e.l.f. Beauty Announces Third Quarter 2017 Results
Nov 08 2017
– Delivers 28% net sales growth over Q3 2016 –
– Raises 2017 Adjusted EPS outlook to
“We are pleased with our third quarter results highlighted by a 28% increase in net sales and strong earnings growth,” stated Tarang Amin, Chairman and Chief Executive Officer. “In a category currently experiencing headwinds, we continue to gain market share driven by the successful execution of our strategy, and mission to make luxurious beauty accessible for all.”
Three Months Results Ended September 30, 2017
Net sales increased 28%, or
Selling, general and administrative expenses (“SG&A”) were
The provision for income taxes was
On a GAAP basis, net income was
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) increased 48% to
Adjusted net income (net income excluding the items identified in the
reconciliation table below) increased 90% to
Nine Months Results Ended September 30, 2017
Net sales increased 23%, or
Selling, general and administrative expenses (“SG&A”) were
The Company generated a tax benefit of
On a GAAP basis, net income was
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) increased 23% to
Adjusted net income (net income excluding the items identified in the
reconciliation table below) increased 117% to
Balance Sheet
At September 30, 2017, the Company had
Company Outlook
The Company adjusted its 2017 outlook to approximately
Full Year | Full Year | |||||||||
2017 Outlook | 2016 Actual Results | |||||||||
Net Sales | $ | Approx. 270 million | $ | 230 million | ||||||
Adjusted EBITDA | $ | 62 million | $ | 54 million | ||||||
Adjusted Net Income | $ | 28 million | $ | 18 million | ||||||
Adjusted Pro Forma Diluted EPS | $ | 0.55 | $ | 0.36 | ||||||
Fully Diluted Shares Outstanding | 50.0 million | 50.2 million | ||||||||
Third Quarter 2017 Conference Call
The Company will hold a conference call today, November 8, 2017, at 4:30 p.m. ET to discuss the Company’s third quarter 2017 results. Investors and analysts interested in participating in the call are invited to dial approximately ten minutes prior to the start of the call. The U.S. toll free dial-in for the conference call is (877) 407-3982 and the international dial-in number is (201) 493-6780. 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 November 8, 2017, until 11:59 p.m. ET on November 15, 2017, and can be accessed by dialing the U.S. toll free dial-in, (844) 512-2921 or the international dial-in, (412) 317-6671, and entering replay pin number 13672483.
About e.l.f. Beauty
e.l.f. makes luxurious beauty accessible for all. 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 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. Beauty, 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, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Adjusted Pro Forma Diluted 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, Adjusted Diluted EPS 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
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 and comprehensive income (loss) (unaudited) (in thousands, except share and per share data) | |||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net sales | $ | 71,865 | $ | 56,312 | $ | 188,295 | $ | 153,132 | |||||||||
Cost of sales | 28,952 | 23,834 | 71,264 | 66,217 | |||||||||||||
Gross profit | 42,913 | 32,478 | 117,031 | 86,915 | |||||||||||||
Selling, general and administrative expenses | 33,133 | 31,002 | 98,843 | 78,807 | |||||||||||||
Operating income | 9,780 | 1,476 | 18,188 | 8,108 | |||||||||||||
Other income (expense), net | (379 | ) | 288 | (1,422 | ) | 2,253 | |||||||||||
Interest expense, net | (2,262 | ) | (5,192 | ) | (6,805 | ) | (11,588 | ) | |||||||||
Income (loss) before provision for income taxes | 7,139 | (3,428 | ) | 9,961 | (1,227 | ) | |||||||||||
