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e.l.f. Beauty Announces First Quarter Fiscal 2024 Results

– Delivered 76% Net Sales Growth –

– Gained 260 Basis Points of Market Share –

– Raises Fiscal 2024 Outlook –

e.l.f. Beauty (NYSE: ELF) today announced results for the three months ended June 30, 2023.

“We are off to a terrific start in our new fiscal year with net sales growth of 76% and market share gains of 260 basis points in Q1. This marks our 18th consecutive quarter of delivering both net sales growth and market share gains. We are one of only five publicly traded consumer companies out of 274 that has grown for 18 straight quarters and averaged at least 20% sales growth per quarter over that period,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “As we look ahead, we believe we are in the early innings of unlocking the full potential we see for e.l.f. Beauty and are raising our fiscal 2024 outlook to reflect our continued momentum.”

Three Months Ended June 30, 2023 Results

For the three months ended June 30, 2023, compared to the three months ended June 30, 2022:

  • Net sales increased 76% to $216.3 million, primarily driven by strength in both our retailer and e-commerce channels.
  • Gross margin increased approximately 280 basis points to 71%, primarily driven by favorable FX impacts, margin accretive mix and cost savings, lower inventory adjustments and improved transportation costs, partially offset by the costs associated with retailer activity and space expansion.
  • Selling, general and administrative expenses ("SG&A") increased $30.4 million to $91.9 million, or 42% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) increased $29.4 million to $84.4 million, or 39% of net sales. The increase in SG&A dollars was primarily due to an increase in marketing and digital spend, operations costs, compensation and benefits, retail fixturing and visual merchandising costs.
  • Net income was $53.0 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $62.9 million.
  • Diluted earnings per share were $0.93 on a GAAP basis. Adjusted diluted earnings per share (diluted earnings per share calculated with adjusted net income excluding the items identified in the reconciliation table below) were $1.10.
  • Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $74.3 million, or 34% of net sales, up 135% year over year.

Balance Sheet

As of June 30, 2023, the Company had $142.5 million in cash and cash equivalents and $59.6 million in long-term debt and finance lease obligations, as compared to $72.2 million in cash and cash equivalents and $89.7 million of long-term debt and finance lease obligations as of June 30, 2022.

Updated Fiscal 2024 Outlook

The Company is providing the following updated outlook for fiscal 2024. The updated outlook for fiscal 2024 reflects an expected 37-39% year-over-year increase in net sales, as compared to an expected 22-24% increase previously.

 

Updated Fiscal 2024 Outlook

 

Previous Fiscal 2024 Outlook

Net sales

$792-802 million

 

$705-720 million

Adjusted EBITDA

$171-174 million

 

$114.5-147.5 million

Adjusted effective tax rate

17-18%

 

21-22%

Adjusted net income

$125-127 million

 

$98.5-100.5 million

Adjusted diluted earnings per share

$2.19-2.22

 

$1.73-1.76

Fiscal year ending diluted shares outstanding

57 million

 

57 million

Webcast Details

The Company will hold a webcast to discuss the results from its first quarter fiscal 2024 today, August 1, 2023, at 4:30 p.m. Eastern Time. The webcast will be broadcast live at https://investor.elfbeauty.com/news-and-events/events. For those unable to listen to the live broadcast, an archived version will be available at the same location.

About e.l.f. Beauty

e.l.f. Beauty, Inc. builds brands designed to disrupt industry norms, shape culture and connect communities through positivity, inclusivity and accessibility. Our deep commitment to clean, cruelty-free beauty at an incredible value has fueled the success of our flagship brand e.l.f. Cosmetics since 2004 and driven our portfolio expansion. Today, our multi-brand portfolio includes e.l.f. Cosmetics, e.l.f. SKIN, pioneering clean-beauty brand Well People and Keys Soulcare, a groundbreaking lifestyle beauty brand created with Alicia Keys. Our family of brands is available online and across leading beauty, mass market and specialty retailers in the U.S., and has a growing international presence.

Learn more by visiting https://investor.elfbeauty.com.

Note Regarding non-GAAP Financial Measures

This press release includes references to non-GAAP measures, including adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. The Company presents these non-GAAP measures because its management uses them as supplemental measures in assessing its operating performance, and believes they are helpful to investors, securities analysts and other interested parties in evaluating the Company’s performance. The non-GAAP measures included in this press release are not measurements of financial performance under GAAP and they should not be considered as alternatives to measures of performance derived in accordance with GAAP. In addition, these non-GAAP measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These non-GAAP measures have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the Company’s results as reported under GAAP. The Company’s definitions and calculations of these non-GAAP measures are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.

