– Delivers 28% net sales growth over Q3 2016
–
– Raises 2017 Adjusted EPS outlook to $0.55 on
net sales of approximately $270 million –
e.l.f. Beauty (NYSE:ELF), today announced results for the three-
and nine-month periods ended September 30, 2017.
“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 $15.6 million from the third quarter
of 2016, to $71.9 million, driven by sales growth across leading
national retailers and the Company’s direct business. Gross margin
expanded to 60% from 58% in the third quarter of 2016, primarily as
a result of margin accretive innovation, coupled with improvements
in customer terms, freight costs and foreign exchange rate
movements, partially offset by customer mix.
Selling, general and administrative expenses (“SG&A”) were
$33.1 million, or 46% of net sales, compared to $31.0 million, or
55% of net sales in the third quarter of 2016. SG&A includes
$4.3 million of costs and expenses that are non-cash or that
management does not believe are reflective of the Company’s ongoing
operations. Adjusted SG&A, excluding these costs and expenses,
was $28.8 million, or 40% of net sales, compared to $24.2 million,
or 43% of net sales, in the same period in fiscal 2016.
The provision for income taxes was $1.3 million, compared to a
benefit of $1.1 million in the third quarter of 2016. The change
was primarily driven by an increase in pretax net income, partially
offset by the impact of discrete items, including a $0.5 million
benefit from stock option exercises.
On a GAAP basis, net income was $5.9 million, or $0.12 per
diluted share, based on a weighted-average share count of 49.3
million shares. This compares to a net loss attributable to common
stockholders of $373.6 million, or $73.13 per share, based on a
weighted-average share count of 5.1 million shares in the third
quarter of 2016.
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) increased 48% to $17.3 million compared
to Adjusted EBITDA of $11.7 million in the third quarter of
2016.
Adjusted net income (net income excluding the items identified
in the reconciliation table below) increased 90% to $8.5 million,
compared to adjusted net income of $4.5 million in the third
quarter of 2016. On a per share basis, adjusted net income
increased 94% to $0.17 per diluted share, based on a
weighted-average share count of 49.3 million shares, from $0.09 per
diluted share, based on a pro forma share count of 50.3 million
shares in the third quarter of 2016.
Nine Months Results Ended September 30, 2017
Net sales increased 23%, or $35.2 million from the first nine
months of 2016, to $188.3 million and gross margin expanded to 62%
from 57% in the first nine months of 2016.
Selling, general and administrative expenses (“SG&A”) were
$98.8 million, or 52% of net sales, compared to $78.8 million, or
51% of net sales in the first nine months of 2016. SG&A
includes $11.5 million of costs and expenses that are non-cash or
that management does not believe are reflective of the Company’s
ongoing operations. Adjusted SG&A, excluding these costs and
expenses, was $87.4 million, or 46% of net sales, compared to $65.9
million, or 43% of net sales, in the same period in fiscal
2016.
The Company generated a tax benefit of $2.0 million, compared to
a provision for income taxes of $0.1 million in the first nine
months of 2016. The benefit in the first nine months of 2017 was
primarily driven by the impact of discrete items, including a $4.9
million benefit from stock option exercises.
On a GAAP basis, net income was $12.0 million, or $0.24 per
diluted share, based on a weighted-average share count of 49.5
million shares. This compares to a net loss attributable to common
stockholders of $504.1 million, or $234.34 per share, based on a
weighted-average share count of 2.2 million shares in the first
nine months of 2016.
Adjusted EBITDA (EBITDA excluding the items identified in the
reconciliation table below) increased 23% to $38.9 million compared
to Adjusted EBITDA of $31.7 million in the first nine months of
2016.
Adjusted net income (net income excluding the items identified
in the reconciliation table below) increased 117% to $19.1 million
compared to adjusted net income of $8.8 million in the first nine
months of 2016. On a per share basis, adjusted net income increased
121% to $0.39 per diluted share, based on a weighted-average share
count of 49.5 million shares, compared to $0.17 per diluted share,
based on a pro forma share count of 50.3 million shares in the
first nine months of 2016.
Balance Sheet
At September 30, 2017, the Company had $5.7 million in cash, as
compared to $21.1 million as of September 30, 2016. Inventory at
September 30, 2017, totaled $63.6 million, compared to $41.3
million on September 30, 2016 and $69.4 million on December 31,
2016. At September 30, 2017, long-term debt totaled $149.7 million,
as compared to $156.8 million as of September 30, 2016.
Company Outlook
The Company adjusted its 2017 outlook to approximately $270
million of net sales, reflecting timing of pipeline shipments and
new distribution, as well as category trends. The Company
reaffirmed its Adjusted EBITDA outlook within the previously
provided range and increased its Adjusted Net Income and Adjusted
Diluted EPS guidance.
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
the United States.
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 China; and other risks and uncertainties that may be
described from time to time in the Company’s reports and filings
with the Securities and Exchange Commission, including the risks
and uncertainties set forth in the Company’s Quarterly Report on
Form 10-Q for the period ended June 30, 2017. Any forward-looking
statements are made pursuant to the Private Securities Litigation
Reform Act of 1995, as amended, and speak only as of the date
hereof. The Company undertakes no obligation to update
forward-looking statements to reflect developments or information
obtained after the date hereof and disclaims any obligation to do
so other than as may be required by law.
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 $0.01 per
share; 250,000,000 shares authorizedas of September 30, 2017,
December 31, 2016 and September 30, 2016;46,242,817, 45,276,137,
and 45,255,757 shares issued and outstanding as ofSeptember 30,
2017, December 31, 2016 and September 30, 2016,respectively
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 New Jersey warehouse and distribution
center in 2016. (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 New Jersey
warehouse and distribution center in 2016. (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 New Jersey warehouse and distribution center in
2016. (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
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version on businesswire.com: http://www.businesswire.com/news/home/20171108006437/en/
Investor Relations:ICR, Inc.Investors:Allison Malkin,
203-682-8200orMedia:Brittany Rae Fraser, 646-277-1231
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