– Delivers Net Sales of $283 million –
- Gains market share in U.S. color cosmetics
-
e.l.f. Beauty (NYSE: ELF) today announced results for the three
and twelve months ended March 31, 2020.
“Fiscal 2020 was a terrific year for e.l.f. Beauty. We saw four
quarters of net sales growth, culminating in a 16% increase in the
fourth quarter versus prior year. We also expanded gross margin
300-basis points, compared to the prior year,” said Tarang Amin,
e.l.f. Beauty’s Chairman and CEO. “Of the top five color cosmetics
brands in the U.S., e.l.f. Cosmetics grew the most market share in
fiscal 2020 with 4.8% of the market, up 50 basis points, according
to Nielsen."
"Given our fiscal 2020 results and execution of our five
strategic imperatives, we believe we are well positioned relative
to the category to navigate the challenges posed by COVID-19. Our
mission to make the best of beauty accessible to every eye, lip and
face is more important than ever. While the current environment is
challenging, we believe our talented team, digital strength and
core value proposition will enable us to continue to gain market
share.”
Full Year Ended March 31, 2020 results
Net sales increased 6%, or $15.2 million, to $282.9 million, as
compared to $267.7 million in fiscal 2019. The increase was
primarily driven by increased productivity across our retail and
e-commerce channels, partially offset by the closing of all 22
e.l.f. retail stores in February 2019. Fiscal 2019 included $12.0
million in net sales related to e.l.f. retail stores. Excluding the
contribution from e.l.f. retail stores, net sales increased 11% as
compared to fiscal 2019.
Gross margin increased to 64% from 61% when compared to fiscal
2019, with benefits primarily from margin accretive innovation,
cost savings, price increases, favorable movements in foreign
exchange rates and an increase in inventory reserves in the prior
year, partially offset by higher sales adjustments and the impact
of tariffs on goods imported from China.
Selling, general and administrative expenses (“SG&A”) was
$157.2 million, or 56% of net sales, compared to $137.7 million, or
51% of net sales in fiscal 2019. Adjusted SG&A (SG&A
excluding the items identified in the reconciliation table below)
was $139.3 million, or 49% of net sales, compared to $120.3
million, or 45% of net sales in fiscal 2019. The increase was
primarily due to investments in marketing and digital expenses,
bonus accrual, investment in merchandising programs, 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 increased from a benefit of $1.3
million, or an effective tax rate of 29%, for the twelve months
ended March 31, 2019 to expense of $6.2 million, or an effective
tax rate of 26%, for the twelve months ended March 31, 2020. The
change in the provision for income taxes was primarily driven by an
increase in income before taxes of $28.4 million and a decrease in
one-time tax benefits of $1.0 million, primarily related to the
Company’s provision-to-return adjustment for the period ending
December 31, 2017, which was recorded during fiscal 2019.
On a GAAP basis, net income was $17.9 million, or $0.35 per
diluted share, based on a weighted-average diluted share count of
50.8 million shares. This compares to net loss of $3.1 million, or
$0.06 per diluted share, based on a weighted-average diluted share
count of 49.3 million shares in fiscal 2019.
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) slightly increased to $62.6 million
from $62.4 million in fiscal 2019.
Adjusted net income (net income excluding the items identified
in the reconciliation table below) was $32.2 million, or $0.63 per
diluted share, based on a weighted-average diluted share count of
50.8 million shares. This compares to adjusted net income of $32.7
million, or $0.66 per diluted share, based on a weighted-average
diluted share count of 49.3 million in fiscal 2019.
Three months ended March 31, 2020 results
Net sales increased 13%, or $8.6 million, to $74.7 million as
compared to $66.1 million in the three months ended March 31, 2019.
The increase was primarily driven by increased productivity across
our retail and e-commerce channels, partially offset by the closing
of all 22 e.l.f. retail stores in February 2019. The three months
ended March 31, 2019 included $1.9 million in net sales related to
e.l.f. retail stores. Excluding the contribution from e.l.f. retail
stores, net sales increased 16% as compared to the three months
ended March 31, 2019.
Gross margin increased to 64% from 61% when compared to the
three months ended March 31, 2019, with benefits from margin
accretive innovation, cost savings, price increases, favorable
movements in foreign exchange rates and an increase in inventory
reserves in the prior year, partially offset by higher sales
adjustments and the impact of tariffs on goods imported from
China.
