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e.l.f. Beauty Announces Fourth Quarter and Full Fiscal 2023 Results

– Delivered 48% Net Sales Growth in Fiscal 2023 –

– Gained Market Share for Fourth Consecutive Year –

– Provides Fiscal 2024 Outlook –

e.l.f. Beauty (NYSE: ELF) today announced results for the three and twelve months ended March 31, 2023.

“Our outstanding results in fiscal 2023 underscore the power of the e.l.f. brand and the world class team at e.l.f. Beauty,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. "We grew net sales by 78% in Q4, marking our seventeenth consecutive quarter of net sales growth. We gained 270 basis points of market share in the quarter and increased our ranking to the number three U.S. Mass Cosmetics brand for the first time, according to Nielsen. As we look ahead, we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty.”

Fourth Quarter Fiscal 2023 Review

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022:

  • Net sales increased 78% to $187.4 million, primarily driven by strength across our retailer and e-commerce channels.
  • Gross margin increased approximately 470 basis points to 69%, primarily driven by pricing, lower transportation costs, product mix and cost savings.
  • Selling, general and administrative expenses ("SG&A") increased $55.7 million to $121.1 million, or 65% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) was $113.9 million, or 61% of net sales. The year over year increase in SG&A dollars was primarily due to an increase in marketing and digital spend, operations costs, and compensation and benefits.
  • Net income was $16.2 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $23.8 million.
  • Diluted earnings per share were $0.29 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 $0.42.
  • Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $21.2 million, or 11% of net sales, up 66% year over year.

Full Year Fiscal 2023 Review

For the twelve months ended March 31, 2023, compared to the twelve months ended March 31, 2022:

  • Net sales increased 48% to $578.8 million, primarily driven by strength across our retailer and e-commerce channels.
  • Gross margin increased approximately 330 basis points to 67%, primarily driven by pricing, cost savings and product mix, partially offset by inventory adjustments.
  • SG&A increased $100.3 million to $322.3 million, or 56% of net sales. Adjusted SG&A was $293.2 million, or 51% of net sales. The year over year increase in SG&A dollars was primarily due to an increase in marketing and digital spend, compensation and benefits, operations costs, retail fixturing and visual merchandising costs.
  • Net income was $61.5 million on a GAAP basis. Adjusted net income was $91.8 million.
  • Diluted earnings per share were $1.11 on a GAAP basis. Adjusted diluted earnings per share were $1.66.
  • Adjusted EBITDA was $116.8 million, or 20% of net sales, up 56% year over year.

Balance Sheet

The Company ended fiscal 2023 with $120.8 million in cash and cash equivalents and $60.9 million of long-term debt and finance lease obligations, as compared to $43.4 million in cash and cash equivalents and $91.1 million of long-term debt and finance lease obligations at the end of fiscal 2022.

Fiscal 2024 Outlook

The Company is providing the following outlook for fiscal 2024. When compared to fiscal 2023, the outlook for fiscal 2024 reflects an expected 22-24% increase in net sales.

 

 

Fiscal 2024 Outlook

 

Fiscal 2023

Net sales

 

$705-720 million

 

$579 million

Adjusted EBITDA

 

$144.5-147.5 million

 

$116.8 million

Adjusted effective tax rate

 

21-22%

 

10%

Adjusted net income

 

$98.5-100.5 million

 

$91.8 million

Adjusted diluted earnings per share

 

$1.73-1.76

 

$1.66

Weighted average diluted shares outstanding

 

57 million

 

55 million

Webcast Details

The Company will hold a webcast to discuss the results from its fourth quarter fiscal 2023 today, May 24, 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 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 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 expense related to stock-based compensation and other non-cash and non-recurring items. Such other non-cash or non-recurring items historically include 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 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 restructuring of operations, stock-based compensation, other non-cash and non-recurring items, loss on extinguishment of debt, amortization of acquired intangible assets and the tax impact of the foregoing adjustments. Such other non-cash or non-recurring items, which historically include legal settlements, pre-launch costs to develop the Company’s brand, Keys Soulcare, and third-party costs related to M&A due diligence.

