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NEW YORK, Jan. 16, 2024 (GLOBE NEWSWIRE) — Waldencast plc, (NASDAQ: WALD) (“Waldencast”), a global multi-brand goodlooks and wellness platform, today announced that it has filed its annual report for the fiscal year. Closed December 31, 2022 on Form 20-F (“2022 20-F”) which aggregates the restated monetary statements for fiscal years 2021 and 2020 with the Securities and Exchange Commission, which is also located on its investor relations site at https: /ir. waldencastArraycom/.
2022 Results Highlights
On July 27, 2022 (the “Closing Date”), Waldencast finalized the business combination (“Business Combination”) with Obagi Global Holdings Limited (“Obagi Skincare”) and Milk Makeup LLC (“Milk Makeup”)Array The anticipated effects of certain highlights of the company’s functionality for the eras provided on 20-F 2022. As you read the monetary statements included on our Form 20-F and in this release, you will notice that there is a transparent department between the “previous” eras that come with the consolidated monetary statements up to the balance sheet date and the “successor” eras that accompany all eras. after the date of acquisition. The predecessor and successor effects provided are not comparable, as the successor generation includes the consolidated financial statements of Waldencast, Obagi Skincare, and Milk Makeup, while the previous generation includes only the financial statements of Obagi Skincare. Please refer to our 2022-20-F for more information on our significant accounting policies and restatements related to 2021 and 2020. Please also see the definitions and reconciliations provided later in this release with respect to certain non-GAAP adjustments discussed below.
Net Income: U. S. GAAP Net SalesU. S. Skincare Estimates were $92. 4 million for the period from July 28, 2022 to December 31, 2022 (“2022 Successor Period”) (of which $61. 1 million is similar to the Obagi skincare segment and $31. 3 million similar to the milk makeup segment). ). Segment), $73. 8 million for the period January 1, 2022 through July 27, 2022 (“Prior 2022 Period”) and $142. 5 million for the year ended December 31, 2021 (“Prior 2021 Period”).
Obagi Skincare Group and Milk Makeup’s combined sales for the year ended December 31, 2022 were $207. 4 million, up 9. 4% from $189. 5 million in the same period last year.
Obagi Skincare and Milk Makeup Group’s combined comparable net sales reached $184. 3 million in 2022, up 9. 3% from $168. 6 million in 2021. The group’s combined comparable net sales for 2022 include the following:
the write-off of $44. 5 million of sales from Obagi Skincare’s Southeast Asia distributor in 2022, which relates to shipments that the Southeast Asian distributor was unable to pay this generation, in part due to delays in obtaining product registrations in Vietnam this generation in the 3rd quarter of 2022, which were then received in the second quarter of 2023.
a $35. 3 million deduction resulting from income similar to certain services rendered through Obagi Skincare distributors, which are recorded as income relief rather than an expense. This update has no effect on money or net income; and
a reduction of $11.2 million in revenue driven by a change in the revenue recognition criteria relating to the U.S. physician channel provider for Obagi Skincare, which is further described in the 2022 20-F.
See “Item 5. Waldencast Operating and Financial Statement and Outlook” and “Item 8. Financial Information – Note 2. Restatement and Reclassifications” of 20-F 2022 to obtain more data on the basis and have an effect on the restatement and adjustments in accounting strategies during the applicable periods, adding the elements described above that have been implemented for 2022, 2021 and 2020.
Net Income and Adjusted EBITDA: The Company recorded a net loss of $(120. 6) million in the 2022 successor era, $(21. 1) million in the predecessor era of 2022 and $(19. 6) million in the previous era of 2021. The loss of the 2022 successor generation includes the effect of an impairment of Obagi Skincare’s goodwill of $68. 7 million, which was identified shortly after the business combination was based on management’s qualitative assessment. Adjusted EBITDA was $16. 0 million in the 2022 successor era, $0. 1 million in the 2022 predecessor era, and $20. 6 million in the 2022 successor era. during the past era of 2021.
Combined Adjusted EBITDA was $(8.8) million in fiscal year 2022, versus $17.2 million in 2021. 2022 Combined Adjusted EBITDA was impacted by losses incurred within the Obagi Skincare segment as a result of: (i) the various challenges faced in connection with the Southeast Asia distributor ($4.3 million), (ii) an excess inventory provision ($6.4 million), and (iii) a loss related to the Obagi China Business which was carved-out at the time of the Business Combination ($8.7 million).
Obagi Skincare: Obagi’s combined net sales for Obagi Skincare were $134. 9 million in 2022, down 5. 3% from $142. 5 million in 2021. Obagi’s combined comparable net sales were $111. 8 million in 2022, down 8. 0% from the previous year’s $121. 5 million, related to China. sales. Obagi Skincare’s adjusted EBITDA was $9. 8 million in 2022 compared to $20. 6 million in 2021, reflecting accounting changes and non-recurring items discussed above.
Milk Makeup: Milk Makeup delivered a robust performance in 2022, achieving Combined Milk Net Revenue of $72.5 million, up 54% vs. $47.1 million in 2021. Milk Makeup also delivered its first year of positive Adjusted EBITDA in 2022 of $6.9 million vs $(3.4) million in 2021, even with a significant increase in planned sales and marketing investments.
Liquidity: As of December 31, 2022, money and cash equivalents amounted to $8. 7 million. As of the same date, we had long-term credit facilities of $220. 7 million with a notable principal of $184. 8 million, resulting in net debt of $176. 1 million. In September 2023, the Company successfully completed a $70 million private placement, which was partially used to fully liquidate the remarkable revolving credit facility balance, further modifying its capital structure.
