Exhibit 99.1
e.l.f. Beauty Announces First Quarter Fiscal 2021 Results
– Delivers 8% Net Sales Growth and 500 Basis Points Gross Margin Expansion –
– Gains 100 Basis Points of Nielsen Market Share in U.S. Color Cosmetics –
– Announces New Lifestyle Beauty Brand with Alicia Keys –
“We are proud of the e.l.f. team for delivering strong results and navigating category headwinds during these unprecedented times,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “This is our sixth consecutive quarter of net sales growth, up 8% in Q1 versus last year. We also expanded gross margin to 67%, up nearly 500 basis points versus last year. Of the top five color cosmetics brands in the U.S., we were the only one to grow share in the quarter with 5.5% of the market, up 100 basis points versus last year, according
to Nielsen. We believe that the successful execution of our strategic imperatives has set the foundation for long-term growth for the e.l.f. brand, as well as a platform for strategic extensions.”
“Today, we are also thrilled to announce that we are partnering with Alicia Keys, 15-time Grammy Award winning artist, producer, actress, and New York Times best-selling author, to create a new lifestyle beauty brand. This brand is a natural extension for us, bringing new meaning to beauty with an inclusive point of view, an authentic voice and a line of skin-loving, dermatologist-developed, cruelty-free products. We look forward to leveraging our operating platform and track record of success to build a multi-brand portfolio and advance our mission to make the best of beauty accessible to all.”
Net sales increased 8%, or $4.8 million, to $64.5 million, as compared to $59.8 million in the three months ended June 30, 2019. The increase was primarily driven by strength in digital, partially offset by certain retailer store closures in the U.S. and internationally due to COVID-19. Gross margin increased to
67% from 62% when compared to the three months ended June 30, 2019, with benefits primarily driven by the shift in our sales mix to elfcosmetics.com, price increases implemented last summer, margin accretive innovation, cost savings, and favorable movements in foreign exchange rates, partially offset by the impact of tariffs on goods imported from China. SG&A was $40.3 million, or 63% of net sales, compared to $32.1 million, or 54% of net sales in the three months ended
June 30, 2019. The increase was primarily due to increased employee compensation costs related to annualizing headcount from building out our marketing, digital and innovation capabilities, proxy contest costs, operations costs driven by the increase in eCommerce sales, and investments in marketing and digital. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) was $33.1 million, or 51% of net sales, compared to $27.8 million, or 47% of net sales in the three months ended June 30, 2019. The
benefit for income taxes was $1 thousand, as compared to a provision of $1.9 million in the three months ended June 30, 2019. The change was primarily driven by a decrease in income before taxes of $4.1 million and an increase in discrete tax benefit of $0.7 million, primarily related to share-based compensation. Net income was $1.5 million, or $0.03 per diluted share, based on a weighted-average diluted share count of 50.9 million shares. This compares to net income of
$3.7 million, or $0.07 per diluted share, based on a weighted-average diluted share count of 50.3 million shares in the three months ended June 30, 2019.
Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) increased 7% to $15.5 million from $14.5 million in the three
months ended June 30, 2019. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $8.6 million, or $0.17 per diluted share, based on a weighted-average diluted share count of 50.9 million shares. This compares to adjusted net income of $6.9 million, or $0.14 per diluted share, based on a weighted-average diluted share count of 50.3 million in the three months ended June 30, 2019. Balance
Sheet
As of June 30, 2020, the Company had $54.2 million in cash and cash equivalents, as compared to $60.7 million as of June 30, 2019. The decrease was primarily due to the acquisition of W3LL PEOPLE for $25.9 million in February 2020. As of June 30, 2020, long-term debt totaled $122.7 million, as compared to $135.5 million as of June 30,
2019. New Lifestyle Beauty Brand with Alicia Keys
The Company believes strategic extensions are key to its long-term growth as it evolves from a single brand to a multi-brand beauty company. Today, the Company is announcing a new lifestyle beauty brand developed by e.l.f. with Alicia Keys. This is not just another “celebrity beauty line.” The Company has developed a robust multi-year, multi-category product pipeline with Alicia Keys to support the long-term growth of this brand. Adding this brand plus W3LL PEOPLE to the
Company’s portfolio reflects the Company’s deep commitment to inclusive, accessible, and cruelty-free beauty. The Company’s interests are aligned with Alicia’s with a royalty and milestone-based fee structure that leverages both cash and e.l.f. Beauty equity. The Company expects this new lifestyle beauty brand to be available online and in retail outlets in calendar year 2021. The Company looks forward to unveiling more in advance of its Q2 earnings call in November. COVID-19 Business Update
The
Company has seen volatility in its sales performance due to the COVID-19 outbreak. It anticipates sales results will continue to be impacted until consumers return to normal shopping patterns. The Company continues to focus on the following areas to address the impact of the COVID-19 pandemic on the business: 1) supporting the health and safety of employees and community; 2) minimizing disruption to the supply chain; and 3) keeping adequate levels of liquidity and flexibility within the Company’s credit agreement. Company Outlook
The Company continues to expect sales trends and the economy overall to remain challenged for
the next several months. Given the uncertainty around the timing, speed and duration of the recovery from the adverse impacts of COVID-19, the Company is continuing to suspend guidance for fiscal year 2021.
