– Delivered 33% Net Sales Growth –

– Gained 115 Basis Points of Market Share –

– Raises Fiscal 2023 Outlook –

e.l.f. Beauty (NYSE: ELF) today announced results for the three and six months ended September 30, 2022.

“I am proud of the e.l.f. Beauty team for delivering our 15th consecutive quarter of net sales growth, with Q2 up 33%,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “In the second quarter, e.l.f. was the fastest growing top 5 color cosmetics brand and we expanded our market share by 115 basis points, according to Nielsen. We believe our value proposition, innovation engine, and ability to attract and engage consumers will continue to fuel our growth.”

Three Months Ended September 30, 2022 Results

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

  • Net sales increased 33% to $122.3 million, primarily driven by strength in both our retailer and e-commerce channels.
  • Gross margin increased approximately 190 basis points to 65%, primarily driven by price increases, cost savings and product mix, partially offset by inventory adjustments and higher transportation costs.
  • Selling, general and administrative expenses ("SG&A") increased $13.7 million to $64.2 million, or 52% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) increased $11.0 million to $56.2 million, or 46% of net sales. The increase was primarily due to an increase in compensation and benefits, marketing and digital spend, and operations costs.
  • The provision for income taxes was $1.6 million.
  • Net income was $11.7 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $20.1 million.
  • Diluted earnings per share were $0.21 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 $0.36.
  • Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $27.3 million, or 22% of net sales, up 47% year over year.

Six Months Ended September 30, 2022 Results

For the six months ended September 30, 2022, compared to the six months ended September 30, 2021:

  • Net sales increased 30% to $245.0 million, primarily driven by strength in both our retailer and e-commerce channels.
  • Gross margin increased approximately 290 basis points to 66%, primarily driven by price increases, cost savings, and product mix, partially offset by inventory adjustments and higher transportation costs.
  • SG&A increased $24.5 million to $125.7 million, or 51% of net sales. Adjusted SG&A increased $20.4 million to $111.2 million, or 45% of net sales. The increase was primarily due to an increase in compensation and benefits, marketing and digital spend and operations costs.
  • The provision for income taxes was $6.3 million.
  • Net income was $26.2 million on a GAAP basis. Adjusted net income was $41.2 million.
  • Diluted earnings per share were $0.48 on a GAAP basis. Adjusted diluted earnings per share were $0.76.
  • Adjusted EBITDA was $58.9 million, or 24% of net sales, up 47% year over year.

Balance Sheet

As of September 30, 2022, the Company had $85.3 million in cash and cash equivalents and $88.3 million in long-term debt and finance lease obligations, as compared to $41.7 million in cash and cash equivalents and $93.9 million of long-term debt and finance lease obligations as of September 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 22-24% year-over-year increase in net sales, as compared to an expected 14-16% year-over-year increase previously.

 

Updated Fiscal 2023 Outlook

 

Previous Fiscal 2023 Outlook

Net sales

$478-486 million

 

$448-456 million

Adjusted EBITDA

$93.5-95.0 million

 

$83.5-85.0 million

Adjusted effective tax rate

22-23%

 

25-26%

Adjusted net income

$59.0-60.5 million

 

$47.0-48.5 million

Adjusted diluted earnings per share

$1.07-1.10

 

$0.84-0.87

Fiscal year ending diluted shares outstanding

56 million

 

56 million

Webcast Details

The Company will hold a webcast to discuss the results from its second quarter fiscal 2023 today, November 2, 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 our value proposition, innovation engine, and ability to attract and engage consumers will continue to fuel our growth. 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 September 30,

 

Six months ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Net sales

 

$

122,349

 

 

$

91,855

 

 

$

244,950

 

 

$

188,902

 

Cost of sales

 

 

42,789

 

 

 

33,870

 

 

 

82,405

 

 

 

69,011

 

Gross profit

 

 

79,560

 

 

 

57,985

 

 

 

162,545

 

 

 

119,891

 

Selling, general and administrative expenses

 

 

64,183

 

 

 

50,447

 

 

 

125,738

 

 

 

101,196

 

Restructuring expense

 

 

 

 

 

96

 

 

 

 

 

 

82

 

Operating income

 

 

15,377

 

 

 

7,442

 

 

 

36,807

 

 

 

18,613

 

Other expense, net

 

 

(1,262

)

 

 

(646

)

 

 

(2,925

)

 

 

(808

)