Shares Outstanding1: As of December 31, 2023, the Company had 122,076,410 percentages of notable non-unusual inventory, consisting of 101,228,857 percentages of Class A notable non-unusual inventory and 20,847,553 percentages of Class B notable non-unusual inventory. Fully diluted percentages greater than 129,695,296 million as of December 31, 2023, primarily due to an additional 14,000,000 percentages of Class A non-unusual inventory issued in the September 2023 personal placement and 2,760,000 million ordinary percentages allocated in the form of percentage subsidies to the employees. As of December 31, 2023, 70,245,039 Class A ordinary shares remain subject to contractual retention provisions entered into as a component of the September 2023 personal placement, of which (i) 10,401,884 are locked until March 14, 2023. 2024, (ii) 7,159,376 are blocked until May 8, 2024, (iii) 31,205,649 are blocked until September 14, 2024 and (iv) 21,478,130 are blocked until November 8, 2024. Contractual lockups that in the past applied to Shaper Milk Makeup members and founders expired in 2023. Other related key points The duration of those holds is set forth in our 2022 20-F.
_________1 The diluted number of percentages excludes the set of control percentage awards still assigned. As of 12/31/23, the Company had set aside 4,922,262 common percentages for long-term employee incentive issues that increased on 1/1/24 to 8,584,554 common percentages owed. to the perpetual provision of the plan. See reconciliation of notable and non-unusual percentages with fully diluted percentages later in this report.
Management observation of business performance.
Overview
Michel Brousset, founder and CEO of Waldencast, said: “In an era marked by the strength of the cosmetics and skincare sector, fiscal 2022 was a disappointing year for Waldencast, with reported earnings and adjusted EBITDA negatively impacted by operational and business procedural issues at Obagi Skincare, which overshadowed the robust functionality of Milk Makeup. In 2023, we temporarily moved to the basics of Obagi Skincare and repositioned the logo for successful expansion, restoring the product registrations needed to function in Southeast Asia, adding the right talent, organizational infrastructure, and business practices, and proceeding to invest in innovation. Although 2023 proved to be a year of transition, we remain confident in our ability to generate successful expansion supported by a strong operating platform and physically powerful industry trends for the categories we serve. “.
“While the timeline for our expansion goals has been extended, our vision for Waldencast remains unchanged: our goal is to build a world-class global appearance and wellness platform that creates, acquires, accelerates, and scales the next generation of high-quality devices. expansion, highly successful and driven brands. We are a natural player in good looks and wellness, an operational platform designed to combine speed and agility, reinventing the long-term corporate good looks as the headquarters of tomorrow’s brands that meet consumer desires. and values,” he continued.
“As a result, the finishing touch of the significant charts required to record our 2022 F-20, adding up to the restatement of our 2021 and 2020 financial statements, marks a key and critical milestone in our efforts to regain compliance with Nasdaq reporting requirements, ahead of our hearing with the Nasdaq panel and satisfaction with the provision of monetary data and similar reporting needs under our credit,” Concluded.
The Company believes the beauty industry remains highly attractive, having demonstrated strong growth, profitability and resilience in 2022. Despite economic uncertainties, the prestige beauty category in the U.S. ended fiscal year 2022 with a growth of 15% against the prior year (Circana report) and great momentum, one of the fastest growing consumer categories2. Against this backdrop, we believe Waldencast is well positioned with leading brands in two of the largest, most promising and most resilient segments of the beauty market: prestige clean make-up and professional, science led skincare.
Obagi Skincare is a leading and well-established logo in the healthcare market, one of the most attractive sub-segments of high-end skincare in the United States. With its innovative generation and clinically proven transformative results, Obagi Skincare has a point of customer and physician loyalty, and is well-positioned to meet customers’ growing desire for effective, high-performance skincare, while paving the way for Obagi Skincare’s expansion into other categories.
Milk Makeup is a prestigious, leading, award-winning white makeup logo, with exclusive products, huge popularity among Gen Z consumers, and an emerging global presence. Milk Makeup has built a biological base of visitors through a varied and inclusive network known for its cultural relevance and iconic products. Milk Makeup is one of the leading white makeup logos, and in 2022, it will be the second blank logo at Sephora USA. In the U. S. , which offers an applicable promise of fresh, blank, working makeup: white makeup is one of the fastest-growing byproducts. Segments in the good looks industry.
_____________2 Source: Circana, prestige good-looking market as measured overall in the U. S. U. S. dollar sales, January-December 2022 vs. 2021.
Obagi Skin Care
Obagi Skincare had US GAAP net sales of $61. 1 million in the successive era of 2022, $73. 8 million in the previous era of 2022, and $142. 5 million in the previous era of 2021. For the year ended December 31, 2022, Obagi Skincare had combined Obagi’s net sales of $134. 9 million, down 5. 3% from $142. 5 million in 2021. Excluding similar sales to the Chinese business, Obagi Skincare had net sales comparable to Obagi of $111. 8 million in 2022, down 8. 0% from $121. 5 million in 2021. Adjusted EBITDA $(9. 8) million in 2022 compared to $20. 6 million in 2021, reflecting the significant accounting changes and non-recurring items discussed above.
