e.l.f. Beauty, Inc. Announces Fourth Quarter and Full Year 2016 Results
Mar 08 2017
- Delivers 20% net sales growth in 2016 -
- Provides guidance of 24% to 28% net sales growth in 2017 -
“We are pleased to report that e.l.f. grew net sales 20% and expanded gross margin by over 500 basis points in 2016,” stated Tarang Amin, Chairman and Chief Executive Officer. “This strong performance reflects progress executing our mission to make luxurious beauty accessible to all women. Our first to mass innovation and authentic brand appeals to some of the best consumers in cosmetics – young, diverse, make-up enthusiasts. With strength across leading national retailers and our direct business, we expect net sales growth in 2017 of 24% to 28%.”
Three Months Results Ended December 31, 2016
Net sales increased 17%, or
Selling, general and administrative expenses (“SG&A”) increased to 40%
of net sales, compared to 37% of net sales in the fourth quarter of
2015, primarily due to continued investment to support long-term growth.
SG&A includes
On a GAAP basis, net income was
Adjusted net income (net income excluding the items identified in the
reconciliation table below) increased 36% to
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) was
Full Year Results Ended December 31, 2016
Net sales increased 20%, or
SG&A increased to 48% of net sales, compared to 39% of net sales for
fiscal 2015, primarily due to continued investment to support long-term
growth. SG&A includes
On a GAAP basis, net loss attributable to common stockholders was
Adjusted net income (net income excluding the items identified in the
reconciliation table below) increased 33% to
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) was
Balance Sheet
At December 31, 2016, the Company had
Refinancing
On December 23, 2016, the Company refinanced its existing credit
facility allowing it to lengthen the maturity at a lower interest rate.
The new facility consists of a five-year,
Company Outlook
The Company is pleased to provide full year guidance for 2017, implying strong revenue growth, the full-year impact of public company expenses, and continued investments in people, infrastructure, and brand building.
Full Year | Full Year | ||||||||
2017 Outlook | 2016 Actual Results | ||||||||
Net Sales | $ | 285 - 295 million | $ | 230 million | |||||
Adjusted EBITDA | $ | 61 - 64 million | $ | 54 million | |||||
Adjusted Net Income | $ | 21 - 23 million | $ | 18 million | |||||
Adjusted Pro Forma Diluted EPS | $ | 0.40 - 0.43 | $ | 0.36 | |||||
The Company affirms its long-term growth algorithm of 20% compound annual net sales and EBITDA growth from 2016 to 2019 and annual gross margin expansion of 100 bps or greater during the same period.
Fourth Quarter and Full Year 2016 Conference Call
The Company will hold a conference call today, March 8, 2017, at 4:30 p.m. ET to discuss the Company’s fourth quarter and full year 2016 results. Investors and analysts interested in participating in the call are invited to dial (877) 451-6152 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at http://investor.elfcosmetics.com/ and remain available for 90 days. A telephone replay of this call will be available at 7:30 p.m. ET on March 8, 2017, until 11:59 p.m. ET on March 15, 2017, and can be accessed by dialing (844) 512-2921 and entering replay pin number 13656364.
About e.l.f. Beauty, Inc.
e.l.f. makes luxurious beauty accessible for all women to play
beautifully®. Established in 2004 as an e-commerce business (www.elfcosmetics.com),
e.l.f. has become a true multi-channel brand through its e.l.f. stores
and national distribution at Target, Walmart, CVS, Old Navy and other
leading retailers. By engaging young, diverse makeup enthusiasts with
innovative, high-quality cosmetics at an extraordinary value, e.l.f. has
become one of the fastest growing cosmetics companies in
For more information about e.l.f., visit the Company’s website at http://www.elfcosmetics.com.
Note Regarding Non-GAAP Financial Measures
This press release includes references to Adjusted SG&A, Adjusted Net Income, EBITDA, Adjusted EBITDA and Adjusted Pro Forma EPS. The Company presents these measures because its management uses these 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 measures referenced above 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 alternative measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These alternative 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 alternative measures are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measures in the tables at the end of this press release. With respect to the Company’s expectations under “Company Outlook” above, the Company is not able to provide a quantitative reconciliation of the Adjusted EBITDA, Adjusted Net Income and Adjusted Pro Forma Diluted EPS guidance non-GAAP measures to the corresponding Net Income and Diluted EPS GAAP measures without unreasonable efforts. The Company cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, the Company is unable to address the probable significance of the unavailable information.
Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements discuss the Company’s current expectations,
estimates and projections relating to its financial condition, results
of operations, plans, objectives, future performance and business. These
statements, including management quotes and those under the heading
“Company Outlook,” are based on the Company’s current plans and
expectations and involve risks and uncertainties which are, in many
instances, beyond the Company’s control, and which could cause actual
results to differ materially from those included in or contemplated or
implied by the forward-looking statements. Such risks and uncertainties
include, but are not limited to: the Company’s ability to grow Net
Sales, Gross Margin, Adjusted EBITDA, Adjusted Net Income and Adjusted
Pro Forma Diluted EPS as anticipated; the Company’s ability to
effectively compete with other cosmetics companies; the Company’s
ability to successfully introduce new products; the loss of one or more
of the Company’s key retail customers or if the general business
performance of its key retail customers declines; the consequences if
the Company fails to maintain the quality, performance and safety of its
products; the Company’s ability to successfully implement its growth
strategy; the Company’s ability to grow its business at historic rates,
or at all, and to manage growth effectively; any damage to the Company’s
reputation or brand; the loss of, or damage to, the Company’s warehouse
and distribution center and/or the manufacturing facilities or
distribution centers of its third-party manufacturers and suppliers; the
loss of the third-party suppliers, manufacturers, distributors and other
vendors that the Company relies on to produce products or provide
services that are consistent with its standards or applicable regulatory
requirements; the Company’s ability to effectively manage its inventory;
the Company’s ability to manage its debt obligations; the Company’s
ability to maintain sufficient liquidity to sustain its business and
meet seasonal working capital requirements; the Company’s ability to
protect against service interruptions, data corruption, cyber-based
attacks or network security breaches, and to effectively resolve issues
in a timely manner if they occur; the Company’s ability to protect
sensitive information of its consumers and information technology
systems against security breaches; the Company’s ability to manage the
political, legal and economic risks associated with its operations in
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated statements of operations (in thousands, except share and per share data) | ||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net sales | $ | 65,436 | $ | 76,436 | $ | 191,413 | $ | 229,567 | ||||||||
Cost of sales | 30,407 | 31,116 | 91,084 | 97,332 | ||||||||||||
Gross profit | 35,029 | 45,320 | 100,329 | 132,236 | ||||||||||||
Selling, general, and administrative expenses | 24,092 | 30,349 | 74,758 | 109,156 | ||||||||||||
Operating income | 10,937 | 14,971 | 25,571 | 23,079 | ||||||||||||
Other income (expense), net | (3,255 | ) | 763 | (4,172 | ) | 3,016 | ||||||||||
Interest expense, net | (3,246 | ) | (4,695 | ) | (12,721 | ) | (16,283 | ) | ||||||||
Income (loss) before provision for income taxes | 4,436 | 11,039 | 8,678 | 9,812 | ||||||||||||
Income tax benefit (provision) | (2,009 | ) | (4,438 | ) | (4,321 | ) | (4,499 | ) | ||||||||
Net income (loss) | $ | 2,427 | $ | 6,601 | $ | 4,357 | $ | 5,313 | ||||||||
Comprehensive income (loss) | $ | 2,427 | $ | 6,601 | $ | 4,357 | $ | 5,313 | ||||||||
Weighted average number of shares outstanding - basic: | 34,493 | 43,744,855 | 30,523 | 12,606,529 | ||||||||||||
Weighted average number of shares outstanding - diluted: | 34,493 | 49,524,007 | 30,523 | 12,606,529 | ||||||||||||
Net loss per share - basic: | $ | (1,151.13 | ) | $ | 0.15 | $ | (1,559.81 | ) | $ | (39.47 | ) | |||||
Net loss per share - diluted: | $ | (1,151.13 | ) | $ | 0.13 | $ | (1,559.81 | ) | $ | (39.47 | ) | |||||
The Company noted that the net loss per share in periods prior to the fourth quarter of fiscal 2016 was primarily driven by the requirement to accrete its preferred stock to maximum redemption value, prior to its conversion as part of the initial public offering. These accretion charges are deducted from net income for purposes of calculating GAAP earnings per share, and created a loss attributable to common stockholders in those periods.