“We expect consumer behavior to remain impacted by COVID-19 at least through the end of the calendar 2020, if not our full fiscal year,” said Mandy Fields, Chief Financial Officer. “We believe that our digital strength, core value proposition and our strong portfolio of brands will position us for long-term growth as consumer behavior normalizes post-COVID.”
Webcast Details
The
Company will hold a webcast to discuss the results from its first quarter fiscal 2021 today, August 5, 2020, at 4:30 p.m. Eastern Time. Investors and analysts interested in participating are invited to register prior to the start of the webcast at https://investor.elfcosmetics.com/ (hover over "news & events" then click on "events"). Following the presentation, anyone who would like to ask a question should do so through a separate dial-in line at (866) 807-9684 or (412) 317-5415 internationally.
Those not asking questions can hear the question and answer session through the webcast. A replay of the webcast will be available at the link above for twelve-months.
About e.l.f. Beauty
e.l.f. Beauty stands with every eye, lip, face and paw. This deep commitment to inclusive, accessible, cruelty-free beauty has fueled the success of our namesake e.l.f. Cosmetics brand since 2004. With the acquisition of the pioneering clean-beauty brand W3LL People in February 2020, and a new lifestyle beauty brand created with Alicia Keys expected to launch in calendar year 2021, we continue to strategically expand our portfolio with brands that support our purpose and values. Our family of brands is available online, and across
leading beauty, mass-market, and clean beauty specialty retailers.
Learn more by visiting investor.elfcosmetics.com
About e.l.f. Cosmetics
Since 2004, e.l.f. Cosmetics has made the best of beauty accessible to every eye, lip and face. We make high-quality, prestige-inspired cosmetics and skin care products at an extraordinary value and are proud to be 100% vegan and cruelty-free. As one of the first online beauty brands, e.l.f. continues to attract a highly-engaged audience and set benchmarks with new digital platforms. Our brand is widely available at leading retailers such as Target, Walmart and Ulta Beauty, and has a growing international presence.
About
W3LL PEOPLE
A clean beauty pioneer with 40 EWG VERIFIED™ products, W3LL PEOPLE has raised the standard for high-performance, plant-powered, cruelty-free cosmetics since 2008. Founded on the principles of purity, artistry and responsibility, we are committed to creating clean products that help people be well, look well, and do well. Currently available online and at select Target, Whole Foods, Detox Market and Credo Beauty stores, the brand aims to become even more accessible to consumers as part of the e.l.f. Beauty family.
About A New Lifestyle Beauty Brand with Alicia Keys
In 2021, we anticipate the launch of a lifestyle beauty brand created
with artist, producer, actress, and New York Times best-selling author Alicia Keys. Born of Alicia’s personal skincare journey and her passion for bringing light into the world, the brand vision is more than skin deep. With an inclusive point of view, an authentic voice, and a line of skin-loving, dermatologist-developed, cruelty-free products, this lifestyle beauty brand aims to bring new meaning to beauty by honoring ritual in our daily life and practicing intention in every action. The brand is expected to be available online and through exclusive retail partnerships in select markets.