In FY2023, we implemented a number of projects similar to Obagi Skincare’s business style to be better placed for opportunities in one of the fastest-growing sub-segments of the premium skincare market by:
elevate Obagi Skincare’s global leadership team with the addition of Jordan Meyer as President, Linda Esposito as Chief Financial Officer, and Justin Giouzepis as Chief Marketing Officer, with significant industry experience, leadership skills, and business acumen to meet our overseas and multi-channel needs. and brand expansion ambitions;
Build a solid foundation for sustainable expansion in the key strategic region of Southeast Asia by acquiring the Vietnamese operations of the former Southeast Asia distributor and the status quo of infrastructure for a direct distribution style in the region, which is 10 times longer than the Vietnamese market. The skincare market in Southeast Asia is approximately $11 billion3 and developing rapidly, and the Obagi Skincare logo has enjoyed wide acceptance in the dermatology community. As a component of this initiative, we have strengthened the control team with the hiring of Chris Driver, a seasoned professional with extensive global and South Asian experience in the good looks industry, drafted through Anne Tran, Obagi Skincare’s Country Manager in Vietnam and Do Thi Thanh Tam. , Regional Chief Financial Officer, who bring a wealth of experience in the country and category;
Build stronger, future-proof logo, marketing, and portfolio strategies and plans under the leadership of our new Chief Marketing Officer and the new global marketing organization to drive and drive the expansion of our physician distribution channel. Our product innovation and expansion strategy, combined with our virtual and overseas acceleration, is designed to enable Obagi Skincare to be the world’s leading logo for physician-delivered products; and
accelerate Obagi’s digitalization and online sales with the progression and acceleration of our direct-to-consumer channel, obagi. com, as well as effectively internalize the opportunity we see with Amazon to be controlled internally and exit the former Obagi distributor.
Despite the disappointing financial effects for 2022, our enthusiasm for the Obagi Skincare business is stronger than ever. We strongly believe that the steps we have taken since the business combination will allow the logo and our business as a whole to be better placed to execute our strategic projects. and drive successful long-term expansion. ” Since the business combination, our expansion strategy for Obagi Skincare has focused on 3 main levers:
expanding our U.S. Physician channel penetration by improving our channel go-to market strategy and suite of services and support aimed at driving product adoption and utilization;
Expand the breadth and intensity of our portfolio by introducing more than 20 of our core products into existing doors and accelerating our innovation to meet the unmet desires of our clinicians and consumers, such as the successful and gradual launch of Nu-Cil Lash and its expansion to Brow. ; and
expanding the brand’s U.S. and international footprint by replicating U.S. successes in the right channels and geographies as well as accelerating the digitalization of the brand and its online reach.
_____________
3 Source: Southeast Asia Skincare Value Sales* (USD million) in 2023, Euromonitor, KPMG analysis. Note: Southeast Asian countries include nine countries, namely Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. .
Milk Makeup
Milk Makeup delivered strong performance in 2022 with combined milk net sales of $72. 5 million, up 54% from $47. 1 million a year earlier, while achieving its first year of positive combined milk EBITDA of $6, 9 million in 2022 to $(3. 4) million in 2022. 2021. Milk Makeup outperformed the market, which recovered strongly from the pandemic and developed particularly faster than the overall good-looking category.
In 2022, Milk Makeup demonstrated outstanding growth, both within North America and internationally, supported by the success of its product offering and successful marketing initiatives in line with its three strategic priorities:
continue to revolutionize the market with cutting-edge products that offer superior functionality and blank applications and expand our portfolio;
duplicate the logo’s unique and engaging DNA and accelerate logo and product awareness to succeed and connect with more consumers through increased marketing investments to expand their community; and
Continuing to build our “Gen Z” cult favorites while expanding our values and “next generation” footprint locally and internationally.
In 2023, Milk Makeup demonstrated ongoing strong performance, advancing on its key strategic goals via:
successfully bringing cutting-edge innovation to market with two high-profile releases, Pore Eclipse Powder and Contouring Sticks (a successful extension of the rugged Pore Eclipse Pillars and Sticks) and TikTok sensation Odyssey Lip Oil, while also winning an awards host, adding two of the coveted Allure awards for best looks;
Ensure high-impact logo awareness by running virtual marketing campaigns on social media (e. g. , TikTok) and physical campaigns that achieve your network at applicable touchpoints with applicable messaging; and
expanding into high demand markets such as the U.K. with the launch into Space NK and being a brand anchor of the highly publicized Sephora brick and mortar launch in the U.K.
Financial Overview
In accounting for the Business Combination, Waldencast was deemed to be the accounting acquirer, and Obagi Skincare was deemed to be the predecessor entity for purposes of financial reporting. Under the acquisition method of accounting, Waldencast’s assets and liabilities retained their carrying values and the assets and liabilities associated with Obagi Skincare and Milk Makeup were recorded at their fair values measured as of the acquisition date, which created a new basis of accounting.
Reading the monetary statements that come in our 20-F 2022 and in this press release, you notice that there is a transparent department between the “previous” eras that come with the consolidated monetary statements to the balance sheet date and the “successors”. “Eras that come with all eras after the acquisition date. The predecessor and successor effects presented are not comparable, as the successor era includes the consolidated monetary statements of Waldencast, Obagi Skincare, and Milk Makeup, while the previous era includes only the monetary statements of Obagi Skincare.
