– Delivered 50% Net Sales Growth –

– Gained 20 Basis Points of Market Share in Nielsen U.S. Color Cosmetics –

– Raises Fiscal 2022 Guidance –

e.l.f. Beauty (NYSE: ELF) today announced results for the three months ended June 30, 2021.

“I’m proud of the e.l.f. Beauty team for delivering exceptional first quarter results, highlighted by 50% net sales growth,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “We've seen consumer demand for color cosmetics inflect positively and we continue to outperform our competitors. In the first quarter, e.l.f. Cosmetics was the only top 5 U.S. color cosmetics brand to post growth and gain share relative to pre-pandemic levels, per Nielsen. Our products are resonating and our brand momentum and category outperformance is strong.”

“We’re raising our fiscal 2022 outlook given our outstanding first quarter results and our expectations for continued momentum across our brand portfolio,” said Mandy Fields, e.l.f. Beauty’s Chief Financial Officer. “Our marketing and digital initiatives are delivering strong return on investment, and we’re leaning into these programs to fuel our growth.”

Three Months Ended June 30, 2021 Results

For the three months ended June 30, 2021, compared to the three months ended June 30, 2020:

  • Net sales increased 50% to $97.0 million, primarily driven by strength in our national and international retailers.
  • Gross margin decreased approximately 340 basis points to 63.8%, primarily driven by unfavorable foreign exchange rates, elevated transportation costs and an increase in inventory adjustments.
  • Selling, general and administrative expenses ("SG&A") increased $10.4 million to $50.7 million or 52.3% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) increased $12.4 million to $45.6 million, or 46.9% of net sales. The increase in SG&A was primarily due to investments in marketing and digital and increased operational costs.
  • The provision for income taxes was $1.5 million.
  • Net income was $8.3 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $14.3 million.
  • Diluted earnings per share were $0.15 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 $0.27.
  • Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $21.7 million or 22.4% of net sales, up 40% year over year.

Balance Sheet

As of June 30, 2021, the Company had $63.4 million in cash and cash equivalents and $95.3 million in long-term debt and finance lease obligations, as compared to $54.2 million in cash and cash equivalents and $122.7 million of long-term debt and finance lease obligations as of June 30, 2020.

Fiscal 2022 Outlook

The Company is providing the following updated outlook for fiscal 2022. When compared to fiscal 2021, the updated outlook for fiscal 2022 reflects an expected 12-14% increase in net sales, as compared to an expected 8-10% increase previously.

 

Updated Fiscal 2022 Outlook

 

Original Fiscal 2022 Outlook

Net sales

$357-364 million

 

$343-350 million

Adjusted EBITDA

$66.5-68.0 million

 

$66.0-67.5 million

Adjusted effective tax rate

24-25%

 

24-25%

Adjusted net income

$36.0-37.5 million

 

$35.0-36.8 million

Adjusted diluted earnings per share

$0.65-0.68

 

$0.64-0.67

Weighted average diluted shares outstanding

55 million

 

55 million

Webcast Details

The Company will hold a webcast to discuss the results from its first quarter fiscal 2022 today, August 4, 2021, at 4:30 p.m. Eastern Time. The webcast will be broadcasted 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 stands with every eye, lip, face and paw. This deep commitment to inclusive, accessible, cruelty-free beauty has fueled the success of our namesake e.l.f. Cosmetics brand since 2004. With the addition of pioneering clean-beauty brand W3LL PEOPLE and launch of the lifestyle beauty brand Keys Soulcare created with Alicia Keys, we continue to strategically expand our portfolio with brands that support our purpose and values. Our family of brands is available online, and across leading beauty, mass-market, and clean beauty specialty retailers.

