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BUSINESS COMBINATIONS | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS On July 27, 2022, Waldencast consummated its initial business combination with (i) Obagi, pursuant to an Agreement and Plan of Merger dated November 15, 2021, by and among Waldencast, Obagi Merger Sub, Inc., a Cayman Islands exempted company limited by shares and an indirect wholly-owned subsidiary of Waldencast (“Merger Sub”), and Obagi (the “Obagi Merger Agreement”), and (ii), Milk, pursuant to an Equity Purchase Agreement dated November 15, 2021, by and among Waldencast, Obagi Holdco 1 Limited, a limited company incorporated under the laws of Jersey (“Holdco Purchaser”) and a subsidiary of Waldencast, Waldencast Partners LP together with Holdco Purchaser, (the “Purchasers”), certain members of Milk (the “Milk Members”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as representative of the Milk Members (the “Equityholder Representative”) (the “Milk Equity Purchase Agreement” and together with the Obagi Merger Agreement, the “Transaction Agreements”). Pursuant to the Obagi Merger Agreement, at the effective time of the Obagi Merger (the “Obagi Merger Effective Time”) Merger Sub merged with and into Obagi (the “Obagi Merger”) and the separate corporate existence of Merger Sub ceased, with Obagi surviving as an indirect subsidiary of the Company. At the Obagi Merger Effective Time, all outstanding ordinary shares of Obagi, $0.50 par value (“Obagi common shares”) were canceled and exchanged for (i) 28,237,506 Class A ordinary shares of Waldencast and (ii) cash in the amount of $345.4 million. Pursuant to the Milk Equity Purchase Agreement, at the effective time of the Milk Transaction (the “Milk Purchase Effective Time”) the Purchasers acquired from the Milk Members all of their equity in Milk in exchange for (i) 21,104,225 limited partnership units in Waldencast Partners LP (“Waldencast LP Units”) (ii) 21,104,225 Class B ordinary shares, which are non-economic voting shares of Waldencast and (iii) cash in the amount of $121.6 million (the “Milk Transaction”). Each Waldencast LP Unit and Class B ordinary share held by a Milk Member is redeemable at the option of the holder, and, if such option is exercised, exchangeable at the option of Waldencast into one Waldencast Class A ordinary share or cash, in accordance with the terms of the Amended and Restated Waldencast Partners LP Agreement. Upon consummation of the Business Combination Waldencast became organized in an “Up-C” structure, whereby the equity interests of Obagi and Milk are held by Waldencast Partners LP, which is an indirect subsidiary of Waldencast plc. In the Business Combination, Waldencast was deemed to be the accounting acquirer and continues as the SEC registrant. Obagi and Milk were deemed to be the accounting acquirees, however Obagi is considered the predecessor entity for purposes of financial reporting. Waldencast was determined to be the accounting acquirer based on evaluation of the following factors: –The owners of Waldencast have the largest voting interest in the combined company; –The original owner of Waldencast, Waldencast Long-Term Capital LLC (the “Sponsor”), and its affiliates nominated the majority of the initial members who will serve on the board of directors of Waldencast (the former owner of Obagi nominated one director, and Milk nominated no directors); and –Waldencast’s existing management holds executive management roles for the post-combination company, whilst Obagi and Milk management team members report into the current Waldencast executive team. Immediately prior to the Obagi Merger Effective Time, Obagi carved out and distributed the Obagi China Business to Cedarwalk pursuant to the Obagi China Distribution. Following the Obagi China Distribution, the Obagi China Business continues to be held by Cedarwalk, which also owned 24.5% of the fully diluted Waldencast plc Class A ordinary shares as of the Obagi Merger Effective Time. Prior to the Obagi China Distribution, the pre-tax losses for the Obagi China Business were $8.0 million, $3.7 million and $2.3 million for the period from January 1 to July 27, 2022 (Predecessor Period), the year ended December 31, 2021 (Predecessor Period) and the year ended December 31, 2020 (Predecessor Period), respectively. See “Note 17. Related Party Transactions” for more information on ongoing transactions with the Obagi China Business following the close of the Obagi Merger. Measurement period adjustments will be recognized in the reporting period in which the adjustments are determined. Obagi and Milk Purchase Price Allocation:
(In thousands) | Obagi |  | Milk |  | Total
Total Purchase Price: |  |  |  |  |
Cash consideration | $ | 345,398 |  |  | $ | 121,629 |  |  | $ | 467,027 |
Equity consideration | 277,824 |  |  | 200,087 |  |  | 477,911 |
Cash repayment of debt | 136,112 |  |  | 3,935 |  |  | 140,047 |
Related party liability | 22,100 |  |  | — |  |  | 22,100 |
Total purchase consideration | $ | 781,434 |  |  | $ | 325,651 |  |  | $ | 1,107,085 |
Fair value of assets acquired: |  |  |  |  |
Cash and cash equivalents | $ | 15,850 |  |  | $ | 2,092 |  |  | $ | 17,942 |
Restricted cash | 650 |  |  | 819 |  |  | 1,469 |
Account receivable, net | 15,214 |  |  | 3,866 |  |  | 19,080 |
Related party receivable | 327 |  |  | 199 |  |  | 526 |
Inventories | 31,026 |  |  | 30,945 |  |  | 61,971 |
Prepaid expenses | 4,307 |  |  | 520 |  |  | 4,827 |
Other current assets | 359 |  |  | - |  |  | 359 |
Property and equipment | 1,245 |  |  | 8,436 |  |  | 9,681 |
Intangible assets | 505,300 |  |  | 157,500 |  |  | 662,800 |
Right-of-use assets | 4,811 |  |  | 8,232 |  |  | 13,043 |
Other assets | 227 |  |  | - |  |  | 227 |
Total identifiable assets acquired | $ | 579,316 |  |  | $ | 212,609 |  |  | $ | 791,925 |