SG&A was $47.0 million, or 63% of net sales, compared to
$37.3 million, or 56% of net sales in the three months ended March
31, 2019. Adjusted SG&A was $41.5 million, or 55% of net sales,
compared to $33.6 million, or 51% of net sales in the three months
ended March 31, 2019. The increase was primarily due to investments
in marketing and digital expenses and merchandising
investments.
The benefit for income taxes was $0.2 million, as compared to
$3.3 million in the three months ended March 31, 2019. The change
in the benefit for income taxes was a result of a reduction in
losses before taxes of $20.7 million, as well as a $1.9 million
difference in tax benefits associated with the vesting of
restricted stock or exercise of stock options, from a $1.5 million
expense in the three months ended March 31, 2019 to a $0.4 million
benefit in the three months ended March 31, 2020.
On a GAAP basis, net loss was $0.3 million, or $0.01 per diluted
share, based on a weighted-average diluted share count of 51.0
million shares. This compares to net loss of $17.9 million, or
$0.37 per diluted share, based on a weighted-average diluted share
count of 48.0 million shares in the three months ended March 31,
2019.
Adjusted EBITDA decreased 3% to $11.7 million from $12.0 million
in the three months ended March 31, 2019.
Adjusted net income increased to $5.3 million, or $0.10 per
diluted share, based on a weighted-average diluted share count of
51.0 million shares. This compares to adjusted net income of $3.2
million, or $0.06 per diluted share, based on a weighted-average
diluted share count of 49.4 million in the three months ended March
31, 2019.
Balance sheet
As of March 31, 2020, the Company had $46.2 million in cash and
cash equivalents, as compared to $53.9 million as of March 31,
2019. The decrease was primarily due to funding the $25.9
million-dollar acquisition of W3LL People and $7.9 million dollars
in share repurchases. These expenditures were partially offset by
improved cash flow from operations. As of March 31, 2020, long-term
debt totaled $126.1 million, as compared to $138.0 million as of
March 31, 2019.
COVID-19 Business Update
As previously discussed, the Company has seen a significant
decline in retail sales due to the impact of the COVID-19 pandemic
on consumer behavior. The Company anticipates its sales results to
be negatively impacted until consumers return to normal shopping
patterns. The Company has focused on the following areas as it
assesses and addresses the impact of the COVID-19 pandemic on its
business:
Health and Safety of our People and Community
The Company’s first priority is the safety and well-being of the
Company’s employees. The Company has adopted for U.S. employees
many of the protocols its team in China leveraged to address the
pandemic, including sending safety kits to all employees and
providing assistance with other needs. The Company has an extremely
talented team and plans to protect as many jobs as possible during
this time.
The Company is also caring for its consumer community. The
Company has supported its community through donations to foodbanks,
mental health organizations and healthcare workers. Drawing on the
success of e.l.f. Cosmetics’ original TikTok hashtag challenge, the
Company remixed “Eyes. Lips. Face.” into a new “Eyes. Lips. Face.
SAFE.” public service announcement to raise awareness of basic
preventative measures to help stop the spread of the disease. The
Company also manufactured hand sanitizer, which has been shared
with the Company’s employees and partners and is being included
with every order on elfcosmetics.com for a limited time.
“Our focus will always be on our employees and community and I’m
proud of our efforts to get through this together,” said Mr.
Amin.
Supply Chain and Distribution
Although the Company’s supply chain is largely based in China,
during the COVID-19 outbreak, the Company’s operations were
minimally disrupted. As of today, the Company’s Chinese-based
suppliers and employees are fully operational, and the Company’s
supply chain is back to normal run rates. The Company’s U.S.
distribution centers are also fully operational, fulfilling
national retailer and e-commerce orders. Moving forward, the
Company will continue to work with its suppliers to closely manage
inventory levels as it monitors the impact of COVID-19 on
demand.
Cost Savings and Liquidity
The Company has taken a number of cost-saving measures to
mitigate impact from COVID-19, including reducing expenses and
scaling back marketing and digital investments in proportion to net
sales. The Company also plans to reduce costs in the areas of
merchandising, operations as well as capital expenditures, and is
tightly managing receivables and inventory.
