Waldencast plc(WALD) - 2023 Q4 - Annual Report

Financial Performance - Waldencast reported U.S. GAAP net revenue of $92.4 million for the 2022 Successor Period, with $61.1 million from Obagi Skincare and $31.3 million from Milk Makeup[2]. - Combined Group Net Revenue for Obagi Skincare and Milk Makeup for fiscal year 2022 was $207.4 million, up 9.4% from $189.5 million in the prior year[2]. - Obagi Skincare achieved Combined Net Revenue of $134.9 million in 2022, down 5.3% from $142.5 million in 2021[10]. - Milk Makeup's Combined Net Revenue was $72.5 million in 2022, representing a 54% increase from $47.1 million in 2021[13]. - Net revenue for the Successor period (July 28, 2022 to December 31, 2022) was $92,373,000, while the Predecessor period (January 1, 2022 to July 27, 2022) reported $73,760,000, indicating a growth of 25.2%[21]. - The company reported a comparable net revenue of $75,154,000 for the Successor period, which is a decrease of 9.3% compared to the previous year[24]. - Net revenue for the year ended December 31, 2022, was $92,373,000, a decrease from $142,472,000 in 2021[41]. Losses and Expenses - The company recognized a net loss of $(120.6) million during the 2022 Successor Period, which included a goodwill impairment of $68.7 million for Obagi Skincare[4]. - The net loss for the Successor period was $120,557,000, while the Predecessor period reported a net loss of $21,057,000, showing a substantial increase in losses[21]. - The net loss for the period from July 28, 2022, to December 31, 2022, was $(120.56) million, which is a net loss margin of (130.5)%[37]. - The company reported a loss on impairment of goodwill amounting to $68.72 million, which significantly impacted the overall financial results[37]. - The total operating expenses for the Successor period were $159,437,000, compared to $58,155,000 in the Predecessor period, reflecting a significant increase[21]. EBITDA and Margins - Adjusted EBITDA for the combined group was $(8.8) million in fiscal year 2022, compared to $17.2 million in 2021[4]. - Adjusted EBITDA for the Successor period was $(16,027,000), compared to $7,263,000 in the Predecessor period, indicating a decline in operational performance[23]. - Adjusted EBITDA for the year ended December 31, 2022, was $(16.03) million, compared to $20.57 million in 2021, indicating a significant decline in operational profitability[37]. - The Adjusted EBITDA Margin for the year ended December 31, 2022, was (17.4)%, down from 14.4% in 2021, reflecting challenges in maintaining profitability[37]. - The adjusted gross profit for the Successor period was $10,690,000, down from $42,892,000 in the Predecessor period, representing a decline of 75.1%[23]. - The adjusted gross margin for the Successor period was 17.5%, down from 58.2% in the Predecessor period, reflecting a significant margin compression[23]. Cash and Debt Position - As of December 31, 2022, cash and cash equivalents were $8.7 million, with a net debt position of $176.1 million[4]. - The company reported a net debt position of $176,076,000 as of December 31, 2022[42]. Market Strategy and Growth - The skincare market in Southeast Asia is approximately $11 billion and growing rapidly, with Obagi Skincare aiming to capture opportunities in this region[11]. - The company plans to enhance its digitalization and online sales through direct-to-consumer channels and internalizing Amazon operations[11]. - Waldencast aims to build a global beauty and wellness platform focused on high-growth, purpose-driven brands, despite challenges faced in 2022[5]. - The company launched two high-profile products, Pore Eclipse Powder and Contouring Sticks, contributing to brand awareness and market presence[16]. - The company expanded into high-demand markets, including the U.K., with launches in Space NK and Sephora, enhancing its market footprint[16]. - The company is focusing on building its "Gen Z" community and enhancing brand awareness through increased marketing investments[16]. - The company aims to build a global beauty and wellness platform through the acquisition and scaling of purpose-driven brands[45]. - Waldencast's vision includes maintaining brand distinctiveness while leveraging operational scale and market responsiveness[45]. Transaction and Restructuring Costs - The company incurred transaction-related costs primarily due to legal expenses associated with the Business Combination, amounting to $9.37 million[37]. - The relocation costs associated with moving Obagi's headquarters from California to Texas were included in restructuring costs, totaling $160,000[37]. - The company incurred transaction-related costs of $170,000 during the successor period[39]. Other Financial Metrics - Gross margin for Milk Makeup was 49.9% for the year ended December 31, 2022, while Obagi's gross margin was 26.4%[41]. - Adjusted gross profit for Milk Makeup was $18,875,000, with an adjusted gross margin of 60.3%[41]. - The total diluted shares outstanding as of December 31, 2023, was 129,695,296[44]. - Management believes that non-GAAP financial measures provide a better perspective on ongoing performance, despite the limitations of excluding certain significant components[26]. - The company has excluded sales related to the former Obagi China business from its Combined Comparable Group Net Revenue, which is crucial for accurate performance evaluation[29].