– Delivered 85% Net Sales Growth –
– e.l.f. Cosmetics Gained 305 Basis Points of
Market Share –
– Raises Fiscal 2024 Outlook –
e.l.f. Beauty (NYSE: ELF) today announced results for the three
and nine months ended December 31, 2023.
“Our vision is to create a different kind of beauty company and
you can see that in the exceptional, consistent, category-leading
growth we’ve delivered,” said Tarang Amin, e.l.f. Beauty’s Chairman
and Chief Executive Officer. “In Q3, we grew net sales by 85% and
market share by 305 basis points, marking our 20th consecutive
quarter of growth in each. I’m extremely proud of our team and the
progress we continue to make across color cosmetics, skin care and
internationally.”
Three Months Ended December 31, 2023 Results
For the three months ended December 31, 2023, compared to
the three months ended December 31, 2022:
- Net sales increased 85% to $270.9 million, primarily
driven by strength in both retailer and e-commerce channels.
- Gross margin increased approximately 350 basis points to
71%, primarily driven by favorable foreign exchange impacts,
improved transportation costs, cost savings and mix.
- Selling, general and administrative (“SG&A”)
expenses increased $84.7 million to $160.1 million, or 59% of
net sales. Adjusted SG&A (SG&A excluding the items
identified in the reconciliation table below) increased $79.1
million to $147.3 million, or 54% 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, depreciation and
amortization and professional fees.
- Net income was $26.9 million on a GAAP basis.
Adjusted net income (net income excluding the items
identified in the reconciliation table below) was $42.9
million.
- Diluted earnings per share were $0.46 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 $0.74.
- Adjusted EBITDA (EBITDA excluding the items identified
in the reconciliation table below) was $59.1 million, or 22% of net
sales, up 61% year over year.
Nine Months Ended December 31, 2023 Results
For the nine months ended December 31, 2023, compared to the
nine months ended December 31, 2022:
- Net sales increased 80% to $702.8 million, primarily
driven by strength in both retailer and e-commerce channels.
- Gross margin increased approximately 400 basis points to
71%, primarily driven by favorable foreign exchange impacts, cost
savings and mix, improved transportation costs, and lower inventory
adjustments, partially offset by costs associated with retailer
activity and space expansion.
- SG&A increased $163.1 million to $364.2 million, or
52% of net sales. Adjusted SG&A increased $150.2 million
to $329.5 million, or 47% 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, depreciation and
amortization and professional fees.
- Net income was $113.1 million on a GAAP basis.
Adjusted net income was $152.9 million.
- Diluted earnings per share were $1.97 on a GAAP basis.
Adjusted diluted earnings per share were $2.66.
- Adjusted EBITDA was $193.8 million, or 28% of net sales,
up 103% year over year.
Balance Sheet
As of December 31, 2023, the Company had $72.7 million in cash
and cash equivalents and $164.4 million of long-term debt and
finance lease obligations, as compared to $87.0 million in cash and
cash equivalents and $62.2 million of long-term debt and finance
lease obligations as of December 31, 2022.
Naturium Acquisition
On October 4, 2023, the Company closed the acquisition of
Naturium, a fast-growing, high performance skin care brand, for
$333.0 million in a combination of cash and Company stock. The
acquisition furthers the Company’s 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 69-71% year-over-year increase in net sales, as compared
to an expected 55-57% increase previously.
Updated Fiscal 2024
Outlook
Previous Fiscal 2024
Outlook
Net sales
$980-990 million
$896-906 million
Adjusted EBITDA
$218-220 million
$197-200 million
Adjusted effective tax rate
14%
17-18%
Adjusted net income
$164-166 million
$144-146 million
Adjusted diluted earnings per share
$2.84-2.87
$2.47-2.50
Fiscal year ending diluted shares
outstanding
58 million
58 million
Webcast Details
The Company will hold a webcast to discuss the results from its
third quarter fiscal 2024 today, February 6, 2024, 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, loss on
extinguishment of debt 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, impairment of
equity investment, loss on extinguishment of debt, 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, loss on extinguishment of debt, 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. 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
(unaudited)
(in thousands, except share
and per share data)
Three months ended December
31,
Nine months ended December
31,
2023
2022
2023
2022
Net sales
$
270,943
$
146,537
$
702,789
$
391,487
Cost of sales
78,986
47,812
205,895
130,217
Gross profit
191,957
98,725
496,894
261,270
Selling, general and administrative
expenses
160,121
75,434
364,246
201,172
Operating income
31,836
23,291
132,648
60,098
Other income (expense), net
2,565
730
1,902
(2,195
)
Impairment of equity investment
—
—
(1,720
)
—
Interest expense, net
(3,985
)
(463
)
(3,021
)
(1,912
)
Loss on extinguishment of debt
—
(176
)
—
(176
)
Income before provision for income
taxes
30,416
23,382
129,809
55,815
Income tax provision
(3,528
)
(4,277
)
(16,673
)
(10,531
)
Net income
$
26,888
$
19,105
$
113,136
$
45,284
Net income per share:
Basic
$
0.49
$
0.36
$
2.08
$
0.87
Diluted
$
0.46
$
0.34
$
1.97
$
0.82
Weighted average shares outstanding:
Basic
55,140,887
52,707,406
54,503,518
52,239,761
Diluted
58,030,115
55,840,137
57,550,094
54,906,065