On April 8, 2020, the Company amended its credit agreement to
provide greater flexibility with its quarterly maintenance
covenants. The Company also accessed $20 million of its $50 million
revolving credit facility, giving it approximately $65 million in
cash on hand.
Company outlook
Looking forward, the Company expects sales trends and the
economy overall to remain volatile for the next several months.
Given the uncertainty around the timing, speed and duration of the
recovery from the adverse impacts of COVID-19, the Company is
suspending guidance for fiscal year 2021.
“We believe the steps we’ve taken to fortify our balance sheet
and reduce expenses will help us navigate these unprecedented
times,” said Mandy Fields, Chief Financial Officer. “We remain
focused on executing our five strategic imperatives and advancing
our strategic extensions, which gives me optimism in the long-term
potential of our company.”
Fourth quarter and full fiscal year 2020 conference
call
The Company will hold a webcast to discuss the results from its
fourth quarter fiscal 2020 and full-year fiscal 2020 today at 4:30
p.m. Eastern Time. Investors and analysts interested in
participating are invited to register prior to the start of the
webcast at https://investor.elfcosmetics.com/ (hover over "news
& events" then click on "events"). Following the presentation,
anyone who cares to ask a question should do so through a separate
dial-in line at (866) 807-9684 or (412) 317-5415 internationally.
Those not asking questions can hear the question and answer session
through the webcast. A replay of the webcast will be available at
the link above for twelve-months and a replay of the audio portion
of the webcast is available at (877) 344-7529 or (412) 317-0088
internationally.
About e.l.f. Beauty:
e.l.f. Beauty stands with every eye, lip, face and paw. This
deep commitment to inclusive, accessible, cruelty-free beauty has
fueled the success of our namesake e.l.f. Cosmetics brand since
2004. With the acquisition of clean-beauty brand W3LL People in
February 2020, we continue to expand our portfolio with strategic
extensions that support our purpose and values. Our family of
brands is available online, and across leading beauty, mass-market,
and natural specialty retailers.
Learn more by visiting investor.elfcosmetics.com
About e.l.f. Cosmetics:
Since 2004, e.l.f. Cosmetics 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.
continues to attract a highly-engaged audience and set benchmarks
with new digital platforms. Our brand is widely available at
leading retailers such as Target, Walmart and Ulta Beauty, and has
a growing international presence.
Learn more by visiting www.elfcosmetics.com
About W3LL PEOPLE:
A clean beauty pioneer with 40 EWG VERIFIED™ products, W3LL
PEOPLE has raised the standard for high-performance, plant-powered,
cruelty-free cosmetics since 2008. Founded on the principles of
purity, artistry and responsibility, we are committed to creating
clean products that help people be well, look well, and do well.
Currently available online and at select Target, Whole Foods, Detox
Market and Credo Beauty stores, the brand aims to become even more
accessible to consumers as part of the e.l.f. Beauty family.
Learn more by visiting www.w3llpeople.com
Note regarding non-GAAP financial measures
This press release includes references to non-GAAP measures,
including the year over year percentage increase in net sales
(excluding the contribution of e.l.f. retail stores), 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.
Net sales (excluding e.l.f. stores) excludes net sales from the
Company's 22 e.l.f. retail stores which were closed in February
2019. 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.