With respect to the Company’s expectations under “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 “Fiscal 2024 Outlook” above and those statements that we believe we are still 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 (loss)

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three months ended March 31,

 

Twelve months ended March 31,

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

Net sales

 

$

187,357

 

 

$

105,135

 

 

$

578,844

 

 

$

392,155

 

Cost of sales

 

 

58,231

 

 

 

37,635

 

 

 

188,448

 

 

 

140,423

 

Gross profit

 

 

129,126

 

 

 

67,500

 

 

 

390,396

 

 

 

251,732

 

Selling, general and administrative expenses

 

 

121,081

 

 

 

65,332

 

 

 

322,253

 

 

 

221,912

 

Restructuring (income) expense

 

 

 

 

 

(18

)

 

 

 

 

 

50

 

Operating income

 

 

8,045

 

 

 

2,186

 

 

 

68,143

 

 

 

29,770

 

Other expense (income), net

 

 

320

 

 

 

(484

)

 

 

(1,875

)

 

 

(1,438

)

Interest expense, net

 

 

(106

)

 

 

(529

)

 

 

(2,018

)

 

 

(2,441

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(176

)

 

 

(460

)

Income before provision for income taxes

 

 

8,259

 

 

 

1,173

 

 

 

64,074

 

 

 

25,431

 

Income tax benefit (provision)

 

 

7,987

 

 

 

383

 

 

 

(2,544

)

 

 

(3,661

)

Net income

 

$

16,246

 

 

$

1,556

 

 

$

61,530

 

 

$

21,770

 

Comprehensive income

 

$

16,246

 

 

$

1,556

 

 

$

61,530

 

 

$

21,770

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

 

$

0.03

 

 

$

1.17

 

 

$

0.43

 

Diluted

 

$

0.29

 

 

$

0.03

 

 

$

1.11

 

 

$

0.41

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

53,189,447

 

 

 

51,273,325

 

 

 

52,474,811

 

 

 

50,940,808

 

Diluted

 

 

56,641,510

 

 

 

53,778,530

 

 

 

55,337,554

 

 

 

53,654,303

 

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

March 31, 2023

 

March 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

120,778

 

 

$

43,353

 

Accounts receivable, net

 

 

67,928

 

 

 

45,567

 

Inventory, net

 

 

81,323

 

 

 

84,498

 

Prepaid expenses and other current assets

 

 

33,296

 

 

 

19,611

 

Total current assets

 

 

303,325

 

 

 

193,029

 

Property and equipment, net

 

 

7,874

 

 

 

10,577

 

Intangible assets, net

 

 

78,041

 

 

 

86,163

 

Goodwill

 

 

171,620

 

 

 

171,620

 

Investments

 

 

2,875

 

 

 

2,875

 

Other assets

 

 

31,866

 

 

 

30,368

 

Total assets

 

$

595,601

 

 

$

494,632

 

 

 

 

 

 

Liabilities and stockholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt and capital lease obligations

 

$

5,575

 

 

$

5,786

 

Accounts payable

 

 

31,427

 

 

 

19,227

 

Accrued expenses and other current liabilities

 

 

70,974

 

 

 

40,004

 

Total current liabilities

 

 

107,976

 

 

 

65,017

 

Long-term debt and finance lease obligations

 

 

60,881

 

 

 

91,080

 

Deferred tax liabilities

 

 

3,742

 

 

 

9,593

 

Long-term operating lease obligations

 

 

11,201

 

 

 

15,744

 

Other long-term liabilities

 

 

784

 

 

 

769

 

Total liabilities

 

 

184,584

 

 

 

182,203

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of March 31, 2023 and March 31, 2022; 53,770,482 and 52,243,764 shares issued and outstanding as of March 31, 2023 and March 31, 2022, respectively

 

 

535

 

 

 

515

 

Additional paid-in capital

 

 

832,481

 

 

 

795,443

 

Accumulated deficit

 

 

(421,999

)

 

 

(483,529

)

Total stockholders' equity

 

 

411,017

 

 

 

312,429

 

Total liabilities and stockholders' equity

 

$

595,601

 

 

$

494,632

 

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

 

 

 

Twelve months ended March 31,

 

 

2023

 

2022

Cash flows from operating activities:

 

 

 

 

Net income

 

$

61,530

 

 

$

21,770

 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

 

22,164

 

 

 

27,083

 

Restructuring expense

 

 

 

 

 

50

 

Stock-based compensation expense

 

 

29,117

 

 

 

19,646

 

Amortization of debt issuance costs and discount on debt

 

 

346

 

 

 

394

 

Deferred income taxes

 

 

(6,401

)

 

 

(3,701

)

Loss on extinguishment of debt

 

 

176

 

 

 

460

 

Other, net

 

 

179

 

 

 

496

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(22,432

)

 

 

(5,597

)

Inventory

 

 

3,174

 

 

 

(27,655

)

Prepaid expenses and other assets

 

 

(24,553

)

 

 

(10,555

)

Accounts payable and accrued expenses

 

 

42,995

 

 

 

1,498

 

Other liabilities

 

 

(4,412

)

 

 

(4,376

)