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated balance sheets (in thousands, except share and per share data) | ||||||||
December 31, 2015 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 14,004 | $ | 15,295 | ||||
Accounts receivable, net | 22,475 | 37,825 | ||||||
Inventories | 31,261 | 69,397 | ||||||
Prepaid expenses and other current assets | 2,978 | 2,387 | ||||||
Total current assets | 70,718 | 124,904 | ||||||
Property and equipment, net | 9,854 | 17,151 | ||||||
Intangible assets, net | 121,282 | 113,003 | ||||||
Goodwill | 157,264 | 157,264 | ||||||
Other assets | 1,954 | 2,407 | ||||||
Total assets | $ | 361,072 | $ | 414,729 | ||||
Liabilities, convertible preferred stock and stockholders' equity (deficit) | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt and capital lease obligations | $ | 10,325 | $ | 8,650 | ||||
Accounts payable | 11,114 | 37,944 | ||||||
Accrued expenses and other current liabilities | 13,713 | 33,676 | ||||||
Foreign currency forward contracts | 10,702 | - | ||||||
Total current liabilities | 45,854 | 80,270 | ||||||
Long-term debt and capital lease obligations | 134,594 | 156,177 | ||||||
Deferred tax liabilities | 42,126 | 34,212 | ||||||
Other long-term liabilities | 1,601 | 3,208 | ||||||
Total liabilities | 224,175 | 273,867 | ||||||
Commitments and contingencies | ||||||||
Convertible preferred stock, par value of | 197,295 | — | ||||||
Stockholders' equity (deficit): | ||||||||
Preferred stock, par value of | — | — | ||||||
Common stock, par value of | — | 438 | ||||||
Additional paid-in capital | 6,785 | 700,871 | ||||||
Accumulated deficit | (67,183 | ) | (560,447 | ) | ||||
Total stockholders' equity (deficit) | $ | (60,398 | ) | $ | 140,862 | |||
Total liabilities, convertible preferred stock and stockholders' equity (deficit) | $ | 361,072 | $ | 414,729 | ||||
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated statements of cash flows (in thousands) | ||||||||
Year ended December 31, | ||||||||
2015 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 4,357 | $ | 5,313 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Amortization of intangible assets | 8,246 | 8,279 | ||||||
Depreciation of property and equipment | 2,043 | 4,873 | ||||||
Stock-based compensation expense | 503 | 7,149 | ||||||
Amortization of debt issuance costs and discount on debt | 1,070 | 1,281 | ||||||
Deferred income taxes | (3,933 | ) | (7,575 | ) | ||||
Loss on extinguishment of debt | - | 2,736 | ||||||
Loss on disposal of fixed assets | 571 | 260 | ||||||
Compensation expense paid to seller | 489 | - | ||||||
Loss/(gain) on foreign currency forward contracts | 4,741 | (10,702 | ) | |||||
Other, net | 23 | (13 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 4,448 | (15,392 | ) | |||||
Inventories | (2,147 | ) | (37,994 | ) | ||||
Prepaid expenses and other assets | 943 | (635 | ) | |||||
Accounts payable and accrued expenses | 3,532 | 43,144 | ||||||
Other liabilities | 787 | 1,396 | ||||||
Due to related parties | (1,154 | ) | - | |||||
Net cash provided by (used in) operating activities | 24,519 | 2,120 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (10,142 | ) | (9,223 | ) | ||||
Proceeds from sale of property and equipment | - | 84 | ||||||
Acquisition of intangible assets | (100 | ) | - | |||||
Net cash used in investing activities | (10,242 | ) | (9,139 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from revolving line of credit | 27,150 | 5,500 | ||||||
Repayment of revolving line of credit | (29,100 | ) | (13,200 | ) | ||||
Proceeds from long term debt | - | 172,749 | ||||||
Repayment of long term debt | (2,625 | ) | (151,540 | ) | ||||
Cash received from issuance of common stock | 25 | 64,071 | ||||||
