e.l.f. Beauty, Inc. (ELF) on Q4 2021 Results - Earnings Call Transcript
KC Katten: Thank you for joining us today to discuss e.l.f. Beauty's Fourth Quarter and Fiscal 2021 Results. I'm KC Katten, Vice President of Investor Relations. With me today are Tarang Amin, Chairman and Chief Executive Officer; and Mandy Fields, Senior Vice President and Chief Financial Officer. We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.elfbeauty.com. Since many of our remarks today contain forward-looking statements, please refer to our earnings release and reports filed with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements. In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliation of the differences between the non-GAAP presentation and the most directly comparable GAAP measure. Tarang Amin: Thank you, KC, and good afternoon, everyone. I hope that you're well. Today, we'll discuss our results in the fourth quarter full year fiscal 2021 and outlook for fiscal 2022. I want to start by recognizing our e.l.f. Beauty team. We have much to be proud of in fiscal 2021. Q4 marked our ninth consecutive quarter of net sales growth. While the color cosmetics category was negatively affected by the COVID-19 pandemic, our outperformance throughout the year underscored the strength of our business model. In fiscal 2021, e.l.f. Cosmetics was the only top five color cosmetics brand to post growth. And the only top five brand to gain share with 5.7% of the market, up 100 basis points year-over-year. We advanced our transformation to a multi-brand portfolio with the recharge of W3LL PEOPLE and launch of Keys Soulcare. We also continue to lead with purpose, e.l.f. Beauty stands with every eye, lip, face and paw. Since our founding, we've had a deep commitment to diversity and inclusion. We're one of only five public companies in the U.S. with a board of directors that has over 55% women and over 20% black representation. We're proud that our employee base, which is over 75% women, over 40% diverse and over 60% millennial and Gen Z is representative of the young diverse consumers we serve. We achieved a significant milestone on our sustainability journey this year, reducing an estimated 650,000 pounds of excess packaging through Project Unicorn. We accomplished all of this with an unwavering focus on executing our five strategic imperatives. Let me provide a few highlights from the year. Our first strategic imperative is to drive brand demand. e.l.f. Cosmetics now has nearly 12 million followers across our digital ecosystem, growing double-digits year-over-year. Our earned media value was up 29% compared to prior year and we're the only brand growing in our competitive set. We continue to find innovative ways to engage and entertain our community, moving far beyond traditional beauty boundaries. In music, we became a global sensation with our first TikTok hashtag challenge, featuring our original Eyes. Lips. Face. song, which remains one of the most viral campaigns in TikTok history. We are the first beauty brand to drop a holiday album, launch a campaign on Triller and have four songs make the U.S. and global billboard’s Triller top 20 list. This year's Beautyscape event, The Remix infuse the power of makeup and music and feature three musical artists, including Grammy nominated global superstar, Tove Lo. We ventured into gaming, which resonates strongly with our young diverse community. We are the first major beauty brand to launch a branded channel on Twitch named e.l.f. You. Our Twitch channel champions’ female empowerment in gamers and features new streams every week. Mandy Fields: Thank you, Tarang. I am pleased to share the highlights of our outstanding fourth quarter and full year fiscal 2021 results. We ended the year strong. In the fourth quarter, net sales grew 24% versus prior year driven by ongoing momentum for the e.l.f. Cosmetics brand, benefits from stimulus-related spending and the launch of Keys Soulcare. We also delivered 14% growth and adjusted EBITDA with ongoing investment in marketing and digital, as well as increasing FX headwinds to our gross margin. Operator: We will now begin the question-and-answer session. Our first question today will come from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: Hey guys. So I just wanted to touch on the revenue side. Obviously you came in above your expectations in Q4. Can you just help us understand what drove that upside, how sustainable some of those items may be as you're looking out over the next few quarters? And then in terms of the U.S. cosmetics category, what you're seeing so far in fiscal Q1, given you're two months into the quarter? How is the recovery progressing on it, your real basis or looking back to 2019? So a bit of color on the category rebound here and what you're seeing in the last couple of months maybe post the quarter? Thanks. Mandy Fields: Yes, no problem. All right. So I will start with Q4 and the key drivers that drove that 24% growth. I'll start off by saying we're very pleased with the 24% growth that we saw in Q4. Really that was driven by four key factors. One is just the ongoing momentum we have with the e.l.f. brand, we saw that continue into Q4. Secondly, is the impact of stimulus. This third round was by far the largest impact that we've seen out of the three stimulus rounds, so that also had an impact. I would also say that Keys Soulcare and pipeline related to that launch added to our sales in the quarter. And then lastly, we also spoke last quarter about order shifting out of Q3 into Q4 that also had an impact to the quarter. So I would say overall pleased with the underlying momentum that we saw in the quarter, but certainly also some stimulus related things that we think will kind of roll off, we talked about Q1 being stronger behind stimulus as well. And so, you'll see that continue on into Q1. Tarang Amin: Okay. And then on your question on the category, we're definitely seeing a resurgence in color cosmetics. I think in the last four weeks in scanner data, the category was up 32%, we were up 52% over that same time period. So we're seeing even stronger results on e.l.f. But from a perspective