Note Regarding non-GAAP Financial Measures
This press release includes references to non-GAAP measures, including, adjusted EBITDA, adjusted net income and adjusted
diluted EPS. The Company presents these non-GAAP measures because its management uses them as supplemental measures in assessing its operating performance, and believes they are helpful to investors, securities analysts and other interested parties in evaluating the Company’s performance. The non-GAAP measures included in this press release are not measurements of financial performance under GAAP and they should not be considered as alternatives to measures of performance derived in accordance with GAAP. In addition, these non-GAAP measures should not be construed as an inference that the Company’s future results will be
unaffected by unusual or non-recurring items. These non-GAAP measures have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the Company’s results as reported under GAAP. The Company’s definitions and calculations of these non-GAAP measures are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation. Adjusted EBITDA excludes costs or gains related to restructuring of operations, stock-based compensation and other non-cash and non-recurring costs. Adjusted net income excludes costs or gains related to restructuring of operations, stock based compensation, other non-cash and non-recurring costs, amortization of
acquired intangible assets and the tax impact of the foregoing adjustments.
Forward-looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws, including those statements relating to the Company’s expectations regarding sales and the overall economy for fiscal year 2021 under “COVID-19 Business Update” and “Company Outlook” above; the Company’s belief that the successful execution
of its strategic imperatives has set the foundation for long-term growth for the e.l.f. brand, as well as a platform for strategic extensions; the Company’s beliefs and expectations regarding the success and growth potential of the lifestyle beauty brand created with Alicia Keys; the Company’s desire to leverage its operating platform and track record of success to build a multi-brand portfolio; the Company’s belief that strategic extensions are key to its long-term growth; the Company’s belief that its product pipeline will support the long-term growth of the lifestyle beauty brand created with Alicia Keys; the
Company belief that its interests are aligned with Alicia Keys; the Company’s expectations regarding the availability of the lifestyle beauty brand created with Alicia Keys; the Company’s expectations regarding its focus as it navigates the COVID-19 pandemic; and the Company’s expectations regarding consumer behavior during the COVID-19 pandemic. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, actual results and the timing of selected events may differ materially from those expectations. Factors that could cause actual results to differ materially from those
in the forward looking statements include, among other things, the risks and uncertainties that are described in the Company's most recent Annual Report on Form 10-K, as updated from time to time in the Company's SEC filings, as well as the Company’s ability to effectively compete with other beauty companies; the Company’s ability to successfully introduce new products; the Company’s ability to attract new retail customers and/or expand business with its existing retail customers; the
Company’s ability to optimize shelf space at its key retail customers; the loss of any of the Company’s key retail customers or if the general business performance of its key retail customers declines; the Company’s ability to effectively manage its SG&A and other expenses; the Company’s ability to achieve the anticipated benefits of the lifestyle beauty brand created with Alicia Keys, unexpected costs, charges or expenses related to the lifestyle beauty brand created with Alicia Keys, and the uncertainty regarding the impact of the COVID-19 pandemic. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only
as of the date hereof. Except as required by law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. |
| | | | |
Investors: | | Media: |
Melinda Fried | | Alecia Pulman |
Head
of Corporate Communications, e.l.f. Beauty | | ICR, Inc. |
