e.l.f. Beauty (NYSE: ELF) today announced results for the three months ended June 30, 2023.
“We are off to a terrific start in our new fiscal year with net sales growth of 76% and market share gains of 260 basis points in Q1. This marks our 18th consecutive quarter of delivering both net sales growth and market share gains. We are one of only five publicly traded consumer companies out of 274 that has grown for 18 straight quarters and averaged at least 20% sales growth per quarter over that period,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “As we look ahead, we believe we are in the early innings of unlocking the full potential we see for e.l.f. Beauty and are raising our fiscal 2024 outlook to reflect our continued momentum.”
Three Months Ended June 30, 2023 Results
For the three months ended June 30, 2023, compared to the three months ended June 30, 2022:
- Net sales increased 76% to $216.3 million, primarily driven by strength in both our retailer and e-commerce channels.
- Gross margin increased approximately 280 basis points to 71%, primarily driven by favorable FX impacts, margin accretive mix and cost savings, lower inventory adjustments and improved transportation costs, partially offset by the costs associated with retailer activity and space expansion.
- Selling, general and administrative expenses ("SG&A") increased $30.4 million to $91.9 million, or 42% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below)increased$29.4 million to $84.4 million, or 39% of net sales. The increase in SG&A dollars was primarily due to an increase in marketing and digital spend, operations costs, compensation and benefits, retail fixturing and visual merchandising costs.
- Net income was $53.0 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below)was $62.9 million.
- Diluted earnings per share were $0.93 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 $1.10.
- Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $74.3 million, or 34% of net sales, up 135% year over year.
Balance Sheet
As of June 30, 2023, the Company had $142.5 million in cash and cash equivalents and $59.6 million in long-term debt and finance lease obligations, as compared to $72.2 million in cash and cash equivalents and $89.7 million of long-term debt and finance lease obligations as of June 30, 2022.
Updated Fiscal 2024 Outlook
The Company is providing the following updated outlook for fiscal 2024. The updated outlook for fiscal 2024 reflects an expected 37-39% year-over-year increase in net sales, as compared to an expected 22-24% increase previously.
Updated Fiscal 2024 Outlook | Previous Fiscal 2024 Outlook | ||
Net sales | $792-802 million | $705-720 million | |
Adjusted EBITDA | $171-174 million | $114.5-147.5 million | |
Adjusted effective tax rate | 17-18% | 21-22% | |
Adjusted net income | $125-127 million | $98.5-100.5 million | |
Adjusted diluted earnings per share | $2.19-2.22 | $1.73-1.76 | |
Fiscal year ending diluted shares outstanding | 57 million | 57 million |
Webcast Details
The Company will hold a webcast to discuss the results from its first quarter fiscal 2024 today, August 1, 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 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 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. 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 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.
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 believe 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 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 and comprehensive income (unaudited) (in thousands, except share and per share data) | |||||||
Three months ended June 30, | |||||||
2023 | 2022 | ||||||
Net sales | $ | 216,339 | $ | 122,601 | |||
Cost of sales | 63,767 | 39,616 | |||||
Gross profit | 152,572 | 82,985 | |||||
Selling, general and administrative expenses | 91,939 | 61,555 | |||||
Operating income | 60,633 | 21,430 | |||||
Other income (expense), net | 399 | (1,663 | ) | ||||
Impairment of equity investment | (1,720 | ) | — | ||||
Interest income (expense), net | 341 | (663 | ) | ||||
Income before provision for income taxes | 59,653 | 19,104 | |||||
Income tax provision | (6,676 | ) | (4,635 | ) | |||
Net income | $ | 52,977 | $ | 14,469 | |||
Comprehensive income | $ | 52,977 | $ | 14,469 | |||
Net income per share: | |||||||
Basic | $ | 0.98 | $ | 0.28 | |||
Diluted | $ | 0.93 | $ | 0.27 | |||
Weighted average shares outstanding: | |||||||
Basic | 53,938,136 | 51,707,160 | |||||
Diluted | 57,175,870 | 53,834,732 | |||||
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated balance sheets (unaudited) (in thousands, except share and per share data) | ||||||||||||
June 30, 2023 | March 31, 2023 | June 30, 2022 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 142,549 | $ | 120,778 | $ | 72,248 | ||||||
Accounts receivable, net | 90,531 | 67,928 | 52,281 | |||||||||
Inventory, net | 98,053 | 81,323 | 70,339 | |||||||||
Prepaid expenses and other current assets | 39,276 | 33,296 | 21,772 | |||||||||
Total current assets | 370,409 | 303,325 | 216,640 | |||||||||
Property and equipment, net | 7,581 | 7,874 | 9,339 | |||||||||
Intangible assets, net | 76,013 | 78,041 | 84,132 | |||||||||
Goodwill | 171,620 | 171,620 | 171,620 | |||||||||
Investments | 1,155 | 2,875 | 2,875 | |||||||||
Other assets | 31,103 | 31,866 | 29,251 | |||||||||
Total assets | $ | 657,881 | $ | 595,601 | $ | 513,857 | ||||||
Liabilities and stockholders' equity | ||||||||||||
Current liabilities: | ||||||||||||
Current portion of long-term debt and capital lease obligations | $ | 5,431 | $ | 5,575 | $ | 5,793 | ||||||
Accounts payable | 53,237 | 31,427 | 16,023 | |||||||||
Accrued expenses and other current liabilities | 51,037 | 70,974 | 39,916 | |||||||||
Total current liabilities | 109,705 | 107,976 | 61,732 | |||||||||
Long-term debt and finance lease obligations | 59,612 | 60,881 | 89,684 | |||||||||
Deferred tax liabilities | 5,855 | 3,742 | 13,538 | |||||||||
Long-term operating lease obligations | 10,137 | 11,201 | 14,637 | |||||||||
Other long-term liabilities | 870 | 784 | 817 | |||||||||
Total liabilities | 186,179 | 184,584 | 180,408 | |||||||||
Stockholders' equity: | ||||||||||||
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2023, March 31, 2023 and June 30, 2022; 54,417,579, 53,770,482 and 52,424,445 shares issued and outstanding as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively | 543 | 535 | 517 | |||||||||
Additional paid-in capital | 840,181 | 832,481 | 801,992 | |||||||||
Accumulated deficit | (369,022 | ) | (421,999 | ) | (469,060 | ) | ||||||
Total stockholders' equity | 471,702 | 411,017 | 333,449 | |||||||||
Total liabilities and stockholders' equity | $ | 657,881 | $ | 595,601 | $ | 513,857 | ||||||
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated statements of cash flows (unaudited) (in thousands) | ||||||||
Three months ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash flows from operati | ||||||||