of a broader view, I would say the category is still not back to where it was in 2019. I think it's down 3% relative to where it was in 2019. So we're seeing a recovery, we have further to go. We're encouraged by as people get more vaccines, as restrictions are lifted, as people get back into retail, we're quite bullish on the category going forward. Certainly stimulus was a benefit, but even as we start lapping some of the stimulus spending and looking at last year stimulus around this time, we're still encouraged by what we're seeing overall. Dara Mohsenian: Okay. And if I could just follow-up on the shipment issues with containers, et cetera. Is that more of a short-term issue in the next few weeks here? Or is that something that could linger as you look out going forward? And how do you think about, if there is potential upside for the year your ability to actually supply products in terms of incremental retail demand versus what you're expecting? Thanks. Tarang Amin: Sure. So like many other companies, we’re facing that imbalance in global containers, and I will say that's going to impact us for at least the next few months. What I would tell you is imbalances tend to balance out, even in our history we've had periods where you've had port strikes, other disruptions in supply. We feel confident in terms of our overall capacity and ability to manufacture products and our guidance is reflective of the imbalance that we're seeing. So the 8% to 10% revenue growth takes into consideration any of the supply and balance that we're seeing currently. Dara Mohsenian: Great. Thanks. Operator: Our next question comes from Erinn Murphy with Piper Sandler. Erinn Murphy: Great, thanks. Good afternoon. My question is around the Keys Soulcare brand. I was curious if you could speak a little bit more about the response thus far, particularly internationally. And then if you think through the guidance for the year, I'm not sure if you're – Mandy, if you're breaking out kind of what Keys could contribute. But if you could just help us shape how like the pipeline fill will look as we move throughout the year, if there is any specific quarter to call out as you kind of roll out in additional retailers abroad? And then I have a quick follow-up. Thank you. Tarang Amin: So Erinn, we're really pleased with the launch of Keys Soulcare. As I mentioned in the prepared remarks, since we announced the brand we've had over 15 billion press impressions, our Instagram engagement rates are higher. And we're particularly pleased with what we're seeing in terms of support from our key customers. So in our Ulta Beauty launch, it was the first time ever that they dedicated the entire store takeover to a brand launch, we were at the front of the store for 12 weeks. As we've moved on to an end cap in their procedure section, we’re really pleased with kind of what they're doing behind the brand. We're equally pleased with the plans that Douglas has against the brands. So internationally Keys Soulcare will definitely accelerate our move internationally as a global brand. What I tell you internationally right now is, much of Europe has been shut down. So some of our launches did move out a few months particularly in Germany, which is still closed, but we're encouraged as markets start to open up as vaccination rates get better there, you'll hear us talk more about Keys internationally. I'm excited for you to see what that looks like as Douglas goes up. Mandy Fields: Yes. And then Erinn, just on your question on the impact to the quarters and what are we seeing. So we're not breaking out the impact of revenue for each of the brands. But I can say that pipeline or new product launches, all of those things that is embedded within our 8% to 10% guidance that we've provided. Erinn Murphy: Okay, great. Thanks Mandy. And just a quick follow-up for you, Mandy, on pricing for the e.l.f. brand, I think you were taking some pricing. Has any of that gone in what percent of its skew base have you taken price on and just curious if there is been any consumer response, as you think about mitigating factors to some of the gross margin pressures you called out? Thanks so much. Mandy Fields: Yes, and so we did talk about using pricing as a lever, we talked about that last quarter. And I can say that, that pricing has – is in effect now, in May we took that pricing, we'll take some time for that to show up at shelf, just similar to our July of 2019 price increase that we took. And at that time recall, we took pricing on about a third of our skews. I can say for this round in the U.S. it is much smaller, and internationally, we did not take a price increase in 2019. So this is a larger price increase I would say internationally versus what we took in the U.S. here in May. So that is definitely a lever we're looking to, to help offset some of the FX headwinds we've spoken about and we'll have more to say on that in the coming months. Erinn Murphy: Great. Thank you. Mandy Fields: Yes. Operator: Our next question comes from Andrea Teixeira with J.P. Morgan. Andrea Teixeira: Thank you, and congrats on the quarter. I appreciate your commentary about the disruptions. But I think it would be helpful if you could give us how much you're baking in. Is that 100 bps or 200 bps of the outlook and – I think we all understand we've been to the comeback, right? So I'm assuming you're not thinking it will come back in fiscal 2022. And then related to that, I understand Mandy, you don't want to break down by brand, but if you can give us an idea if you're looking at underlying with impact from the disruptions that you have in the supply chain to be around the mid single-digit for organic, and then the best thing your contribution from both Keys Soulcare and W3LL PEOPLE? And then I have a follow-up on the diluted number of shares. Mandy Fields: Yes. Okay. So let me take the underlying impact question first on just trying to understand the trends that we're seeing by brand. I would say that, like I said in our prepared remarks, we’re really pleased with the underlying momentum that we have on the e.l.f. brand. And I think that a lot of the analysts