– Delivers Net Sales of $81 Million –
– Increases Fiscal 2020 Outlook –
e.l.f. Beauty (NYSE: ELF) today announced results for the three
and nine months ended December 31, 2019.
“We are pleased with our third quarter results with net sales of
$81 million, up 8 percent excluding e.l.f. retail stores. Our team
is executing well against our five strategic imperatives and e.l.f.
is gaining market share,” said Chairman and CEO Tarang Amin. “Our
marketing and digital initiatives continue to bring heightened
awareness to the brand, particularly among Gen Z and Millennial
consumers. Given our momentum, we are raising our Fiscal 2020
guidance.”
Three months ended December 31, 2019 results
Net sales increased 3%, or $2.2 million, to $80.8 million as
compared to $78.6 million in the three months ended December 31,
2018. The increase was primarily driven by increased productivity
across channels, progress against our strategic imperatives and
timing of product shipments. This was partially offset by the
closing of all 22 e.l.f. retail stores in February 2019. The three
months ended December 31, 2018 included $3.7 million in net sales
related to our 22 e.l.f. retail stores. Excluding the contribution
from e.l.f. retail stores, net sales increased 8% as compared to
the three months ended December 31, 2018.
Gross margin increased to 65% from 60% when compared to the
three months ended December 31, 2018, with benefits from price
increases, margin accretive innovation, cost savings, favorable
movements in foreign exchange rates, and a lower inventory reserve,
partially offset by tariffs on goods imported from China.
Selling, general and administrative expenses (“SG&A”) was
$39.6 million, or 49% of net sales, compared to $33.9 million, or
43% of net sales in the three months ended December 31, 2018.
Adjusted SG&A (SG&A excluding the items identified in the
reconciliation table below) was $35.8 million, or 44% of net sales,
compared to $29.3 million, or 37% of net sales in the three months
ended December 31, 2018. The increase was primarily due to
investments in marketing and digital expenses and bonus accrual,
partially offset by the closure of e.l.f. retail stores.
The provision for income taxes was $3.0 million, as compared to
$1.0 million in the three months ended December 31, 2018. The
change in the provision for income taxes was driven by lower
discrete tax benefits of $2.4 million, primarily related to
share-based compensation in 2018.
On a GAAP basis, net income was $8.0 million, or $0.16 per
diluted share, based on a weighted-average diluted share count of
51.0 million shares. This compares to net income of $9.7 million,
or $0.20 per diluted share, based on a weighted-average diluted
share count of 49.2 million shares in the three months ended
December 31, 2018.
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) decreased 4% to $21.4 million from
$22.4 million in the three months ended December 31, 2018.
Adjusted net income (net income excluding the items identified
in the reconciliation table below) decreased to $12.2 million, or
$0.24 per diluted share, based on a weighted-average diluted share
count of 51.0 million shares. This compares to adjusted net income
of $14.6 million, or $0.30 per diluted share, based on a
weighted-average diluted share count of 49.2 million in the three
months ended December 31, 2018.
Nine Months Ended December 31, 2019 results
Net sales increased 3%, or $6.6 million, to $208.1 million, as
compared to $201.5 million in the nine months ended December 31,
2018. The increase was primarily driven by increased productivity
across channels supported by our strategic imperatives, partially
offset by the closing of all 22 e.l.f. retail stores in February
2019. The nine months ended December 31, 2018 included $10.1
million in net sales related to our 22 e.l.f. retail stores.
Excluding the contribution from e.l.f. retail stores, net sales
increased 9% as compared to the nine months ended December 31,
2018.
Gross margin increased to 64% from 61% when compared to the nine
months ended December 31, 2018, with benefits primarily from margin
accretive innovation, cost savings, favorable movements in foreign
exchange rates and price increases, partially offset by higher
sales adjustments and the impact of tariffs on goods imported from
China.
