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e.l.f. Beauty Announces Third Quarter Fiscal 2024 Results

– 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.

 

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