e.l.f. Beauty Announces First Quarter Fiscal 2023 Results
– Delivered 26% Net Sales Growth –
– Gained 120 Basis Points of Market Share –
– Raises Fiscal 2023 Outlook –
OAKLAND, California; August 3, 2022 — e.l.f. Beauty (NYSE: ELF) today announced results for the three months ended June 30, 2022.
“I am proud of the e.l.f. Beauty team for achieving our fourteenth consecutive quarter of net sales growth,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “We continue to significantly outperform our competition. In the first quarter, we were the fastest growing top 5 color cosmetics brand and expanded our market share by 120 basis points, according to Nielsen. We are continuing to lean into our strengths—our core value proposition, innovation engine, and ability to attract and engage consumers—and are pleased to raise our Fiscal 2023 outlook.”
Three Months Ended June 30, 2022 Results
For the three months ended June 30, 2022, compared to the three months ended June 30, 2021:
•Net sales increased 26% to $122.6 million, primarily driven by strength in our national and international retailers.
•Gross margin increased approximately 390 basis points to 68%, primarily driven by price increases, cost savings, and product mix, which helped to mitigate the impact of higher transportation costs in the quarter.
•Selling, general and administrative expenses ("SG&A") increased $10.8 million to $61.6 million or 50% of net sales. Adjusted SG&A increased $9.4 million to $55.0 million, or 45% of net sales. The increase was primarily due to an increase in compensation and benefits and marketing and digital spend.
•The provision for income taxes was $4.6 million.
•Net income was $14.5 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $21.1 million.
•Diluted earnings per share were $0.27 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 $0.39.
•Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $31.7 million, or 26% of net sales, up 46% year over year.
Balance Sheet
As of June 30, 2022, the Company had $72.2 million in cash and cash equivalents and $89.7 million in long-term debt and finance lease obligations, as compared to $63.4 million in cash and cash equivalents and $95.3 million of long-term debt and finance lease obligations as of June 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 14-16% year-over-year increase in net sales, as compared to an expected 10-12% year-over-year increase previously.
Updated Fiscal 2023 Outlook
Previous Fiscal 2023 Outlook
Net sales
$448-456 million
$432-440 million
Adjusted EBITDA
$83.5-85.0 million
$80.5-82.0 million
Adjusted effective tax rate
25-26%
27-28%
Adjusted net income
$47.0-48.5 million
$43.5-45.5 million
Adjusted diluted earnings per share
$0.84-0.87
$0.78-0.81
Weighted average diluted shares outstanding
56 million
56 million
Webcast Details
The Company will hold a webcast to discuss the results from its first quarter fiscal 2023 today, August 3, 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 the Company is continuing to lean into its strengths—its core value proposition, innovation engine, and ability to attract and engage consumers. 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.
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 June 30,
2022
2021
Net sales
$
122,601
$
97,047
Cost of sales
39,616
35,141
Gross profit
82,985
61,906
Selling, general and administrative expenses
61,555
50,749
Restructuring income
—
(14)
Operating income
21,430
11,171
Other expense, net
(1,663)
(162)
Interest expense, net
(663)
(745)
Loss on extinguishment of debt
—
(460)
Income before provision for income taxes
19,104
9,804
Income tax provision
(4,635)
(1,528)
Net income
$
14,469
$
8,276
Comprehensive income
$
14,469
$
8,276
Net income per share:
Basic
$
0.28
$
0.16
Diluted
$
0.27
$
0.15
Weighted average shares outstanding:
Basic
51,707,160
50,544,573
Diluted
53,834,732
53,408,443
e.l.f. Beauty, Inc. and subsidiaries
Condensed consolidated balance sheets
(unaudited)
(in thousands, except share and per share data)
June 30, 2022
March 31, 2022
June 30, 2021
Assets
Current assets:
Cash and cash equivalents
$
72,248
$
43,353
$
63,402
Accounts receivable, net
52,281
45,567
43,127
Inventory, net
70,339
84,498
54,528
Prepaid expenses and other current assets
21,772
19,611
21,674
Total current assets
216,640
193,029
182,731
Property and equipment, net
9,339
10,577
15,561
Intangible assets, net
84,132
86,163
92,256
Goodwill
171,620