and investors look to Nielsen data to kind of get a pulse on where we're seeing trends on the e.l.f. brand. I will say that looking at Nielsen, we do expect that to be a little bit volatile, right, because we're a cycling stimulus in the base and a lot of moving parts as we go through, we have stimulus now on top of stimulus. So there is – that's said, we just feel strong about where we're positioned from an e.l.f. standpoint. Keys and W3LL PEOPLE, W3LL PEOPLE, this will be kind of a growth year for W3LL PEOPLE, I would describe it with the recharge and packaging and that's showing up at shelf. We certainly expect that to have an impact. And then with Keys Soulcare, it will also be incremental, if you're thinking about how you build that up as we launch more broadly, internationally and build momentum behind that brand. So that's the additional color I can give you behind each of our brands. Tarang Amin: Yes. And then on the container imbalance, what I tell you is, it's definitely impacting our fulfillment rates right now, but one of the benefits we have is each of our retailers carry a significant amount of inventory. So we haven't seen a major impact yet in terms of in-stock levels, those are still pretty healthy. And so, as we managed through that, we've embedded it in our guidance in terms of what we'd see, particularly through the front half of the year. And we'll learn more and we'll report on that as we go forward, hopeful that imbalance will balance out and we'll be able to get more containers in. Andrea Teixeira: Yes. On that, I mean, is that critical for your summer launches, right, if you will, like late summer launches, but you were saying you feel confident that the second quarter calendar would be not as bad from what you just said about the beginning, it sounds as you feel very confident with, as you said, like you – high few rates for the initial summer, which is obviously the June quarter. And then we have to monitor what's going to happen to the fall. Is that the way we should be thinking? And then hopefully by the December quarter you’re going to be in a better - a much better position again. Tarang Amin: That's what we hope. I mean, it's still a dynamic situation, so we'll monitor it. What I would tell you is the fall resets, which is a key part, which we usually ship during summer. We are supplementing our shipments with some air freight to be able to make sure that can set those shelves properly and on time. And that's reflected in some of the cost pressures that Mandy talked about. Andrea Teixeira: And one last – that's helpful. And one last thing Tarang – the dilute number of shares was a little bit higher, I think obviously last year may not be – the last fiscal year may not be representative of what your compensation, SBC and all of those moving parts. Can you help us like understand what are the puts and takes there? Mandy Fields: Yes, Andrea. Just on the share count that we provided, if you look at our Q4 fully diluted share count was around 53 million shares. If you recall out, in our evergreen, we talked about the share count, the burn rate going down to 2%, so you can add that on to the 53 million where we exited Q4. And then additionally, we have had an appreciation in the share price, so many in anti-diluted shares have turned into our diluted share count and so that's also being added in. And so, that's how we're getting to that kind of that 55 million range for fiscal 2022 Andrea Teixeira: Also for the reasons, okay, perfect. Thank you so much. I'll pass it on. Mandy Fields: Yes. Operator: Our next question comes from Linda Bolton Weiser with DA Davidson. Linda Bolton Weiser: Yes. Hi, thank you. So can you just talk a little bit about your comment about treating skincare as a fourth brand, that sort of sounds to me like maybe needing more marketing investment behind it. And does that mean you get less kind of halo effect as the overall brand kind of boosting both? I mean, what – can you just give more color on what you mean by treating it as a fourth brand? Thanks. Tarang Amin: Sure, Linda. We've seen great momentum in skincare, and in fact, if you take a look at that track channel sales e.l.f. skin was up 22%, this last fiscal year in a category that was down 3%. So we've been having momentum for quite some time executing on our strategy. This just reflects the growing strategic importance of skincare as part of overall portfolio. Obviously Keys Soulcare was launched skincare first as a category on e.l.f., we have high hopes and plans for skincare. So it doesn't necessarily impact our marketing levels, we're staying consistent in that 14% to 16% overall for marketing as a percent – marketing and digital as a percent of sales. It just reflects – the reflection that skincare, the approach to skincare is different than color cosmetics. While color cosmetics, purchases are often driven by impulse and trend, skincare we're finding through our own history is really driven by efficacy and education. And so really taking that approach of really treating skincare differently than color cosmetics, I think really builds on the success that we've been having. Linda Bolton Weiser: Great. Thank you. And then just on the Keys Soulcare line, you've talked about further expansion geographically coming up in the next year. Is there any timeframe for launch of additional skews to the line? Tarang Amin: There is Linda, we have Keys Soulcare, it was different in its approach in two ways. One is a true lifestyle beauty brand focused on content, community and conversation. But in addition to that, it's multi-category in scope. So we started in skincare, I think there is a piece where we announced today that our next category will be body. They’ll be coming out with three new products in the body range, and you'll see that follow-up with additional other categories in skews. We have a robust innovation pipeline that you'll continue to see a stream of new product news on Keys Soulcare throughout the year. Linda Bolton Weiser: Great. And then I guess just a question on your cash flow in the fourth quarter was actually a little bit better than we had projected, and you've