$63.3 million of Net Revenue Q2 2024 +25.7% net revenue Comparable Growth: +30.9% Obagi Medical and +20.0% Milk Makeup vs Q2 2023 Adjusted EBITDA of $6.3 million, up +64.5% vs Q2 2023
NEW YORK, Aug. 27, 2024 (GLOBE NEWSWIRE) -- Waldencast plc (NASDAQ:WALD) ("Waldencast" or the "Company"), a global multi-brand beauty and wellness platform, today reported operating results for the three months ended June 30, 2024 ("Q2 2024") and six months ended June 30, 2024 ("H1 2024") on Form 6-K to the U.S. Securities and Exchange Commission, which are also available on the Company's investor relations site at http://ir.waldencast.com/.
Michel Brousset, Waldencast Founder and CEO, said: "We are pleased to report a net revenue Comparable Growth increase of 25.7% in Q2 2024, further accelerating the growth of 21% delivered in Q1 2024. Following this first strong half, and with various growth drivers planned for the second half, we are even more confident in our ability to deliver our FY 2024 outlook with net revenue Comparable Growth above the rate achieved in Q2 2024. Consequently, we expect Adjusted EBITDA for H2 2024 to exceed that of H1 2024, both in absolute value and margin, and we continue to expect to achieve a mid-teens Adjusted EBITDA Margin for the full year. Milk Makeup and Obagi Medical brands continue to grow well ahead of the markets in which they operate and are still far from achieving their full potential. As a young Company, we had to work extremely hard to address the challenges faced in 2022 and in the transition year of 2023. We are now focused on stepping up the investment in our brands and the development of our communities. This combination of strong community engagement and compelling high-performance products will continue to drive increasing demand for our brands around the world. We delivered multiple blockbuster innovations in H1 2024 and feel excited about what is coming in H2 2024 and beyond. I'm always thankful to the continuous support of our consumers, investors, partners, employees and everyone who shares our dream of building a global best-in-class beauty and wellness operating platform."
Brand Update
We are more excited than ever about our business and our brands' growth prospects. We believe that we have two powerful, high-growth, compelling brands perfectly positioned in the most attractive segments of the beauty business. In H1 2024, both brands successfully grew their communities, with Milk Makeup growing Earned Media Value (EMV)1 by +100% year over year and climbing 7 ranks from 2023, whilst Obagi Medical grew EMV +165% year over year, demonstrating one of the fastest growth rates in EMV for beauty brands in the US.
Both brands also delivered blockbuster innovation in the first half with Milk Makeup's 8 times award winning, twice-sold out Viral Cooling Jelly Tint and Obagi Medical's Daily Hydro-Drops® Rejuvenating Eye Gel Cream, which sold out in less than 72 hours.
This combination of strong community engagement and compelling high-performance products is driving increased global demand for our brands. Coupled with the power of our Waldencast platform and talented teams, we believe we are well positioned to drive long term profitable growth as we build long-lasting iconic beauty brands and increase operational efficiencies. As we look forward to H2 2024, both brands are poised to continue to scale their communities in the U.S. and internationally as well as to launch further exciting innovations.
Milk Makeup launches build into high replenishment categories with Kush Eye Roller Mascara and Brow Tints, shade extensions of Odyssey Lip Oil Gloss, and the much anticipated launch of Hydro Grip + Glow Primer. This unique product is aimed at recruiting new consumers and builds on the buzz around the cult Hydro Grip franchise by showcasing a new incremental benefit while re-affirming its unparalleled hold and unique formula.
Obagi Medical will be launching two of our most exciting innovations so far, bringing medical grade lifting power to new heights with two strong line extensions of our bestselling ELASTIderm® franchise, starting with ELASTIderm® Lift Up & Sculpt Facial Moisturizer, clinically proven to visibly lift and sculpt facial contours in only 6 weeks2. This launch will be complemented with ELASTIderm® Advanced Filler Concentrate, a targeted treatment clinically proven to visibly reduce the appearance of fine lines with a single application2. The Advanced Filler Concentrate is a non-injectable instant fine line filler, with impressive clinical results after a single application and further improvement after 8 weeks showing a 19% reduction in the appearance of fine lines and forehead lines2. These innovations are intended not only to strengthen our anti-ageing portfolio in two of the top three skin concerns treated by physicians (fine lines & wrinkles and sagging skin & loss of elasticity), but also to strengthen our dermatological skincare and physician dispensed brand DNA and penetration.