Interest expense, net

 

 

(786

)

 

 

(597

)

 

 

(1,449

)

 

 

(1,342

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(460

)

Income before provision for income taxes

 

 

13,329

 

 

 

6,199

 

 

 

32,433

 

 

 

16,003

 

Income tax provision

 

 

(1,619

)

 

 

(475

)

 

 

(6,254

)

 

 

(2,003

)

Net income

 

$

11,710

 

 

$

5,724

 

 

$

26,179

 

 

$

14,000

 

Comprehensive income

 

$

11,710

 

 

$

5,724

 

 

$

26,179

 

 

$

14,000

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.11

 

 

$

0.50

 

 

$

0.28

 

Diluted

 

$

0.21

 

 

$

0.11

 

 

$

0.48

 

 

$

0.26

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

52,298,905

 

 

 

50,875,618

 

 

 

52,004,661

 

 

 

50,711,000

 

Diluted

 

 

55,037,514

 

 

 

53,541,724

 

 

 

54,437,752

 

 

 

53,475,988

 

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

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

September 30, 2022

 

March 31, 2022

 

September 30, 2021

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

85,317

 

 

$

43,353

 

 

$

41,694

 

Accounts receivable, net

 

 

53,912

 

 

 

45,567

 

 

 

44,374

 

Inventory, net

 

 

81,288

 

 

 

84,498

 

 

 

76,816

 

Prepaid expenses and other current assets

 

 

26,881

 

 

 

19,611

 

 

 

18,420

 

Total current assets

 

 

247,398

 

 

 

193,029

 

 

 

181,304

 

Property and equipment, net

 

 

8,934

 

 

 

10,577

 

 

 

13,945

 

Intangible assets, net

 

 

82,101

 

 

 

86,163

 

 

 

90,225

 

Goodwill

 

 

171,620

 

 

 

171,620

 

 

 

171,620

 

Investments

 

 

2,875

 

 

 

2,875

 

 

 

2,875

 

Other assets

 

 

29,213

 

 

 

30,368

 

 

 

33,043

 

Total assets

 

$

542,141

 

 

$

494,632

 

 

$

493,012

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt and capital lease obligations

 

$

5,801

 

 

$

5,786

 

 

$

19,254

 

Accounts payable

 

 

19,279

 

 

 

19,227

 

 

 

19,299

 

Accrued expenses and other current liabilities

 

 

46,868

 

 

 

40,004

 

 

 

32,665

 

Total current liabilities

 

 

71,948

 

 

 

65,017

 

 

 

71,218

 

Long-term debt and finance lease obligations

 

 

88,284

 

 

 

91,080

 

 

 

93,865

 

Deferred tax liabilities

 

 

10,635

 

 

 

9,593

 

 

 

15,114

 

Long-term operating lease obligations

 

 

13,440

 

 

 

15,744

 

 

 

17,919

 

Other long-term liabilities

 

 

874

 

 

 

769

 

 

 

803

 

Total liabilities

 

 

185,181

 

 

 

182,203

 

 

 

198,919

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of September 30, 2022, March 31, 2022 and September 30, 2021; 52,896,411, 52,243,764 and 52,035,864 shares issued and outstanding as of September 30, 2022, March 31, 2022 and September 30, 2021, respectively

 

 

525

 

 

 

515

 

 

 

511

 

Additional paid-in capital

 

 

813,785

 

 

 

795,443

 

 

 

784,881

 

Accumulated deficit

 

 

(457,350

)

 

 

(483,529

)

 

 

(491,299

)

Total stockholders' equity

 

 

356,960

 

 

 

312,429

 

 

 

294,093

 

Total liabilities and stockholders' equity

 

$

542,141

 

 

$

494,632

 

 

$

493,012

 

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

 

 

 

Six months ended September 30,

 

 

2022

 

2021

Cash flows from operating activities:

 

 

 

 

Net income

 

$

26,179

 

 

$

14,000

 

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

 

 

 

 

Depreciation and amortization

 

 

11,075

 

 

 

13,349

 

Restructuring expense

 

 

 

 

 

82

 

Stock-based compensation expense

 

 

14,576

 

 

 

9,387

 

Amortization of debt issuance costs and discount on debt

 

 

181

 

 

 

211

 

Deferred income taxes

 

 

1,042

 

 

 

1,635

 

Loss on extinguishment of debt

 

 

 

 

 

460

 

Other, net

 

 

