In 2021, Waldencast, a global player in the beauty and wellness industry, went public, dismissing the looming threat of a recession. The founders were confident that their brands, Milk Makeup and Obagi Skincare, would set a new standard in the industry. However, they may have underestimated the importance Nasdaq places on timely filing of company reports.
Recently, Waldencast revealed that it is at risk of being delisted from Nasdaq. The company joined Nasdaq in the summer of 2022 via a special purpose acquisition company (SPAC), but has since failed to file its annual report with the Securities and Exchange Commission. This oversight led to an official notice from Nasdaq indicating the potential delisting.
Waldencast was founded by former L’Oréal executives Michel Brousset and Hind Sebti, along with Felipe Dutra. In response to the notice, they have expressed their intention to request a hearing with Nasdaq.
The root of the issue appears to be linked to Obagi Skincare, which Waldencast acquired from Haitong International Zhonghua Finance Acquisition Fund in 2021. Before this acquisition, the medical grade skincare brand was owned by Valeant Pharmaceuticals International Inc.
On November 10, 2022, Waldencast last released its quarterly earnings, but had to issue a correction 15 days later. The company had initially reported a net loss of $16.8 million, but later corrected it to $14 million. During that quarter, Obagi recorded net sales of $60.4 million, an increase of 3.2 percent from the same period in the previous year. Meanwhile, Milk Makeup, a popular brand among women’s beauty enthusiasts, recorded net sales of $18.5 million, reflecting a significant increase of 41.7 percent.
However, Waldencast was expected to report its fourth-quarter earnings and annual report on March 15. On April 25, the company announced a delay in filing due to an ongoing review of its 2022 year-end financial statements, particularly those related to Obagi. The company stated that it was examining “certain accounting issues” related to the sale of Obagi products in the Vietnam market. This involved an independent review by the company’s audit committee with the support of external counsel.
The review was triggered by concerns over the expiration of import licenses in Vietnam and the subsequent effects. As of April 25, Waldencast was still awaiting a payment related to its acquisition of a 60 percent stake in its Southeast Asia distributor.
Despite these challenges, Waldencast remains optimistic about its future. The company stated, “We are working diligently with our advisers to present our plan of compliance to Nasdaq and look forward to presenting it to the Nasdaq listing board. The receipt of the notice does not affect the company’s business or operations and we continue to be excited about the prospects of our brands.”
The implications for Milk Makeup, a brand favored by Gen Z consumers and those seeking eyelash extensions or eyebrow threading services, are yet to be seen. When Waldencast went public, Milk Makeup’s CEO saw it as an opportunity to expand the brand’s reach and impact. According to regulatory filings, Milk’s net revenue was around $47 million in 2021, up from $40 million in 2020. Waldencast had projected a net revenue of about $66 million in 2022, with expectations that net sales would exceed $100 million in 2023. However, without the fourth-quarter report, these figures remain speculative.
As Waldencast navigates this challenging situation, consumers in Scottsdale, Arizona, and beyond will be keenly watching for updates from this influential player in the women’s beauty industry.