Condensed
consolidated statements of operations and comprehensive income
(unaudited)
(in thousands, except share and per share data)
|
| | | | | | | | |
| | |
| | 2020 | | 2019 |
| | | | |
Net
sales | | $ | 64,527 |
| | $ | 59,764 |
|
Cost of sales | | 21,186 |
| | 22,573 |
|
Gross
profit | | 43,341 |
| | 37,191 |
|
Selling, general and administrative expenses | | 40,332 |
| | 32,055 |
|
Restructuring
income | | — |
| | (1,792 | ) |
Operating income | | 3,009 |
| | 6,928 |
|
Other
(expense) income, net | | (30 | ) | | 351 |
|
Interest expense, net | | (1,468 | ) | | (1,717 | ) |
Income
before provision for income taxes | | 1,511 |
| | 5,562 |
|
Income tax (provision) benefit | | 1 |
| | (1,856 | ) |
Net
income | | $ | 1,512 |
| | $ | 3,706 |
|
Comprehensive income | | $ | 1,512 |
| | $ | 3,706 |
|
Net
income per share: | | | | |
Basic | | $ | 0.03 |
| | $ | 0.08 |
|
Diluted | | $ | 0.03 |
| | $ | 0.07 |
|
Weighted
average shares outstanding: | | | | |
Basic | | 48,924,454 |
| | 48,345,942 |
|
Diluted | | 50,939,938 |
| | 50,317,088 |
|
Condensed consolidated balance sheets
(unaudited)
(in thousands, except share and per share data)
|
| | | | | | | | | | | | |
| | | | | | |
Assets | | | | | | |
Current
assets: | | | | | | |
Cash and cash equivalents | | $ | 54,224 |
| | $ | 46,167 |
| | $ | 60,746 |
|
Accounts
receivable, net | | 29,825 |
| | 29,721 |
| | 22,623 |
|
Inventory, net | | 52,752 |
| | 46,209 |
| | 51,020 |
|
Prepaid
expenses and other current assets | | 8,714 |
| | 10,263 |
| | 6,795 |
|
Total current assets | | 145,515 |
| | 132,360 |
| | 141,184 |
|
Property
and equipment, net | | 16,146 |
| | 17,171 |
| | 16,493 |
|
Intangible assets, net | | 100,379 |
| | 102,410 |
| | 95,333 |
|
Goodwill | | 171,321 |
| | 171,321 |
| | 157,264 |
|
Investments | | 2,875 |
| | 2,875 |
| | 2,875 |
|
Other
assets | | 25,832 |
| | 26,967 |
| | 22,832 |
|
Total assets | | $ | 462,068 |
| | $ | 453,104 |
| | $ | 435,981 |
|
| | | | | | |
Liabilities
and stockholders' equity | | | | | | |
Current liabilities: | | | | | | |
Current
portion of long-term debt and capital lease obligations | | $ | 13,187 |
| | $ | 12,568 |
| | $ | 10,681 |
|
Accounts payable | | 21,484 |
| | 12,390 |
| | 16,982 |
|
Accrued
expenses and other current liabilities | | 22,560 |
| | 26,165 |
| | 18,313 |
|
Total current liabilities | | 57,231 |
| | 51,123 |
| | 45,976 |
|
Long-term
debt and finance lease obligations | | 122,701 |
| | 126,088 |
| | 135,511 |
|
Deferred tax liabilities | | 21,478 |
| | 21,892 |
| | 17,839 |
|
Long-term
operating lease obligations | | 11,400 |
| | 11,239 |
| | 13,945 |
|
Other long-term liabilities | | 550 |
| | 591 |
| | 702 |
|
Total
liabilities | | 213,360 |
| | 210,933 |
| | 213,973 |
|
| | | | | | |
Commitments
and contingencies | | | | | | |
| | | | | | |
Stockholders'
equity: | | | | | | |
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2020, March 31, 2020 and June 30, 2019; 50,708,699, 50,003,531 and 49,865,995 shares issued and outstanding as of June 30, 2020, March 31, 2020
and June 30, 2019, respectively | | 491 |
| | 489 |
| | 484 |
|
Additional paid-in capital | | 758,236 |
| | 753,213 |
| | 747,233 |
|
Accumulated
deficit | | (510,019 | ) | | (511,531 | ) | | (525,709 | ) |
Total stockholders' equity | | 248,708 |
| | 242,171 |
| | 222,008 |
|
Total
liabilities and stockholders' equity | | $ | 462,068 |
| | $ | 453,104 |
| | $ | 435,981 |
|
Condensed consolidated statements of cash flows
(unaudited)
(in thousands)
|
| | | | | | | | |
| | |
| | 2020 | | 2019 |
Cash
flows from operating activities: | | | | |
Net income | | $ | 1,512 |
| | $ | 3,706 |
|
Adjustments
to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 6,429 |
| | 5,192 |
|
Restructuring income | | — |
| | (1,792 | ) |
Stock-based
compensation expense | | 4,627 |
| | 3,926 |
|
Amortization of debt issuance costs and discount on debt | | 214 |
| | 190 |
|
Deferred
income taxes | | (414 | ) | | 1,086 |
|
Other, net | | 72 |
| | 16 |
|
Changes
in operating assets and liabilities: | | | | |
Accounts receivable | | (174 | ) | | 9,641 |
|
Inventories | | (6,543 | ) | | (7,241 | ) |
Prepaid
expenses and other assets | | 1,065 |
| | 725 |
|
Accounts payable and accrued expenses | | 5,891 |
| | 2,190 |
|
Other
liabilities | | (856 | ) | | (4,774 | ) |