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 expectations regarding sales
and the overall economy for fiscal year 2021 under “Company
outlook” above; the Company’s belief that executing its five
strategic imperatives in fiscal 2020 sets a strong foundation to
navigate the challenges posed by COVID-19; the Company’s statement
that its first priority is its world-class team and community; the
Company’s beliefs that its talented team, digital strength and core
value proposition will enable it to continue to gain market share;
the Company’s expectations that its sales results will be
negatively impacted until consumers return to normal shopping
patterns; the Company’s focus on the following areas as it assesses
and addresses the impact of the COVID-19 pandemic on its business:
Health and Safety of its People and Community, Supply Chain and
Distribution, and Cost Savings and Liquidity; the Company’s focus
being always on its employees and community; the Company’s plans to
continue to work with its suppliers to closely manage inventory
levels as it monitors the impact of COVID-19 on demand; the
Company’s plans to reduce costs in the areas of merchandising,
operations as well as capital expenditures; the Company’s plans to
tightly manage receivables and inventory; and the Company’s plans
to remain focused on executing its five strategic imperatives and
advancing its strategic extensions. 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 March
31,
Twelve months ended March
31,
2020
2019
2020
2019
Net sales
$
74,712
$
66,141
$
282,851
$
267,656
Cost of sales
26,648
25,650
101,728
104,632
Gross profit
48,064
40,491
181,123
163,024
Selling, general, and administrative
expenses
47,024
37,324
157,155
137,669
Restructuring expense (income)
—
22,176
(5,982
)
22,176
Operating income (loss)
1,040
(19,009
)
29,950
3,179
Other (expense) income, net
(176
)
(315
)
426
183
Interest expense, net
(1,387
)
(1,849
)
(6,307
)
(7,702
)
(Loss) income before provision for income
taxes
(523
)
(21,173
)
24,069
(4,340
)
Income tax benefit (provision)
182
3,259
(6,185
)
1,261
Net (loss) income
$
(341
)
$
(17,914
)
$
17,884
$
(3,079
)
Comprehensive (loss) income
$
(341
)
$
(17,914
)
$
17,884
$
(3,079
)
Net (loss) income per share:
Basic
$
(0.01
)
$
(0.37
)
$
0.37
$
(0.07
)
Diluted
$
(0.01
)
$
(0.37
)
$
0.35
$
(0.06
)
Weighted average shares outstanding:
Basic
48,704,133
48,022,926
48,498,813
47,220,203
Diluted
51,045,588
48,022,926
50,817,143
49,293,771
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated balance
sheets
(unaudited)
(in thousands, except share and
per share data)
March 31, 2020
March 31, 2019
Assets
Current assets:
Cash and cash equivalents
$
46,167
$
53,874
Accounts receivable, net
29,721
32,275
Inventory, net
46,209
43,779
Prepaid expenses and other current
assets
10,263
7,340
Total current assets
132,360
137,268
Property and equipment, net
17,171
16,006
Intangible assets, net
102,410
97,053
Goodwill
171,321
157,264
Investments
2,875
2,875
Other assets
26,967
21,222
Total assets
$
453,104
$
431,688
Liabilities and stockholders'
equity
Current liabilities:
Current portion of long-term debt and
capital lease obligations
$
12,568
$
10,259
Accounts payable
12,390
16,280
Accrued expenses and other current
liabilities
26,165
18,590
Total current liabilities
51,123
45,129
Long-term debt and finance lease
obligations
126,088
138,025
Deferred tax liabilities
21,892
16,753
Long-term operating lease obligations
11,239
15,898
Other long-term liabilities
591
668
Total liabilities
210,933
216,473
Commitments and contingencies
Stockholders' equity:
Common stock, par value of $0.01 per
share; 250,000,000 shares authorized as of March 31, 2020 and March
31, 2019; 50,003,531 and 49,645,450 shares issued and outstanding
as of March 31, 2020 and March 31, 2019, respectively
489
483
Additional paid-in capital
753,213
744,147
Accumulated deficit
(511,531
)
(529,415
)
Total stockholders' equity
242,171
215,215
Total liabilities and stockholders'
equity
$
453,104
$
431,688
e.l.f. Beauty, Inc. and
subsidiaries
Condensed consolidated
statements of cash flows
(unaudited)
(in thousands)
Twelve months ended March
31,
2020
2019
Cash flows from operating
activities:
Net income (loss)
$
17,884
$
(3,079
)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
22,843
21,117
Restructuring (income) loss
(5,982
)
22,176
Stock-based compensation expense
15,488
16,864
Amortization of debt issuance costs and
discount on debt
747
783
Deferred income taxes
2,443
