Waldencast Reports Q3 2024 Financial Results

$70.2 million of Net Revenue Q3 2024

+34.6% Comparable Net Revenue Growth

Both brands accelerating from Q2 2024

+45.5% Obagi Medical and +23.5% Milk Makeup vs Q3 2023

Adjusted EBITDA of $11.4 million, up +134.0% vs Q3 2023

LONDON, Nov. 20, 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 September 30, 2024 ("Q3 2024”) and nine months ended September 30, 2024 ("Nine Months 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 another quarter of strong results, with Comparable Net Revenue Growth of 34.6% and continued gross margin and Adjusted EBITDA expansion. This reflects the strength of both our Obagi Medical and Milk Makeup brands, driven by increased consumer demand, the introduction of strong innovation in both brands, and improved stock availability. In Q3 2024, our Adjusted EBITDA Margin rose to 16.3%, a 720-basis point improvement over last year. We are confident in our ability to deliver on our guidance of full year Comparable Net Revenue Growth above the 25.7% growth achieved in the second quarter while delivering Adjusted EBITDA Margin in the mid-teens as we continue to leverage the power of our Waldencast platform to drive growth and enhance profitability of our market leading brands.”

Q3 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.

For the three months ended September 30, 2024 compared to the three months ended September 30, 2023:

Net Revenue for Q3 2024 was $70.2 million, a +30.8% increase on a net revenue basis and a +34.6% increase in Comparable Net Revenue Growth. This strong performance reflects the impact of our strategic focus on strengthening the brand equity of both Milk Makeup and Obagi Medical, accelerating the pace of innovation, and expanding the reach of both brands domestically and internationally.

Gross Profit was $48.1 million, compared to Gross Profit of $35.9 million in Q3 2023. Adjusted Gross Profit was $51.4 million, or 73.2% of net revenue, a 400-basis point increase. This increase was driven by growth in higher-margin digital channels, lower inventory adjustments, and product mix.

Net Loss improved from $36.5 million in Q3 2023 to $13.1 million in Q3 2024, driven by improvements in Adjusted Gross Margin, and fair value adjustment for warrants.

Adjusted EBITDA for Q3 2023 was $11.4 million, compared with $4.9 million in Q3 2024, an increase of 134.0%. Adjusted EBITDA Margin was 16.3% of net revenue, a 720-basis point expansion reflecting sales growth and strong operational leverage that has more than offset increased investment in marketing, and the international structure we put in place to support growth.

Liquidity: The business maintained strong cash conversion during Q3 2024 supported by effective working capital management and limited capital expenditure thanks to our asset light business model. However, the Company continues to incur significant non-recurring costs associated with legal and advisory fees. As of September 30, 2024, the Group had $17.6 million in cash and cash equivalents and $154.0 million of Net Debt. In addition, $30 million remains undrawn on the Company's $45 million revolving credit facility as of September 30, 2024.

Outstanding Shares: As of November 15, 2024, the Company had 122,850,904 ordinary shares outstanding, consisting of 112,084,376 Class A ordinary shares outstanding and 10,766,528 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 128,328,987 as of November 15, 2024, primarily driven by forfeitures of unvested shares and lower in-the-money dilutive instruments. All contractual lock-ups with shareholders have now expired.

Fiscal 2024 Outlook: We expect to deliver on our guidance of full year Comparable Net Revenue Growth above the 25.7% growth achieved in the second quarter while delivering Adjusted EBITDA Margin in the mid-teens.

• Net Revenue reached $38.7 million vs $28.2 million in Q3 2023 with Comparable Net Revenue Growth of 45.5%, and Adjusted EBITDA of $7.5 million, a 129.7% increase from Q3 2023.
• The robust net revenue growth for Obagi Medical was driven by: 1) the continued growth of our brand awareness supported by stronger selling and marketing investments; 2) our continued strong innovation including the launch of the power duo of Elastiderm Lift Up & Sculpt Facial Moisturizer and Advanced Filler Concentrate, which helped lift the rest of our Elastiderm franchise; 3) the growth of the brand's distribution footprint through our continued international expansion, and the acceleration of our digital channels through the expansion of our direct-to-consumer channel capabilities as well as the business model optimization of our main e-commerce business partner. This business model optimization benefit, which resulted from the internalization of this distribution channel in 2023 will normalize in subsequent quarters.
• The U.S. physician dispensed channel returned to growth in Q3 2024 due to better stock levels of key products. Additionally, although we saw improved stock availability in the quarter, out-of-stocks continue to impact select key products in the short-term, with further progress expected in Q4 2024 to support domestic and international expansion.
• Adjusted Gross Margin increased 1,010-basis points to 78.6% compared to Q3 2023, due to a more favorable channel mix and other sourcing and operational efficiency initiatives.
• Adjusted EBITDA Margin rose by 770-basis points to 19.3%, up from 11.6% in Q3 2023.
  Advertisement

• Net Revenue reached $31.5 million, up 23.5%, and Adjusted EBITDA of $8.5 million, which doubled from Q3 2023.
• Milk Makeup's brand momentum continues through 1) increased brand awareness and strong consumer engagement; 2) continued expansion of the brand distribution footprint with the addition of four new European retailers in 2024; and 3) new launches in the quarter building on the success of the Cooling Water Jelly Tints, with the introduction of two additional Jelly Tint shades and the launch of Hydro Grip + Glow and Kush High Roller brow and mascara, further strengthening our product offering.
• Adjusted Gross Margin decreased by 340-basis points versus Q3 2023, primarily due to seasonal product mix shift toward lower margin holiday promotional kits and higher off-price channel sales, as well as an inventory provision release in Q3 2023.
• Adjusted EBITDA Margin improved from 16.7% in Q3 2023 to 27.1% in Q3 2024.

For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023:

Net Revenue was $201.8 million, compared to net revenue of $163.0 million in the Nine Months 2023, a +23.8% increase on a net revenue basis and a +26.9% increase in Comparable Net Revenue Growth.

Gross Profit was $142.3 million, compared to Gross Profit of $104.1 million in the Nine Months 2023. Adjusted Gross Profit was $150.9 million, or 74.8% of net revenue, a margin improvement of 720-basis points.

Net Loss was $26.1 million, compared to a Net Loss of $73.2 million in the Nine Months 2023. Net loss improved primarily due to income related to the fair value adjustment for warrants.

Adjusted EBITDA was $29.1 million, or Adjusted EBITDA Margin of 14.4%, compared to 11.5% in the Nine Months 2023.

Nine Months 2024 Highlights

Waldencast will host a conference call to discuss its third quarter results for the period ended September 30, 2024, Thursday, November 21, 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 Net Revenue 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, discontinued product write-off, 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 and restructuring 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.