Try our mobile app

Published: 2023-11-01 16:07:38 ET
<<<  go to ELF company page
EX-99.1 2 q22024er-991.htm EX-99.1 Document

Exhibit 99.1

elfbeauty_2a.jpg
e.l.f. Beauty Announces Second Quarter Fiscal 2024 Results
– Delivered 76% Net Sales Growth –

– Gained 330 Basis Points of Color Cosmetics Category Share –

– Raises Fiscal 2024 Outlook –
OAKLAND, California; November 1, 2023 — e.l.f. Beauty (NYSE: ELF) today announced results for the three and six months ended September 30, 2023.
“We continue to deliver exceptional, consistent, category-leading sales growth,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “In Q2, we grew net sales by 76% and category share by 330 basis points, marking our 19th consecutive quarter of growth in each. As we look ahead, the significant whitespace we see across color cosmetics, skin care and international gives us confidence that we are in the early innings of unlocking the full potential we see for e.l.f. Beauty.”
Three Months Ended September 30, 2023 Results
For the three months ended September 30, 2023, compared to the three months ended September 30, 2022:
•Net sales increased 76% to $215.5 million, primarily driven by strength in both retailer and e-commerce channels.
•Gross margin increased approximately 570 basis points to 71%, primarily driven by lower inventory adjustments, cost savings and mix, improved transportation costs and favorable foreign exchange impacts, partially offset by costs associated with retailer activity and space expansion.
•Selling, general and administrative (“SG&A”) expenses increased $48.0 million to $112.2 million, or 52% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) increased $41.6 million to $97.8 million, or 45% of net sales. The increase in SG&A dollars was primarily due to an increase in marketing and digital spend, compensation and benefits, professional fees, retail fixturing and visual merchandising costs and operations costs.
•Net income was $33.3 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $47.1 million.
•Diluted earnings per share were $0.58 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 $0.82.
•Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $60.4 million, or 28% of net sales, up 122% year over year.
Six Months Ended September 30, 2023 Results
For the six months ended September 30, 2023, compared to the six months ended September 30, 2022:
•Net sales increased 76% to $431.8 million, primarily driven by strength in both retailer and e-commerce channels.


•Gross margin increased approximately 425 basis points to 71%, primarily driven by cost savings and mix, lower inventory adjustments, favorable foreign exchange impacts and improved transportation costs, partially offset by costs associated with retailer activity and space expansion.
•SG&A increased $78.4 million to $204.1 million, or 47% of net sales. Adjusted SG&A increased $71.0 million to $182.2 million, or 42% 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 and professional fees.
•Net income was $86.2 million on a GAAP basis. Adjusted net income was $110.0 million.
•Diluted earnings per share were $1.50 on a GAAP basis. Adjusted diluted earnings per share were $1.92.
•Adjusted EBITDA was $134.7 million, or 31% of net sales, up 129% year over year.
Balance Sheet
As of September 30, 2023, the Company had $167.8 million in cash and cash equivalents and $57.7 million of long-term debt and finance lease obligations, as compared to $85.3 million in cash and cash equivalents and $88.3 million of long-term debt and finance lease obligations as of September 30, 2022.
Naturium Acquisition
On October 4, 2023, the Company closed on the acquisition of Naturium, a fast-growing, high performance skin care brand, for $355 million in a combination of cash and Company stock, furthering its 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 55-57% year-over-year increase in net sales, as compared to an expected 37-39% increase previously.

The Company notes this outlook now includes the addition of Naturium. e.l.f. Beauty continues to expect Naturium to contribute approximately $48 million in net sales, approximately $9 million in adjusted EBITDA and approximately $0.04 in adjusted EPS on a fully diluted basis in fiscal 2024. This reflects Naturium’s contribution for approximately half of e.l.f. Beauty’s fiscal year, based on the transaction closing date of October 4, 2023.

Updated Fiscal 2024 OutlookPrevious Fiscal 2024 Outlook
Net sales$896-906 million$792-802 million
Adjusted EBITDA$197-200 million$171-174 million
Adjusted effective tax rate
17-18%
17-18%
Adjusted net income$144-146 million$125-127 million
Adjusted diluted earnings per share$2.47-2.50$2.19-2.22
Fiscal year ending diluted shares outstanding58 million57 million
Webcast Details
The Company will hold a webcast to discuss the results from its second quarter fiscal 2024 today, November 1, 2023, 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 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, 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, 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 and those statements that we are 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 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.

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
(unaudited)
(in thousands, except share and per share data)
 
Three months ended September 30,Six months ended September 30,
2023202220232022
Net sales$215,507 $122,349 $431,846 $244,950 
Cost of sales63,142 42,789 126,909 82,405 
Gross profit152,365 79,560 304,937 162,545 
Selling, general and administrative expenses112,186 64,183 204,125 125,738 
Operating income 40,179 15,377 100,812 36,807 
Other expense, net(1,062)(1,262)(663)(2,925)
Impairment of equity investment— — (1,720)— 
Interest income (expense), net623 (786)964 (1,449)
Income before provision for income taxes39,740 13,329 99,393 32,433 
Income tax provision(6,469)(1,619)(13,145)(6,254)
Net income $33,271 $11,710 $86,248 $26,179 
Comprehensive income$33,271 $11,710 $86,248 $26,179 
Net income per share:
Basic$0.61 $0.22 $1.59 $0.50 
Diluted$0.58 $0.21 $1.50 $0.48 
Weighted average shares outstanding:
Basic54,425,384 52,298,905 54,183,091 52,004,661 
Diluted57,438,152 55,037,514 57,308,342 54,437,752 





e.l.f. Beauty, Inc. and subsidiaries
Condensed consolidated balance sheets
(unaudited)
(in thousands, except share and per share data)
 