Adjusted EBITDA excludes expense or income related to stock-based compensation, impairment of equity investment and other non-cash and non-recurring items. Such other non-cash or non-recurring items include amortization of internal-use software costs related to cloud applications and cloud computing ERP implementation costs. Adjusted SG&A excludes expense related to stock-based compensation and other non-recurring items. Such other non-recurring items includes other non-recurring cloud computing ERP implementation costs. Adjusted effective tax rate is the tax rate when excluding the pre-tax impact of expense or income related to restructuring of operations, stock-based compensation, other non-cash and non-recurring items, amortization of acquired intangible assets, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the impact was incurred. Adjusted net income excludes expense or income related to stock-based compensation, other non-recurring items, impairment of equity investment, amortization of acquired intangible assets and the tax impact of the foregoing adjustments. Such other non-recurring items, which include other non-recurring cloud computing ERP implementation costs.

With respect to the Company’s expectations under “Updated Fiscal 2024 Outlook” above, the Company is not able to provide a quantitative reconciliation of the adjusted EBITDA, adjusted net income and adjusted diluted earnings per share guidance non-GAAP measures to the corresponding net income and diluted earnings per share GAAP measures without unreasonable efforts. The Company cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including those statements relating to the Company's outlook for fiscal 2024 under “Updated Fiscal 2024 Outlook” above and those statements that we believe we are in the early innings of unlocking the full potential we see for e.l.f. Beauty. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, actual results and the timing of selected events may differ materially from those expectations. Factors that could cause actual results to differ materially from those in the forward looking statements include, among other things, the risks and uncertainties that are described in the Company's most recent Annual Report on Form 10-K, as updated from time to time in the Company's SEC filings, as well as the Company’s ability to effectively compete with other beauty companies; the Company’s ability to successfully introduce new products; the Company’s ability to attract new retail customers and/or expand business with its existing retail customers; the Company’s ability to optimize shelf space at its key retail customers; the loss of any of the Company’s key retail customers or if the general business performance of its key retail customers declines; and the Company’s ability to effectively manage its SG&A and other expenses. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of operations and comprehensive income

(unaudited)

(in thousands, except share and per share data)

 

 

Three months ended June 30,

 

2023

 

2022

Net sales

$

216,339

 

 

$

122,601

 

Cost of sales

 

63,767

 

 

 

39,616

 

Gross profit

 

152,572

 

 

 

82,985

 

Selling, general and administrative expenses

 

91,939

 

 

 

61,555

 

Operating income

 

60,633

 

 

 

21,430

 

Other income (expense), net

 

399

 

 

 

(1,663

)

Impairment of equity investment

 

(1,720

)

 

 

 

Interest income (expense), net

 

341

 

 

 

(663

)

Income before provision for income taxes

 

59,653

 

 

 

19,104

 

Income tax provision

 

(6,676

)

 

 

(4,635

)

Net income

$

52,977

 

 

$

14,469

 

Comprehensive income

$

52,977

 

 

$

14,469

 

 

 

 

 

Net income per share:

 

 

 

Basic

$

0.98

 

 

$

0.28

 

Diluted

$

0.93

 

 

$

0.27

 

Weighted average shares outstanding:

 

 

 

Basic

 

53,938,136

 

 

 

51,707,160

 

Diluted

 

57,175,870

 

 

 

53,834,732

 

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

June 30, 2023

 

March 31, 2023

 

June 30, 2022

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

142,549

 

 

$

120,778

 

 

$

72,248

 

Accounts receivable, net

 

 

90,531

 

 

 

67,928

 

 

 

52,281

 

Inventory, net

 

 

98,053

 

 

 

81,323

 

 

 

70,339

 

Prepaid expenses and other current assets

 

 

39,276

 

 

 

33,296

 

 

 

21,772

 

Total current assets

 

 

370,409

 

 

 

303,325

 

 

 

216,640

 

Property and equipment, net

 

 

7,581

 

 

 

7,874

 

 

 

9,339

 

Intangible assets, net

 

 

76,013

 

 

 

78,041

 

 

 

84,132

 

Goodwill

 

 

171,620

 

 

 

171,620

 

 

 

171,620

 

Investments

 

 

1,155

 

 

 

2,875

 

 

 

2,875

 

Other assets

 

 

31,103

 

 

 

31,866

 

 

 

29,251

 

Total assets

 

$

657,881

 

 

$

595,601

 

 

$

513,857

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

 

$

5,431

 

 

$

5,575

 

 

$

5,793

 

Accounts payable

 

 

53,237

 

 

 

31,427

 

 

 

16,023

 

Accrued expenses and other current liabilities

 

 

51,037

 

 

 

70,974

 

 

 

39,916

 

Total current liabilities

 

 

109,705

 

 

 

107,976

 

 

 

61,732

 

Long-term debt and finance lease obligations

 

 

59,612

 

 

 

60,881

 

 

 

89,684

 

Deferred tax liabilities

 

 

5,855

 

 

 

3,742

 

 

 

13,538

 

Long-term operating lease obligations

 

 

10,137

 

 

 

11,201

 

 

 

14,637

 

Other long-term liabilities

 

 

870

 

 

 

784

 

 

 

817

 

Total liabilities

 

 

186,179

 

 

 

184,584

 

 

 

