Executive Summary / Key Takeaways

• Strategic Transformation Underway: Waldencast plc ($WALD) is actively transforming its business model, moving beyond traditional beauty to become a comprehensive beauty and aesthetics platform, highlighted by the recent FDA approval of Obagi saypha MagIQ and the Novaestiq acquisition.
• Dual-Brand Growth Engine: The company leverages two distinct, high-growth brands—Milk Makeup in prestige clean makeup and Obagi Medical in professional science-led skincare—each with strong innovation pipelines and expanding distribution footprints.
• Operational Efficiency and Margin Expansion: Waldencast's "Flywheel Effect" strategy focuses on driving gross margin expansion through operational efficiencies, reinvesting these savings into marketing and sales to fuel top-line growth and enhance profitability.
• Aesthetics Market Entry: The acquisition of Novaestiq Corp. and the FDA approval of Obagi saypha MagIQ injectable hyaluronic acid gel mark a significant entry into the U.S. dermal filler market, effectively doubling Obagi Medical's addressable market to approximately $4.2 billion by 2029.
• Revised 2025 Outlook and Strategic Review: Despite strong H1 2025 brand performance, Waldencast has updated its full-year 2025 guidance to low to mid-single-digit net revenue growth and low to mid-teens adjusted EBITDA margins, reflecting market moderation and purposeful investment. The company is also undertaking a strategic review to maximize shareholder value.

A Platform for Prestige and Professional Beauty

Waldencast plc, incorporated in 2020, embarked on a mission to build a global, best-in-class beauty and wellness operating platform. This ambition is rooted in developing, acquiring, accelerating, and scaling conscious, high-growth, purpose-driven brands. The foundational step in this journey was the business combination with Obagi Medical and Milk Makeup, establishing a robust presence in prestige skin and color. This strategic framework, dubbed the "Waldencast Flywheel Effect," centers on enhancing operational efficiency to expand gross margins, then strategically reinvesting these gains into sales and marketing to drive top-line growth and achieve operational leverage.

The beauty market itself remains a resilient and dynamic industry, consistently demonstrating growth driven by premiumization and consumers' increasing demand for efficacy and performance. In 2024, the Prestige Beauty segment grew by 7%, with Prestige Makeup expanding by 5% and Professional Skincare showing robust 8% growth, outpacing Prestige Skincare at 2%. This trend underscores a broader market bifurcation, where prestige offerings continue to outperform mass-market products, a favorable environment for Waldencast's brand portfolio.

Technological Edge and Innovation Powering Growth

Waldencast's competitive strength is significantly bolstered by the technological differentiation and innovation embedded within its core brands.

Obagi Medical: Science-Backed Skincare and Aesthetic Expansion
Obagi Medical, positioned as the number one U.S. physician-recommended medical-grade skincare brand, excels in addressing critical skin concerns such as pigmentation, fine lines, wrinkles, and sagging skin, which collectively represent two-thirds of in-office skincare sales. The brand's core technology lies in its "breakthrough patented technology and transformative, clinically proven results," developed through partnerships with 39 research and development partners and leveraging Waldencast's open development ecosystem. Obagi's rigorous clinical testing program, involving 329 studies and up to 10 different tests per innovation, underpins its claims of efficacy.

A pivotal technological advancement for Obagi Medical is its recent expansion into the aesthetics market. On September 10, 2025, Waldencast announced the FDA approval of Obagi saypha MagIQ Injectable Hyaluronic Acid Gel. This product, developed by Croma-Pharma and distributed under the Obagi Medical brand, utilizes proprietary MACRO Core Technology. This technology creates a stable 3D HA matrix designed for consistent gel distribution, predictable injection force, and natural-looking results across all skin types. A pivotal 270-patient clinical trial demonstrated its non-inferiority to control fillers with similar safety profiles, notably including a high representation of diverse Fitzpatrick skin types. This approval, following the July 2025 acquisition of Novaestiq Corp. and the U.S. rights to the Saypha® line, effectively doubles Obagi Medical's addressable market to approximately $4.2 billion by 2029. The company plans to launch Obagi saypha MagIQ in the U.S. in 2026, leveraging its existing network of practices and aesthetic professionals. This strategic move positions Obagi Medical as the first "Mega-Brand" in the combined medical-grade skincare and aesthetics industry, creating a synergistic go-to-market model and a physician-dispensed moat.