September 30, 2023March 31, 2023September 30, 2022
Assets
Current assets:
Cash and cash equivalents$167,763 $120,778 $85,317 
Accounts receivable, net86,683 67,928 53,912 
Inventory, net147,228 81,323 81,288 
Prepaid expenses and other current assets33,772 33,296 26,881 
Total current assets435,446 303,325 247,398 
Property and equipment, net7,624 7,874 8,934 
Intangible assets, net73,986 78,041 82,101 
Goodwill171,620 171,620 171,620 
Investments1,155 2,875 2,875 
Other assets57,105 31,866 29,213 
Total assets$746,936 $595,601 $542,141 
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and capital lease obligations$5,228 $5,575 $5,801 
Accounts payable63,736 31,427 19,279 
Accrued expenses and other current liabilities83,407 70,974 46,868 
Total current liabilities152,371 107,976 71,948 
Long-term debt and finance lease obligations57,735 60,881 88,284 
Deferred tax liabilities4,901 3,742 10,635 
Long-term operating lease obligations14,559 11,201 13,440 
Other long-term liabilities942 784 874 
Total liabilities230,508 184,584 185,181 
Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of September 30, 2023, March 31, 2023 and September 30, 2022; 54,621,561, 53,770,482 and 52,896,411 shares issued and outstanding as of September 30, 2023, March 31, 2023 and September 30, 2022, respectively545 535 525 
Additional paid-in capital851,634 832,481 813,785 
Accumulated deficit(335,751)(421,999)(457,350)
Total stockholders' equity516,428 411,017 356,960 
Total liabilities and stockholders' equity$746,936 $595,601 $542,141 







e.l.f. Beauty, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(unaudited)
(in thousands)
 
Six months ended September 30,
20232022
Cash flows from operating activities:
Net income $86,248 $26,179 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization12,311 11,075 
Stock-based compensation expense18,417 14,576 
Amortization of debt issuance costs and discount on debt149 181 
Deferred income taxes1,159 1,042 
Impairment of equity investment1,720 — 
Other, net221 (24)
Changes in operating assets and liabilities:
Accounts receivable(18,812)(8,301)
Inventory(65,904)3,210 
Prepaid expenses and other assets(27,090)(9,555)
Accounts payable and accrued expenses45,112 6,798 
Other liabilities(2,261)(2,135)
Net cash provided by operating activities51,270 43,046 
Cash flows from investing activities: 
Purchase of property and equipment(1,465)(694)
Net cash used in investing activities(1,465)(694)
Cash flows from financing activities: 
Repayment of long-term debt(2,500)(2,500)
Debt issuance costs paid(665)— 
Cash received from issuance of common stock750 2,503 
Other, net(405)(391)
Net cash used in financing activities(2,820)(388)
Net increase in cash and cash equivalents46,985 41,964 
Cash and cash equivalents - beginning of period120,778 43,353 
Cash and cash equivalents - end of period$167,763 $85,317 




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,
2023202220232022
Net income $33,271 $11,710 $86,248 $26,179 
Interest income (expense), net(623)786 (964)1,449 
Income tax provision6,469 1,619 13,145 6,254 
Depreciation and amortization5,586 4,320 10,173 9,013 
EBITDA$44,703 $18,435 $108,602 $42,895 
Stock-based compensation11,217 8,032 18,417 14,576 
Impairment of equity investment (a)— — 1,720 — 
Other non-cash and non-recurring items (b)4,498 786 5,979 1,465 
Adjusted EBITDA$60,418 $27,253 $134,718 $58,936 

(a) Represents an impairment of equity investment recorded during the six months ended September 30, 2023.
(b) 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 September 30,Six months ended September 30,
2023202220232022
Selling, general and administrative expenses$112,186 $64,183 $204,125 $125,738 
Stock-based compensation(11,190)(8,022)(18,413)(14,571)
Other non-recurring items (a)(3,189)— (3,541)— 
Adjusted selling, general and administrative expenses$97,807 $56,161 $182,171 $111,167 
 
(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 September 30,Six months ended September 30,
2023202220232022
Net income $33,271 $11,710 $86,248 $26,179 
Stock-based compensation11,217 8,032 18,417 14,576 
Other non-recurring items (a)3,189 — 3,541 — 
Impairment of equity investment (b)— — 1,720 — 
Amortization of acquired intangible assets (c)2,027 2,031 4,055 4,062 
Tax Impact (d)(2,559)(1,718)(3,955)(3,635)
Adjusted net income$47,145 $20,055 $110,026 $41,182 
Weighted average number of shares outstanding – diluted57,438,152 55,037,514 57,308,342 54,437,752 
Adjusted diluted earnings per share$0.82 $0.36 $1.92 $0.76 

(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 six months ended September 30, 2023.
(c) Represents amortization expense of acquired intangible assets consisting of customer relationships and trademarks.
(d) Represents the tax impact of the above adjustments.