180,408

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2023, March 31, 2023 and June 30, 2022; 54,417,579, 53,770,482 and 52,424,445 shares issued and outstanding as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively

 

 

543

 

 

 

535

 

 

 

517

 

Additional paid-in capital

 

 

840,181

 

 

 

832,481

 

 

 

801,992

 

Accumulated deficit

 

 

(369,022

)

 

 

(421,999

)

 

 

(469,060

)

Total stockholders' equity

 

 

471,702

 

 

 

411,017

 

 

 

333,449

 

Total liabilities and stockholders' equity

 

$

657,881

 

 

$

595,601

 

 

$

513,857

 

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

 

 

 

Three months ended June 30,

 

 

2023

 

2022

Cash flows from operating activities:

 

 

 

 

Net income

 

$

52,977

 

 

$

14,469

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

5,637

 

 

 

5,724

 

Stock-based compensation expense

 

 

7,200

 

 

 

6,542

 

Amortization of debt issuance costs and discount on debt

 

 

75

 

 

 

91

 

Deferred income taxes

 

 

2,113

 

 

 

3,945

 

Impairment of equity investment

 

 

1,720

 

 

 

 

Other, net

 

 

71

 

 

 

21

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(22,615

)

 

 

(6,727

)

Inventory

 

 

(16,729

)

 

 

14,158

 

Prepaid expenses and other assets

 

 

(8,094

)

 

 

(3,258

)

Accounts payable and accrued expenses

 

 

2,014

 

 

 

(3,442

)

Other liabilities

 

 

(1,015

)

 

 

(945

)

Net cash provided by operating activities

 

 

23,354

 

 

 

30,578

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

 

 

(616

)

 

 

(241

)

Net cash used in investing activities

 

 

(616

)

 

 

(241

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Repayment of long-term debt

 

 

(1,250

)

 

 

(1,250

)

Cash received from issuance of common stock

 

 

485

 

 

 

2

 

Other, net

 

 

(202

)

 

 

(194

)

Net cash used in financing activities

 

 

(967

)

 

 

(1,442

)

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

21,771

 

 

 

28,895

 

Cash and cash equivalents - beginning of period

 

 

120,778

 

 

 

43,353

 

Cash and cash equivalents - end of period

 

$

142,549

 

 

$

72,248

 

e.l.f. Beauty, Inc. and subsidiaries

Reconciliation of GAAP net income to non-GAAP adjusted EBITDA

(unaudited)

(in thousands)

 

 

Three months ended June 30,

 

2023

 

2022

Net income

$

52,977

 

 

$

14,469

Interest income (expense), net

 

(341

)

 

 

663

Income tax provision

 

6,676

 

 

 

4,635

Depreciation and amortization

 

4,587

 

 

 

4,693

EBITDA

$

63,899

 

 

$

24,460

Stock-based compensation

 

7,200

 

 

 

6,542

Impairment of equity investment (a)

 

1,720

 

 

 

Other non-cash and non-recurring items (b)

 

1,481

 

 

 

679

Adjusted EBITDA

$

74,300

 

 

$

31,681

(a) Represents an impairment of equity investment recorded during the three months ended June 30, 2023.

(b) Represents other non-cash or non-recurring items, which include amortization of internal-use software costs related to cloud applications and cloud computing ERP implementation costs.

e.l.f. Beauty, Inc. and subsidiaries

Reconciliation of GAAP SG&A to non-GAAP adjusted SG&A

(unaudited)

(in thousands)

 

 

Three months ended June 30,

 

2023

 

2022

Selling, general and administrative expenses

$

91,939

 

 

$

61,555

 

Stock-based compensation

 

(7,223

)

 

 

(6,549

)

Other non-recurring items (a)

 

(352

)

 

 

 

Adjusted selling, general and administrative expenses

$

84,364

 

 

$

55,006

 

(a) Represents other non-recurring cloud computing ERP implementation costs.

e.l.f. Beauty, Inc. and subsidiaries

Reconciliation of GAAP net income to non-GAAP adjusted net income

(unaudited)

(in thousands, except share and per share data)

 

 

Three months ended June 30,

 

2023

2022

Net income

$

52,977

 

$

14,469

 

Stock-based compensation

 

7,200

 

 

6,542

 

Other non-recurring items (a)

 

352

 

 

 

Impairment of equity investment (b)

 

1,720

 

 

 

Amortization of acquired intangible assets (c)

 

2,028

 

 

2,031

 

Tax Impact (d)

 

(1,396

)

 

(1,917

)

Adjusted net income

$

62,881

 

$

21,125

 

 

 

 

Weighted average number of shares outstanding – diluted

 

57,175,870

 

 

53,834,732

 

Adjusted diluted earnings per share

$

1.10

 

$

0.39

 

(a) Represents other non-recurring cloud computing ERP implementation costs.

(b) Represents an impairment of equity investment recorded during the three months ended June 30, 2023.

(c) Represents amortization expense of acquired intangible assets consisting of customer relationships and trademarks.

(d) Represents the tax impact of the above adjustments.

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