e.l.f. Beauty Announces First Quarter Fiscal 2023 Results

Rhea-AI Summary

e.l.f. Beauty reported a robust performance for the three months ended June 30, 2022, with net sales growth of 26% to $122.6 million, bolstered by strong retailer relationships. The company gained 120 basis points of market share, marking its 14th consecutive quarter of sales growth. Gross margins improved by 390 basis points to 68%. e.l.f. raised its fiscal 2023 outlook, projecting net sales of $448-456 million, up from the previous estimate of $432-440 million. Adjusted diluted EPS is now expected to be $0.84-0.87.

Positive

• Net sales increased by 26% to $122.6 million.
• Achieved 14th consecutive quarter of net sales growth.
• Gained 120 basis points of market share.
• Gross margin improved by 390 basis points to 68%.
• Raised fiscal 2023 net sales outlook to $448-456 million.

Negative

• SG&A expenses increased by $10.8 million to $61.6 million.
• SG&A represented 50% of net sales.
• Adjusted SG&A increased to $55.0 million, or 45% of net sales.

– Delivered 26% Net Sales Growth –

– Gained 120 Basis Points of Market Share –

– Raises Fiscal 2023 Outlook –

OAKLAND, Calif.--(BUSINESS WIRE)-- 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.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220803005683/en/

Investors:

KC Katten

VP, Corporate Development & Investor Relations, e.l.f. Beauty

KKatten@elfbeauty.com

Media:

Melinda Fried

Head of Corporate Communications, e.l.f. Beauty

mfried@elfbeauty.com

Source: e.l.f. Beauty

FAQ

What were e.l.f. Beauty's net sales for Q1 2023?

e.l.f. Beauty reported net sales of $122.6 million for the three months ended June 30, 2022.

How much did e.l.f. Beauty increase its fiscal 2023 sales outlook?

e.l.f. raised its fiscal 2023 sales outlook to $448-456 million from $432-440 million.

What is the adjusted diluted EPS for e.l.f. Beauty for fiscal 2023?

The adjusted diluted EPS is expected to be between $0.84 and $0.87.

What was the gross margin for e.l.f. Beauty in Q1 2023?

The gross margin increased to 68%, up 390 basis points.

How much market share did e.l.f. Beauty gain in Q1 2023?

e.l.f. Beauty gained 120 basis points of market share.