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 costs. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, costs related to the automation of certain warehouse and distribution activities, and amortization related to certain cloud computing costs. Adjusted SG&A excludes costs related to stock-based compensation and other non-cash and non-recurring costs. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities. 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 costs, 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 costs, amortization of acquired intangible assets and the tax impact of the foregoing adjustments. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

With respect to the Company’s expectations under “Fiscal 2022 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 2022 under “Fiscal 2022 Outlook” above and those statements that consumer demand for color cosmetics is inflecting positively, that the Company’s products are resonating and brand momentum and category outperformance is strong, and that the Company expects continued momentum across its brand portfolio. 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,

 

 

2021

 

2020

Net sales

 

$

97,047

 

 

$

64,527

 

Cost of sales

 

35,141

 

 

21,186

 

Gross profit

 

61,906

 

 

43,341

 

Selling, general and administrative expenses

 

50,749

 

 

40,332

 

Restructuring income

 

(14

)

 

 

Operating income

 

11,171

 

 

3,009

 

Other expense, net

 

(162

)

 

(30

)

Interest expense, net

 

(745

)

 

(1,468

)

Loss on extinguishment of debt

 

(460

)

 

 

Income before provision for income taxes

 

9,804

 

 

1,511

 

Income tax (provision) benefit

 

(1,528

)

 

1

 

Net income

 

$

8,276

 

 

$

1,512

 

Comprehensive income

 

$

8,276

 

 

$

1,512

 

 

 

 

 

 

Net income per share:

 

 

 

 

Basic

 

$

0.16

 

 

$

0.03

 

Diluted

 

$

0.15

 

 

$

0.03

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

50,544,573

 

 

48,924,454

 

Diluted

 

53,408,443

 

 

50,939,938

 

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

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

June 30, 2021

 

March 31, 2021

 

June 30, 2020

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,402

 

 

$

57,768

 

 

$

54,224

 

Accounts receivable, net

 

43,127

 

 

40,185

 

 

29,825

 

Inventory, net

 

54,528

 

 

56,810

 

 

52,752

 

Prepaid expenses and other current assets

 

21,674

 

 

15,381

 

 

8,714

 

Total current assets

 

182,731

 

 

170,144

 

 

145,515

 

Property and equipment, net

 

15,561

 

 

13,770

 

 

16,146

 

Intangible assets, net

 

92,256

 

 

94,286

 

 

100,379

 

Goodwill

 

171,620

 

 

171,620

 

 

171,321

 

Investments

 

2,875

 

 

2,875

 

 

2,875

 

Other assets

 

33,349

 

 

34,698

 

 

25,832

 

Total assets

 

$

498,392

 

 

$

487,393

 

 

$

462,068

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

 

$

32,247

 

 

$

16,281

 

 

$

13,187

 

Accounts payable

 

17,113

 

 

15,699

 

 

21,484

 

Accrued expenses and other current liabilities

 

33,617

 

 

41,351

 

 

22,560

 

Total current liabilities

 

82,977

 

 

73,331

 

 

57,231

 

Long-term debt and finance lease obligations

 

95,254

 

 

110,255

 

 

122,701

 

Deferred tax liabilities

 

17,750

 

 

13,479

 

 

21,478

 

Long-term operating lease obligations

 

19,053

 

 

20,084

 

 

11,400

 

Other long-term liabilities

 

736

 

 

598

 

 

550

 

Total liabilities

 

215,770

 

 

217,747

 

 

213,360

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2021, March 31, 2021 and June 30, 2020; 51,826,156, 51,590,830 and 50,708,699 shares issued and outstanding as of June 30, 2021, March 31, 2021 and June 30, 2020, respectively

 

508

 

 

504

 

 

491

 

Additional paid-in capital

 

779,137

 

 

774,441

 

 

758,236

 

Accumulated deficit

 

(497,023

)

 

(505,299

)

 

(510,019

)

Total stockholders' equity

 

282,622

 

 

269,646

 

 

248,708

 

Total liabilities and stockholders' equity

 

$

498,392

 

 

$

487,393

 

 

$

462,068

 

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

 

 

 

Three months ended June 30,

 

 

2021

 

2020

Cash flows from operating activities:

 

 

 

 

Net income

 

$

8,276

 