got a nice healthy cash balance. Is there any thought to returning to share repurchase and kind of, what are your thoughts on additional acquisitions now that you've kind of relaunched the W3LL PEOPLE and gotten the Alicia Keys off the ground, what are your thoughts there? Mandy Fields: Hi, Linda. So on the share repurchase front, we are just backing up to just cash overall and our priorities, our cash priorities as we look forward are really focused on our strategic imperatives and strategic extensions, supporting Keys Soulcare and also supporting W3LL PEOPLE. From an acquisition standpoint, we have been very thoughtful on that front with W3LL PEOPLE being our first acquisition last year, it's something that kind of – is on our priority list, but feel that we are – our hands are full at this point with Keys and W3LL PEOPLE. Tarang Amin: And the only other thing I would add Linda is, when we think of strategic extensions, it's not only potential tuck-in acquisitions, it's also incubating new brands. And I think the success we have with Keys Soulcare shows the capability of our team of kind of, I think we stood up that brand in about a year's time. So we're definitely interested in enhancing kind of our product portfolio, brand portfolio with other brands that we either acquire or build in-house. Linda Bolton Weiser: Okay, great. Thank you very much. Operator: Our next question comes from Steph Wissink with Jefferies. Steph Wissink: Thank you. Good afternoon, everyone. I have a question just on the sales and EBITDA growth tracking together, even with the gross margin pressure. I think Mandy, you mentioned this is the first in a three year target period to grow EBITDA faster than sales. If you were to see gross margins be less pressured than what your guidance embeds, is that where the source of upside likely comes from, or do you expect to spend that back to try to drive upside to the sales line? Mandy Fields: Thanks for the question, Steph. It's always a balance. We do feel like the gross margin pressures are real. And so that's why we have pulled other levers within our toolkit to help offset some of those gross margin pressures. So the pricing that we just took focusing on the non-marketing expenses within SG&A to help deliver that five to 10 basis points of EBITDA leverage. Now as we look out and think about our long-term economic model, what we talked about was a three-year view on that so with EBITDA outpacing over that three-year period. And so that's what we continue to be focused on. So I feel great that even in a year with great cost pressures, we are still talking about delivering leverage and demonstrating EBITDA growth. And we'll just take it kind of one quarter at a time as we see how things materialize. Steph Wissink: Mandy, if I could, I think you gave some specificity around Q1 mentioning that marketing was going to be up year-over-year, just given that it was down below your threshold last year. Can you remind us kind of what that step function could look like year-over-year, just for modeling purposes? Mandy Fields: Sure. So let's see here, so last year if you recall, Q1 of last year, that was kind of in the beginning of COVID and we've had really pulled back on our marketing investment. So you're going to see some step up there, last year our marketing investment was only 11% of sales in Q1. So we talked about 14% to 16% for the year, so certainly expect to see a step up there in Q1 of this year. Steph Wissink: Thank you very much. Mandy Fields: Yes. Operator: Our next question comes from Bill Chappell with Truist Securities. Bill Chappell: Thanks. Good afternoon. Tarang Amin: Good afternoon. Bill Chappell: Hey Tarang, can you talk a little bit more about the decision to walk away from the domestic manufacturing? Are you giving up anything in terms of potential gross margin expansion? Did you find cost savings elsewhere? Does that mean you're permanently going to stay kind of out of the domestic manufacturing? Just, I know this project has at least a year long into the process, so it's a little surprised that you're pulling the plug now. Tarang Amin: Yes. Well, Bill, I would say first and foremost, we're really happy with our overall supply chain and operations advantage we have in terms of our combination of cost, quality and speed. We originally done the business case on the U.S. plant in Southern California, it really based on three things. One was cost savings, two was supplier diversification and the third was lead time reduction. Now that plant had faced a number of delays related to COVID-related delays. So by the time we're able to actually get into the engineering work, we really evaluated the cost profile of that facility relative to what we get from the rest of our supply chain and determined that it was going to take a lot more money to be able to realize its full potential. Now having said that, so that was an easy decision from a business standpoint of saying let's not pursue, let's not put more money into that facility relative to the advantage we have in the rest of our supply chain. We remain interested though in diversification and lead time reduction. And so on the diversification front, as I mentioned, the same time that we face COVID-related delays on the Southern California facility, we did start up new suppliers in both Thailand and Taiwan that gives us the diversification, but still leverages the power that we have in our multifunctional team in China. And I would say, in terms of domestic manufacturing or other sources of manufacturing will remain open as long as the business case pans out. So I'd say, we're always looking to see how we can further strengthen the advantage we have in our operations. And it just wasn't the case in that particular facility. Bill Chappell: And just picture that there's no write down or charge off for that that I saw? Mandy Fields: Yes. Bill, we do have a restructuring charge that we took in Q4 of $2.6 million related to that closure. Bill Chappell: And that was the entirety? Mandy Fields: That's right. Bill Chappell: Got it. And then just switching gears on as I look at the shelf space gains, Mandy, you