(24

)

 

 

257

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(8,301

)

 

 

(4,374

)

Inventories

 

 

3,210

 

 

 

(19,958

)

Prepaid expenses and other assets

 

 

(9,555

)

 

 

(6,379

)

Accounts payable and accrued expenses

 

 

6,798

 

 

 

(5,878

)

Other liabilities

 

 

(2,135

)

 

 

(2,018

)

Net cash provided by operating activities

 

 

43,046

 

 

 

774

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

 

 

(694

)

 

 

(3,649

)

Net cash used in investing activities

 

 

(694

)

 

 

(3,649

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from revolving line of credit

 

 

 

 

 

26,480

 

Repayment of revolving line of credit

 

 

 

 

 

(13,000

)

Proceeds from long-term debt

 

 

 

 

 

25,581

 

Repayment of long-term debt

 

 

(2,500

)

 

 

(52,025

)

Debt issuance costs paid

 

 

 

 

 

(1,064

)

Cash received from issuance of common stock

 

 

2,503

 

 

 

1,224

 

Other, net

 

 

(391

)

 

 

(395

)

Net cash used in financing activities

 

 

(388

)

 

 

(13,199

)

 

 

 

 

 

Net increase in cash and cash equivalents

 

 

41,964

 

 

 

(16,074

)

Cash and cash equivalents - beginning of period

 

 

43,353

 

 

 

57,768

 

Cash and cash equivalents - end of period

 

$

85,317

 

 

$

41,694

 

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,

 

 

2022

 

2021

 

2022

 

2021

Net income

 

$

11,710

 

$

5,724

 

$

26,179

 

$

14,000

Interest expense, net

 

 

786

 

 

597

 

 

1,449

 

 

1,342

Income tax provision

 

 

1,619

 

 

475

 

 

6,254

 

 

2,003

Depreciation and amortization

 

 

4,320

 

 

5,908

 

 

9,013

 

 

11,029

EBITDA

 

$

18,435

 

$

12,704

 

$

42,895

 

$

28,374

Restructuring expense (a)

 

 

 

 

96

 

 

 

 

82

Stock-based compensation

 

 

8,032

 

 

5,107

 

 

14,576

 

 

9,387

Loss on extinguishment of debt (b)

 

 

 

 

 

 

 

 

460

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

 

 

786

 

 

588

 

 

1,465

 

 

1,890

Adjusted EBITDA

 

$

27,253

 

$

18,495

 

$

58,936

 

$

40,193

(a) Restructuring expense during the three and six months ended September 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 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 September 30,

 

Six months ended September 30,

 

2022

 

2021

 

2022

 

2021

Selling, general and administrative expenses

$

64,183

 

 

$

50,447

 

 

$

125,738

 

 

$

101,196

 

Stock-based compensation

 

(8,022

)

 

 

(5,033

)

 

 

(14,571

)

 

 

(9,223

)

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

 

 

 

 

(240

)

 

 

 

 

 

(1,237

)

Adjusted selling, general and administrative expenses

$

56,161

 

 

$

45,174

 

 

$

111,167

 

 

$

90,736

 

(a) Represents various 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 September 30,

 

Six months ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Net income

 

$

11,710

 

 

$

5,724

 

 

$

26,179

 

 

$

14,000

 

Restructuring expense (a)

 

 

 

 

 

96

 

 

 

 

 

 

82

 

Stock-based compensation

 

 

8,032

 

 

 

5,107

 

 

 

14,576

 

 

 

9,387

 

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

 

 

 

 

 

240

 

 

 

 

 

 

1,237

 

Loss on extinguishment of debt (c)

 

 

 

 

 

 

 

 

 

 

 

460

 

Amortization of acquired intangible assets (d)

 

 

2,031

 

 

 

2,031

 

 

 

4,062

 

 

 

4,062

 

Tax Impact (e)

 

 

(1,718

)

 

 

(1,931

)

 

 

(3,635

)

 

 

(3,676

)

Adjusted net income

 

$

20,055

 

 

$

11,267

 

 

$

41,182

 

 

$

25,552

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding – diluted

 

 

55,037,514

 

 

 

53,541,724

 

 

 

54,437,752

 

 

 

53,475,988

 

Adjusted diluted earnings per share

 

$

0.36

 

 

$

0.21

 

 

$

0.76

 

 

$

0.48

 

(a) Restructuring expense during the three and six months ended September 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 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.

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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