 

$

1,512

 

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

 

 

 

 

Depreciation and amortization

 

6,222

 

 

6,429

 

Restructuring income

 

(14

)

 

 

Stock-based compensation expense

 

4,280

 

 

4,627

 

Amortization of debt issuance costs and discount on debt

 

118

 

 

214

 

Deferred income taxes

 

4,271

 

 

(414

)

Loss on extinguishment of debt

 

460

 

 

 

Other, net

 

97

 

 

72

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(2,971

)

 

(174

)

Inventories

 

2,320

 

 

(6,543

)

Prepaid expenses and other assets

 

(7,131

)

 

1,065

 

Accounts payable and accrued expenses

 

(7,419

)

 

5,891

 

Other liabilities

 

(1,017

)

 

(856

)

Net cash provided by operating activities

 

7,492

 

 

11,823

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

 

(2,336

)

 

(1,155

)

Net cash used in investing activities

 

(2,336

)

 

(1,155

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from revolving line of credit

 

26,480

 

 

20,000

 

Repayment of revolving line of credit

 

 

 

(20,000

)

Proceeds from long term debt

 

25,581

 

 

 

Repayment of long-term debt

 

(50,775

)

 

(2,475

)

Debt issuance costs paid

 

(1,064

)

 

(334

)

Cash received from issuance of common stock

 

463

 

 

398

 

Other, net

 

(207

)

 

(200

)

Net cash provided by (used in) financing activities

 

478

 

 

(2,611

)

 

 

 

 

 

Net increase in cash and cash equivalents

 

5,634

 

 

8,057

 

Cash and cash equivalents - beginning of period

 

57,768

 

 

46,167

 

Cash and cash equivalents - end of period

 

$

63,402

 

 

$

54,224

 

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,

 

 

2021

 

2020

Net income

 

$

8,276

 

 

$

1,512

 

Interest expense, net

 

745

 

 

1,468

 

Income tax provision (benefit)

 

1,528

 

 

(1

)

Depreciation and amortization

 

5,121

 

 

5,360

 

EBITDA

 

$

15,670

 

 

$

8,339

 

Restructuring income (a)

 

(14

)

 

 

Stock-based compensation

 

4,280

 

 

4,627

 

Loss on extinguishment of debt (b)

 

460

 

 

 

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

 

1,302

 

 

2,577

 

Adjusted EBITDA

 

$

21,698

 

 

$

15,543

 

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

(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 costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, costs related to the automation of certain warehouse and distribution activities, and amortization related to certain cloud computing 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,

 

 

2021

 

2020

Selling, general, and administrative expenses

 

$

50,749

 

 

$

40,332

 

Stock-based compensation

 

(4,190

)

 

(4,627

)

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

 

(997

)

 

(2,577

)

Adjusted selling, general, and administrative expenses

 

$

45,562

 

 

$

33,128

 

(a) Represents various non-cash or non-recurring costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

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,

 

 

2021

 

2020

Net income

 

$

8,276

 

 

$

1,512

 

Restructuring income (a)

 

(14

)

 

 

Stock-based compensation

 

4,280

 

 

4,627

 

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

 

997

 

 

2,577

 

Loss on extinguishment of debt (c)

 

460

 

 

 

Amortization of acquired intangible assets (d)

 

2,031

 

 

2,031

 

Tax Impact (e)

 

(1,745

)

 

(2,130

)

Adjusted net income

 

$

14,285

 

 

$

8,617

 

 

 

 

 

 

Weighted average number of shares outstanding – diluted

 

53,408,443

 

 

50,939,938

 

Adjusted diluted earnings per share

 

$

0.27

 

 

$

0.17

 

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

(b) Represents various non-cash or non-recurring costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

(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, trademarks and favorable leases.

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

 

Investors: KC Katten VP, Investor Relations, e.l.f. Beauty KKatten@elfbeauty.com

Media: Brittany Fraser ICR, Inc. elfpr@icrinc.com

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