_______________________________________________
1 Earned Media Value (EMV) is a Tribe Dynamics proprietary metric for measuring the performance of digital earned media. Management Data as of H1 2024.
2 Results based on a 2024 clinical test. Data on file at Obagi Cosmeceuticals LLC.
Q2 2024 Results Overview & FY 2024 Outlook
Please refer to the definitions and reconciliations set out further in this release with respect to certain adjusted non-GAAP measures discussed below which are included to provide an easier understanding of the underlying performance of the business but should not be seen as a substitute for the U.S. GAAP numbers presented in this release.
Net Revenue and Comparable Growth: Net Revenue for Q2 2024 was $63.3 million, compared to Net Revenue of $49.4 million in Q2 2023, a growth of 28.2% on a Net Revenue basis and a 25.7% increase in Comparable Growth, after adjusting for product sales to the former Obagi Medical China Business. Obagi Medical saw accelerated growth in Q2 2024 driven by growth in higher margin e-commerce sales. Milk Makeup saw continued strong growth in international markets during Q2 2024, whilst the U.S. market was impacted by out of stocks, particularly in the successful Cooling Water Jelly Tints, which was materially improved towards the end of the quarter. The growth of both brands was significantly impacted by out of stocks in some of our key products as demand outstripped our forecasts.
Gross Profit and Adjusted Gross Profit: Gross Profit for Q2 2024 was $44.6 million, compared to Gross Profit of $31.2 million in Q2 2023. After adjusting for the amortization of intangibles and a non-recurring write-off of products related to discontinued business, the Adjusted Gross Profit for Q2 2024 was $47.5 million, or 75.0% of Net Revenue, resulting in a margin improvement of 650 basis points compared to Q2 2023 Adjusted Gross Profit of $33.8 million, or 68.5% of Net Revenue. The Adjusted Gross Profit Margin improved due to growth in higher-margin e-commerce sales, reduced off-price sales, and lower inventory write-offs.
Net Loss for Q2 2024 was $9.0 million, compared to a Net Loss of $23.5 million in Q2 2023. Net loss improved primarily due to income related to the fair value adjustment for warrants.
Adjusted EBITDA for Q2 2024 was $6.3 million, or a 10.0% Adjusted EBITDA Margin, compared with a Q2 2023 Adjusted EBITDA of $3.9 million, or a 7.8% Adjusted EBITDA Margin. The Group continued in Q2 2024 to grow more profitable distribution channels and create operational efficiencies, whilst increasing employee related compensation and marketing investments in the period.
Liquidity: The business had a strong cash conversion during H1 2024, although the Company continues to incur non-recurring costs associated with legal and advisory fees. As of June 30, 2024, the Group had $19.7 million in cash and cash equivalents and $155.0 million of Net Debt. In addition, $30 million remains undrawn on the Company's revolving credit facility of $45 million as of June 30, 2024.
Outstanding Shares: As of August 15, 2024, the Company had 122,662,281 ordinary shares outstanding, consisting of 110,608,950 Class A ordinary shares outstanding and 12,053,331 Class B ordinary shares outstanding. As of December 31, 2023, the Company had 122,076,410 ordinary shares outstanding, consisting of 101,228,857 Class A ordinary shares outstanding and 20,847,553 Class B ordinary shares outstanding. Fully Diluted Shares decreased from 129,695,296 at December 31, 2023 to 126,820,174 as of August 15, 2024, primarily driven by forfeitures of unvested shares and lower in-the-money dilutive instruments. As of August 15, 2024, 52,683,779, or 43%, Class A ordinary shares remain subject to contractual lock-up arrangements entered into in connection with the September 2023 private placement, of which (i) 31,205,649 are locked until September 14, 2024 and (ii) 21,478,130 are locked until November 8, 2024.
Fiscal 2024 Outlook: We expect to further accelerate H2 2024 net revenue Comparable Growth above the rate achieved in Q2 2024. We expect Adjusted EBITDA for H2 2024 to exceed that of H1 2024, both in absolute value and margin, and we continue to expect to achieve a mid-teens Adjusted EBITDA Margin for the full year.