Additionally, during the fiscal year ended December 31, 2023, the Company’s control and the audit committee of the board of directors of Waldencast, with the assistance of legal and accounting advisors, conducted a review of internal accounting issues related to the earnings popularity in Prior Periods, adding topics related to earnings popularity from sales of Obagi Skincare products in Southeast Asia to Vietnam, transactions with other Obagi Skincare suppliers within and outside the United States, as well as certain others accounting elements. Following this review, the Board of Directors, acting on the advice of the Audit Committee, concluded that reliance should no longer be placed on the financial statements for certain prior periods. On this basis, 20-F 2022 comprises the restated consolidated balance sheets as of December 31, 2021 as well as the consolidated statements of income, cash flows and shareholders’ equity for the years ended December 31, 2021 and 2020 See “Part 5. Array Review and Operating and Monetary Prospects of Waldencast” and “Item 8. Financial Data – Note 2. Restatement and Reclassifications” in 20-F 2022 for more information on the basis and affect the restatement.
In addition to the monetary effects presented in this section, the control also comes with certain monetary highlights of the business for the era covered through F-20, 2022, which come with non-GAAP measures that the control uses to describe the underlying functionality of the business. . See definitions of non-GAAP measures and reconciliation to the closest GAAP measure.
2022 20F Consolidated Statements of Operations and Comprehensive Income
Period from July 28, 2022 to December 31, 2022
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2021 (Restated)
Year ended December 31, 2020 (as represented)
United States (in thousands)
Successor (Waldencast)
Predecessor (Obagi)
Net revenue (including related party net revenue of $17,219 in the Successor period)
92 373
73 760
142 472
94,428
Cost of goods sold (including related party costs of $5,128 in the Successor period)
60,657
30,868
55 037
29 096
Gross profit
31 716
42 892
87 435
65,332
Selling and administrative expenses.
88 926
55 549
82 968
60 421
Research & Development
1 796
2 606
6,092
4 383
Loss on impairment of goodwill
68,715
–
–
–
Total Operating Expenses
159 437
58 155
89,060
64 804
Operating Source of Revenue (Loss)
(127 721
)
(15 263
)
(1 625
)
528
Interest expense, net
6 230
6,652
11 118
6 281
Change in the fair value of derivative collateral liabilities
(6. 793
)
–
–
–
Loss on extinguishment of debt
–
–
2,317
–
Gain in PPP Forgiveness
–
–
(6 824
)
–
Loss on write-off of loan receivable
–
–
2 555
–
Other expenses (income), net
(798
)
(971
)
(817
)
11
Total other expenditure (income), net
(1 361
)
5 681
8 349
6 292
Loss Before Source of Income Taxes
(126 360
)
(20,944
)
(9 974
)
(5 764
)
Income tax expense (benefit)
(5,803
)
113
9,602
(3,394
)
Net loss
(120 557
)
(21 057
)
(19,576
)
(2 370
)
Net loss attributable to non-controlling interests
(24,990
)
–
–
–
Net loss attributable to Class A shareholders
(95 567
)
(21 057
)
(19 576
)
(2 370
)
Net loss consistent with percentage attributable to Class A consistent with percentages:
Basic & Diluted
(1. 11
)
(2,63
)
(2.45
)
(0,30
)
Actions used in calculating loss consistent with action:
Basic & Diluted
86 460 560
8 000 002
8 000 002
8 000 002
Net loss
(120 557
)
(21 057
)
(19 576
)
(2 370
)
Other Integral Source of Income (Losses) – Translation Differences, Net of Tax
(36
)
96
(32
)
sixteen
Total Loss
(120 593
)
(20,961
)
(19 608
)
(2 354
)
Comprehensive loss attributable to non-controlling interests
(24,997
)
–
–
–
Comprehensive loss attributable to Class A shareholders
(95,596
)
(20 961
)
(19 608
)
(2 354
)
Summary of Financial Highlights
ObagiUnited States Dollars (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022 (Predecessor Period)
Year Ended December 31, 2022 (Predecessor Successor Period)
Year Ended December 31, 2021 (Prior Period)
Growth
Net Income
61 090
73. 760
134,850
142 472
(5. 3
%)
Adjusted Gross Profit
10. 690
42 892
53 582
87,435
(38,7
%)
% Adjusted Gross Margin
17,5
%
58. 2
%
39,7
%
61,4
%
(2,164 points)
Adjusted EBITDA
(9 857
)
95
(9,762
)
20,566
(147,5
%)
% Adjusted EBITDA margin
(16. 1
%)
0,1
%
(7. 2
%)
14. 4
%
(2,167 points)
MilkU. S. Dollars (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year ended December 31, 2022
Year ended December 31, 2021
Growth
Net Income
31,283
41 218
72,501
47 076
54,0
%
Adjusted Gross Profit
18,875
26 998
45 873
25 295
81,4
%
Adjusted Gross Margin %
60.3
%
65. 5
%
63,3
%
53. 7
%
954 bps
Adjusted EBITDA
(241
)
7. 168
6 927
(3 403
)
(303.5
%)
% adjusted EBITDA margin
(0,8
%)
17. 4
%
9. 6
%
(7. 2
%)
1,678 bps
Central United States dollars (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year ended December 31, 2022
Year ended December 31, 2021
Growth
Adjusted EBITDA
(5 929
)
–
(5 929
)
–
–
GroupU.S. Dollars (in thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2022 (Combined)
Financial ended December 31, 2021 (combined)
Growth
Net Revenue
92,373
114 978
207 351
189,548
9.4
%
Adjusted EBITDA
(16 027
)
7 263
(8 764
)
17 163
(151,1
%)
% Adjusted EBITDA margin
(17. 4
%)
6. 3
%
(4.2
%)
9. 1
%
(1,328 points)
GroupU. S. Dollars (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2022 (Combined)
Year ended December 31, 2021 (Combined)
Growth
Net Income
92,373
114,978
207 351
189 548
9.4
%
Adjusted by:
Obagi China Net Income
(17 219
)
(5 816
)
(23 035
)
(20 972
)
Comparable Revenue
75 154
109 162
184,316
168. 576
9. 3
%
ObagiUnited States Dollars (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year ended December 31, 2022
Year ended December 31, 2021
Growth
Net Revenue
61 090
73. 760
134 850
142 472
(5.3
%)
Adjusted for:
Obagi China Net Revenue
(17 219
)
(5 816
)
(23. 035
)
(20 972
)
Comparable Revenue
43,871
67 944
111 815
121 500
(8,0
%)
Non-GAAP Financial Measures
In addition to the monetary measures presented in F-20, 2022 and in this report in accordance with accounting principles sometimes accepted in the U. S. Waldencast reports its monetary effects based on stated and explained non-GAAP measures. monetary measures. Waldencast believes that the non-GAAP measures used in this press release provide useful data for control and investors regarding certain monetary and business trends similar to its monetary condition and the effects of operations. Waldencast believes that the use of those non-GAAP measures provides an additional tool that investors can use to compare the existing effects of operations and trends in terms of business mix and other factors. These non-GAAP measures also provide insight into how Waldencast’s control compares and monitors the company’s performance.