(5,107
)
Other, net
873
576
Changes in operating assets and
liabilities:
Accounts receivable
2,504
(907
)
Inventories
(435
)
17,948
Prepaid expenses and other assets
(6,500
)
(8,718
)
Accounts payable and accrued expenses
5,962
619
Other liabilities
(11,514
)
(3,504
)
Net cash provided by operating
activities
44,313
58,768
Cash flows from investing
activities:
Acquisition, net of cash acquired
(25,923
)
—
Purchase of property and equipment
(9,422
)
(9,605
)
Net cash used in investing activities
(35,345
)
(9,605
)
Cash flows from financing
activities:
Repayment of long-term debt
(9,488
)
(8,250
)
Repurchase of common stock
(7,904
)
—
Cash received from issuance of common
stock
1,488
3,080
Other, net
(771
)
(593
)
Net cash used in financing activities
(16,675
)
(5,763
)
Net (decrease) increase in cash and cash
equivalents
(7,707
)
43,400
Cash and cash equivalents - beginning of
period
53,874
10,474
Cash and cash equivalents - end of
period
$
46,167
$
53,874
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP net
sales to non-GAAP net sales
(unaudited)
(in thousands)
Three months ended March
31,
Twelve months ended March
31,
2019
2019
Net sales
$
66,141
$
267,656
Net sales - e.l.f. retail stores
(1,856
)
(12,001
)
Net sales (excluding e.l.f. retail
stores)
$
64,285
$
255,655
e.l.f. Beauty, Inc. and
subsidiaries
Reconciliation of GAAP net
income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
Three months ended March
31,
Twelve months ended March
31,
2020
2019
2020
2019
Net (loss) income
$
(341
)
$
(17,914
)
$
17,884
$
(3,079
)
Interest expense, net
1,387
1,849
6,307
7,702
Income (benefit) tax provision
(182
)
(3,259
)
6,185
(1,261
)
Depreciation and amortization
5,278
10,520
20,223
24,093
EBITDA
$
6,142
$
(8,804
)
$
50,599
$
27,455
Restructuring expense (income) (a)
—
16,859
(5,982
)
16,859
Stock-based compensation
4,206
3,683
15,488
16,864
Other non-cash and non-recurring costs
(b)
1,357
292
2,505
1,261
Adjusted EBITDA
$
11,705
$
12,030
$
62,610
$
62,439
(a) Represents restructuring expense (income) related to the
e.l.f. retail store closures. The twelve months ended March 31,
2020 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.
(b) Represents various non-cash or non-recurring costs,
including costs related to the development or acquisition of new
brands, including W3LL People in February 2020, as well as 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 March
31,
Twelve months ended March
31,
2020
2019
2020
2019
Selling, general, and administrative
expenses
$
47,024
$
37,324
$
157,155
$
137,669
Stock-based compensation
(4,206
)
(3,683
)
(15,488
)
(16,864
)
Other non-cash and non-recurring costs
(a)
(1,357
)
(10
)
(2,380
)
(494
)
Adjusted selling, general, and
administrative expenses
$
41,461
$
33,631
$
139,287
$
120,311
(a) Represents various non-cash or non-recurring costs,
including costs related to the development or acquisition of new
brands, including W3LL People in February 2020, as well as 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 March
31,
Twelve months ended March
31,
2020
2019
2020
2019
Net (loss) income
$
(341
)
$
(17,914
)
$
17,884
$
(3,079
)
Restructuring expense (income) (a)
—
22,176
(5,982
)
22,176
Stock-based compensation
4,206
3,683
15,488
16,864
Other non-cash and non-recurring costs
(b)
1,357
292
2,505
1,261
Amortization of acquired intangible assets
(c)
1,824
1,720
6,984
7,075
Tax Impact (d)
(1,699
)
(6,755
)
(4,691
)
(11,614
)
Adjusted net income
$
5,347
$
3,202
$
32,188
$
32,683
Weighted average number of shares
outstanding -
diluted
51,045,588
49,425,134
50,817,143
49,293,711
Adjusted diluted earnings per share
$
0.10
$
0.06
$
0.63
$
0.66
(a) Represents restructuring expense (income) related to the
e.l.f. retail store closures. The twelve months ended March 31,
2020 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.
(b) Represents various non-cash or non-recurring costs,
including costs related to the development or acquisition of new
brands, including W3LL People in February 2020, as well as the
automation of certain warehouse and distribution activities.
(c) Represents amortization expense of acquired intangible
assets consisting of customer relationships, trademarks and
favorable leases.
(d) Represents the tax impact of the above adjustments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200521005706/en/
Investors: Willa McManmon, e.l.f. Beauty (650)
960-5177
Media: Brittany Fraser, ICR, Inc. (203) 682-8200
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