Enhanced Investments - Financial Portal

Published: 2023-05-24 16:06:57 ET

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EX-99.1 2 q42023er-991.htm EX-99.1 Document

Exhibit 99.1

e.l.f. Beauty Announces Fourth Quarter and Full Fiscal 2023 Results

– Delivered 48% Net Sales Growth in Fiscal 2023 –

– Gained Market Share for Fourth Consecutive Year –

– Provides Fiscal 2024 Outlook –

OAKLAND, California; May 24, 2023 — e.l.f. Beauty (NYSE: ELF) today announced results for the three and twelve months ended March 31, 2023.

“Our outstanding results in fiscal 2023 underscore the power of the e.l.f. brand and the world class team at e.l.f. Beauty,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. "We grew net sales by 78% in Q4, marking our seventeenth consecutive quarter of net sales growth. We gained 270 basis points of market share in the quarter and increased our ranking to the number three U.S. Mass Cosmetics brand for the first time, according to Nielsen. As we look ahead, we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty."

Fourth Quarter Fiscal 2023 Review

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022:

•Net sales increased 78% to $187.4 million, primarily driven by strength across our retailer and e-commerce channels.

•Gross margin increased approximately 470 basis points to 69%, primarily driven by pricing, lower transportation costs, product mix and cost savings.

•Selling, general and administrative expenses ("SG&A") increased $55.7 million to $121.1 million, or 65% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) was $113.9 million, or 61% of net sales. The year over year increase in SG&A dollars was primarily due to an increase in marketing and digital spend, operations costs, and compensation and benefits.

•Net income was $16.2 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $23.8 million.

•Diluted earnings per share were $0.29 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 $0.42.

•Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $21.2 million, or 11% of net sales, up 66% year over year.

Full Year Fiscal 2023 Review

For the twelve months ended March 31, 2023, compared to the twelve months ended March 31, 2022:

•Net sales increased 48% to $578.8 million, primarily driven by strength across our retailer and e-commerce channels.

•Gross margin increased approximately 330 basis points to 67%, primarily driven by pricing, cost savings and product mix, partially offset by inventory adjustments.

•SG&A increased $100.3 million to $322.3 million, or 56% of net sales. Adjusted SG&A was $293.2 million, or 51% of net sales. The year over year 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.

•Net income was $61.5 million on a GAAP basis. Adjusted net income was $91.8 million.

•Diluted earnings per share were $1.11 on a GAAP basis. Adjusted diluted earnings per share were $1.66.

•Adjusted EBITDA was $116.8 million, or 20% of net sales, up 56% year over year.

Balance Sheet

The Company ended fiscal 2023 with $120.8 million in cash and cash equivalents and $60.9 million of long-term debt and finance lease obligations, as compared to $43.4 million in cash and cash equivalents and $91.1 million of long-term debt and finance lease obligations at the end of fiscal 2022.

Fiscal 2024 Outlook

The Company is providing the following outlook for fiscal 2024. When compared to fiscal 2023, the outlook for fiscal 2024 reflects an expected 22-24% increase in net sales.

Fiscal 2024 Outlook

Fiscal 2023

Net sales

$705-720 million

$579 million

Adjusted EBITDA

$144.5-147.5 million

$116.8 million

Adjusted effective tax rate

21-22%

10%

Adjusted net income

$98.5-100.5 million

$91.8 million

Adjusted diluted earnings per share

$1.73-1.76

$1.66

Weighted average diluted shares outstanding

57 million

55 million

Webcast Details

The Company will hold a webcast to discuss the results from its fourth quarter fiscal 2023 today, May 24, 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 specialty retailers in the U.S., and has a growing international presence.

Learn more by visiting https://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 “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 “Fiscal 2024 Outlook” above and those statements that we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty. 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.


Investors:						Media:
KC Katten						Melinda Fried
VP, Corporate Development & Investor Relations, e.l.f. Beauty KKatten@elfbeauty.com						Head of Corporate Communications, e.l.f. Beauty mfried@elfbeauty.com

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

Condensed consolidated statements of operations and comprehensive income (loss)

(unaudited)

(in thousands, except share and per share data)


	Three months ended March 31,				Twelve months ended March 31,
	2023		2022		2023		2022

Net sales	$	187,357	$	105,135	$	578,844	$	392,155
Cost of sales	58,231		37,635		188,448		140,423
Gross profit	129,126		67,500		390,396		251,732
Selling, general and administrative expenses	121,081		65,332		322,253		221,912
Restructuring (income) expense	—		(18)		—		50
Operating income	8,045		2,186		68,143		29,770
Other expense (income), net	320		(484)		(1,875)		(1,438)
Interest expense, net	(106)		(529)		(2,018)		(2,441)
Loss on extinguishment of debt	—		—		(176)		(460)
Income before provision for income taxes	8,259		1,173		64,074		25,431
Income tax benefit (provision)	7,987		383		(2,544)		(3,661)
Net income	$	16,246	$	1,556	$	61,530	$	21,770
Comprehensive income	$	16,246	$	1,556	$	61,530	$	21,770
Net income per share:
Basic	$	0.31	$	0.03	$	1.17	$	0.43
Diluted	$	0.29	$	0.03	$	1.11	$	0.41
Weighted average shares outstanding:
Basic	53,189,447		51,273,325		52,474,811		50,940,808
Diluted	56,641,510		53,778,530		55,337,554		53,654,303

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

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)