said, your guidance doesn't include any shelf space gains. I think I'm right in saying that the spring is more of – it's a bigger time for shelf space gains in the fall. But if you're going to get ones in the fall, would that we'd know that over the next couple months, is this what you're in the process of? And is there a chance that you get shelf space gains or are we kind of past that where you're not expecting a whole lot new in the fall and you're more just velocity of existing space. Mandy Fields: Yes. So like I said, in our prepared remarks, no indication of shelf space gains at this point. But we remain hopeful and I believe we have a track record of getting shelf space gains each year. We just haven't baked that into our guidance because we usually will do that once we do have confirmation of such gains. Tarang Amin: And the decisions, Bill, for this spring really are made a little bit later this summer. And so as Mandy says, we're quite hopeful given the momentum that we have, not only the amount of share we grew last year, our overall productivity, our innovation pipeline and consumer appeal. So we stand, I think, stronger than we've ever stood in terms of our ability to get more shelf space. We just didn't want to cloud guidance with expectations on shelf space. So it's clean from a standpoint of no space. And if we did get confirmation on more space, we'd update the guidance throughout the year. Bill Chappell: Got it. Thanks so much. Mandy Fields: Yes. Operator: Our next question comes from Jon Andersen with William Blair. Jon Andersen: Hey, good afternoon everybody. I just have one quick one on W3LL PEOPLE. If you could talk a little bit more about your plans for W3LL PEOPLE this year, it sounds like there's been a restage that's going on, but if you could describe if you'll be gaining new distribution as well. I think at the time of the acquisition, one of the theses was that you could leverage your trade relationships, particularly with national retailers to perhaps expand the distribution for that brand. So just some more color around your plans for W3LL PEOPLE this year and what kind of underpins the growth as you see it. Thanks. Tarang Amin: Sure, Jon. So on, W3LL PEOPLE, we are highly encouraged with the plans that we have. There are really four key focus areas. First is recharging the brand similar to what we did with e.l.f. and you see an entirely new brand expression on W3LL PEOPLE, everything from its positioning to packaging that you'll start seeing rollout over the next few months. The second is innovation, really leveraging our strength in innovation and building out the product assortment on W3LL PEOPLE that you'll start seeing some of those new products coming out. I'd say, the third is putting it on our operating platform. So we were able to basically reformulate every single product in the W3LL PEOPLE range, move it onto our operating platform, realize significant COG savings that we put into sharper pricing and that brand recharge. And then the fourth element is distribution. And our key focus on distribution, I would say is Target and Ulta. Target is where the brand historically was most developed. Feel like we have further to go with Target. Ulta, we were already part of the conscious beauty initiative at Ulta, we’ll be looking to leverage that to more space within Ulta and then other customers. So we feel great and we're really pleased with the momentum that we're seeing right now in W3LL PEOPLE. And then the last thing I would say is W3LL PEOPLE also dramatically accelerated our own plans across e.l.f. in the clean beauty space. Keys Soulcare came out the door fully clean. One of the founders of W3LL PEOPLE, Dr. Renée Snyder, dermatologist really was instrumental with the development of that brand. e.l.f. is well on its way in terms of our own clean journey. I think in the next few months, you'll see e.l.f. be 100% clean as well. So there are other benefits W3LL PEOPLE got to the company beyond kind of the growth momentum we see in that brand. Jon Andersen: Great point. Thanks for the help. Operator: Our next question comes from Rupesh Parikh with Oppenhimer. Rupesh Parikh: Thanks for taking my question. So I just want to go back to your comments on the reopening. I was just curious if you're seeing anything surprising as you look at consumer behavior out there. And then if you look at e.l.f. dot-com, are you seeing stickiness or maybe this skincare business as now, consumers may be also buying makeup as well? Tarang Amin: Sure. So, I'd say on the reopening, it's consistent with what we'd expect. We've long talked about as things opened back up as there's more vaccines out there. People go back to normal behavior. You'd see a resurgence in color cosmetics and we very much are seeing that in category trends, but especially on e.l.f. where we were strong before during the pandemic and now kind of coming out of it. So hopeful on the category, as I said, the category is still not where it was two years ago, but we like the trends we're seeing, not only on e.l.f., but I'd say also in some of our key competitors and a lot of that's driven not only by consumers coming back, but the level of innovation that's out there, really pleased seeing kind of Maybelline’s Sky High Mascara, L'Oréal’s Infallible Foundation makes as a few new items. So we like seeing that activity in the broader category. We definitely believe that'll bring more consumers into the category, which is always a great thing for e.l.f. And then in terms of our online business, we had real strength there all throughout the year. It was up triple-digits for our last fiscal year. And one of the big drivers of it was quite a few new consumers, I think almost 70% new consumers. And so our real focus has been on retaining those consumers. So I’m particularly pleased with the progress we've had on our Beauty Squad loyalty program up almost 40% year-over-year in terms of total Beauty Squad loyalty members. And as I mentioned in the prepared remarks, Beauty Squad loyalty members, as well as the new consumers are definitely having a stronger affinity to skincare, which has been great for our overall