SG&A was $110.1 million, or 53% of net sales, compared to
$100.3 million, or 50% of net sales in the nine months ended
December 31, 2018. Adjusted SG&A was $97.8 million, or 47% of
net sales, compared to $86.7 million, or 43% of net sales in the
nine months ended December 31, 2018. The increase was primarily due
to investments in marketing and digital expenses, bonus accrual,
and increased depreciation expenses driven by customer fixture
programs. These increases were partially offset by the closure of
e.l.f. retail stores.
The provision for income taxes was $6.4 million, as compared to
$2.0 million in the nine months ended December 31, 2018. The change
in the provision for income taxes was primarily driven by an
increase in income before taxes of $7.8 million and a decrease in
discrete tax benefit of $2.8 million, primarily related to
share-based compensation in 2018.
On a GAAP basis, net income was $18.2 million, or $0.36 per
diluted share, based on a weighted-average diluted share count of
50.7 million shares. This compares to net income of $14.8 million,
or $0.30 per diluted share, based on a weighted-average diluted
share count of 49.3 million shares in the nine months ended
December 31, 2018.
Adjusted EBITDA increased 1% to $50.9 million from $50.4 million
in the nine months ended December 31, 2018.
Adjusted net income was $26.8 million, or $0.53 per diluted
share, based on a weighted-average diluted share count of 50.7
million shares. This compares to adjusted net income of $29.5
million, or $0.60 per diluted share, based on a weighted-average
diluted share count of 49.3 million in the nine months ended
December 31, 2018.
Balance sheet
As of December 31, 2019, the Company had $74.7 million in cash
and cash equivalents, as compared to $51.2 million as of December
31, 2018. The increase was primarily due to improved operating
results, partially offset by payments made to terminate store
leases. As of December 31, 2019, long-term debt totaled $129.2
million, as compared to $140.5 million as of December 31, 2018.
Company outlook
As previously disclosed, the Company changed its fiscal year
from the twelve months beginning January 1 and ending December 31
to the twelve months beginning April 1 and ending March 31. As a
result, throughout this press release, the twelve-month periods
ended March 31, 2019 and March 31, 2020 are referred to as “fiscal
2019” and “fiscal 2020,” respectively.
“We are encouraged by the progress we are making against our
strategic imperatives,” said Mandy Fields, Senior Vice President
and Chief Financial Officer. “These imperatives have delivered
growth, despite a soft color cosmetics category.”
In the table below, fiscal 2019 includes the operation of e.l.f.
retail stores. The fiscal 2020 outlook does not include e.l.f.
retail stores. The new fiscal 2020 outlook reflects expected net
sales growth of 7% to 8% when compared to net sales in fiscal 2019,
excluding the contribution of e.l.f. retail stores.
New Fiscal 2020
Outlook
Prior Fiscal 2020
Outlook
Fiscal 2019 (1)
(unaudited)
Net sales
$
274-277 million
$
265-272 million
$
268 million
Adjusted EBITDA
$
58-60 million
$
52-55 million
$
62 million
Adjusted net income
$
28-30 million
$
23-25 million
$
33 million
Adjusted diluted EPS
$
0.55-0.59
$
0.44-0.48
$
0.66
Fully diluted shares outstanding
52.5 million
52.5 million
49.3 million
(1) Refer to Company outlook and comparability notes section
below for further information regarding e.l.f. retail stores
results included in fiscal 2019.
Company outlook and comparability notes
- The footnotes to the table below provide additional information
regarding the e.l.f. retail stores contributions to fiscal 2019
results:
Fiscal 2019
(unaudited)
Net sales (1)
$
267,656
Net loss (2)
$
(3,079
)
Adjusted EBITDA (2)
$
62,439
Adjusted net income (2)
$
32,683
(1) Net sales includes $12.0 million related to e.l.f. retail
stores.
(2) Net loss, adjusted EBITDA and adjusted net income include
$13.7 million of four-wall expenses related to e.l.f. retail stores
in fiscal 2019. Four-wall expenses include only directly
identifiable costs such as product costs, rent and occupancy
expenses and store employee salaries. Other indirect shared costs
such as corporate overhead, depreciation and corporate employee
salaries were not historically allocated to the e.l.f. retail
stores business for internal reporting purposes and have not been
adjusted from the amounts included above.
