– Delivered 49% Net Sales Growth –
– Gained 150 Basis Points of Market Share –
– Raises Fiscal 2023 Outlook –
e.l.f. Beauty (NYSE: ELF) today announced results for the three
and nine months ended December 31, 2022.
"We delivered a terrific third quarter - growing our net sales
by 49% and expanding our market share by 150 basis points,
according to Nielsen.” said Tarang Amin, e.l.f. Beauty's Chairman
and Chief Executive Officer. “This quarter marked our 16th
consecutive quarter of net sales growth, reflecting the continued
strong execution by the e.l.f. Beauty team. As we look ahead, we're
excited about the potential we see as we continue to make the best
of beauty accessible to every eye, lip, face and skin concern."
Three Months Ended December 31, 2022 Results
For the three months ended December 31, 2022, compared to
the three months ended December 31, 2021:
- Net sales increased 49% to $146.5 million, primarily
driven by strength in both our retailer and e-commerce
channels.
- Gross margin increased approximately 180 basis points to
67%, primarily driven by price increases, cost savings and product
mix, partially offset by inventory adjustments and costs related to
space gains and Spring shelf resets.
- Selling, general and administrative expenses
("SG&A") increased $20.1 million to $75.4 million, or 51%
of net sales. Adjusted SG&A (SG&A excluding the
items identified in the reconciliation table below) increased $19.6
million to $68.2 million, or 47% of net sales. The increase was
primarily due to an increase in marketing and digital spend,
compensation and benefits, operations costs, retail fixturing and
visual merchandising costs.
- The provision for income taxes was $4.3 million.
- Net income was $19.1 million on a GAAP basis.
Adjusted net income (net income excluding the items
identified in the reconciliation table below) was $26.8
million.
- Diluted earnings per share were $0.34 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 $0.48.
- Adjusted EBITDA (EBITDA excluding the items identified
in the reconciliation table below) was $36.6 million, or 25% of net
sales, up 69% year over year.
Nine Months Ended December 31, 2022 Results
For the nine months ended December 31, 2022, compared to
the nine months ended December 31, 2021:
- Net sales increased 36% to $391.5 million, primarily
driven by strength in both our retailer and e-commerce
channels.
- Gross margin increased approximately 255 basis points to
67%, primarily driven by price increases, cost savings, and product
mix, partially offset by inventory adjustments and higher
transportation costs.
- SG&A increased $44.6 million to $201.2 million, or
51% of net sales. Adjusted SG&A increased $40.0 million
to $179.4 million, or 46% of net sales. The increase was primarily
due to an increase in marketing and digital spend, compensation and
benefits, operations costs, retail fixturing and visual
merchandising costs.
- The provision for income taxes was $10.5
million.
- Net income was $45.3 million on a GAAP basis.
Adjusted net income was $68.0 million.
- Diluted earnings per share were $0.82 on a GAAP basis.
Adjusted diluted earnings per share were $1.24.
- Adjusted EBITDA was $95.5 million, or 24% of net sales,
up 54% year over year.
Balance Sheet
As of December 31, 2022, the Company had $87.0 million in cash
and cash equivalents and $62.2 million in long-term debt and
finance lease obligations, as compared to $32.9 million in cash and
cash equivalents and $92.5 million of long-term debt and finance
lease obligations as of December 31, 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 38-39% year-over-year increase in net sales, as compared
to an expected 22-24% year-over-year increase previously.