Q2 2024 Highlights
(In millions, except for percentages)
Q2 2024
% Sales
% Growth
% Comp Growth
Q2 2023
% Sales
Waldencast
Net Revenue
63.3
100.0%
28.2%
25.7%
49.4
100.0%
Adjusted Gross Profit
47.5
75.0%
40.3%
33.8
68.5%
Adjusted EBITDA
6.3
10.0%
64.5%
3.9
7.8%
Obagi Medical
Net Revenue
34.6
100.0%
35.9%
30.9%
25.5
100.0%
Adjusted Gross Profit
27.4
79.3%
52.3%
18.0
70.8%
Adjusted EBITDA
6.5
18.6%
55.4%
4.1
16.3%
Milk Makeup
Net Revenue
28.7
100.0%
20.0%
23.9
100.0%
Adjusted Gross Profit
20.0
69.7%
26.5%
15.8
66.1%
Adjusted EBITDA
5.7
19.8%
48.0%
3.8
16.1%
Obagi Medical:
Net Revenue of $34.6 million in Q2 2024 vs $25.5 million in Q2 2023. Comparable Growth of 30.9% against Q2 2023, Net Loss of $5.7 million and Adjusted EBITDA of $6.5 million, a 55.4% increase from Q2 2023.
Growth drivers consisted of an acceleration in our digital channels and the addition of sales from our Southeast Asia subsidiary, established in Q3 2023.
Physician dispense declined in Q2 driven by key products out of stocks. We expect this channel to return to year over year growth in Q3 as the supply chain recovers and we launch a number of exciting new products.
Adjusted Gross Margin increased 850 basis points to 79.3% compared to Q2 2023 primarily due to an acceleration in digital channels and a reduction in inventory write-offs.
Obagi Medical continues to focus on operational leverage, whilst investing in key business drivers and the ramp up in Southeast Asia to ensure future profitable growth.
Milk Makeup:
Net Revenue of $28.7 million, a growth of +20.0% vs. Q2 2023, Net Loss of $0.4 million whilst delivering Adjusted EBITDA of $5.7 million, increasing 48.0% against Q2 2023.
Milk Makeup was impacted by out of stocks particularly in the successful Cooling Water Jelly Tints, which was materially improved towards the end of the quarter and is driving momentum going into Q3. Despite the out of stocks, the international business delivered high growth as the business continued to develop consumer awareness within existing and new retailers and markets.
Adjusted Gross Margin increased by 360 basis points primarily due to lower off-price channel sales compared to Q2 2023.
Successfully completed a warehouse transition to drive cost efficiency and optimize brand operations for future growth both domestically and internationally.
Adjusted EBITDA margin improved from 16.1% in Q2 2023 to 19.8% in Q2 2024 due to topline growth and gross margin improvement. Our focus on profitable growth continues, with strong emphasis on operational efficiency and accelerating our investment in marketing, community, and international structure to support growth.
H1 2024 Results Overview
Net Revenue for H1 2024 was $131.6 million, compared to Net Revenue of $109.3 million in H1 2023, a +20.3% increase on a Net Revenue basis and a +23.1% increase in Comparable Growth.
Gross Profit for H1 2024 was $94.2 million, compared to Gross Profit of $68.2 million in H1 2023. Adjusted Gross Profit for H1 2024 was $99.5 million, or 75.6% of Net Revenue, resulting in a margin improvement of 890 basis points compared to Adjusted Gross Profit of $73.0 million in H1 2023 or 66.7% of Net Revenue.
Net Loss for H1 2024 was $12.9 million, compared to a Net Loss of $36.8 million in H1 2023. Net loss improved primarily due to income related to the fair value adjustment for warrants.
Adjusted EBITDA for H1 2024 was $17.7 million, or 13.4% Adjusted EBITDA Margin compared to 12.7% in H1 2023.
