E.l.f. beauty announces third quarter fiscal 2023 results
Oakland, calif.--(business wire)--e.l.f. beauty (nyse: elf) today announced results for the three and nine months ended december 31, 2022. "we delivered a terrific third quarter - growing our net sales by 49% and expanding our market share by 150 basis points, according to nielsen.” said tarang amin, e.l.f. beauty's chairman and chief executive officer. “this quarter marked our 16th consecutive quarter of net sales growth, reflecting the continued strong execution by the e.l.f. beauty team. as we look ahead, we're excited about the potential we see as we continue to make the best of beauty accessible to every eye, lip, face and skin concern." three months ended december 31, 2022 results for the three months ended december 31, 2022, compared to the three months ended december 31, 2021: net sales increased 49% to $146.5 million, primarily driven by strength in both our retailer and e-commerce channels. gross margin increased approximately 180 basis points to 67%, primarily driven by price increases, cost savings and product mix, partially offset by inventory adjustments and costs related to space gains and spring shelf resets. selling, general and administrative expenses ("sg&a") increased $20.1 million to $75.4 million, or 51% of net sales. adjusted sg&a (sg&a excluding the items identified in the reconciliation table below) increased $19.6 million to $68.2 million, or 47% of net sales. the increase was primarily due to an increase in marketing and digital spend, compensation and benefits, operations costs, retail fixturing and visual merchandising costs. the provision for income taxes was $4.3 million. net income was $19.1 million on a gaap basis. adjusted net income (net income excluding the items identified in the reconciliation table below) was $26.8 million. diluted earnings per share were $0.34 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 $0.48. adjusted ebitda (ebitda excluding the items identified in the reconciliation table below) was $36.6 million, or 25% of net sales, up 69% year over year. nine months ended december 31, 2022 results for the nine months ended december 31, 2022, compared to the nine months ended december 31, 2021: net sales increased 36% to $391.5 million, primarily driven by strength in both our retailer and e-commerce channels. gross margin increased approximately 255 basis points to 67%, primarily driven by price increases, cost savings, and product mix, partially offset by inventory adjustments and higher transportation costs. sg&a increased $44.6 million to $201.2 million, or 51% of net sales. adjusted sg&a increased $40.0 million to $179.4 million, or 46% of net sales. the increase was primarily due to an increase in marketing and digital spend, compensation and benefits, operations costs, retail fixturing and visual merchandising costs. the provision for income taxes was $10.5 million. net income was $45.3 million on a gaap basis. adjusted net income was $68.0 million. diluted earnings per share were $0.82 on a gaap basis. adjusted diluted earnings per share were $1.24. adjusted ebitda was $95.5 million, or 24% of net sales, up 54% year over year. balance sheet as of december 31, 2022, the company had $87.0 million in cash and cash equivalents and $62.2 million in long-term debt and finance lease obligations, as compared to $32.9 million in cash and cash equivalents and $92.5 million of long-term debt and finance lease obligations as of december 31, 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 38-39% year-over-year increase in net sales, as compared to an expected 22-24% year-over-year increase previously. updated fiscal 2023 outlook previous fiscal 2023 outlook net sales $541-545 million $478-486 million adjusted ebitda $110.5-112 million $93.5-95 million adjusted effective tax rate 19% 22-23% adjusted net income $75.5-77 million $59-60.5 million adjusted diluted earnings per share $1.37-1.40 $1.07-1.10 fiscal year ending diluted shares outstanding 56 million 56 million webcast details the company will hold a webcast to discuss the results from its third quarter fiscal 2023 today, february 1, 2023, at 4:30 p.m. eastern time. the webcast will be broadcast live at https://investor.elfbeauty.com/news-and-events/events. for those unable to listen to the live broadcast, an archived