Deferred offering costs paid | (391 | ) | (7,821 | ) | ||||
Proceeds from repayment of employee note receivable | - | 7,912 | ||||||
Dividend paid | - | (68,000 | ) | |||||
Debt issuance costs paid | - | (704 | ) | |||||
Other, net | - | (657 | ) | |||||
Net cash provided by (used in) financing activities | (4,941 | ) | 8,310 | |||||
Net increase in cash | 9,336 | 1,291 | ||||||
Cash - beginning of period | 4,668 | 14,004 | ||||||
Cash - end of period | 14,004 | 15,295 | ||||||
e.l.f. Beauty, Inc. and subsidiaries Reconciliation of GAAP Net income (loss) to non-GAAP Adjusted EBITDA (unaudited) (in thousands) | ||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Net income (loss) | $ | 2,427 | $ | 6,601 | $ | 4,357 | $ | 5,313 | ||||||||
Interest expense | 3,246 | 4,695 | 12,721 | 16,283 | ||||||||||||
Provision (benefit) for income taxes | 2,009 | 4,438 | 4,321 | 4,499 | ||||||||||||
Depreciation and amortization | 2,897 | 3,574 | 10,289 | 13,152 | ||||||||||||
EBITDA | $ | 10,579 | $ | 19,308 | $ | 31,688 | $ | 39,247 | ||||||||
Transaction-related expenses (a) | — | — | 705 | — | ||||||||||||
Costs related to "restructuring" of operations (b) | 6 | 50 | 1,595 | 4,701 | ||||||||||||
Initial public offering costs (c) | 509 | — | 1,144 | 945 | ||||||||||||
Stock-based compensation | 147 | 1,560 | 503 | 7,149 | ||||||||||||
Management fee (d) | 192 | — | 854 | 875 | ||||||||||||
Pre-opening costs (e) | — | 424 | 64 | 1,231 | ||||||||||||
Customer expansion costs (f) | 436 | 371 | 1,191 | 721 | ||||||||||||
Other non-cash and non-recurring costs | 408 | — | 530 | — | ||||||||||||
(Gains) / losses on foreign currency contracts (g) | 5,289 | 405 | 7,904 | (1,097 | ) | |||||||||||
Adjusted EBITDA | $ | 17,566 | $ | 22,118 | $ | 46,178 | $ | 53,772 | ||||||||
(a) Represents transaction-related expenses related to the acquisition of e.l.f. Cosmetics, Inc. |
(b) Represents costs associated with the restructuring of the
Company’s operations including the transition of the Company’s |
(c) Represents expenses related to preparing for and completing the Company’s initial public offering. |
(d) Represents management fees paid to TPG Growth II Management, LLC. |
(e) Represents costs associated with e.l.f. stores incurred prior to the store opening, including legal-related costs, rent and occupancy expenses, marketing and other store operating supply expenses. |
(f) Represents costs associated with securing additional distribution space, slotting expense, freight and certain costs related to installation of fixtures. |
(g) Represents non-cash (gains) / losses on the Company’s foreign currency contracts. |
e.l.f. Beauty, Inc. and subsidiaries Reconciliation of GAAP SG&A to non-GAAP SG&A (unaudited) (in thousands) | ||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Selling, general, and administrative expenses | $ | 24,092 | $ | 30,349 | $ | 74,758 | $ | 109,156 | ||||||||
Transaction-related expenses (a) | — | — | (705 | ) | — | |||||||||||
Costs related to "restructuring" of operations (b) | (6 | ) | (50 | ) | (1,595 | ) | (4,701 | ) | ||||||||
Initial public offering costs (c) | (509 | ) | — | (1,144 | ) | (945 | ) | |||||||||
Stock-based compensation | (147 | ) | (1,560 | ) | (503 | ) | (7,149 | ) | ||||||||
Management fee (d) | (192 | ) | — | (854 | ) | (875 | ) | |||||||||
Pre-opening costs (e) | — | (424 | ) | (64 | ) | (1,231 | ) | |||||||||
Customer expansion costs (f) | (121 | ) | — | (432 | ) | — | ||||||||||
Other non-cash and non-recurring costs | (408 | ) | — | (530 | ) | — | ||||||||||
Adjusted selling, general, and administrative expenses | $ | 22,709 | $ | 28,315 | $ | 68,931 | $ | 94,255 | ||||||||
(a) Represents transaction-related expenses related to the acquisition of e.l.f. Cosmetics, Inc. |