171,620
171,620
Investments
2,875
2,875
2,875
Other assets
29,251
30,368
33,349
Total assets
$
513,857
$
494,632
$
498,392
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and capital lease obligations
$
5,793
$
5,786
$
32,247
Accounts payable
16,023
19,227
17,113
Accrued expenses and other current liabilities
39,916
40,004
33,617
Total current liabilities
61,732
65,017
82,977
Long-term debt and finance lease obligations
89,684
91,080
95,254
Deferred tax liabilities
13,538
9,593
17,750
Long-term operating lease obligations
14,637
15,744
19,053
Other long-term liabilities
817
769
736
Total liabilities
180,408
182,203
215,770
Commitments and contingencies
Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2022, March 31, 2022 and June 30, 2021; 52,424,445, 52,243,764 and 51,826,156 shares issued and outstanding as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively
517
515
508
Additional paid-in capital
801,992
795,443
779,137
Accumulated deficit
(469,060)
(483,529)
(497,023)
Total stockholders' equity
333,449
312,429
282,622
Total liabilities and stockholders' equity
$
513,857
$
494,632
$
498,392
e.l.f. Beauty, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(unaudited)
(in thousands)
Three months ended June 30,
2022
2021
Cash flows from operating activities:
Net income
$
14,469
$
8,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
5,724
6,222
Restructuring income
—
(14)
Stock-based compensation expense
6,542
4,280
Amortization of debt issuance costs and discount on debt
91
118
Deferred income taxes
3,945
4,271
Loss on extinguishment of debt
—
460
Other, net
21
97
Changes in operating assets and liabilities:
Accounts receivable
(6,727)
(2,971)
Inventories
14,158
2,320
Prepaid expenses and other assets
(3,258)
(7,131)
Accounts payable and accrued expenses
(3,442)
(7,419)
Other liabilities
(945)
(1,017)
Net cash provided by operating activities
30,578
7,492
Cash flows from investing activities:
Purchase of property and equipment
(241)
(2,336)
Net cash used in investing activities
(241)
(2,336)
Cash flows from financing activities:
Proceeds from revolving line of credit
—
26,480
Proceeds from long-term debt
—
25,581
Repayment of long-term debt
(1,250)
(50,775)
Debt issuance costs paid
—
(1,064)
Cash received from issuance of common stock
2
463
Other, net
(194)
(207)
Net cash (used in) provided by financing activities
(1,442)
478
Net increase in cash and cash equivalents
28,895
5,634
Cash and cash equivalents - beginning of period
43,353
57,768
Cash and cash equivalents - end of period
$
72,248
$
63,402
e.l.f. Beauty, Inc. and subsidiaries
Reconciliation of GAAP net income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
Three months ended June 30,
2022
2021
Net income
$
14,469
$
8,276
Interest expense, net
663
745
Income tax provision
4,635
1,528
Depreciation and amortization
4,693
5,121
EBITDA
$
24,460
$
15,670
Restructuring income (a)
—
(14)
Stock-based compensation
6,542
4,280
Loss on extinguishment of debt (b)
—
460
Other non-cash and non-recurring items (c)
679
1,302
Adjusted EBITDA
$
31,681
$
21,698
(a) Restructuring income during the three months ended June 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 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.
e.l.f. Beauty, Inc. and subsidiaries
Reconciliation of GAAP SG&A to non-GAAP adjusted SG&A
(unaudited)
(in thousands)
Three months ended June 30,
2022
2021
Selling, general and administrative expenses
$
61,555
$
50,749
Stock-based compensation
(6,549)
(4,190)
Other non-cash and non-recurring items (a)
—
(997)
Adjusted selling, general and administrative expenses
$
55,006
$
45,562
(a) Represents various non-cash or non-recurring items, which 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.
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 June 30,
2022
2021
Net income
$
14,469
$
8,276
Restructuring income (a)
—
(14)
Stock-based compensation
6,542
4,280
Other non-cash and non-recurring items (b)
—
997
Loss on extinguishment of debt (c)
—
460
Amortization of acquired intangible assets (d)
2,031
2,031
Tax Impact (e)
(1,917)
(1,745)
Adjusted net income
$
21,125
$
14,285
Weighted average number of shares outstanding – diluted
53,834,732
53,408,443
Adjusted diluted earnings per share
$
0.39
$
0.27
(a) Restructuring income during the three months ended June 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 other 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.
