accelerating Future Growth
Accelerating Future Growth • The goal is to generate 15%-20% sustained annual growth rates in revenues and profits • Add up to $100 million in new revenue within 3-5 years • Establish direct relationships with end-users on a major scale • Maintain or improve contribution margins • Avoid cannibalizin
Slide 17: Multiplies Revenue Prospects Immediately
Multiplies Revenue Prospects Immediately
Slide 18: Multiplies Revenue Prospects Immediately
Multiplies Revenue Prospects Immediately Increase volume with ing physician practices Recruit new practices operating within our traditional specialties reduce or eliminate discounting) + Few of our partners carry and sell all Obagi products * With OMP’s online pharmacy and fulfillment available the
Slide 19: Expected Revenue Impact of Immediate Benefits
Expected Revenue Impact of Immediate Benefits “Back of the Envelope” Revenues Discussed Above
Slide 20: 2012 Investments - Management Estimates
2012 Investments - Management Estimates 1 1. Other than Operations, some Sales & Marketing and Other, all listed expense items are one-time investments.
Slide 21: Longer Term Opportunities
• Draw large numbers of new users into online community • Spread to non-traditional medical channels • International possibilities become interesting - particularly Japan and Asia Longer Term Opportunities
Slide 22: Obagi Financials
OBAGI FINANCIALS
Slide 23: Financial Overview
NASDAQ Ticker Symbol OMPI Stock price (3/9/2012) $13.00 FD Shares outstanding 18.7M Market cap (3/9/2012) $243M Financial Metrics (non-GAAP*) 2011 Gross Margin 79% Operating Margin 21% EBITDA Margin 24% ROA 19% ROE 25% Financial Overview ($’s in millions except for share price & EPS) As of December
Slide 24: Comments to 2011 and 2012 Outlook
Comments to 2011 and 2012 Outlook • 2011 Financial Results: • Excludes any impact related to the Zein Obagi law suit and settlement • Includes any negative impact due to Texas Hydroquinone; revenue and expenses • GAAP revenue was $114.1M and non-GAAP EPS was $0.81 • 2012 Guidance: • Core business: •
Slide 25: Annual Revenue & EPS Trends
Revenues EPS * See our Report on Form 8-K filed with the Commission on March 11, 2010 for Non-GAAP financial measures. ** See our Report on Form 8-K filed with the Commission on March 10, 2011 for Non-GAAP financial measures. *** See our Report on Form 8-K filed with the Commission on March 8, 2012
Slide 26: Balance Sheet Summary
($ in millions) Dec. 2011 Cash and Cash Equivalents $35.0M 2011 Free Cash Flow (1) $23.9M Total Assets $77.8M Total Bank Debt (2) $0 Shareholders’ Equity $60.9M Authorized Buyback (remaining) $30.0M Balance Sheet Summary (1) 2011 free cash flow before $5.0 million legal settlement paid to Dr. Obagi
Slide 27: Closing Thoughts
CLOSING THOUGHTS
Slide 28: Key Takeaways and Investment Highlights
Key Takeaways and Investment Highlights • Experienced Management Team • Outstanding Brand Recognition and Track Record for Product Innovation • Expansion of Distribution Channels to Accelerate Growth • Targeted End Users Through e-Commerce Channel
Slide 29: Q&A
Q&A
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