basket building as well. Rupesh Parikh: Okay, great. Thank you. I'll pass it on. Operator: Our next question comes from Mark Astrachan with Stifel. Mark Astrachan: Yes, thanks and good afternoon everyone. I guess couple directional follow-ups. One on this whole idea of e.l.f. skincare, does that ultimately into over time lead to more shelf space for that maybe even specifically within that category, in terms of the placement of it sort of separation from some of the makeup products and then directionally kind of, how do you holistically think about that? And then separately on the investment spend or marketing spend for this year? So I think you had said 14% to 16%, I guess, what factors drive where A&P spend finishes the year sort of keeping in mind that you're going to be up a lot in the first quarter. So that would apply down a bit in 2Q, 3Q, 4Q and how do you think about that? And as I said, what factors influence that and how quickly can you change it if you need to? Tarang Amin: Sure. So e.l.f. skin, we definitely see expansion potential, not only in shelf space, but the number of new items. I think I've cited in prior calls that e.l.f. skin skincare as a percentage of our portfolio in track channels is single-digits overall, I think, about 9%, 8%, 9% yet on elfcosmetics.com and Amazon it's close to 25% of our sales. So and the biggest difference if you take a look at what's going on online versus in retail is a number of our skincare items on shelf. So we've already had a strategy even with the fall resets coming up of getting more of our skincare assortment onto retailer shelves. In addition, as we earn more space, we use that as an opportunity to increase our footprint on skincare, both in sets where skincare is housed within the overall e.l.f. set, similar to what we do with Target or places like Ulta Beauty, where skincare is housed in the skincare department, you see opportunity in both areas, both getting more assortment in as well as increasing our space. And then on the marketing side of what kind of Mandy add into that, but I'd say, we're comfortable with the momentum we've been able to drive at that 14% to 16%. And so the way we approach marketing is, we really said it as a rate on by brand, each brand has a different percent that we're targeting for that brand. And it goes pretty much hand-in-hand with the sales as we go through. Mandy Fields: And I would just add to that, Mark that in terms of turning it off or turning it on because we have a completely 100% digital spend, we are able to move pretty quickly with the ebbs and flows of the business. So feel great about how we're managing that percentage over the course of the year. Mark Astrachan: Thank you. Operator: Our next question is a follow-up from Andrea Teixeira with J.P. Morgan. Andrea Teixeira: Thank you for taking my follow-up. I just want to confirm like what you said Mandy on the pricing. So I understand you don't want to quantify but you said that pricing in the U.S. will be a little bit less than international. And you alluded to 2019 when you took pricing about a third of the SKUs. So how should we be thinking, and obviously starting now in May, so part of your first quarter is not going to be positively impacted? So how can we think about magnitude of price increases in fiscal 2022 that is embedded in your guide? And also if you – just another follow-up on e-commerce. So I think I understood Tarang, correct me if I'm wrong. You said 25%, but can you quantify, you did give us the number of Beauty Squad member growth, but if you can quantify the growth in e-commerce, that will be helpful, both retail.com and your own elf.com. Mandy Fields: Okay. So I will take the pricing question. So in terms of impact, so we have talked about, again, it's small in the U.S., but broader internationally. If you think about international is roughly 11% of our business. You could assume that, it's roughly the same playbook that we took when we took in 2019, we've now applied that internationally as well. So it will have some impact to the business, Andrea, but not as large of an impact as we saw when we did this pricing in 2019. And again, we're not going, we're not pulling that lever as heavily because we still want to be sure that we're providing that value for our consumers. And so we're just not going to take pricing all the way up so that we maintain that balance with wanting to offset some of these FX headwinds with also delivering that value to our consumers. So we'll be able to report out on that potential impact next quarter when we report earnings. But that's how I'm thinking about it right now. Tarang Amin: And then on your question on our e-commerce business online, our total e-commerce business, where we finished the year was about 17% of our total business. And it was up triple-digits. I think in the year before, e-commerce is only above roughly 9% in FY2020 – it's finished the year in FY2021 at 17% of our business. So we saw definitely a great growth rates there. And that growth was well-balanced between elfcosmetics.com, retailer.com and Amazon. So we saw growth across all three of the major areas that we look at our online business on. Andrea Teixeira: Thank you. That's helpful. Operator: This concludes our question-and-answer session. I'd like to turn the call back over to Tarang Amin for any closing remarks. Tarang Amin: Well, thanks for joining us today. I'm so grateful for our incredible team at e.l.f. Beauty, who've collaborated to navigate the challenges of the pandemic and build our market share. I believe our future is bright and remain confident in our long-term strategy. We look forward to seeing some of you at the upcoming William Blair and Piper Sandler conferences, and speaking with you in August when we'll discuss our first quarter results. Thank you and be well. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
BofA Lifts e.l.f. Beauty Price Target Despite Near-Term Margin Pressure
BofA Securities raised its price target on e.l.f. Beauty (NYSE:ELF) to $135 from $113 while maintaining a Buy rating, pointing to longer-term upside potential despite softer first-quarter expectations.