There are limitations to non-GAAP monetary measures, as they exclude fees and credits that will need to be included in the GAAP monetary presentation. Items excluded from GAAP monetary measures, such as net income/loss to arrive at non-GAAP monetary measures, are vital elements in understanding and comparing our monetary performance. Non-GAAP monetary measures should be considered in conjunction with, and not as alternatives to, monetary measures prepared in accordance with GAAP.
Please refer to the definitions set forth in the press release and the tables included in this press release for a reconciliation of those measures to comparable maximum GAAP monetary measures. The data and monetary knowledge contained in this press release have not been audited in accordance with the criteria of the Public Enterprises Accounting Oversight Board.
The group’s combined net sales are explained as net sales combining the pre- and post-acquisition eras of Obagi Skincare and the pre- and post-acquisition eras of Milk Makeup for the eras ended December 31, 2022 and December 31, 2021. U. S. GAAP, the times before and after the date of the business combination will not be mixed, and the era prior to the acquisition of Milk Makeup will not be included. Management believes that these non-GAAP annual comparative effects provide insight into the ongoing functionality of the combination. Group Operations.
Combined Comparable Group Net Revenue is defined as net revenue that combines the predecessor and post acquisition periods for Obagi Skincare and the pre and post-acquisition periods for Milk Makeup for the periods ended December 31, 2022 and December 31, 2021 and excludes sales related to the former Obagi China business, which was not acquired by Waldencast at the time of the Business Combination (the “Obagi China Business”) as well as related party sales under the transition agreement entered into between Waldencast and Obagi China in connection with the Business Combination. The distribution of Obagi Skincare’s products in China has remained under ownership of Cedarwalk Skincare Limited, Obagi Skincare’s former owners, who have entered into a licensing and distribution agreement with Waldencast. Management believes that this non-GAAP measures provides perspective on how Waldencast’s management evaluates and monitors the performance of the business.
Obagi’s combined net source of revenue is explained as the net source of revenue combining the pre- and post-acquisition periods of Obagi Skincare for the periods ended December 31, 2022 and December 31, 2021. Under U. S. GAAP, the periods before and after the date of the business combination are not expected to consolidate, and control believes that these non-GAAP annual comparative effects provide an influence on the continued functionality of the combined group’s operations.
Obagi’s mixed comparable net sales are explained as net sales combining the pre- and post-acquisition periods of Obagi Skincare for the periods ended December 31, 2022 and December 31, 2021 and excluding sales similar to Obagi’s business in China, as well as sales. to similar components under the transition agreement between Waldencast and Obagi China as a component of the business combination. The distribution of Obagi Skincare products in China remained an asset of Cedarwalk Skincare Limited, the former owners of Obagi Skincare, who entered into a licensing agreement and distribution agreement with Waldencast. Under U. S. GAAP, the periods before and after the date of the business combination may not be mixed, and Control believes that these non-GAAP annual comparative effects provide an attitude about the continued functionality of the combined group’s operations.
Combined net milk revenue is explained as the net source of revenue combining the pre- and post-acquisition eras of Milk Makeup for the eras ending December 31, 2022 and December 31, 2021. According to U. S. GAAP, the era prior to the acquisition of Milk Makeup will not be included. Management believes that these non-GAAP annual comparative effects provide insight into the continued functionality of the combined group’s operations.