Income tax benefit (provision) | (1,274 | ) | 1,051 | 2,034 | (61 | ) | |||||||||||
Net income (loss) | $ | 5,865 | $ | (2,377 | ) | $ | 11,995 | $ | (1,288 | ) | |||||||
Comprehensive income (loss) | $ | 5,865 | $ | (2,377 | ) | $ | 11,995 | $ | (1,288 | ) | |||||||
Net income (loss) per share - basic: | $ | 0.13 | $ | (73.13 | ) | $ | 0.27 | $ | (234.34 | ) | |||||||
Net income (loss) per share - diluted: | $ | 0.12 | $ | (73.13 | ) | $ | 0.24 | $ | (234.34 | ) | |||||||
Weighted average number of shares outstanding - basic: | 45,813,801 | 5,109,016 | 45,132,567 | 2,151,324 | |||||||||||||
Weighted average number of shares outstanding - diluted: | 49,283,247 | 5,109,016 | 49,462,166 | 2,151,324 | |||||||||||||
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated balance sheets (unaudited) (in thousands, except share and per share data) | |||||||||||||
September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||
Assets | |||||||||||||
Current assets: | |||||||||||||
Cash | $ | 5,677 | $ | 15,295 | $ | 21,084 | |||||||
Accounts receivable, net | 35,627 | 37,825 | 33,931 | ||||||||||
Inventories | 63,571 | 69,397 | 41,308 | ||||||||||
Prepaid expenses and other current assets | 8,302 | 2,387 | 10,065 | ||||||||||
Total current assets | 113,177 | 124,904 | 106,388 | ||||||||||
Property and equipment, net | 16,635 | 17,151 | 15,019 | ||||||||||
Intangible assets, net | 107,636 | 113,003 | 115,074 | ||||||||||
Goodwill | 157,264 | 157,264 | 157,264 | ||||||||||
Investments | 2,875 | - | - | ||||||||||
Other assets | 9,433 | 2,407 | 1,713 | ||||||||||
Total assets | $ | 407,020 | $ | 414,729 | $ | 395,458 | |||||||
Liabilities, convertible preferred stock and stockholders' equity | |||||||||||||
Current liabilities: | |||||||||||||
Current portion of long-term debt and capital lease obligations | $ | 18,140 | $ | 8,650 | $ | 4,619 | |||||||
Accounts payable | 21,007 | 37,944 | 21,493 | ||||||||||
Accrued expenses and other current liabilities | 12,937 | 33,676 | 32,822 | ||||||||||
Foreign currency forward contracts | - | - | 2,369 | ||||||||||
Total current liabilities | 52,084 | 80,270 | 61,303 | ||||||||||
Long-term debt and capital lease obligations | 149,690 | 156,177 | 156,831 | ||||||||||
Deferred tax liabilities | 34,408 | 34,212 | 42,072 | ||||||||||
Other long-term liabilities | 2,878 | 3,208 | 2,498 | ||||||||||
Total liabilities | 239,060 | 273,867 | 262,704 | ||||||||||
Commitments and contingencies | |||||||||||||
Stockholders' equity: | |||||||||||||
Common stock, par value of | 459 | 438 | 437 | ||||||||||
Additional paid-in capital | 715,953 | 700,871 | 699,364 | ||||||||||
Accumulated deficit | (548,452 | ) | (560,447 | ) | (567,047 | ) | |||||||
Total stockholders' equity | $ | 167,960 | $ | 140,862 | $ | 132,754 | |||||||
Total liabilities, convertible preferred stock and stockholders' equity | $ | 407,020 | $ | 414,729 | $ | 395,458 | |||||||
e.l.f. Beauty, Inc. and subsidiaries Condensed consolidated statements of cash flows (unaudited) (in thousands) | |||||||||
Nine months ended September 30, | |||||||||
2017 | 2016 | ||||||||
Cash flows from operating activities: | |||||||||
Net income (loss) | $ | 11,995 | $ | (1,288 | ) | ||||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities: | |||||||||
Amortization of intangible and other non-current assets | 5,555 | 6,209 | |||||||
Depreciation of property and equipment | 5,121 | 3,369 | |||||||
Stock-based compensation expense | 9,720 | 5,589 | |||||||
Amortization of debt issuance costs and discount on debt | 605 | 1,504 | |||||||
Deferred income taxes | (1 | ) | 193 | ||||||
Debt prepayment penalty | — | 400 | |||||||
Loss on disposal of fixed assets | 241 | 235 | |||||||
Loss/(gain) on foreign currency forward contracts | — | (8,333 | ) | ||||||
