– Delivered 76% Net Sales Growth –
– Gained 330 Basis Points of Color Cosmetics
Category Share –
– Raises Fiscal 2024 Outlook –
e.l.f. Beauty (NYSE: ELF) today announced results for the three
and six months ended September 30, 2023.
“We continue to deliver exceptional, consistent,
category-leading sales growth,” said Tarang Amin, e.l.f. Beauty's
Chairman and Chief Executive Officer. “In Q2, we grew net sales by
76% and category share by 330 basis points, marking our 19th
consecutive quarter of growth in each. As we look ahead, the
significant whitespace we see across color cosmetics, skin care and
international gives us confidence that we are in the early innings
of unlocking the full potential we see for e.l.f. Beauty.”
Three Months Ended September 30, 2023 Results
For the three months ended September 30, 2023, compared
to the three months ended September 30, 2022:
- Net sales increased 76% to $215.5 million, primarily
driven by strength in both retailer and e-commerce channels.
- Gross margin increased approximately 570 basis points to
71%, primarily driven by lower inventory adjustments, cost savings
and mix, improved transportation costs and favorable foreign
exchange impacts, partially offset by costs associated with
retailer activity and space expansion.
- Selling, general and administrative (“SG&A”)
expenses increased $48.0 million to $112.2 million, or 52% of
net sales. Adjusted SG&A (SG&A excluding the items
identified in the reconciliation table below) increased $41.6
million to $97.8 million, or 45% of net sales. The increase in
SG&A dollars was primarily due to an increase in marketing and
digital spend, compensation and benefits, professional fees, retail
fixturing and visual merchandising costs and operations costs.
- Net income was $33.3 million on a GAAP basis.
Adjusted net income (net income excluding the items
identified in the reconciliation table below) was $47.1
million.
- Diluted earnings per share were $0.58 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 $0.82.
- Adjusted EBITDA (EBITDA excluding the items identified
in the reconciliation table below) was $60.4 million, or 28% of net
sales, up 122% year over year.
Six Months Ended September 30, 2023 Results
For the six months ended September 30, 2023, compared to the six
months ended September 30, 2022:
- Net sales increased 76% to $431.8 million, primarily
driven by strength in both retailer and e-commerce channels.
- Gross margin increased approximately 425 basis points to
71%, primarily driven by cost savings and mix, lower inventory
adjustments, favorable foreign exchange impacts and improved
transportation costs, partially offset by costs associated with
retailer activity and space expansion.
- SG&A increased $78.4 million to $204.1 million, or
47% of net sales. Adjusted SG&A increased $71.0 million
to $182.2 million, or 42% of net sales. The increase in SG&A
dollars was primarily due to an increase in marketing and digital
spend, compensation and benefits, operations costs, retail
fixturing and visual merchandising costs and professional
fees.
- Net income was $86.2 million on a GAAP basis.
Adjusted net income was $110.0 million.
- Diluted earnings per share were $1.50 on a GAAP basis.
Adjusted diluted earnings per share were $1.92.
- Adjusted EBITDA was $134.7 million, or 31% of net sales,
up 129% year over year.
Balance Sheet
As of September 30, 2023, the Company had $167.8 million in cash
and cash equivalents and $57.7 million of long-term debt and
finance lease obligations, as compared to $85.3 million in cash and
cash equivalents and $88.3 million of long-term debt and finance
lease obligations as of September 30, 2022.
Naturium Acquisition
On October 4, 2023, the Company closed on the acquisition of
Naturium, a fast-growing, high performance skin care brand, for
$355 million in a combination of cash and Company stock, furthering
its mission to make the best of beauty accessible to every eye,
lip, face and skin concern.
Updated Fiscal 2024 Outlook
The Company is providing the following updated outlook for
fiscal 2024. The updated outlook for fiscal 2024 reflects an
expected 55-57% year-over-year increase in net sales, as compared
to an expected 37-39% increase previously.
The Company notes this outlook now includes the addition of
Naturium. e.l.f. Beauty continues to expect Naturium to contribute
approximately $48 million in net sales, approximately $9 million in
adjusted EBITDA and approximately $0.04 in adjusted EPS on a fully
diluted basis in fiscal 2024. This reflects Naturium’s contribution
for approximately half of e.l.f. Beauty’s fiscal year, based on the
transaction closing date of October 4, 2023.