United States (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2022 (Combined)
Year Ended December 31, 2021 (Combined)
Obagi Net Income
61 090
73 760
134 850
142 472
Net Milk Income
31 283
–
–
–
Net Income
92 373
73 760
134 850
142 472
Adjusted by:
Net Milk Income
–
41 218
72,501
47 076
Combined Net Income
92 373
114 978
207 351
189 548
Adjusted EBITDA is defined as GAAP net income (loss) before interest income or expense, income tax (benefit) expense, depreciation and amortization, and further adjusted for the items as described in the reconciliation below. We believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business. Adjusted EBITDA excludes certain expenses that are required to be presented in accordance with GAAP because management believes they are non-core to our regular business. These include: (1) non-cash expenses, such as depreciation and amortization, stock-based compensation, inventory fair value adjustments, the amortization of fair value of the related party liability to Obagi China, change in fair value of financial instruments, loss on impairment of goodwill, and foreign currency transaction loss (gain); and (2) interest expense, income tax expense. In addition adjustments include expenses that are not related to our underlying business performance including (1) transaction-related costs which includes mainly legal expenses in connection with the Business Combination, including creating and maintaining the Up-C structure, as well as advisory and consulting fees; (2) the gain on PPP Loan forgiveness which relates to the forgiveness of the full amount of a PPP Loan in June 2021; (3) loss on extinguishment of debt, and loss on write-off of loan receivables which relates to the write-off of previously deferred financing costs due to the refinancing of Obagi’s debt in March 2021 and the write-off of a loan receivable in 2021 that was later deemed uncollectible; (4) gains/losses on disposal of assets; and (5) restructuring costs which relates to the relocation costs associated with the relocation of Obagi’s headquarters from California to Texas in 2022.
Adjusted EBITDA margin is explained as Adjusted EBITDA as a percentage of sales.
Period from July 28, 2022 to December 31, 2022
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2021 (Restated)
United States (thousands)
Obagi (successor)
Milk (successor)
Central Costs (Successor)
Waldencast (Overall) (Successor)
Predecessor(Obagi)
Net loss
(93,757
)
(13 773
)
(13 027
)
(120. 557
)
(21 057
)
(19 576
)
Adjusted by:
Depreciation and amortization
17 845
9,137
–
26 982
8,190
13,904
Interest expense, net
4 008
119
2,103
6,230
6 652
11,118
Income tax expense (benefit)
(5 803
)
–
–
(5 803
)
113
9 602
Stock-based reimbursement expense
4 373
1 011
2 352
7 736
–
–
Transaction Costs¹
358
170
8,844
9 372
5 841
5,244
COGS have a similar effect to the fair price adjustment of inventories²
6 759
3 276
–
10 035
–
–
Change in the Fair Value of Derivative Collateral Liabilities³
–
–
(6 793
)
(6 793
)
–
–
Interest Rate Tunnel Fair Change ⁴
–
–
592
592
–
–
Amortization of similar liabilities⁵
(12,186
)
–
–
(12 186
)
–
–
Loss (gain) on foreign exchange transactions
(329
)
(181
)
–
(510
)
30
202
(Gain) loss on disposal of assets
–
–
–
–
35
52
Restructuring Costs⁶
160
–
–
160
291
1,972
Loss on Extinguishment of Debt⁷
–
–
–
–
–
2,317
Gain on PPP Forgiveness⁸
–
–
–
–
–
(6 824
)
Loss on Loan Receivables⁹
–
–
–
–
–
2 555
Loss on impairment of goodwill
68 715
–
–
68 715
–
–
adjusted EBITDA
(9 857
)
(241
)
(5 929
)
(16 027
)
95
20 566
Net income
61 090
31 283
–
92 373
73,760
142 472
Net Loss of Net Income
(153,5
%)
(44.0
%)
N/A
(130,5
%)
(28,5
%)
(13. 7
%)
Adjusted EBITDA margin
(16. 1
%)
(0,8
%)
N/A
(17,4
%)
0. 1
%
14.4
%
¹Primarily includes legal fees similar to the Business Combination, adding the creation and maintenance of the Up-C structure, as well as advisory and advisory fees. ²Relates to the amortization of the accumulation at the fair price of the shares as a result of the Business Combination. ³Relates to the replacement at fair price of collateral liabilities and is not definitively similar to transactions. ⁴Relates to interest rate tunnels and does not is definitely similar to operations. ⁵Relates to the fair price amortization of like-for-like liabilities during the TSA era with respect to Obagi China. ⁶Relates to relocation costs relevant to the relocation of Obagi’s headquarters from California to Texas. ⁷Relates to the write-off of past deferred financing costs due to the refinancing of Obagi’s debt in March 2015. 2021. ⁸Relates to the cancellation of the full amount of a PPP loan in June 2021. ⁹Relates to the cancellation of a receivable loan in 2021 that was later deemed uncollectible.
July 28 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year ended December 31, 2021
United States (thousands)
Milk (successor)
Milk
Net Source of Income (Loss)
(13 773
)
3 197
(7 847
)
Adjusted by:
Depreciation and amortization
9,137
1 441
1 975
Interest expense, net
119
22
18
Income tax expense (benefit)
–
–
–
Stock-based compensation expense
1,011
131
77
Transaction Costs¹
170
1 924
1 989
COGS impact related to Inventory fair value adjustment²
3 276
–
–
Foreign currency transaction loss (gain)
(181
)
429
219
(Gain) loss on disposal of assets
–
24
166
Adjusted EBITDA
(241
)
7 168
(3 403
)
Net income
31. 283
41 218
47,076
Net Loss of Net Income
(44,0
%)
7. 8
%
(16,7
%)
Adjusted EBITDA as % of sales
(0,8
%)
17. 4
%
(7. 2
%)
¹Includes primarily legal fees similar to the Business Combination, in addition to the creation and maintenance of the Up-C structure, as well as advisory and consulting fees. ² Corresponds to the amortization of the accumulation at the fair price of the shares as a result of the Business Combination.
Combined Adjusted EBITDA is explained as Adjusted EBITDA combining (1) the pre- and post-acquisition periods of Obagi Skincare and (2) the pre- and post-acquisition periods of Milk Makeup for the periods ended December 31, 2022 onwards. December 31, 2021 and (3) core prices for the 2022 successor period.