- The following table presents a reconciliation of quarterly net
sales for fiscal 2019 to quarterly net sales excluding e.l.f.
retail stores:
Three months ended (unaudited)
Fiscal 2019
e.l.f. retail stores
Fiscal 2019 (excluding
e.l.f.
retail stores)
June 30
$
59,055
$
3,228
$
55,827
September 30
63,889
3,182
60,707
December 31
78,571
3,735
74,836
March 31
66,141
1,856
64,285
Total
$
267,656
$
12,001
$
255,655
Long-term model
“Over our almost sixteen-year history we grew in every year
except calendar 2018. This year, it was critical for us to
re-establish growth. Having done so, I would like to share our
long-term model,” said Amin. “Over the next three years, absent
major shelf space gains or strategic extensions, the Company
expects compounded annual revenue growth in the low to mid-single
digits. With significant space gains or strategic extensions, the
Company expects revenue growth in the mid to high-single digits,”
continued Amin. “In both cases, the Company expects adjusted EBITDA
growth to outpace net sales growth.”
Third quarter fiscal 2020 conference call
The Company will hold a conference call today, February 5, 2020,
at 4:30 p.m. ET to discuss the Company’s third quarter fiscal 2020
results. Investors and analysts interested in participating in the
call are invited to dial-in approximately ten minutes prior to the
start of the call. The U.S. toll free dial-in for the conference
call is (877) 407-3982 and the international dial-in number is
(201) 493-6780. The conference call will also be webcast live at:
http://investor.elfcosmetics.com/news-and-events/events and remain
available for 7 days. A telephone replay of this call will be
available at 7:30 p.m. ET on February 5, 2020, until 11:59 p.m. ET
on February 12, 2020, and can be accessed by dialing the U.S. toll
free dial-in, (844) 512-2921 or the international dial-in, (412)
317-6671, and entering replay pin number 13698163.
About e.l.f. Beauty
Since 2004, e.l.f. has made the best of beauty accessible to
every eye, lip and face. We make high-quality, prestige-inspired
cosmetics and skin care products at an extraordinary value and are
proud to be 100% vegan and cruelty-free. As one of the first online
beauty brands, e.l.f. has a passionate social following, national
distribution at leading retailers such as Target, Walmart and Ulta
Beauty, and a growing international presence. Learn more by
visiting www.elfcosmetics.com.
Note regarding non-GAAP financial measures
This press release includes references to non-GAAP measures,
including adjusted SG&A, EBITDA, adjusted EBITDA, adjusted net
income and adjusted diluted EPS. 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 and other non-cash and
non-recurring costs. Adjusted net income excludes costs or gains
related to restructuring of operations, stock-based compensation,
other non-cash and non-recurring costs, amortization of acquired
intangible assets and the tax impact of the foregoing adjustments.