Updated Fiscal 2023
Outlook
Previous Fiscal 2023
Outlook
Net sales
$541-545 million
$478-486 million
Adjusted EBITDA
$110.5-112 million
$93.5-95 million
Adjusted effective tax rate
19%
22-23%
Adjusted net income
$75.5-77 million
$59-60.5 million
Adjusted diluted earnings per share
$1.37-1.40
$1.07-1.10
Fiscal year ending diluted shares
outstanding
56 million
56 million
Webcast Details
The Company will hold a webcast to discuss the results from its
third quarter fiscal 2023 today, February 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 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 expense or income 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
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 expense related to
stock-based compensation and other non-cash and non-recurring
items. Such other non-cash or non-recurring items historically
include 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 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 restructuring of operations, stock-based compensation,
other non-cash and non-recurring items, loss on extinguishment of
debt, amortization of acquired intangible assets and the tax impact
of the foregoing adjustments. Such other non-cash or non-recurring
items, which historically include legal settlements, pre-launch
costs to develop the Company’s brand, Keys Soulcare, 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 regarding
our ability to continue to make the best of beauty accessible to
every eye, lip, face and skin concern. 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 December
31,
Nine months ended December
31,
2022
2021
2022
2021
Net sales
$
146,537
$
98,118
$
391,487
$
287,020
Cost of sales
47,812
33,777
130,217
102,788
Gross profit
98,725
64,341
261,270
184,232
Selling, general and administrative
expenses
75,434
55,384
201,172
156,580
Restructuring (income) expense
—
(14
)
—
68
Operating income
23,291
8,971
60,098
27,584
Other income and expenses, net
730
(146
)
(2,195
)
(954
)
Interest expense, net
(463
)
(570
)
(1,912
)
(1,912
)
Loss on extinguishment of debt
(176
)
—
(176
)
(460
)
Income before provision for income
taxes
23,382
8,255
55,815
24,258
Income tax provision
(4,277
)
(2,041
)
(10,531
)
(4,044
)
Net income
$
19,105
$
6,214
$
45,284
$
20,214
Comprehensive income
$
19,105
$
6,214
$
45,284
$
20,214
Net income per share:
Basic
$
0.36
$
0.12
$
0.87
$
0.40
Diluted
$
0.34
$
0.12
$
0.82
$
0.38
Weighted average shares outstanding:
Basic
52,707,406
51,072,639
52,239,761
50,831,985
Diluted
55,840,137
53,891,438
54,906,065
53,614,910
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated balance
sheets
(unaudited)
(in thousands, except share
and per share data)
December 31, 2022
March 31, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
87,021
$
43,353
$
32,889
Accounts receivable, net
66,237
45,567
47,180
Inventory, net
81,250
84,498
85,248
Prepaid expenses and other current
assets
28,382
19,611
19,808
Total current assets
262,890
193,029
185,125
Property and equipment, net
8,726
10,577
12,231
Intangible assets, net
80,071
86,163
88,194
Goodwill
171,620
171,620
171,620
Investments
2,875
2,875
2,875
Other assets
29,743
30,368
30,905
Total assets
$
555,925
$
494,632
$
490,950
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and
capital lease obligations
$
5,690
$
5,786
$
5,780
Accounts payable
32,049
19,227
22,756
Accrued expenses and other current
liabilities
49,798
40,004
33,977
Total current liabilities
87,537
65,017
62,513
Long-term debt and finance lease
obligations
62,177
91,080
92,474
Deferred tax liabilities
7,783
9,593
13,078
Long-term operating lease obligations
12,329
15,744
16,659
Other long-term liabilities
795
769
758
Total liabilities
170,621
182,203
185,482
Commitments and contingencies
Stockholders' equity:
Common stock, par value of $0.01 per
share; 250,000,000 shares authorized as of December 31, 2022, March
31, 2022 and December 31, 2021; 53,165,462, 52,243,764 and
52,120,683 shares issued and outstanding as of December 31, 2022,
March 31, 2022 and December 31, 2021, respectively
528
515
512
Additional paid-in capital
823,021
795,443
790,041
Accumulated deficit
(438,245
)
(483,529
)
(485,085
)