United States (thousands)
Period from July 28, 2022 to December 31, 2022 (Successor Period)
Period from January 1, 2022 to July 27, 2022
Year Ended December 31, 2022 (Combined)
Year ended December 31, 2021 (Combined)
Obagi Adjusted EBITDA
(9,857
)
95
(9 762
)
20 566
Milk Adjusted EBITDA
(241
)
–
–
–
Adjusted Central EBITDA
(5,929
)
–
–
–
Adjusted EBITDA
(16 027
)
95
(9,762
)
20 566
Adjusted by:
Milk Adjusted EBITDA
–
7 168
6 927
(3,403
)
Adjusted Core EBITDA
–
–
(5 929
)
–
Combined Adjusted EBITDA
(16 027
)
7 263
(8 764
)
17 163
Obagi Skincare’s adjusted gross profit is explained as the segment’s GAAP gross profit and excludes similar sales to its distributor in China under a bridge facility agreement, the effect of Obagi Skincare’s partial similar sales to the Chinese distributor and the effect of Inventory. Gross fair price due to the popularity of the business combination. No changes in gross benefits were reported in prior periods for Obagi Skincare.
Adjusted gross margin on replacement milk is explained as the segment’s GAAP gross margin and excludes the effect of accrual on the fair share price resulting from the accounting of the business combination. There is no change to the supplemental milk gross benefit for the era prior to July 27, 2022.
Adjusted gross margin is explained as adjusted gross profit divided by the net source of revenue (GAAP) for the successor era and the combined net source of revenue for the predecessor era of 2022 and the predecessor era of 2021.
July 28 to December 31, 2022 (Successor Period)
Period from January 1 to July 27, 2022
Year ended December 31 2021
United States (thousands)
Obagi
Milk
Waldencast(Total)
Predecessor (Obagi)
Net revenue (including related party net revenue of $17,219 in the successor period)
61,090
31 283
92 373
73 760
142 472
Gross profit
16,117
15 599
31,716
42,892
87,435
Gross margin %
26. 4
%
49.9
%
34. 3
%
58. 2
%
61,4
%
Gross Margin Adjustments:
Amortization of the fair value of the related party liability
(12,186
)
–
(12,186
)
–
–
Amortization of Fair Fit on Inventory
6 759
3 276
10 035
–
–
Adjusted Gross Profit
10 690
18,875
29. 565
42 892
87 435
% Adjusted Gross Margin
17.5
%
60.3
%
32,0
%
58. 2
%
61,4
%
The debt position is explained as the notable principal amount of the 2022 term loan and the 2022 revolving credit facility minus money and money equivalents as of December 31, 2022.
U.S. Dollars (in thousands)
Net Debt to Net Debt eBook Reconciliation
Long-term debt tranche
20 095
Long-term debt
159 229
Net of Debt eBook
179 324
Settings:
Add: Unamortized debt issuance costs
5. 445
Less: Cash & Cash Equivalents
(8 693
)
Net Debt
176. 076
Below is a reconciliation of the notable and non-unusual shares with the fully diluted stocks.
Calculation of the number of diluted shares as of December 31, 2023 (assuming a final value of 12/30/23)
Behaviour
Class A Common Shares Outstanding
101,228,857
Common Class A inventories are subject to notable inventory characteristics maintained by our officers that may be exercised recently or within 60 days of the date of registration.
1 916 666
Class A Common Shares are subject to limited percentage pools that vest or will vest within 60 days of the record date and have not yet been settled)
6,758
Outstanding Class A with Dilutive Executive Awards
103,152,281
Class B Shares Outstanding1
20,847,553
Minuses: dilutive moves from above
1 923 424
Basic Shares outstanding
122 076 410
Employee Acquired RSU2
3,379
Sub-Total
122 076 410
Behaviour
Price-weighted
Nonvested Employee RSUs3
3 955 290
Share acquisition rights acquired through employees with a liquidation price4,6
6 122 568
US$4. 40
3. 660. 217
Rights in unacquired employee shares at an exercise price4
1,018,360
$12.59
0
Total diluted shares outstanding7
129 695 296
Warranties5
$11. 50
29 533 282
Unvested employee stock rights with exercise prices (Out of Money)6
11 500 000
1 20,847,553 Waldencast plc Class B inventories held through former Milk members. 2 Acquired RSUs are not yet included in notable core inventories as they have not yet been redeemed at the discretion of unitholders. 3 Unconverted RSUs come with more Strategic Growth Initiative MSW Inventories awarded in January 2023. Pool (net of forfeitures) of 2,760,000 (assuming maximum payment)4 Dilution of inventory rights acquired by workers with restructuring values represents a net inventory agreement employing the inventory repurchase method, based on the terminal value of WALD. of $10. 94 on December 29, 2023. 5 Includes 11,499,950 Waldencast plc warrants, 5,333,333 Waldencast plc warrants issued in connection with a personal placement under the sponsor’s early acquisition agreement and 5,766,666 Waldencast plc warrants Waldencast plc issued in connection with a personal placement under a third party advance purchase agreement. agreement with a strike value of $11. 50, redeemable at $18. 00; comes with 5,933,333 Waldencast plc warrants issued in a personal placement at the end of Waldencast Acquisition Corp. ‘s initial public offering and one million Waldencast plc warrants issued in a personal placement under the Working Capital Loan with a restructuring value of $11. 50. 6 Note, where dilution was calculated based on individual grants with the same inventory value, the dilutive inventories would accumulate to 565,424 inventories. This is because the awards paid to our founders have other higher exercise values that, when added, make all features non-dilutive. For more data on awards, see Item 6 “Directors, CEOs and Employees – Compensation” of 20-F 2022. 7 Outstanding diluted inventories exclude the set of executive inventory awards that have not yet been granted. As of 12/31/23, the Company had reserved 4,433,393 inventories for long-term worker incentive issuances which accumulated on 1/1/24 to 8,095,685 due to the continued provision of the plan.