Updated Fiscal 2024
Outlook
Previous Fiscal 2024
Outlook
Net sales
$896-906 million
$792-802 million
Adjusted EBITDA
$197-200 million
$171-174 million
Adjusted effective tax rate
17-18%
17-18%
Adjusted net income
$144-146 million
$125-127 million
Adjusted diluted earnings per share
$2.47-2.50
$2.19-2.22
Fiscal year ending diluted shares
outstanding
58 million
57 million
Webcast Details
The Company will hold a webcast to discuss the results from its
second quarter fiscal 2024 today, November 1, 2023, at 4:30 p.m.
Eastern Time. The webcast will be broadcast live at
https://investor.elfbeauty.com/news-and-events/events-and-presentations.
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 norms,
shape culture and connect communities through positivity,
inclusivity and accessibility. A digitally disruptive brand from
the start, we launched in 2004 selling premium-quality makeup for
$1 online. Today, we have five visionary, purpose-driven brands,
all of which make the best of beauty accessible to every eye, lip,
face and skin concern. Our brand portfolio includes e.l.f.
Cosmetics, e.l.f. SKIN, Naturium, Well People and Keys Soulcare.
With a focus on clean, cruelty free and vegan products, we are also
the first beauty company with a Fair Trade™ certified manufacturing
facility. e.l.f. Beauty brands are sold online and at leading
beauty, mass market, and specialty retailers in the U.S. and
internationally.
Learn more at https://www.elfbeauty.com/
Note Regarding non-GAAP Financial Measures
This press release includes references to non-GAAP measures,
including adjusted EBITDA, adjusted SG&A, 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 or substitutes for 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, costs related to the
acquisition of Naturium, 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 and costs related to the acquisition of
Naturium.
Adjusted effective tax rate is the tax rate when excluding the
pre-tax impact of expense or income related to 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 and costs related to the
acquisition of Naturium.
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
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 successfully address any
difficulties and challenges encountered in connection with its
acquisition of Naturium, including the integration of Naturium's
business with the Company's business; 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 September
30,
Six months ended September
30,
2023
2022
2023
2022
Net sales
$
215,507
$
122,349
$
431,846
$
244,950
Cost of sales
63,142
42,789
126,909
82,405
Gross profit
152,365
79,560
304,937
162,545
Selling, general and administrative
expenses
112,186
64,183
204,125
125,738
Operating income
40,179
15,377
100,812
36,807
Other expense, net
(1,062
)
(1,262
)
(663
)
(2,925
)
Impairment of equity investment
—
—
(1,720
)
—
Interest income (expense), net
623
(786
)
964
(1,449
)
Income before provision for income
taxes
39,740
13,329
99,393
32,433
Income tax provision
(6,469
)
(1,619
)
(13,145
)
(6,254
)
Net income
$
33,271
$
11,710
$
86,248
$
26,179
Comprehensive income
$
33,271
$
11,710
$
86,248
$
26,179
Net income per share:
Basic
$
0.61
$
0.22
$
1.59
$
0.50
Diluted
$
0.58
$
0.21
$
1.50
$
0.48
Weighted average shares outstanding:
Basic
54,425,384
52,298,905
54,183,091
52,004,661
Diluted
57,438,152
55,037,514
57,308,342
54,437,752
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated balance
sheets
(unaudited)
(in thousands, except share
and per share data)
September 30, 2023
March 31, 2023
September 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
167,763
$
120,778
$
85,317
Accounts receivable, net
86,683
67,928
53,912
Inventory, net
147,228
81,323
81,288
Prepaid expenses and other current
assets
33,772
33,296
26,881
Total current assets
435,446
303,325
247,398
Property and equipment, net
7,624
7,874
8,934
Intangible assets, net
73,986
78,041
82,101
Goodwill
171,620
171,620
171,620
Investments
1,155
2,875
2,875
Other assets
57,105
31,866
29,213
Total assets
$
746,936
$
595,601
$
542,141
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and
capital lease obligations
$
5,228
$
5,575
$
5,801
Accounts payable
63,736
31,427
19,279
Accrued expenses and other current
liabilities
83,407
70,974
46,868
Total current liabilities
152,371
107,976
71,948
Long-term debt and finance lease
obligations
57,735
60,881
88,284
Deferred tax liabilities
4,901
3,742
10,635
Long-term operating lease obligations
14,559
11,201
13,440
Other long-term liabilities
942
784
874
Total liabilities
230,508
184,584
185,181
Stockholders' equity:
Common stock, par value of $0.01 per
share; 250,000,000 shares authorized as of September 30, 2023,
March 31, 2023 and September 30, 2022; 54,621,561, 53,770,482 and
52,896,411 shares issued and outstanding as of September 30, 2023,
March 31, 2023 and September 30, 2022, respectively
545
535
525
Additional paid-in capital
851,634
832,481
813,785
Accumulated deficit
(335,751
)
(421,999
)
(457,350
)
Total stockholders' equity
516,428
411,017
356,960
Total liabilities and stockholders'
equity
$
746,936
$
595,601
$
542,141
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated
statements of cash flows
(unaudited)
(in thousands)
Six months ended September
30,
2023
2022
Cash flows from operating
activities:
Net income
$
86,248
$
26,179
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
12,311
11,075
Stock-based compensation expense
18,417
14,576
Amortization of debt issuance costs and
discount on debt
149
181
Deferred income taxes
1,159
1,042
Impairment of equity investment
1,720
—
Other, net
221
(24
)
Changes in operating assets and
liabilities:
Accounts receivable
(18,812
)
(8,301
)
Inventory
(65,904
)
3,210
Prepaid expenses and other assets
(27,090
)
(9,555
)
Accounts payable and accrued expenses
45,112
6,798
Other liabilities
(2,261
)
(2,135
)
Net cash provided by operating
activities
51,270
43,046
Cash flows from investing
activities:
Purchase of property and equipment
(1,465
)
(694
)
Net cash used in investing activities
(1,465
)
(694
)
Cash flows from financing
activities:
Repayment of long-term debt
(2,500
)
(2,500
)
Debt issuance costs paid
(665
)
—
Cash received from issuance of common
stock
750
2,503
Other, net
(405
)
(391
)
Net cash used in financing activities
(2,820
)
(388
)
Net increase in cash and cash
equivalents
46,985
41,964
Cash and cash equivalents - beginning of
period
120,778
43,353
Cash and cash equivalents - end of
period
$
167,763
$
85,317
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP net
income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
Three months ended September
30,
Six months ended September
30,
2023
2022
2023
2022
Net income
$
33,271
$
11,710
$
86,248
$
26,179
Interest income (expense), net
(623
)
786
(964
)
1,449
Income tax provision
6,469
1,619
13,145
6,254
Depreciation and amortization
5,586
4,320
10,173
9,013
EBITDA
$
44,703
$
18,435
$
108,602
$
42,895
Stock-based compensation
11,217
8,032
18,417
14,576
Impairment of equity investment (a)
—
—
1,720
—
Other non-cash and non-recurring items
(b)
4,498
786
5,979
1,465
Adjusted EBITDA
$
60,418
$
27,253
$
134,718
$
58,936
(a) Represents an impairment of equity investment recorded
during the six months ended September 30, 2023. (b) Represents
other non-cash or non-recurring items, which include amortization
of internal-use software costs related to cloud applications, costs
related to the acquisition of Naturium, 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 September
30,
Six months ended September
30,
2023
2022
2023
2022
Selling, general and administrative
expenses
$
112,186
$
64,183
$
204,125
$
125,738
Stock-based compensation
(11,190
)
(8,022
)
(18,413
)
(14,571
)
Other non-recurring items (a)
(3,189
)
—
(3,541
)
—
Adjusted selling, general and
administrative expenses
$
97,807
$
56,161
$
182,171
$
111,167
(a) Represents other non-recurring cloud computing ERP
implementation costs and costs related to the acquisition of
Naturium.
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 September
30,
Six months ended September
30,
2023
2022
2023
2022
Net income
$
33,271
$
11,710
$
86,248
$
26,179
Stock-based compensation
11,217
8,032
18,417
14,576
Other non-recurring items (a)
3,189
—
3,541
—
Impairment of equity investment (b)
—
—
1,720
—
Amortization of acquired intangible assets
(c)
2,027
2,031
4,055
4,062
Tax Impact (d)
(2,559
)
(1,718
)
(3,955
)
(3,635
)
Adjusted net income
$
47,145
$
20,055
$
110,026
$
41,182
Weighted average number of shares
outstanding – diluted
57,438,152
55,037,514
57,308,342
54,437,752
Adjusted diluted earnings per share
$
0.82
$
0.36
$
1.92
$
0.76
(a) Represents other non-recurring cloud computing ERP
implementation costs and costs related to the acquisition of
Naturium. (b) Represents an impairment of equity investment
recorded during the six months ended September 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101135623/en/
Investors: KC Katten VP, Corporate Development & Investor
Relations, e.l.f. Beauty kkatten@elfbeauty.com
Media: Melinda Fried Head of Corporate Communications, e.l.f.
Beauty mfried@elfbeauty.com
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