Other, net | 194 | (93 | ) | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | 1,993 | (11,503 | ) | ||||||
Inventories | 5,837 | (9,907 | ) | ||||||
Prepaid expenses and other assets | (13,030 | ) | (8,315 | ) | |||||
Accounts payable and accrued expenses | (34,067 | ) | 23,592 | ||||||
Other liabilities | (330 | ) | 897 | ||||||
Net cash provided by (used in) operating activities | (6,167 | ) | 2,549 | ||||||
Cash flows from investing activities: | |||||||||
Purchase of property and equipment | (4,371 | ) | (5,553 | ) | |||||
Investment in equity securities | (2,875 | ) | — | ||||||
Proceeds from sale of property and equipment | — | 84 | |||||||
Net cash used in investing activities | (7,246 | ) | (5,469 | ) | |||||
Cash flows from financing activities: | |||||||||
Proceeds from revolving line of credit | 24,100 | 5,500 | |||||||
Repayment of revolving line of credit | (14,600 | ) | (13,200 | ) | |||||
Proceeds from long term debt | — | 62,294 | |||||||
Repayment of long-term debt | (6,188 | ) | (42,369 | ) | |||||
Debt issuance costs paid | (519 | ) | - | ||||||
Cash received from issuance of common stock | 1,309 | 64,034 | |||||||
Proceeds from repayment of employee note receivable | — | 7,912 | |||||||
Deferred offering costs paid | — | (5,574 | ) | ||||||
Dividend paid | — | (68,000 | ) | ||||||
Debt prepayment penalty | — | (400 | ) | ||||||
Other, net | (307 | ) | (197 | ) | |||||
Net cash provided by financing activities | 3,795 | 10,000 | |||||||
Net increase (decrease) in cash | (9,618 | ) | 7,080 | ||||||
Cash - beginning of period | 15,295 | 14,004 | |||||||
Cash - end of period | $ | 5,677 | $ | 21,084 | |||||
e.l.f. Beauty, Inc. and subsidiaries Reconciliation of GAAP net income to non-GAAP adjusted EBITDA (unaudited) (in thousands) | |||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net income (loss) | $ | 5,865 | $ | (2,377 | ) | $ | 11,995 | $ | (1,288 | ) | |||||||
Interest expense, net | 2,262 | 5,192 | 6,805 | 11,588 | |||||||||||||
Income tax (benefit) provision | 1,274 | (1,051 | ) | (2,034 | ) | 61 | |||||||||||
Depreciation and amortization | 3,528 | 3,347 | 10,676 | 9,578 | |||||||||||||
EBITDA | $ | 12,929 | $ | 5,111 | $ | 27,442 | $ | 19,939 | |||||||||
Costs related to "restructuring" of operations (a) | 17 | 807 | 22 | 4,651 | |||||||||||||
Initial public offering costs (b) | - | 551 | - | 945 | |||||||||||||
Stock-based compensation | 3,787 | 4,433 | 9,720 | 5,589 | |||||||||||||
Management fee (c) | - | 400 | - | 875 | |||||||||||||
Pre-opening costs (d) | 92 | 577 | 162 | 807 | |||||||||||||
Customer expansion costs (e) | - | - | - | 350 | |||||||||||||
Other non-cash and non-recurring costs (f) | 438 | - | 1,589 | - | |||||||||||||
(Gains) / losses on foreign currency contracts (g) | - | (191 | ) | - | (1,502 | ) | |||||||||||
Adjusted EBITDA | $ | 17,263 | $ | 11,688 | $ | 38,935 | $ | 31,654 | |||||||||
(a) |
Represents costs associated with the restructuring of the Company’s
operations, including the transition of the Company’s | |
(b) | Represents expenses related to preparing for and completing the Company’s initial public offering. | |
(c) | Represents management fees paid to TPG Growth II Management, LLC. | |
(d) | 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. | |
(e) | Represents costs associated with securing additional distribution space, slotting expense, freight and certain costs related to installation of fixtures. | |
(f) | Represents legal costs primarily related to a minority equity investment in a social media analytics company, expenses associated with a secondary offering of common stock and costs related to certain transformational information technology projects. | |
(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 adjusted SG&A (unaudited) (in thousands) | |||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Selling, general, and administrative expenses | $ | 33,133 | $ | 31,002 | $ | 98,843 | $ | 78,807 | |||||||||