(b) Represents costs associated with the restructuring of the
Company’s operations including the transition of the Company’s |
(c) Represents expenses related to preparing for and completing the Company’s initial public offering. |
(d) Represents management fees paid to TPG Growth II Management, LLC. |
(e) Represents costs associated with e.l.f. stores incurred prior to the store opening, including legal-related costs, rent and occupancy expenses, marketing and other store operating supply expenses. |
(f) Represents costs associated with securing additional distribution space, freight and certain costs related to installation of fixtures. |
e.l.f. Beauty, Inc. and subsidiaries Reconciliation of GAAP Net income (loss) to non-GAAP Adjusted net income (unaudited) (in thousands, except share and per share data) | ||||||||||||||||
Three months ended December 31, | Year ended December 31, | |||||||||||||||
2015 | 2016 | 2015 | 2016 | |||||||||||||
Net income | $ | 2,427 | $ | 6,601 | $ | 4,357 | $ | 5,313 | ||||||||
Transaction-related expenses (a) | — | — | 705 | — | ||||||||||||
Costs related to "restructuring" of operations (b) | 6 | 50 | 1,595 | 4,701 | ||||||||||||
Initial public offering costs (c) | 509 | — | 1,144 | 945 | ||||||||||||
Stock-based compensation | 147 | 1,560 | 503 | 7,149 | ||||||||||||
Management fee (d) | 192 | — | 854 | 875 | ||||||||||||
Pre-opening costs (e) | — | 424 | 64 | 1,231 | ||||||||||||
Customer expansion costs (f) | 436 | 371 | 1,191 | 721 | ||||||||||||
Other non-cash and non-recurring costs | 408 | — | 530 | — | ||||||||||||
(Gains) / losses on foreign currency contracts (g) | 5,289 | 405 | 7,904 | (1,097 | ) | |||||||||||
Interest expense (h) | — | 1,805 | — | 2,736 | ||||||||||||
Tax Impact (i) | (2,483 | ) | (1,780 | ) | (5,130 | ) | (4,366 | ) | ||||||||
Adjusted Net Income | $ | 6,931 | $ | 9,436 | $ | 13,717 | $ | 18,208 | ||||||||
Fully-diluted pro forma share count (j) | 50,223,726 | 50,223,726 | 50,223,726 | 50,223,726 | ||||||||||||
Adjusted pro forma diluted earnings per share | $ | 0.14 | $ | 0.19 | $ | 0.27 | $ | 0.36 | ||||||||
(a) Represents transaction-related expenses related to the acquisition of e.l.f. Cosmetics, Inc. |
(b) Represents costs associated with the restructuring of the
Company’s operations including the transition of the Company’s |
(c) Represents expenses related to preparing for and completing the Company’s initial public offering. |
(d) Represents management fees paid to TPG Growth II Management, LLC. |
(e) Represents costs associated with e.l.f. stores incurred prior to the store opening, including legal-related costs, rent and occupancy expenses, marketing and other store operating supply expenses. |
(f) Represents costs associated with securing additional distribution space, slotting expense, freight and certain costs related to installation of fixtures. |
(g) Represents non-cash (gains) / losses related to the Company’s foreign currency contracts. |
(h) Represents the prepayment penalty and acceleration of deferred financing fees related to the repayment of the Company’s second lien term loan with proceeds from the Company’s initial public offering, and the acceleration of deferred financing fees associated with the refinancing of the Company’s credit facility in December 2016. |
(i) Represents the tax impact of the above adjustments, as well as the exclusion of the impact of a one-time deferred tax rate adjustment. |
(j) Presented on a fully-diluted basis utilizing the treasury stock method, and reflects the number of shares issued with the initial public offering in September 2016 as if they had been outstanding as of January 1, 2015. |
ELF-ER
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Source: e.l.f. Beauty, Inc.