version will be available at the same location. about e.l.f. beauty e.l.f. beauty, inc. builds brands designed to disrupt industry norms, shape culture and connect communities through positivity, inclusivity and accessibility. our deep commitment to clean, cruelty free beauty at an incredible value has fueled the success of our flagship brand e.l.f. cosmetics since 2004 and driven our portfolio expansion. today, our multi-brand portfolio includes e.l.f. cosmetics, e.l.f. skin, pioneering clean beauty brand well people and keys soulcare, a groundbreaking lifestyle beauty brand created with alicia keys. our family of brands is available online and across leading beauty, mass market and 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 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 “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 regarding our ability to continue to make the best of beauty accessible to every eye, lip, face and skin concern. although the company believes that the expectations reflected in the forward-looking statements are reasonable, actual results and the timing of selected events may differ materially from those expectations. factors that could cause actual results to differ materially from those in the forward looking statements include, among other things, the risks and uncertainties that are described in the company's most recent annual report on form 10-k, as updated from time to time in the company's sec filings, as well as the company’s ability to effectively compete with other beauty companies; the company’s ability to successfully introduce new products; the company’s ability to attract new retail customers and/or expand business with its existing retail customers; the company’s ability to optimize shelf space at its key retail customers; the loss of any of the company’s key retail customers or if the general business performance of its key retail customers declines; and the company’s ability to effectively manage its sg&a and other expenses. potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. these forward-looking statements speak only as of the date hereof. except as required by law, the company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. e.l.f. beauty, inc. and subsidiaries condensed consolidated statements of operations and comprehensive income (unaudited) (in thousands, except share and per share data) three months ended december 31, nine months ended december 31, 2022 2021 2022 2021 net sales $ 146,537 $ 98,118 $ 391,487 $ 287,020 cost of sales 47,812 33,777 130,217 102,788 gross profit 98,725 64,341 261,270 184,232 selling, general and administrative expenses 75,434 55,384 201,172 156,580 restructuring (income) expense — (14 ) — 68 operating income 23,291 8,971 60,098 27,584 other income and expenses, net 730 (146 ) (2,195 ) (954 ) interest expense, net (463 ) (570 ) (1,912 ) (1,912 ) loss on extinguishment of debt (176 ) — (176 ) (460 ) income before provision for income taxes 23,382 8,255 55,815 24,258 income tax provision (4,277 ) (2,041 ) (10,531 ) (4,044 ) net income $ 19,105 $ 6,214 $ 45,284 $ 20,214 comprehensive income $ 19,105 $ 6,214 $ 45,284 $ 20,214 net income per share: basic $ 0.36 $ 0.12 $ 0.87 $ 0.40 diluted $ 0.34 $ 0.12 $ 0.82 $ 0.38 weighted average shares outstanding: basic 52,707,406 51,072,639 52,239,761 50,831,985 diluted 55,840,137 53,891,438 54,906,065 53,614,910 e.l.f. beauty, inc. and subsidiaries condensed consolidated balance sheets (unaudited) (in thousands, except share and per share data) december 31, 2022 march 31, 2022 december 31, 2021 assets current assets: cash and cash equivalents $ 87,021 $ 43,353 $ 32,889 accounts receivable, net 66,237 45,567 47,180 inventory, net 81,250 84,498 85,248 prepaid expenses and other current assets 28,382 19,611 19,808 total current assets 262,890 193,029 185,125 property and equipment, net 8,726 10,577 12,231 intangible assets, net 80,071 86,163 88,194 goodwill 171,620 171,620 171,620 investments 2,875 2,875 2,875 other assets 29,743 30,368 30,905 total assets $ 555,925 $ 494,632 $ 490,950 liabilities and stockholders' equity current liabilities: current portion of long-term debt and capital lease obligations $ 5,690 $ 5,786 $ 5,780 accounts payable 32,049 19,227 22,756 accrued expenses and other current liabilities 49,798 40,004 33,977 total current liabilities 