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated balance
sheets
(unaudited)
(in thousands, except share
and per share data)
December 31, 2023
March 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
72,705
$
120,778
$
87,021
Accounts receivable, net
121,061
67,928
66,237
Inventory, net
204,504
81,323
81,250
Prepaid expenses and other current
assets
56,630
33,296
28,382
Total current assets
454,900
303,325
262,890
Property and equipment, net
12,805
7,874
8,726
Intangible assets, net
230,658
78,041
80,071
Goodwill
340,165
171,620
171,620
Investments
1,155
2,875
2,875
Other assets
68,601
31,866
29,743
Total assets
$
1,108,284
$
595,601
$
555,925
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and
capital lease obligations
$
100,394
$
5,575
$
5,690
Accounts payable
72,917
31,427
32,049
Accrued expenses and other current
liabilities
129,628
70,974
49,798
Total current liabilities
302,939
107,976
87,537
Long-term debt and finance lease
obligations
164,403
60,881
62,177
Deferred tax liabilities
4,281
3,742
7,783
Long-term operating lease obligations
21,720
11,201
12,329
Other long-term liabilities
717
784
795
Total liabilities
494,060
184,584
170,621
Stockholders' equity:
Common stock, par value of $0.01 per
share; 250,000,000 shares authorized as of December 31, 2023, March
31, 2023 and December 31, 2022; 55,412,234, 53,770,482 and
53,165,462 shares issued and outstanding as of December 31, 2023,
March 31, 2023 and December 31, 2022, respectively
553
535
528
Additional paid-in capital
922,592
832,481
823,021
Accumulated other comprehensive loss
(58
)
—
—
Accumulated deficit
(308,863
)
(421,999
)
(438,245
)
Total stockholders' equity
614,224
411,017
385,304
Total liabilities and stockholders'
equity
$
1,108,284
$
595,601
$
555,925
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated
statements of cash flows
(unaudited)
(in thousands)
Nine months ended December
31,
2023
2022
Cash flows from operating
activities:
Net income
$
113,136
$
45,284
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
24,247
16,496
Stock-based compensation expense
29,459
21,833
Amortization of debt issuance costs and
discount on debt
290
271
Deferred income taxes
(1,684
)
(1,819
)
Impairment of equity investment
1,720
—
Acquisition-related seller expenses
(10,549
)
—
Loss on extinguishment of debt
—
176
Other, net
27
(1
)
Changes in operating assets and
liabilities:
Accounts receivable
(45,878
)
(20,620
)
Inventory
(106,898
)
3,248
Prepaid expenses and other assets
(50,696
)
(15,223
)
Accounts payable and accrued expenses
84,733
22,610
Other liabilities
(3,768
)
(3,254
)
Net cash provided by operating
activities
34,139
69,001
Cash flows from investing
activities:
Acquisition, net of cash acquired
(274,973
)
—
Purchase of property and equipment
(5,984
)
(1,647
)
Net cash used in investing activities
(280,957
)
(1,647
)
Cash flows from financing
activities:
Proceeds from revolving line of credit
89,500
—
Proceeds from long-term debt
115,000
—
Repayment of long-term debt
(5,188
)
(28,750
)
Debt issuance costs paid
(665
)
—
Cash received from issuance of common
stock
2,893
5,652
Other, net
(489
)
(588
)
Net cash provided by (used in) financing
activities
201,051
(23,686
)
Effect of exchange rate changes on cash
and cash equivalents
(56
)
—
Net (decrease) increase in cash, cash
equivalents and restricted cash
(45,823
)
43,668
Cash, cash equivalents and restricted cash
- beginning of period
120,778
43,353
Cash, cash equivalents and restricted cash
- end of period
$
74,955
$
87,021
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,
2023
2022
2023
2022
Net income
$
26,888
$
19,105
$
113,136
$
45,284
Interest expense, net
3,985
463
3,021
1,912
Income tax provision
3,528
4,277
16,673
10,531
Depreciation and amortization
10,272
4,386
20,445
13,399
EBITDA
$
44,673
$
28,231
$
153,275
$
71,126
Stock-based compensation
11,042
7,257
29,459
21,833
Impairment of equity investment (a)
—
—
1,720
—
Loss on extinguishment of debt (b)
—
176
—
176
Other non-cash and non-recurring items
(c)
3,378
938
9,357
2,403
Adjusted EBITDA
$
59,093
$
36,602
$
193,811
$
95,538
(a)
Represents an impairment of equity investment recorded during the
nine months ended December 31, 2023.
(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 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 December
31,
Nine months ended December
31,
2023
2022
2023
2022
Selling, general and administrative
expenses
$
160,121
$
75,434
$
364,246
$
201,172
Stock-based compensation
(11,051
)
(7,239
)
(29,464
)
(21,810
)
Other non-recurring items (a)
(1,726
)
—
(5,267
)
—
Adjusted selling, general and
administrative expenses
$
147,344
$
68,195
$
329,515
$
179,362
(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 December
31,
Nine months ended December
31,
2023
2022
2023
2022
Net income
$
26,888
$
19,105
$
113,136
$
45,284
Stock-based compensation
11,042
7,257
29,459
21,833
Other non-recurring items (a)
2,056
—
5,597
—
Impairment of equity investment (b)
—
—
1,720
—
Loss on extinguishment of debt (c)
—
176
—
176
Amortization of acquired intangible assets
(d)
6,128
2,031
10,183
6,093
Tax Impact (e)
(3,219
)
(1,767
)
(7,174
)
(5,402
)
Adjusted net income
$
42,895
$
26,802
$
152,921
$
67,984
Weighted average number of shares
outstanding – diluted
58,030,115
55,840,137
57,550,094
54,906,065
Adjusted diluted earnings per share
$
0.74
$
0.48
$
2.66
$
1.24
(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 nine months ended December 31, 2023. (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/20240206988092/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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