Total stockholders' equity
385,304
312,429
305,468
Total liabilities and stockholders'
equity
$
555,925
$
494,632
$
490,950
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated
statements of cash flows
(unaudited)
(in thousands)
Nine months ended December
31,
2022
2021
Cash flows from operating
activities:
Net income
$
45,284
$
20,214
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
16,496
20,317
Restructuring expense
—
68
Stock-based compensation expense
21,833
14,598
Amortization of debt issuance costs and
discount on debt
271
304
Deferred income taxes
(1,819
)
(401
)
Loss on extinguishment of debt
176
460
Other, net
(1
)
457
Changes in operating assets and
liabilities:
Accounts receivable
(20,620
)
(7,211
)
Inventory
3,248
(28,390
)
Prepaid expenses and other assets
(15,223
)
(8,585
)
Accounts payable and accrued expenses
22,610
(691
)
Other liabilities
(3,254
)
(3,314
)
Net cash provided by operating
activities
69,001
7,826
Cash flows from investing
activities:
Purchase of property and equipment
(1,647
)
(4,596
)
Net cash used in investing activities
(1,647
)
(4,596
)
Cash flows from financing
activities:
Proceeds from revolving line of credit
—
26,480
Repayment of revolving line of credit
—
(26,480
)
Proceeds from long-term debt
—
25,581
Repayment of long-term debt
(28,750
)
(53,275
)
Debt issuance costs paid
—
(1,064
)
Cash received from issuance of common
stock
5,652
1,236
Other, net
(588
)
(587
)
Net cash used in financing activities
(23,686
)
(28,109
)
Net increase (decrease) in cash and cash
equivalents
43,668
(24,879
)
Cash and cash equivalents - beginning of
period
43,353
57,768
Cash and cash equivalents - end of
period
$
87,021
$
32,889
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP net
income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
Three months ended December
31,
Nine months ended December
31,
2022
2021
2022
2021
Net income
$
19,105
$
6,214
$
45,284
$
20,214
Interest expense, net
463
570
1,912
1,912
Income tax provision
4,277
2,041
10,531
4,044
Depreciation and amortization
4,386
5,680
13,399
16,709
EBITDA
$
28,231
$
14,505
$
71,126
$
42,879
Restructuring (income) expense (a)
—
(14
)
—
68
Stock-based compensation
7,257
5,211
21,833
14,598
Loss on extinguishment of debt (b)
176
—
176
460
Other non-cash and non-recurring items
(c)
938
1,980
2,403
3,870
Adjusted EBITDA
$
36,602
$
21,682
$
95,538
$
61,875
(a) Restructuring (income) expense during the three and nine
months ended December 31, 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 other non-cash or non-recurring
items, which historically include 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 December
31,
Nine months ended December
31,
2022
2021
2022
2021
Selling, general and administrative
expenses
$
75,434
$
55,384
$
201,172
$
156,580
Stock-based compensation
(7,239
)
(5,149
)
(21,810
)
(14,372
)
Other non-cash and non-recurring items
(a)
—
(1,611
)
—
(2,848
)
Adjusted selling, general and
administrative expenses
$
68,195
$
48,624
$
179,362
$
139,360
(a) Represents various other non-cash or non-recurring items,
which historically include 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 December
31,
Nine months ended December
31,
2022
2021
2022
2021
Net income
$
19,105
$
6,214
$
45,284
$
20,214
Restructuring (income) expense (a)
—
(14
)
—
68
Stock-based compensation
7,257
5,211
21,833
14,598
Other non-cash and non-recurring items
(b)
—
1,611
—
2,848
Loss on extinguishment of debt (c)
176
—
176
460
Amortization of acquired intangible assets
(d)
2,031
2,031
6,093
6,093
Tax Impact (e)
(1,767
)
(2,316
)
(5,402
)
(5,992
)
Adjusted net income
$
26,802
$
12,737
$
67,984
$
38,289
Weighted average number of shares
outstanding – diluted
55,840,137
53,891,438
54,906,065
53,614,910
Adjusted diluted earnings per share
$
0.48
$
0.24
$
1.24
$
0.71
(a) Restructuring (income) expense during the three and nine
months ended December 31, 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 other non-cash or non-recurring items, which historically
include 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/20230201005792/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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