The firm trimmed its Q1 sales growth estimate to 12% from 15% based on weaker early-quarter scanner data and adjusted its gross margin forecast to 69% from 70%, citing tariff impacts that will only be partially offset by upcoming price hikes set to take effect on August 1. Additionally, non-marketing SG&A is expected to grow faster than sales in the quarter, prompting a downward revision to the firm’s EBITDA estimate for Q1—from $90 million to $69 million.
Despite the short-term drag, BofA remains optimistic about e.l.f.'s trajectory. The analysts anticipate a rebound in sales growth and margin improvement beginning later this year, fueled by higher pricing, ongoing cost efficiencies, and potential supplier concessions. The revised price target reflects confidence in the company’s ability to sustain its category leadership and expand profitability over the medium term.
e.l.f. Beauty, Inc. (NYSE: ELF) Analysts Adjust Price Targets
e.l.f. Beauty, Inc. (NYSE: ELF) is a well-known cosmetics company that offers a wide range of beauty products. It competes with other major players in the beauty industry, such as L'Oréal and Estée Lauder. Over the past year, analysts have adjusted their price targets for ELF, reflecting changes in their expectations for the company's stock performance.
Last month, analysts set an average price target of $95 for ELF, indicating a positive outlook for the company's near-term performance. This optimism may be due to e.l.f. Beauty's ability to gain market share and expand its international presence, as highlighted by its recent activities. Despite challenges like tariffs and fluctuating consumer demand, the company continues to grow its digital channels.
Three months ago, the average price target was $85, showing an upward revision in analysts' expectations. This increase suggests growing confidence in e.l.f. Beauty's performance or market conditions. The company's efforts in inventory management and its focus on profitability could be contributing factors to this positive sentiment.
A year ago, the average price target was significantly higher at $181.11. The substantial decrease over the year may be due to various factors, such as changes in market dynamics or broader economic conditions. Despite this decline, e.l.f. Beauty is rated as a 'hold' with a price target of $75, as there is limited upside potential unless the company raises its fiscal year 2026 guidance above current consensus estimates.
The upcoming Q4 earnings report will be crucial for e.l.f. Beauty, with key areas to watch including fiscal year 2026 revenue guidance and overall profitability outlook. Analysts from D.A. Davidson have set a price target of $77 for the stock. Investors should consider these changes in consensus price targets alongside other factors, such as company news and earnings reports, to make informed decisions about ELF's stock.
e.l.f. Beauty (NYSE:ELF) Maintains Strong Position in the Beauty Industry
e.l.f. Beauty (NYSE:ELF) is a well-known cosmetics company that focuses on providing affordable, high-quality beauty products. The company has carved out a niche in the beauty industry by offering products that are both budget-friendly and effective. e.l.f. Beauty competes with other mass-market and prestige brands, maintaining a competitive edge with its lower price points.
On May 27, 2025, Canaccord Genuity maintained its "Buy" rating for ELF, with the stock priced at $91.72. Analyst Susan Anderson reiterated this rating, setting a price target of $105. e.l.f. Beauty's average unit retail price is approximately $6.50, significantly lower than the mass-market average of over $9. This pricing strategy helps the company maintain its reputation for affordability. Despite the price increase, e.l.f. Beauty remains competitive, offering value to consumers compared to higher-priced prestige brands.
The stock has shown a notable increase of 9.28%, translating to a rise of $7.79. Today, ELF's stock fluctuated between $84.67 and $92.01. Over the past year, the stock reached a high of $219.77 and a low of $49.40, reflecting its volatility. The company's market capitalization is approximately $5.17 billion, with a trading volume of 4,057,519 shares.
E.l.f. Beauty Inc. (NYSE:ELF) Quarterly Earnings Preview
- Analysts predict E.l.f. Beauty Inc. (NYSE:ELF) to report earnings per share of $0.76 and revenue of $328.21 million for the quarter ending December 2024.
- The company's financial metrics such as the price-to-earnings (P/E) ratio of 52.13 and price-to-sales ratio of 4.62 highlight investor confidence in its growth potential.
- ELF's upcoming earnings report on February 6, 2025, could significantly impact its stock price, depending on whether the actual results meet or exceed Wall Street expectations.
E.l.f. Beauty Inc. (NYSE:ELF) is a renowned cosmetics company known for its affordable yet high-quality beauty products. As ELF gears up to release its quarterly earnings on February 6, 2025, analysts and investors are closely watching the company's financial performance. Competing with giants like L'Oréal and Estée Lauder, ELF has carved out a significant niche in the beauty industry.
Wall Street analysts have set the bar with an earnings per share estimate of $0.76 and a projected revenue of approximately $328.21 million. This expected increase in earnings, driven by higher revenues for the quarter ending December 2024, underscores the company's growth trajectory. The forthcoming earnings report, scheduled for February 6, could play a pivotal role in determining ELF's stock price movement in the near term.