Liabilities assumed: |  |  |  |  |
Accounts payable and accrued expenses | 18,699 |  |  | 6,442 |  |  | 25,141 |
Other current liabilities | 12,912 |  |  | 5,483 |  |  | 18,395 |
Lease liabilities | 6,461 |  |  | 10,105 |  |  | 16,566 |
Deferred income tax liabilities | 28,073 |  |  | - |  |  | 28,073 |
Total liabilities assumed: | $ | 66,145 |  |  | $ | 22,030 |  |  | $ | 88,175 |
Net assets acquired | 513,171 |  |  | 190,579 |  |  | 703,750 |
Purchase consideration | 781,434 |  |  | 325,651 |  |  | 1,107,085 |
Goodwill | $ | 268,263 |  |  | $ | 135,072 |  |  | $ | 403,335 |
Goodwill recognized for these acquisitions is attributable to improving the product offerings, expanding into additional markets and the expected cash flows resulting from these efforts, and assembled workforce. Goodwill recognized is not expected to be deductible for local tax purposes. During the Successor Period ended December 31, 2022, the Company recorded a non-cash impairment charge of $68.7 million within the Obagi Skincare reportable segment. See “Note 6. Goodwill” for additional details. See “Note 19. Segment Reporting” for amounts related to revenue and earnings associated with Obagi Skincare and Milk Makeup subsequent to the acquisition date. Related party liability The Company recognized a liability with respect to a related party supply contract executed on the Closing Date between Obagi and Obagi Hong Kong. The fair value of the related party liability was determined using the present value of after-tax cash flows related to unfavorable discounts provided to the Obagi China Business included in the supply agreement. As of the Obagi Merger Effective Time, the Company recognized a related party liability of $22.1 million. During the period from July 28 to December 31, 2022 (Successor Period), the Company amortized $12.2 million of the related party liability into the related party revenue recognized on the sale of products to the Obagi China Business. The Company had a remaining related party liability of $9.9 million, included in Other current liabilities, as of December 31, 2022. Intangible Assets
| Fair Value |  |
| Obagi |  | Milk |  | Total |  | Weighted- Average Useful Life
(In thousands) |  |  |
Trademarks and Trade Name | $ | 414,000 |  |  | $ | 145,000 |  |  | $ | 559,000 |  |  | 14 years
Customer/distributor relationships | 25,000 |  |  | 11,000 |  |  | 36,000 |  |  | 11 years
Tretinoin distribution and supply agreement | 38,900 |  |  | — |  |  | 38,900 |  |  | 5 years
Formulations | 27,400 |  |  | 1,500 |  |  | 28,900 |  |  | 8 years
Total Intangible Assets | $ | 505,300 |  |  | $ | 157,500 |  |  | $ | 662,800 |  |  |
The intangible assets acquired in connection with the Business Combination are classified as Level 3 in the fair value hierarchy. The estimate of the fair values of the acquired amortizable intangible assets were determined using a multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods. Significant estimates used in the determination include estimating future cash flows over multiple periods, terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. Transaction Costs In connection with the Business Combination, Waldencast incurred transactions costs of $9.4 million which was incurred during the period from July 28, 2022 to December 31, 2022 (Successor Period). Transaction costs consisted of advisory, legal, accounting and management fees, which are included in SG&A expenses on the consolidated statements of operations and comprehensive loss. Unaudited ASC 805 Pro Forma The following unaudited pro forma combined financial information presents the Company’s results as though the Business Combination had occurred on January 1, 2021, for the years ended December 31, 2021 and 2022. The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting in accordance with U.S. GAAP.
| Year ended December 31, 2022 |  | Year ended December 31, 2021
(In thousands) | (Unaudited) |  | (Unaudited)
Pro forma net revenue | $ | 200,547 |  |  | $ | 162,583 |
Pro forma net income (loss) | (86,930) |  |  | (145,152) |
Less: Pro forma net income (loss) attributable to noncontrolling interest | (25,140) |  |  | (26,519) |
Pro forma net income (loss) attributable to Waldencast plc | $ | (61,790) |  |  | $ | (118,633) |
These unaudited pro forma results include adjustments such as inventory step-up, amortization of acquired intangible assets, and interest expense on debt financing in connection with the Business Combination. Material, nonrecurring pro forma adjustments directly attributable to the Business Combination include: • Cost of goods sold related to acquired inventory step-up of $10.0 million was removed from net income for the year ended December 31, 2022 and recognized as an incremental cost of goods sold in the year ended December 31, 2021. • Transaction related costs of $66.1 million were removed from net income for the year ended December 31, 2022 and recognized as an expense in the year ended December 31, 2021. The unaudited consolidated pro forma financial information was prepared in accordance with accounting standards and is not necessarily indicative of the results of operations that would have occurred if the Business Combination had been completed on the date indicated, nor is it indicative of the future operating results of the Company. The unaudited pro forma results do not reflect events that either have occurred or may occur after the Business Combination, including, but not limited to, the anticipated realization of operating synergies in subsequent periods. They also do not give effect to certain charges that the Company expects to incur in connection with these acquisitions, including, but not limited to, additional professional fees and employee integration.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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