Milk Makeup: Innovation in Clean, Performance-Driven Cosmetics
Milk Makeup differentiates itself through its commitment to "clean, cool beauty that works," offering products that are vegan, cruelty-free, and free from harmful ingredients. The brand's innovation strategy focuses on "market disrupting beauty innovation" and expanding into high-replenishment categories. A prime example is the Hydro Grip Gel Skin Tint, launched in March 2025, which entered the complexion category. This product is the first gel skin tint designed to last up to 12 hours, addressing a key consumer dissatisfaction with existing skin tints. This innovation quickly became a viral success, generating $18 million in earned media value and over 245 million impressions since its launch, selling one unit per minute in Q1 2025. It has already garnered significant industry recognition, including the 2025 Cosmopolitan Holy Grail Beauty Award for Best Skin Tint.

The "so what" for investors is clear: these technological advancements and innovation strategies directly contribute to Waldencast's competitive moat. For Obagi, the entry into dermal fillers with a clinically proven, proprietary technology expands its revenue streams into a high-growth, high-margin segment, leveraging its existing professional network. For Milk Makeup, continuous innovation in performance-driven clean beauty attracts new consumers and drives loyalty in a competitive market, enhancing its market positioning and long-term growth potential.

Competitive Positioning and Strategic Responses

Waldencast operates in a highly competitive beauty landscape, contending with established giants like Estée Lauder Companies Inc. (EL), L'Oréal S.A. (LRLCY), Procter & Gamble Co. (PG), and Coty Inc. (COTY). While these larger players boast extensive global reach, diversified portfolios, and robust financial resources, Waldencast carves out its niche through specialization and agility.

Obagi Medical, as the fastest-growing top 10 professional skincare brand in the U.S. in 2024, leads in specialized dermatological applications. Its focus on medical-grade, science-backed solutions for specific skin concerns provides a distinct advantage over broader luxury brands like Estée Lauder, which emphasize wider appeal. Obagi's direct-to-physician model and recent expansion into injectables with proprietary MACRO Core Technology create a unique value proposition, allowing it to capture a larger share of the aesthetic spend. This targeted approach offers greater efficiency in clinical settings and potentially faster innovation cycles for evidence-based products compared to L'Oréal's vast, diversified portfolio.

Milk Makeup, a leading clean makeup brand and the number two clean brand at Sephora U.S., differentiates itself with its "cult-favorite" status among Gen Z and its commitment to clean, vegan, and cruelty-free formulations. While it may not match the sheer scale or marketing budgets of a Procter & Gamble or Coty, Milk Makeup's strong community engagement and rapid innovation in unique product formats (like the Hydro Grip Gel Skin Tint) allow it to capture significant market share within its target demographic. The brand's disciplined approach to distribution expansion, prioritizing productivity per store over rapid saturation, helps maintain its premium positioning and brand equity, contrasting with the broader retail presence of mass-market competitors.

Waldencast's overall strategy of acquiring and accelerating purpose-driven brands, coupled with its "asset-light" business model, allows for greater agility and responsiveness compared to larger, more bureaucratic conglomerates. The company's adjusted gross margin of 70.01% (TTM) is competitive, and its operational efficiency initiatives are designed to further enhance profitability. While larger competitors benefit from economies of scale and diversified revenue streams, Waldencast's focused portfolio and deep industry expertise provide a distinct competitive strength in attracting other brands and founders to its platform.

Financial Performance and Operational Dynamics

Waldencast's financial performance in recent periods reflects both the strength of its brands and the challenges of a dynamic market. For fiscal year 2024, Waldencast reported net revenue of $273.9 million, a robust 27.5% increase in comparable growth. This impressive top-line expansion was accompanied by significant profitability improvements, with adjusted gross profit reaching $203.6 million, up 35.3% from 2023, and an adjusted gross profit margin of 74.3%, a 530 basis point improvement year-over-year. Adjusted EBITDA for FY 2024 surged by 65.1% to $40.3 million, expanding the adjusted EBITDA margin to 14.7% from 11.2% in 2023.

Breaking down the performance by brand, Milk Makeup's FY2024 net revenue was $124.6 million, a 24% increase from 2023, with its adjusted EBITDA margin expanding 500 basis points to 23.3%. Obagi Medical's FY2024 net revenue reached $149.3 million, representing comparable growth of 30.7% from 2023, and its adjusted EBITDA margin expanded to 20.4%.