A positive earnings surprise could propel the stock upwards, while a miss might trigger a decline. The sustainability of any price changes and future earnings expectations will largely hinge on the management's commentary on business conditions during the earnings call. This discussion is crucial for investors seeking insights into ELF's future prospects.
ELF's financial metrics offer a deeper understanding of its market position. The company's price-to-earnings (P/E) ratio of 52.13 and price-to-sales ratio of 4.62 signal strong investor confidence in its growth potential. Furthermore, the enterprise value to sales ratio of 4.79 and an enterprise value to operating cash flow ratio of 180.39 reflect a significant valuation premium on ELF's sales and cash flow generation capabilities. The earnings yield stands at about 1.92%, indicating the return on investment for shareholders. Additionally, a debt-to-equity ratio of 0.41 and a current ratio of approximately 1.78 suggest a balanced financial structure with adequate liquidity to meet short-term obligations.
E.l.f. Beauty Inc. (NYSE:ELF) Quarterly Earnings Preview
- Analysts predict E.l.f. Beauty Inc. (NYSE:ELF) to report earnings per share of $0.76 and revenue of $328.21 million for the quarter ending December 2024.
- The company's financial metrics such as the price-to-earnings (P/E) ratio of 52.13 and price-to-sales ratio of 4.62 highlight investor confidence in its growth potential.
- ELF's upcoming earnings report on February 6, 2025, could significantly impact its stock price, depending on whether the actual results meet or exceed Wall Street expectations.
E.l.f. Beauty Inc. (NYSE:ELF) is a renowned cosmetics company known for its affordable yet high-quality beauty products. As ELF gears up to release its quarterly earnings on February 6, 2025, analysts and investors are closely watching the company's financial performance. Competing with giants like L'Oréal and Estée Lauder, ELF has carved out a significant niche in the beauty industry.
Wall Street analysts have set the bar with an earnings per share estimate of $0.76 and a projected revenue of approximately $328.21 million. This expected increase in earnings, driven by higher revenues for the quarter ending December 2024, underscores the company's growth trajectory. The forthcoming earnings report, scheduled for February 6, could play a pivotal role in determining ELF's stock price movement in the near term.
A positive earnings surprise could propel the stock upwards, while a miss might trigger a decline. The sustainability of any price changes and future earnings expectations will largely hinge on the management's commentary on business conditions during the earnings call. This discussion is crucial for investors seeking insights into ELF's future prospects.
ELF's financial metrics offer a deeper understanding of its market position. The company's price-to-earnings (P/E) ratio of 52.13 and price-to-sales ratio of 4.62 signal strong investor confidence in its growth potential. Furthermore, the enterprise value to sales ratio of 4.79 and an enterprise value to operating cash flow ratio of 180.39 reflect a significant valuation premium on ELF's sales and cash flow generation capabilities. The earnings yield stands at about 1.92%, indicating the return on investment for shareholders. Additionally, a debt-to-equity ratio of 0.41 and a current ratio of approximately 1.78 suggest a balanced financial structure with adequate liquidity to meet short-term obligations.
Piper Sandler Lowers e.l.f. Beauty Price Target to $162, Shares Down 3%
e.l.f. Beauty (NYSE:ELF) shares fell more than 3% intra-day on Monday after Piper Sandler analysts lowered their price target for the company from $260 to $162, while maintaining an Overweight rating.
After hosting a dinner and investor meetings with key members of e.l.f.'s leadership during the Growth Frontiers Conference in Nashville, the analysts noted a slight reduction in optimism regarding the potential for a significant fiscal year 2025 beat. The analysts cited macroeconomic challenges and a weaker back-to-school season as contributing factors. Despite these concerns, they remain confident that the higher end of management's projections for both revenue and earnings is still achievable, leaving room for potential upside.
Additionally, Piper Sandler highlighted a disconnect between e.l.f.'s recent valuation trends and the company's demonstrated strength and resilience. The analysts recommend buying into the stock during this period of weakness, given the brand's continued performance and long-term potential.
Piper Sandler Lowers e.l.f. Beauty Price Target to $162, Shares Down 3%
e.l.f. Beauty (NYSE:ELF) shares fell more than 3% intra-day on Monday after Piper Sandler analysts lowered their price target for the company from $260 to $162, while maintaining an Overweight rating.
After hosting a dinner and investor meetings with key members of e.l.f.'s leadership during the Growth Frontiers Conference in Nashville, the analysts noted a slight reduction in optimism regarding the potential for a significant fiscal year 2025 beat. The analysts cited macroeconomic challenges and a weaker back-to-school season as contributing factors. Despite these concerns, they remain confident that the higher end of management's projections for both revenue and earnings is still achievable, leaving room for potential upside.
Additionally, Piper Sandler highlighted a disconnect between e.l.f.'s recent valuation trends and the company's demonstrated strength and resilience. The analysts recommend buying into the stock during this period of weakness, given the brand's continued performance and long-term potential.