87,537 65,017 62,513 long-term debt and finance lease obligations 62,177 91,080 92,474 deferred tax liabilities 7,783 9,593 13,078 long-term operating lease obligations 12,329 15,744 16,659 other long-term liabilities 795 769 758 total liabilities 170,621 182,203 185,482 commitments and contingencies stockholders' equity: common stock, par value of $0.01 per share; 250,000,000 shares authorized as of december 31, 2022, march 31, 2022 and december 31, 2021; 53,165,462, 52,243,764 and 52,120,683 shares issued and outstanding as of december 31, 2022, march 31, 2022 and december 31, 2021, respectively 528 515 512 additional paid-in capital 823,021 795,443 790,041 accumulated deficit (438,245 ) (483,529 ) (485,085 ) total stockholders' equity 385,304 312,429 305,468 total liabilities and stockholders' equity $ 555,925 $ 494,632 $ 490,950 e.l.f. beauty, inc. and subsidiaries condensed consolidated statements of cash flows (unaudited) (in thousands) nine months ended december 31, 2022 2021 cash flows from operating activities: net income $ 45,284 $ 20,214 adjustments to reconcile net income to net cash provided by operating activities: depreciation and amortization 16,496 20,317 restructuring expense — 68 stock-based compensation expense 21,833 14,598 amortization of debt issuance costs and discount on debt 271 304 deferred income taxes (1,819 ) (401 ) loss on extinguishment of debt 176 460 other, net (1 ) 457 changes in operating assets and liabilities: accounts receivable (20,620 ) (7,211 ) inventory 3,248 (28,390 ) prepaid expenses and other assets (15,223 ) (8,585 ) accounts payable and accrued expenses 22,610 (691 ) other liabilities (3,254 ) (3,314 ) net cash provided by operating activities 69,001 7,826 cash flows from investing activities: purchase of property and equipment (1,647 ) (4,596 ) net cash used in investing activities (1,647 ) (4,596 ) 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 (28,750 ) (53,275 ) debt issuance costs paid — (1,064 ) cash received from issuance of common stock 5,652 1,236 other, net (588 ) (587 ) net cash used in financing activities (23,686 ) (28,109 ) net increase (decrease) in cash and cash equivalents 43,668 (24,879 ) cash and cash equivalents - beginning of period 43,353 57,768 cash and cash equivalents - end of period $ 87,021 $ 32,889 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, 2022 2021 2022 2021 net income $ 19,105 $ 6,214 $ 45,284 $ 20,214 interest expense, net 463 570 1,912 1,912 income tax provision 4,277 2,041 10,531 4,044 depreciation and amortization 4,386 5,680 13,399 16,709 ebitda $ 28,231 $ 14,505 $ 71,126 $ 42,879 restructuring (income) expense (a) — (14 ) — 68 stock-based compensation 7,257 5,211 21,833 14,598 loss on extinguishment of debt (b) 176 — 176 460 other non-cash and non-recurring items (c) 938 1,980 2,403 3,870 adjusted ebitda $ 36,602 $ 21,682 $ 95,538 $ 61,875 (a) restructuring (income) expense during the three and nine months ended december 31, 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 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 december 31, nine months ended december 31, 2022 2021 2022 2021 selling, general and administrative expenses $ 75,434 $ 55,384 $ 201,172 $ 156,580 stock-based compensation (7,239 ) (5,149 ) (21,810 ) (14,372 ) other non-cash and non-recurring items (a) — (1,611 ) — (2,848 ) adjusted selling, general and administrative expenses $ 68,195 $ 48,624 $ 179,362 $ 139,360 (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 december 31, nine months ended december 31, 2022 2021 2022 2021 net income $ 19,105 $ 6,214 $ 45,284 $ 20,214 restructuring (income) expense (a) — (14 ) — 68 stock-based compensation 7,257 5,211 21,833 14,598 other non-cash and non-recurring items (b) — 1,611 — 2,848 loss on extinguishment of debt (c) 176 — 176 460 amortization of acquired intangible assets (d) 2,031 2,031 6,093 6,093 tax impact (e) (1,767 ) (2,316 ) (5,402 ) (5,992 ) adjusted net income $ 26,802 $ 12,737 $ 67,984 $ 38,289 weighted average number of shares outstanding – diluted 55,840,137 53,891,438 54,906,065 53,614,910 adjusted diluted earnings per share $ 0.48 $ 0.24 $ 1.24 $ 0.71 (a) restructuring (income) expense during the three and nine months ended december 31, 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 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.