	March 31, 2023		March 31, 2022

Assets
Current assets:
Cash and cash equivalents	$	120,778	$	43,353
Accounts receivable, net	67,928		45,567
Inventory, net	81,323		84,498
Prepaid expenses and other current assets	33,296		19,611
Total current assets	303,325		193,029
Property and equipment, net	7,874		10,577
Intangible assets, net	78,041		86,163
Goodwill	171,620		171,620
Investments	2,875		2,875
Other assets	31,866		30,368
Total assets	$	595,601	$	494,632

Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and capital lease obligations	$	5,575	$	5,786
Accounts payable	31,427		19,227
Accrued expenses and other current liabilities	70,974		40,004

Total current liabilities	107,976		65,017
Long-term debt and finance lease obligations	60,881		91,080
Deferred tax liabilities	3,742		9,593
Long-term operating lease obligations	11,201		15,744
Other long-term liabilities	784		769
Total liabilities	184,584		182,203

Commitments and contingencies

Stockholders' equity:

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of March 31, 2023 and March 31, 2022; 53,770,482 and 52,243,764 shares issued and outstanding as of March 31, 2023 and March 31, 2022, respectively	535		515
Additional paid-in capital	832,481		795,443
Accumulated deficit	(421,999)		(483,529)
Total stockholders' equity	411,017		312,429
Total liabilities and stockholders' equity	$	595,601	$	494,632

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)


	Twelve months ended March 31,
	2023		2022

Cash flows from operating activities:
Net income	$	61,530	$	21,770
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	22,164		27,083
Restructuring expense	—		50
Stock-based compensation expense	29,117		19,646
Amortization of debt issuance costs and discount on debt	346		394
Deferred income taxes	(6,401)		(3,701)


Loss on extinguishment of debt	176		460
Other, net	179		496
Changes in operating assets and liabilities:
Accounts receivable	(22,432)		(5,597)
Inventory	3,174		(27,655)
Prepaid expenses and other assets	(24,553)		(10,555)
Accounts payable and accrued expenses	42,995		1,498
Other liabilities	(4,412)		(4,376)
Net cash provided by operating activities	101,883		19,513

Cash flows from investing activities:

Purchase of property and equipment	(1,723)		(4,818)


Net cash used in investing activities	(1,723)		(4,818)

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	(30,000)		(54,525)
Debt issuance costs paid	—		(1,064)

Cash received from issuance of common stock	8,053		1,677




Other, net	(788)		(779)
Net cash used in financing activities	(22,735)		(29,110)

Net increase (decrease) in cash and cash equivalents	77,425		(14,415)
Cash and cash equivalents - beginning of period	43,353		57,768
Cash and cash equivalents - end of period	$	120,778	$	43,353

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

Reconciliation of GAAP net income to non-GAAP adjusted EBITDA

(unaudited)

(in thousands)


	Three months ended March 31,				Twelve months ended March 31,
	2023		2022		2023		2022

Net income	$	16,246	$	1,556	$	61,530	$	21,770
Interest expense, net	106		529		2,018		2,441
Income tax (benefit) provision	(7,987)		(383)		2,544		3,661
Depreciation and amortization	4,617		5,694		18,016		22,403
EBITDA	$	12,982	$	7,396	$	84,108	$	50,275
Restructuring (income) expense (a)	—		(18)		—		50

Stock-based compensation	7,284		5,048		29,117		19,646
Loss on extinguishment of debt (b)	—		—		176		460
Other non-cash and non-recurring items (c)	977		386		3,380		4,256

Adjusted EBITDA	$	21,243	$	12,812	$	116,781	$	74,687

(a) Restructuring (income) expense during the three and twelve months ended March 31, 2022 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 March 31,				Twelve months ended March 31,
	2023		2022		2023		2022
Selling, general, and administrative expenses	$	121,081	$	65,332	$	322,253	$	221,912


Stock-based compensation	(7,195)		(4,964)		(29,005)		(19,336)


Other non-cash and non-recurring items (a)	—		83		—		(2,765)
Adjusted selling, general, and administrative expenses	$	113,886	$	60,451	$	293,248	$	199,811

(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 March 31,				Twelve months ended March 31,
	2023		2022		2023		2022
Net income	$	16,246	$	1,556	$	61,530	$	21,770
Restructuring (income) expense (a)	—		(18)		—		50

Stock-based compensation	7,284		5,048		29,117		19,646



Other non-cash and non-recurring items (b)	—		(83)		—		2,765
Loss on extinguishment of debt (c)	—		—		176		460


Amortization of acquired intangible assets (d)	2,029		2,030		8,122		8,123
Tax Impact (e)	(1,730)		(1,604)		(7,132)		(7,596)
Adjusted net income	$	23,829	$	6,929	$	91,813	$	45,218

Weighted average number of shares outstanding - diluted	56,641,510		53,778,530		55,337,554		53,654,303
Adjusted diluted earnings per share	$	0.42	$	0.13	$	1.66	$	0.84

(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.

Enhanced Investments, Inc.
329 South Oyster Bay Road #2085
Plainview, NY 11803
team@eninvs.com

Important disclosures

Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.

Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.
Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance.
All the strategies assume investments in equity invstrumenta only and are more relevant for "agressive investment profile". Eastern European flagship strategy assumes using up to 20% leverage of total portfolio. GlobalCommodities and US Growth strategy currently assume no leverage.
Results for the Enhanced Investments strategies as compared to the performance of Illustrative Benchmarks is for informational purposes only. Our investment program does not mirror that of the Illustrative Benchmarks and the volatility may be materially different from the volatility of Illustrative Benchmarks. Reference or comparison to an Illustrative Benchmark does not imply that strategies of Enhanced Investments will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark. The S&P 500 is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.
Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.