The first quarter of 2025, however, presented some anticipated challenges. Net revenue for Q1 2025 was $65.4 million, a 4.1% decline from Q1 2024. This was largely attributed to difficult comparisons against strong launches in Q1 2024 (particularly Milk Makeup's "Jellies"), a decelerating beauty market, and inventory adjustments by retail partners. Milk Makeup's revenue declined 15.1% in Q1 2025, primarily due to these international headwinds and inventory adjustments. Despite this, Milk Makeup's domestic performance was solid, driven by the successful launch of Hydro Grip Gel Skin Tint and its entry into Ulta Beauty (ULTA), contributing to high single-digit growth in U.S. retail sales. Obagi Medical, in contrast, achieved Q1 2025 net revenue of $36.2 million, an increase of 7.1% from Q1 2024, despite being tempered by out-of-stock issues in key SKUs. The brand's adjusted gross profit margin remained strong at 82% in Q1 2025, an increase of 60 basis points.

Liquidity remains a key focus. At the end of Q1 2025, Waldencast held $10.8 million in cash, with an additional $22.5 million available on its new revolving credit facility. Net debt totaled $172.1 million, an increase from $154.2 million at the end of 2024, primarily due to debt refinancing costs that extended the maturity profile to March 2030.

The company anticipates strong positive adjusted EBITDA to cash conversion for the full year, supported by disciplined working capital management and low capital expenditures, which were $2.9 million in 2024.

Strategic Initiatives and Forward Momentum

Waldencast is executing several strategic initiatives to sustain its growth trajectory. For Milk Makeup, the focus is on expanding its brand and community reach, launching market-disrupting innovation, and broadening its footprint. The successful launch of Hydro Grip Gel Skin Tint into the complexion category is a strategic step into a segment known for high loyalty and repurchase rates. The brand's expansion into over 600 Ulta Beauty doors in March 2025 is a significant move to reach incremental consumers not previously captured through Sephora. Milk Makeup is also evolving its marketing strategy, complementing its organic and influencer-based model with broader, top-of-funnel paid campaigns to reach a wider audience.

Obagi Medical's strategic pillars include driving cutting-edge, science-backed innovation, reinforcing its dermatological brand DNA, and expanding brand awareness. The recent FDA approval of Obagi saypha MagIQ injectable hyaluronic acid gel is a transformative event, marking the brand's entry into the U.S. dermal filler market. This move is expected to double Obagi Medical's addressable market and positions it to offer integrated skincare and aesthetic solutions. The company is also actively transforming its supply chain to enhance operational efficiency and improve fulfillment rates, addressing past out-of-stock issues that tempered growth. Furthermore, Obagi is expanding its marketing efforts beyond professionals to directly engage consumers, driving them to physician practices.

Outlook and Risk Considerations

Waldencast's updated full-year 2025 outlook anticipates net revenue growth in the low to mid-single digits and adjusted EBITDA margins in the low to mid-teens. This revised guidance reflects first-half performance and a more moderated industry environment, alongside purposeful investments for future growth. Management remains confident in achieving these targets, citing Milk Makeup's U.S. expansion, improved fulfillment rates at Obagi Medical, continued blockbuster innovation, and growing returns from marketing investments as key drivers.

However, several risks and challenges warrant investor attention. The fluid macroeconomic environment and potential softer consumer sentiment could impact spending. Supply chain disruptions, particularly for Obagi Medical, have led to out-of-stock issues, though the company is actively addressing these through transformation initiatives. International markets, especially in the EU for Milk Makeup, have shown some pressure due to inventory adjustments and softer consumption. Tariffs, while expected to result in a low single-digit percentage increase in cost of goods sold for fiscal 2025, are being mitigated through supply chain optimization, selective pricing actions, and supplier collaboration. Management believes the impact of tariffs is manageable given its relatively low exposure to China (approximately 10% of total cost of goods). The company is also undergoing a strategic review to maximize shareholder value, which, while potentially beneficial, introduces an element of uncertainty.

Conclusion

Waldencast plc is at a pivotal juncture, strategically evolving its platform to capitalize on the convergence of beauty and aesthetics. The core investment thesis hinges on the continued strong performance and expansion of its two distinct brands, Milk Makeup and Obagi Medical, coupled with the transformative entry into the dermal filler market through the Novaestiq acquisition and FDA approval of Obagi saypha MagIQ. While Q1 2025 presented headwinds, the underlying demand for its innovative, science-backed products remains robust, and strategic initiatives are in place to accelerate growth. The updated 2025 guidance reflects a balanced view of market realities and ongoing investments, underscoring management's commitment to long-term value creation. Investors should closely monitor the execution of supply chain improvements, the successful integration and launch of the Saypha® line, and the outcomes of the strategic review, as these will be critical indicators of Waldencast's ability to solidify its position as a leading multi-brand beauty and aesthetics powerhouse.