Net cash provided by operating activities | | 11,823 |
| | 12,865 |
|
| | | | |
Cash
flows from investing activities: | | | | |
|
Purchase of property and equipment | | (1,155 | ) | | (2,904 | ) |
Net
cash used in investing activities | | (1,155 | ) | | (2,904 | ) |
| | | | |
Cash flows from financing activities: | | | | |
|
Proceeds
from revolving line of credit | | 20,000 |
| | — |
|
Repayment of revolving line of credit | | (20,000 | ) | | — |
|
Repayment
of long-term debt | | (2,475 | ) | | (2,063 | ) |
Debt issuance costs paid | | (334 | ) | | — |
|
Repurchase
of common stock | | — |
| | (1,079 | ) |
Cash received from issuance of common stock | | 398 |
| | 240 |
|
Other,
net | | (200 | ) | | (187 | ) |
Net cash used in financing activities | | (2,611 | ) | | (3,089 | ) |
| | | | |
Net
increase in cash and cash equivalents | | 8,057 |
| | 6,872 |
|
Cash and cash equivalents - beginning of period | | 46,167 |
| | 53,874 |
|
Cash
and cash equivalents - end of period | | $ | 54,224 |
| | $ | 60,746 |
|
Reconciliation of GAAP net income to non-GAAP adjusted EBITDA
(unaudited)
(in thousands)
|
| | | | | | | |
| |
| 2020 | | 2019 |
| | | |
Net
income | $ | 1,512 |
| | $ | 3,706 |
|
Interest expense, net | 1,468 |
| | 1,717 |
|
Income
tax (benefit) provision | (1 | ) | | 1,856 |
|
Depreciation and amortization | 5,360 |
| | 4,618 |
|
EBITDA | $ | 8,339 |
| | $ | 11,897 |
|
Restructuring
income (a) | — |
| | (1,792 | ) |
Stock-based compensation | 4,627 |
| | 3,926 |
|
Other non-cash and non-recurring costs (b) | 2,577 |
| | 489 |
|
Adjusted
EBITDA | $ | 15,543 |
| | $ | 14,520 |
|
(a) Represents restructuring income related to the e.l.f. retail store closures. The three months ended June 30, 2019 included a gain related to settlement of outstanding lease liabilities equal to the difference between the amount of cash disbursed and the outstanding liability at the
time of settlement. (b) Represents various non-cash or non-recurring costs, including proxy contest expenses and costs related to the development or acquisition of new brands, including W3LL People in February 2020, as well as the automation of certain warehouse and distribution activities.
Reconciliation of GAAP SG&A to non-GAAP adjusted SG&A
(unaudited)
(in
thousands)
|
| | | | | | | |
| |
| 2020 | | 2019 |
Selling, general, and administrative expenses | $ | 40,332 |
| | $ | 32,055 |
|
Stock-based
compensation | (4,627 | ) | | (3,926 | ) |
Other non-cash and non-recurring costs (a) | (2,577 | ) | | (327 | ) |
Adjusted selling, general, and administrative expenses | $ | 33,128 |
| | $ | 27,802 |
|
(a)
Represents various non-cash or non-recurring costs, including proxy contest expenses and costs related to the development or acquisition of new brands, including W3LL People in February 2020, as well as the automation of certain warehouse and distribution activities.
Reconciliation of GAAP net income to non-GAAP adjusted net income
(unaudited)
(in thousands, except share and per share
data)
|
| | | | | | | |
| |
| 2020 | | 2019 |
Net income | $ | 1,512 |
| | $ | 3,706 |
|
Restructuring
income (a) | — |
| | (1,792 | ) |
Stock-based compensation | 4,627 |
| | 3,926 |
|
Other non-cash and non-recurring costs (b) | 2,577 |
| | 489 |
|
Amortization
of acquired intangible assets (c) | 2,031 |
| | 1,720 |
|
Tax Impact (d) | (2,130 | ) | | (1,116 | ) |
Adjusted net income | $ | 8,617 |
| | $ | 6,933 |
|
| | | |
Weighted
average number of shares outstanding - diluted | 50,939,938 |
| | 50,317,088 |
|
Adjusted diluted earnings per share | $ | 0.17 |
| | $ | 0.14 |
|
(a)
Represents restructuring income related to the e.l.f. retail store closures. The three months ended June 30, 2019 included a gain related to settlement of outstanding lease liabilities equal to the difference between the amount of cash disbursed and the outstanding liability at the time of settlement. (b) Represents various non-cash or non-recurring costs, including proxy contest expenses and costs related to the development or acquisition of new brands, including W3LL People in February 2020, as well as the automation of certain warehouse and distribution activities.
(c) Represents amortization expense of acquired intangible assets consisting of customer relationships, trademarks and favorable leases.
(d) Represents the tax impact of the above
adjustments.
