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e.l.f. Beauty Announces First Quarter Fiscal 2023 Results

·14-min read

– Delivered 26% Net Sales Growth –

– Gained 120 Basis Points of Market Share –

– Raises Fiscal 2023 Outlook –

OAKLAND, Calif., August 03, 2022--(BUSINESS WIRE)--e.l.f. Beauty (NYSE: ELF) today announced results for the three months ended June 30, 2022.

"I am proud of the e.l.f. Beauty team for achieving our fourteenth consecutive quarter of net sales growth," said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. "We continue to significantly outperform our competition. In the first quarter, we were the fastest growing top 5 color cosmetics brand and expanded our market share by 120 basis points, according to Nielsen. We are continuing to lean into our strengths—our core value proposition, innovation engine, and ability to attract and engage consumers—and are pleased to raise our Fiscal 2023 outlook."

Three Months Ended June 30, 2022 Results

For the three months ended June 30, 2022, compared to the three months ended June 30, 2021:

  • Net sales increased 26% to $122.6 million, primarily driven by strength in our national and international retailers.

  • Gross margin increased approximately 390 basis points to 68%, primarily driven by price increases, cost savings, and product mix, which helped to mitigate the impact of higher transportation costs in the quarter.

  • Selling, general and administrative expenses ("SG&A") increased $10.8 million to $61.6 million or 50% of net sales. Adjusted SG&A increased $9.4 million to $55.0 million, or 45% of net sales. The increase was primarily due to an increase in compensation and benefits and marketing and digital spend.

  • The provision for income taxes was $4.6 million.

  • Net income was $14.5 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $21.1 million.

  • Diluted earnings per share were $0.27 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 $0.39.

  • Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $31.7 million, or 26% of net sales, up 46% year over year.

Balance Sheet

As of June 30, 2022, the Company had $72.2 million in cash and cash equivalents and $89.7 million in long-term debt and finance lease obligations, as compared to $63.4 million in cash and cash equivalents and $95.3 million of long-term debt and finance lease obligations as of June 30, 2021.

Updated Fiscal 2023 Outlook

The Company is providing the following updated outlook for fiscal 2023. The updated outlook for fiscal 2023 reflects an expected 14-16% year-over-year increase in net sales, as compared to an expected 10-12% year-over-year increase previously.

Updated Fiscal 2023 Outlook

Previous Fiscal 2023 Outlook

Net sales

$448-456 million

$432-440 million

Adjusted EBITDA

$83.5-85.0 million

$80.5-82.0 million

Adjusted effective tax rate

25-26%

27-28%

Adjusted net income

$47.0-48.5 million

$43.5-45.5 million

Adjusted diluted earnings per share

$0.84-0.87

$0.78-0.81

Weighted average diluted shares outstanding

56 million

56 million

Webcast Details

The Company will hold a webcast to discuss the results from its first quarter fiscal 2023 today, August 3, 2022, 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 clean beauty specialty retailers in the U.S., and has a growing international presence.

Learn more by visiting 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 costs or gains related to restructuring of operations, stock-based compensation, loss on extinguishment of debt and other non-cash and non-recurring items. Such other non-cash or non-recurring items historically include other legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare, third-party costs related to M&A due diligence, and amortization of internal-use software costs related to cloud applications. Adjusted SG&A excludes costs related to stock-based compensation and other non-cash and non-recurring items. Such other non-cash or non-recurring items historically include other legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare and third-party costs related to M&A due diligence. Adjusted effective tax rate is the tax rate when excluding the pre-tax impact of costs or gains 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 costs or gains related to restructuring of operations, stock-based compensation, loss on extinguishment of debt, other non-cash and non-recurring items, amortization of acquired intangible assets and the tax impact of the foregoing adjustments. Such other non-cash or non-recurring items, which historically include other legal settlements, pre-launch costs to develop the Company’s brand and third-party costs related to M&A due diligence.

With respect to the Company’s expectations under "Updated Fiscal 2023 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 2023 under "Updated Fiscal 2023 Outlook" above and those statements that the Company is continuing to lean into its strengths—its core value proposition, innovation engine, and ability to attract and engage consumers. 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; the Company’s ability to effectively manage its SG&A and other expenses; and the uncertainty regarding the impact of the COVID-19 pandemic. 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,

2022

2021

Net sales

$

122,601

$

97,047

Cost of sales

39,616

35,141

Gross profit

82,985

61,906

Selling, general and administrative expenses

61,555

50,749

Restructuring income

(14

)

Operating income

21,430

11,171

Other expense, net

(1,663

)

(162

)

Interest expense, net

(663

)

(745

)

Loss on extinguishment of debt

(460

)

Income before provision for income taxes

19,104

9,804

Income tax provision

(4,635

)

(1,528

)

Net income

$

14,469

$

8,276

Comprehensive income

$

14,469

$

8,276

Net income per share:

Basic

$

0.28

$

0.16

Diluted

$

0.27

$

0.15

Weighted average shares outstanding:

Basic

51,707,160

50,544,573

Diluted

53,834,732

53,408,443

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

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

June 30, 2022

March 31, 2022

June 30, 2021

Assets

Current assets:

Cash and cash equivalents

$

72,248

$

43,353

$

63,402

Accounts receivable, net

52,281

45,567

43,127

Inventory, net

70,339

84,498

54,528

Prepaid expenses and other current assets

21,772

19,611

21,674

Total current assets

216,640

193,029

182,731

Property and equipment, net

9,339

10,577

15,561

Intangible assets, net

84,132

86,163

92,256

Goodwill

171,620

171,620

171,620

Investments

2,875

2,875

2,875

Other assets

29,251

30,368

33,349

Total assets

$

513,857

$

494,632

$

498,392

Liabilities and stockholders' equity

Current liabilities:

Current portion of long-term debt and capital lease obligations

$

5,793

$

5,786

$

32,247

Accounts payable

16,023

19,227

17,113

Accrued expenses and other current liabilities

39,916

40,004

33,617

Total current liabilities

61,732

65,017

82,977

Long-term debt and finance lease obligations

89,684

91,080

95,254

Deferred tax liabilities

13,538

9,593

17,750

Long-term operating lease obligations

14,637

15,744

19,053

Other long-term liabilities

817

769

736

Total liabilities

180,408

182,203

215,770

Commitments and contingencies

Stockholders' equity:

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2022, March 31, 2022 and June 30, 2021; 52,424,445, 52,243,764 and 51,826,156 shares issued and outstanding as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively

517

515

508

Additional paid-in capital

801,992

795,443

779,137

Accumulated deficit

(469,060

)

(483,529

)

(497,023

)

Total stockholders' equity

333,449

312,429

282,622

Total liabilities and stockholders' equity

$

513,857

$

494,632

$

498,392

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

Three months ended June 30,

2022

2021

Cash flows from operating activities:

Net income

$

14,469

$

8,276

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

Depreciation and amortization

5,724

6,222

Restructuring income

(14

)

Stock-based compensation expense

6,542

4,280

Amortization of debt issuance costs and discount on debt

91

118

Deferred income taxes

3,945

4,271

Loss on extinguishment of debt

460

Other, net

21

97

Changes in operating assets and liabilities:

Accounts receivable

(6,727

)

(2,971

)

Inventories

14,158

2,320

Prepaid expenses and other assets

(3,258

)

(7,131

)

Accounts payable and accrued expenses

(3,442

)

(7,419

)

Other liabilities

(945

)

(1,017

)

Net cash provided by operating activities

30,578

7,492

Cash flows from investing activities:

Purchase of property and equipment

(241

)

(2,336

)

Net cash used in investing activities

(241

)

(2,336

)

Cash flows from financing activities:

Proceeds from revolving line of credit

26,480

Proceeds from long-term debt

25,581

Repayment of long-term debt

(1,250

)

(50,775

)

Debt issuance costs paid

(1,064

)

Cash received from issuance of common stock

2

463

Other, net

(194

)

(207

)

Net cash (used in) provided by financing activities

(1,442

)

478

Net increase in cash and cash equivalents

28,895

5,634

Cash and cash equivalents - beginning of period

43,353

57,768

Cash and cash equivalents - end of period

$

72,248

$

63,402

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,

2022

2021

Net income

$

14,469

$

8,276

Interest expense, net

663

745

Income tax provision

4,635

1,528

Depreciation and amortization

4,693

5,121

EBITDA

$

24,460

$

15,670

Restructuring income (a)

(14

)

Stock-based compensation

6,542

4,280

Loss on extinguishment of debt (b)

460

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

679

1,302

Adjusted EBITDA

$

31,681

$

21,698

(a) Restructuring income during the three months ended June 30, 2021, relates to the closure of the Company’s manufacturing plant, including impairment of assets, the disposal of excess inventory on hand at the plant, the termination of manufacturing employees and sub lease income.

(b) Loss on extinguishment of debt includes the write-off of existing debt issuance costs and certain fees paid related to the amended credit agreement.

(c) Represents various non-cash or non-recurring items, which historically include other legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare, third-party costs related to M&A due diligence, and amortization of internal-use software costs related to cloud applications.

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,

2022

2021

Selling, general and administrative expenses

$

61,555

$

50,749

Stock-based compensation

(6,549

)

(4,190

)

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

(997

)

Adjusted selling, general and administrative expenses

$

55,006

$

45,562

(a) Represents various non-cash or non-recurring items, which historically include other legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare, and third-party costs related to M&A due diligence.

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,

2022

2021

Net income

$

14,469

$

8,276

Restructuring income (a)

(14

)

Stock-based compensation

6,542

4,280

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

997

Loss on extinguishment of debt (c)

460

Amortization of acquired intangible assets (d)

2,031

2,031

Tax Impact (e)

(1,917

)

(1,745

)

Adjusted net income

$

21,125

$

14,285

Weighted average number of shares outstanding – diluted

53,834,732

53,408,443

Adjusted diluted earnings per share

$

0.39

$

0.27

(a) Restructuring income during the three months ended June 30, 2021, relates to the closure of the Company’s manufacturing plant, including impairment of assets, the disposal of excess inventory on hand at the plant, the termination of manufacturing employees and sub lease income.

(b) Represents various non-cash or non-recurring items, which historically include other legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare, and third-party costs related to M&A due diligence.

(c) Loss on extinguishment of debt includes the write-off of existing debt issuance costs and certain fees paid related to the amended credit agreement.

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

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005683/en/

Contacts

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