Remarks
About Waldencast
Founded by Michel Brousset and Hind Sebti, Waldencast’s ambition is to build a global best-in-class beauty and wellness operating platform by developing, acquiring, accelerating, and scaling conscious, high-growth purpose-driven brands. Waldencast’s vision is fundamentally underpinned by its brand-led business model that ensures proximity to its customers, business agility, and market responsiveness, while maintaining each brand’s distinct DNA. The first step in realizing its vision was the business combination with Obagi Skincare and Milk Makeup. As part of the Waldencast platform, its brands will benefit from the operational scale of a multi- brand platform; the expertise in managing global beauty brands at scale; a balanced portfolio to mitigate category fluctuations; asset light efficiency; and the market responsiveness and speed of entrepreneurial indie brands. For more information please visit: https://ir.waldencast.com/.
Obagi Skincare is an advanced, industry-leading skincare line based on subtle skin biology and studies with a heritage of 30 years of experience. Initially known as leaders in treating hyperpigmentation with the Obagi Nu-Derm® System, Obagi products are designed to diminish the appearance of premature aging, photodamage, skin discoloration, acne, and sun damage. You can learn more about Obagi Skincare on the https://www. obagi. com brand’s online page.
Founded in 2016, Milk Makeup quickly became a cult-favorite among the beauty community for its values of self-expression and inclusion, captured by its signature Live Your Look, its innovative formulas and clean ingredients. The brand creates vegan, cruelty-free, clean formulas from its Milk Makeup HQ in Downtown NYC. Currently, Milk Makeup offers over 300 products through its US website www.MilkMakeup.com, and its retail partners internationally. More information about Milk Makeup is available on the brand’s website https://milkmakeup.com.
Caution Regarding Forward-Looking Statements
Any statement in this release that is not old is a forward-looking statement made pursuant to the port provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about: the Company’s ability to generate monetary effects consistent with expectations; expectations related to long-term sales, earnings or other monetary and liquidity functionality or other measures of functionality; the Company’s long-term strategy and the long-term operations or effects of operations; expectations related to the Company’s industry and the markets in which it operates; long-term product presentations; the Company’s ability to demonstrate compliance with all applicable requirements for a continuing board of directors on Nasdaq; and any assumptions underlying the above. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “could,” “plan,” “predict” Matrix of “project,” “should,” “will” and “will” and diversifications of those words and similar expressions are intended to identify those forward-looking statements.
These forward-looking statements are not promises of performance, situations or long-term effects and involve a number of known and unknown threats, uncertainties, assumptions and other vital factors, many of which are beyond the Company’s control, which may also cause harm. real. effects. or the effects differ materially from those discussed in the forward-looking statements, including, among others: (i) failure to recognize the expected benefits of the business combination with Obagi Skincare and Milk Makeup, (ii) failure to bring the Company back into compliance with Nasdaq’s continuing directory criteria or the inability to download a further extension of the Panel or the Company’s inability to comply with the situations of any extension granted, which would possibly result in the delisting of the Nasdaq Company’s securities, (iii) the Company’s ability to record the required monetary items in a timely manner, (iv) the Company’s ability to effectively remedy the Company’s internal weaknesses with respect to monetary reporting, (v) the threat of dedirectorship, legal proceedings or government investigations or enforcement actions, including those related to the subject of review through the Audit Committee (the “Committee (vi) the ability of the Company to discharge additional exemptions from the Administrative Agent and the lenders under its services of credit for any long-term proceeding or default or occasion of default, (vii) volatility of Waldencast’s securities due to various factors, including Waldencast’s inability to implement its business plans or to meet or exceed its projections and adjustments monetary benefits, (viii) the ability to implement business plans, forecasts and other expectations, and to identify and take advantage of additional opportunities, (ix) Waldencast’s ability to implement its strategic projects and continue to innovate with existing products of Obagi Skincare and Milk Makeup and to anticipate and respond to market trends and adjustments in the customer’s personal tastes, (x) any adjustments in the customer’s personal tastes in where and how they shop, and (xi) social, political situations and economical. These and other threats, assumptions and uncertainties are described in more detail in the Risk Factors segment of our 20-F 2022 (File No. 01-40207), filed with the Securities and Exchange Commission (the “SEC”) on January 16. 2024. Array and in our other documents that we file with or provide to the SEC, and which we encourage you to read.
If one or more of those dangers or uncertainties materialize, or if the underlying assumptions prove incorrect, actual effects may simply differ materially from those indicated or expected by such forward-looking statements. Accordingly, you are cautioned not to rely on such forward-looking statements, which speak only as of the date they are made. Waldencast expressly disclaims any existing objectives and assumes no legal responsibility to publicly update any forward-looking statements following the distribution of this release, whether as a result of new information, long-term events, adjustments in assumptions or otherwise.
ContactsInvestorsICR Allison Malkinwaldencastir@icrinc. com MediaICRBrittany Fraser Waldencast@icrinc. com