With respect to the Company’s expectations under “Company outlook”
above, the Company is not able to provide a quantitative
reconciliation of the adjusted EBITDA, adjusted net income and
adjusted diluted EPS guidance non-GAAP measures to the
corresponding net income and diluted EPS 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 revised outlook for fiscal
year 2020 under “Company outlook” above, the Company's statements
relating to growth expectations over the next three years under
“Long-term model” above, the statements relating to the Company’s
beliefs regarding its execution of its strategic imperatives, the
Company’s expectations regarding market share, the Company’s
beliefs that its marketing and digital initiatives will continue to
build momentum and bring heightened awareness to the brand, and the
Company’s beliefs regarding the strength or softness of the color
cosmetics category. These forward-looking statements are based on
management's current expectations, estimates, forecasts,
projections, beliefs and assumptions and are not guarantees of
future performance. 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
Quarterly Report on Form 10-Q and 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 December
31,
Nine months ended December
31,
2019
2018
2019
2018
Net sales
$
80,760
$
78,571
$
208,139
$
201,515
Cost of sales
28,240
31,652
75,080
78,982
Gross profit
52,520
46,919
133,059
122,533
Selling, general and administrative
expenses
39,632
33,898
110,131
100,345
Restructuring expense (income)
8
—
(5,982
)
—
Operating income
12,880
13,021
28,910
22,188
Other (expense) income, net
(335
)
(371
)
602
498
Interest expense, net
(1,560
)
(1,963
)
(4,920
)
(5,853
)
Income before provision for income
taxes
10,985
10,687
24,592
16,833
Income tax provision
(2,983
)
(1,015
)
(6,367
)
(1,998
)
Net income
$
8,002
$
9,672
$
18,225
$
14,835
Comprehensive income
$
8,002
$
9,672
$
18,225
$
14,835
Net income per share:
Basic
$
0.16
$
0.20
$
0.38
$
0.32
Diluted
$
0.16
$
0.20
$
0.36
$
0.30
Weighted average shares outstanding:
Basic
48,525,904
47,477,597
48,430,871
46,957,494
Diluted
50,966,550
49,211,311
50,741,492
49,254,848
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated balance
sheets
(unaudited)
(in thousands, except share and
per share data)
December 31, 2019
March 31, 2019
December 31, 2018
Assets
Current assets:
Cash and cash equivalents
$
74,740
$
53,874
$
51,205
Accounts receivable, net
35,082
32,275
36,724
Inventory, net
48,382
43,779
46,341
Prepaid expenses and other current
assets
8,054
7,340
7,473
Total current assets
166,258
137,268
141,743
Property and equipment, net
16,487
16,006
21,804
Intangible assets, net
91,893
97,053
98,773
Goodwill
157,264
157,264
157,264
Investments
2,875
2,875
2,875
Other assets
21,474
21,222
13,397
Total assets
$
456,251
$
431,688
$
435,856
Liabilities and stockholders'
equity
Current liabilities:
Current portion of long-term debt and
capital lease obligations
$
11,939
$
10,259
$
9,861
Accounts payable
19,589
16,280
20,483
Accrued expenses and other current
liabilities
29,767
18,590
12,671
Total current liabilities
61,295
45,129
43,015
Long-term debt and finance lease
obligations
129,236
138,025
140,523
Deferred tax liabilities
17,633
16,753
20,217
Long-term operating lease obligations
5,084
15,898
—
Other long-term liabilities
556
668
2,770
Total liabilities
213,804
216,473
206,525
Commitments and contingencies
Stockholders' equity:
Common stock, par value of $0.01 per
share; 250,000,000 shares authorized as of December 31, 2019, March
31, 2019 and December 31, 2018; 49,914,987, 49,645,450 and
48,715,276 shares issued and outstanding as of December 31, 2019,
March 31, 2019 and December 31, 2018, respectively
486
483
478
Additional paid-in capital
753,151
744,147
740,354
Accumulated deficit
(511,190
)
(529,415
)
(511,501
)
Total stockholders' equity
242,447
215,215
229,331
Total liabilities and stockholders'
equity
$
456,251
$
431,688
$
435,856
e.l.f. Beauty, Inc. and subsidiaries
Condensed consolidated
statements of cash flows
(unaudited)
(in thousands)
Nine months ended December
31,
2019
2018
Cash flows from operating
activities:
Net income
$
18,225
$
14,835
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
16,863
13,573
Restructuring income
(5,982
)
—
Stock-based compensation expense
11,282
13,181
Amortization of debt issuance costs and
discount on debt
565
593
Deferred income taxes
880
(1,674
)
Other, net
410
334
Changes in operating assets and
liabilities:
Accounts receivable
(3,027