Net cash provided by operating activities

 

 

101,883

 

 

 

19,513

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchase of property and equipment

 

 

(1,723

)

 

 

(4,818

)

Net cash used in investing activities

 

 

(1,723

)

 

 

(4,818

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from revolving line of credit

 

 

 

 

 

26,480

 

Repayment of revolving line of credit

 

 

 

 

 

(26,480

)

Proceeds from long-term debt

 

 

 

 

 

25,581

 

Repayment of long-term debt

 

 

(30,000

)

 

 

(54,525

)

Debt issuance costs paid

 

 

 

 

 

(1,064

)

Cash received from issuance of common stock

 

 

8,053

 

 

 

1,677

 

Other, net

 

 

(788

)

 

 

(779

)

Net cash used in financing activities

 

 

(22,735

)

 

 

(29,110

)

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

77,425

 

 

 

(14,415

)

Cash and cash equivalents - beginning of period

 

 

43,353

 

 

 

57,768

 

Cash and cash equivalents - end of period

 

$

120,778

 

 

$

43,353

 

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,

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

Net income

 

$

16,246

 

 

$

1,556

 

 

$

61,530

 

$

21,770

Interest expense, net

 

 

106

 

 

 

529

 

 

 

2,018

 

 

 

2,441

 

Income tax (benefit) provision

 

 

(7,987

)

 

 

(383

)

 

 

2,544

 

 

 

3,661

 

Depreciation and amortization

 

 

4,617

 

 

 

5,694

 

 

 

18,016

 

 

 

22,403

 

EBITDA

 

$

12,982

 

 

$

7,396

 

 

$

84,108

 

 

$

50,275

 

Restructuring (income) expense (a)

 

 

 

 

 

(18

)

 

 

 

 

 

50

 

Stock-based compensation

 

 

7,284

 

 

 

5,048

 

 

 

29,117

 

 

 

19,646

 

Loss on extinguishment of debt (b)

 

 

 

 

 

 

 

 

176

 

 

 

460

 

Other non-cash and non-recurring items (c)

 

 

977

 

 

 

386

 

 

 

3,380

 

 

 

4,256

 

Adjusted EBITDA

 

$

21,243

 

 

$

12,812

 

 

$

116,781

 

 

$

74,687

 

 

(a) Restructuring (income) expense during the three and twelve months ended March 31, 2022 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 other non-cash or non-recurring items, which historically include 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 March 31,

 

Twelve months ended March 31,

 

 

2023

 

2022

 

2023

 

2022

Selling, general, and administrative expenses

 

$

121,081

 

 

$

65,332

 

 

$

322,253

 

 

$

221,912

 

Stock-based compensation

 

 

(7,195

)

 

 

(4,964

)

 

 

(29,005

)

 

 

(19,336

)

Other non-cash and non-recurring items (a)

 

 

 

 

 

83

 

 

 

 

 

 

(2,765

)

Adjusted selling, general, and administrative expenses

 

$

113,886

 

 

$

60,451

 

 

$

293,248

 

 

$

199,811

 

 

(a) Represents various other non-cash or non-recurring items, which historically include 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 March 31,

 

Twelve months ended March 31,

 

 

2023

 

2022

 

2023

 

2022

Net income

 

$

16,246

 

 

$

1,556

 

 

$

61,530

 

 

$

21,770

 

Restructuring (income) expense (a)

 

 

 

 

 

(18

)

 

 

 

 

 

50

 

Stock-based compensation

 

 

7,284

 

 

 

5,048

 

 

 

29,117

 

 

 

19,646

 

Other non-cash and non-recurring items (b)

 

 

 

 

 

(83

)

 

 

 

 

 

2,765

 

Loss on extinguishment of debt (c)

 

 

 

 

 

 

 

 

176

 

 

 

460

 

Amortization of acquired intangible assets (d)

 

 

2,029

 

 

 

2,030

 

 

 

8,122

 

 

 

8,123

 

Tax Impact (e)

 

 

(1,730

)

 

 

(1,604

)

 

 

(7,132

)

 

 

(7,596

)

Adjusted net income

 

$

23,829

 

 

$

6,929

 

 

$

91,813

 

 

$

45,218

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding -

diluted

 

 

56,641,510

 

 

 

53,778,530

 

 

 

55,337,554

 

 

 

53,654,303

 

Adjusted diluted earnings per share

 

$

0.42

 

 

$

0.13

 

 

$

1.66

 

 

$

0.84

 

 

(a) Restructuring (income) expense during the three and twelve months ended March 31, 2022 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 other non-cash or non-recurring items, which historically include 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.

 

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