Costs related to "restructuring" of operations (a) | (17 | ) | (807 | ) | (22 | ) | (4,651 | ) | |||||||||
Initial public offering costs (b) | - | (551 | ) | - | (945 | ) | |||||||||||
Stock-based compensation | (3,787 | ) | (4,433 | ) | (9,720 | ) | (5,589 | ) | |||||||||
Management fee (c) | - | (400 | ) | - | (875 | ) | |||||||||||
Pre-opening costs (d) | (92 | ) | (577 | ) | (162 | ) | (807 | ) | |||||||||
Other non-cash and non-recurring costs (e) | (438 | ) | - | (1,589 | ) | - | |||||||||||
Adjusted selling, general, and administrative expenses | $ | 28,799 | $ | 24,234 | $ | 87,350 | $ | 65,940 | |||||||||
(a) |
Represents costs associated with the restructuring of the Company’s
operations, including the transition of the Company’s | |
(b) | Represents expenses related to preparing for and completing the Company’s initial public offering. | |
(c) | Represents management fees paid to TPG Growth II Management, LLC. | |
(d) | 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. | |
(e) | Represents legal costs primarily related to a minority equity investment in a social media analytics company, expenses associated with a secondary offering of common stock and costs related to certain transformational information technology projects. | |
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 September 30, | Nine months ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net income (loss) | $ | 5,865 | $ | (2,377 | ) | $ | 11,995 | $ | (1,288 | ) | |||||||
Costs related to "restructuring" of operations (a) | 17 | 807 | 22 | 4,651 | |||||||||||||
Initial public offering costs (b) | - | 551 | - | 945 | |||||||||||||
Stock-based compensation | 3,787 | 4,433 | 9,720 | 5,589 | |||||||||||||
Management fee (c) | - | 400 | - | 875 | |||||||||||||
Pre-opening costs (d) | 92 | 577 | 162 | 807 | |||||||||||||
Customer expansion costs (e) | - | - | - | 350 | |||||||||||||
Other non-cash and non-recurring costs (f) | 438 | - | 1,589 | - | |||||||||||||
(Gains) / losses on foreign currency contracts (g) | - | (191 | ) | - | (1,502 | ) | |||||||||||
Interest expense (h) | - | 932 | - | 932 | |||||||||||||
Tax Impact (i) | (1,658 | ) | (626 | ) | (4,419 | ) | (2,587 | ) | |||||||||
Adjusted net income | $ | 8,541 | $ | 4,506 | $ | 19,069 | $ | 8,772 | |||||||||
Fully-diluted pro forma share count (j) | 49,283,247 | 50,276,316 | 49,462,166 | 50,276,316 | |||||||||||||
Adjusted pro forma diluted earnings per share | $ | 0.17 | $ | 0.09 | $ | 0.39 | $ | 0.17 | |||||||||
(a) |
Represents costs associated with the restructuring of the Company’s
operations, including the transition of the Company’s | |
(b) | Represents expenses related to preparing for and completing the Company’s initial public offering. | |
(c) | Represents management fees paid to TPG Growth II Management, LLC. | |
(d) | 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. | |
(e) | Represents costs associated with securing additional distribution space, slotting expense, freight and certain costs related to installation of fixtures. | |
(f) | Represents legal costs primarily related to a minority equity investment in a social media analytics company, expenses associated with a secondary offering of common stock and costs related to certain transformational information technology projects. | |
(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. | |
(i) | Represents the tax impact of the above adjustments. | |
(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, 2016. |
ELF-ER
View source version on businesswire.com: http://www.businesswire.com/news/home/20171108006437/en/
Investor Relations:
ICR, Inc.
Investors:
Allison
Malkin, 203-682-8200
or
Media:
Brittany Rae Fraser,
646-277-1231
Source: e.l.f. Beauty