)
(5,122
)
Inventories
(4,603
)
15,387
Prepaid expenses and other assets
(3,260
)
(6,986
)
Accounts payable and accrued expenses
17,628
6,640
Other liabilities
(11,181
)
(209
)
Net cash provided by operating
activities
37,800
50,552
Cash flows from investing
activities:
Purchase of property and equipment
(7,073
)
(6,205
)
Net cash used in investing activities
(7,073
)
(6,205
)
Cash flows from financing
activities:
Repayment of long-term debt
(7,013
)
(6,187
)
Repurchase of common stock
(3,546
)
—
Cash received from issuance of common
stock
1,272
2,965
Other, net
(574
)
(394
)
Net cash used in financing activities
(9,861
)
(3,616
)
Net increase in cash and cash
equivalents
20,866
40,731
Cash and cash equivalents - beginning of
period
53,874
10,474
Cash and cash equivalents - end of
period
$
74,740
$
51,205
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP net
income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
Three months ended December
31,
Nine months ended December
31,
2019
2018
2019
2018
Net income
$
8,002
$
9,672
$
18,225
$
14,835
Interest expense, net
1,560
1,963
4,920
5,853
Income tax provision
2,983
1,015
6,367
1,998
Depreciation and amortization
5,009
4,956
14,945
13,573
EBITDA
$
17,554
$
17,606
$
44,457
$
36,259
Restructuring expense (income) (a)
8
—
(5,982
)
—
Stock-based compensation
3,352
4,357
11,282
13,181
Other non-cash and non-recurring costs
(b)
516
394
1,148
969
Adjusted EBITDA
$
21,430
$
22,357
$
50,905
$
50,409
(a) Represents restructuring expense (income) related to the
e.l.f. retail store closures. The nine months ended December 31,
2019 included a gain related to settlement of outstanding lease
liabilities equal to the difference between the amount of cash
disbursed and the outstanding liability at the time of settlement.
The three months ended December 31, 2019 included various
administrative costs related to the e.l.f. retail store
closures.
(b) Represents various non-cash or non-recurring costs,
including costs related to Project Unicorn, a fixturing and
packaging transformation initiative and the automation of certain
warehouse and distribution activities.
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP
SG&A to non-GAAP adjusted SG&A
(unaudited)
(in thousands)
Three months ended December
31,
Nine months ended December
31,
2019
2018
2019
2018
Selling, general, and administrative
expenses
$
39,632
$
33,898
$
110,131
$
100,345
Stock-based compensation
(3,352
)
(4,357
)
(11,282
)
(13,181
)
Other non-cash and non-recurring costs
(a)
(516
)
(214
)
(1,023
)
(484
)
Adjusted selling, general, and
administrative expenses
$
35,764
$
29,327
$
97,826
$
86,680
(a) Represents various non-cash or non-recurring costs,
including costs related to Project Unicorn and the automation of
certain warehouse and distribution activities.
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 December
31,
Nine months ended December
31,
2019
2018
2019
2018
Net income
$
8,002
$
9,672
$
18,225
$
14,835
Restructuring expense (income) (a)
8
—
(5,982
)
—
Stock-based compensation
3,352
4,357
11,282
13,181
Other non-cash and non-recurring costs
(b)
516
394
1,148
969
Amortization of acquired intangible assets
(c)
1,720
1,847
5,160
5,355
Tax Impact (d)
(1,395
)
(1,648
)
(2,992
)
(4,859
)
Adjusted net income
$
12,203
$
14,622
$
26,841
$
29,481
Weighted average number of shares
outstanding - diluted
50,966,550
49,211,311
50,741,492
49,254,848
Adjusted diluted earnings per share
$
0.24
$
0.30
$
0.53
$
0.60
(a) Represents restructuring expense (income) related to the
e.l.f. retail store closures. The nine months ended December 31,
2019 included a gain related to settlement of outstanding lease
liabilities equal to the difference between the amount of cash
disbursed and the outstanding liability at the time of settlement.
The three months ended December 31, 2019 included various
administrative costs related to the e.l.f. retail store
closures.
(b) Represents various non-cash or non-recurring costs,
including costs related to Project Unicorn and the automation of
certain warehouse and distribution activities.
(c) Represents amortization expense of acquired intangible
assets consisting of customer relationships and favorable
leases.
(d) Represents the tax impact of the above adjustments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200205005791/en/
Investors: Willa McManmon VP, IR and Corporate
Communications, e.l.f. Cosmetics (650) 960-5177
Media: Alecia Pulman ICR, Inc. (203) 682-8200
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