H1 2024 Highlights
(In millions, except for percentages)
H1 2024
% Sales
% Growth
% Comp Growth
H1 2023
% Sales
Waldencast
Net Revenue
131.6
100.0%
20.3%
23.1%
109.3
100.0%
Adjusted Gross Profit
99.5
75.6%
36.4%
73.0
66.7%
Adjusted EBITDA
17.7
13.4%
27.2%
13.9
12.7%
Obagi Medical
Net Revenue
68.4
100.0%
19.9%
25.4%
57.0
100.0%
Adjusted Gross Profit
54.9
80.3%
42.8%
38.5
67.4%
Adjusted EBITDA
13.2
19.3%
37.1%
9.6
16.9%
Milk Makeup
Net Revenue
63.2
100.0%
20.8%
52.3
100.0%
Adjusted Gross Profit
44.6
70.6%
29.2%
34.5
66.0%
Adjusted EBITDA
15.7
24.9%
23.4%
12.7
24.4%
Conference Call and Webcast Information
Waldencast will host a conference call to discuss its second quarter results ended June 30, 2024, tomorrow, August 28, 2024, at 8:30 AM ET. Those interested in participating in the conference call are invited to dial (877) 704-4453. International callers may dial (201) 389-0920. A live webcast of the conference call will include a slide presentation and will be available online at https://ir.waldencast.com/. A replay of the webcast will remain available on the website until the Company's next conference call. The information accessible on, or through, our website is not incorporated by reference into this release.
Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with U.S. GAAP, Waldencast separately reports financial results on the basis of the measures set out and defined below which are non-GAAP financial measures. Waldencast believes the non-GAAP measures used in this release provide useful information to management and investors regarding certain financial and business trends relating to its financial condition and results of operations. Waldencast believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends. These non-GAAP measures also provide perspective on how Waldencast's management evaluates and monitors the performance of the business.
There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in GAAP financial presentation. The items excluded from GAAP financial measures such as net income/loss to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. Non-GAAP financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with GAAP.
Please refer to definitions set out in the release and the tables included in this release for a reconciliation of these metrics to the most directly comparable GAAP financial measures.
Comparable Net Revenue is defined as Net Revenue excluding sales related to the former Obagi Medical China business, which was not acquired by Waldencast at the time of the Business Combination (the "Obagi Medical China Business") as was presented in previous earnings releases. The sales to the Obagi Medical China business have a below market sales price for a defined period of time after the acquisition of Obagi Medical. As a result of the acquisition, a below market contract liability was recognized and is amortized based on sales. This adjustment is shown in the Adjusted EBITDA reconciliation. Management believes that this non-GAAP measures provides perspective on how Waldencast's management evaluates and monitors the performance of the business. See reconciliation to U.S. GAAP Net Revenue in the Appendix.
Comparable Growth is defined as the growth in Comparable Net Revenue period over period expressed as a percentage.
Adjusted Gross Profit is defined as GAAP gross profit excluding the impact of inventory fair value adjustments, amortization of the supply agreement and formulation intangible assets, and the amortization of the fair value of the related party liability the Obagi Medical China Business. The Adjusted Gross Profit reconciliation by Segment for each period is included in the Appendix.
Adjusted Gross Margin is defined as Adjusted Gross Profit divided by GAAP Net Revenue.
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 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 the Obagi Medical China Business, change in fair value of financial instruments, loss on impairment of leases, and foreign currency transaction loss (gain). In addition, adjustments include expenses that are not related to our underlying business performance including (1) legal, advisory and consultant fees related to the financial restatement of previously issued financial statements and associated regulatory investigation; (2) costs to recover and the value of the inventory recovered from the acquisition of the Vietnam distributor, and the associated discontinued product; and (3) other non-recurring costs, primarily legal settlement costs. The Adjusted EBITDA by Segment for each period is included in the Appendix.
Adjusted EBITDA Margin is defined as Adjusted EBITDA as a percentage of net revenue. The Adjusted EBITDA Margin reconciliation by Segment for each period is included in the Appendix.
(In thousands, except for percentages)
ThreeMonthsEnded June30, 2024
ThreeMonthsEnded June30, 2023
Six monthsended June30, 2024
Six monthsended June30, 2023
Net Loss
$
(9,012
)
$
(23,511
)
$
(12,906
)
$
(36,780
)
Adjusted For:
Depreciation and amortization
15,130
14,634
30,014
30,261
Interest expense, net
4,419
5,132
8,711
9,611
Income tax benefit
(1,669
)
(2,061
)
(2,353
)
(4,509
)
Stock-based compensation expense
3,468
1,284
4,526
5,476
Legal and advisory non-recurring costs(1)
2,515
7,689
10,439
10,624
Change in fair value of warrants and interest rate collar
(8,572
)
(1,137
)
(20,732
)
