elf-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_______________________________________________________________

FORM 10-Q

_______________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37873

_______________________________________________________________

e.l.f. Beauty, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________________


Delaware						46-4464131
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


570 10th Street
Oakland,	CA	94607

(Address of principal executive offices, including zip code)

_______________________________________________________________


(510)			778-7787

(Registrant’s telephone number, including area code)

_______________________________________________________________


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ELF	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐

Non- accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of October 29, 2021 was 52,031,436 shares.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” ”believe,” “contemplate,” “continue,” "could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, our actual results and the timing of selected events may differ materially. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk factors” in Part II, Item 1A and elsewhere in this Quarterly Report. 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 of this Quarterly Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

The principal risks and uncertainties affecting our business include the following:

•The beauty industry is highly competitive, and if we are unable to compete effectively our results will suffer.

•Our new product introductions may not be as successful as we anticipate.

•Any damage to our reputation or brands may materially and adversely affect our business, financial condition and results of operations.

•Our success depends, in part, on the quality, performance and safety of our products.

•We may not be able to successfully implement our growth strategy.

•Our growth and profitability are dependent on a number of factors, and our historical growth may not be indicative of our future growth.

•We may be unable to grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

•A disruption in our operations could materially and adversely affect our business.

•We rely on a number of third-party suppliers, manufacturers, distributors and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brands, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

•We depend on a limited number of retailers for a large portion of our net sales, and the loss of one or more of these retailers, or business challenges at one or more of these retailers, could adversely affect our results of operations.

•We have significant operations in China, which exposes us to risks inherent in doing business in that country.

•If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely affected.

•Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

The summary risk factors described above should be read together with the text of the full risk factors below in the section entitled “Risk factors” and the other information set forth in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission (the "SEC"). The risks summarized above or described in the section entitled “Risk factors” are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations, and future growth prospects.

e.l.f. Beauty, Inc.

Table of Contents


PART I. FINANCIAL INFORMATION			5
Item 1. Financial statements (unaudited)			5
Condensed consolidated balance sheets			5
Condensed consolidated statements of operations and comprehensive income			6

Condensed consolidated statements of stockholders’ equity			7
Condensed consolidated statements of cash flows			8
Notes to condensed consolidated financial statements (unaudited)			9

Item 2. Management’s discussion and analysis of financial condition and results of operations			19

Item 3. Quantitative and qualitative disclosures about market risk			24

Item 4. Controls and procedures			24

PART II. OTHER INFORMATION			26

Item 1. Legal proceedings			26

Item 1A. Risk factors			26

Item 2. Unregistered sales of equity securities and use of proceeds			50

Item 3. Defaults upon senior securities			50

Item 4. Mine safety disclosures			51

Item 5. Other information			51

Item 6. Exhibits			51

SIGNATURES			52

PART I. FINANCIAL INFORMATION

Item 1. Financial statements (unaudited)

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)


	September 30, 2021		March 31, 2021		September 30, 2020
Assets
Current assets:
Cash and cash equivalents	$	41,694	$	57,768	$	41,041
Accounts receivable, net	44,374		40,185		33,844
Inventory, net	76,816		56,810		64,486
Prepaid expenses and other current assets	18,420		15,381		12,389
Total current assets	181,304		170,144		151,760
Property and equipment, net	13,945		13,770		16,270
Intangible assets, net	90,225		94,286		98,348
Goodwill	171,620		171,620		171,620
Investments	2,875		2,875		2,875
Other assets	33,043		34,698		32,551
Total assets	$	493,012	$	487,393	$	473,424

Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and finance lease obligations	$	19,254	$	16,281	$	14,219
Accounts payable	19,299		15,699		20,544
Accrued expenses and other current liabilities	32,665		41,351		26,264
Total current liabilities	71,218		73,331		61,027
Long-term debt and finance lease obligations	93,865		110,255		118,577
Deferred tax liabilities	15,114		13,479		19,466
Long-term operating lease obligations	17,919		20,084		19,185
Other long-term liabilities	803		598		516
Total liabilities	198,919		217,747		218,771

Commitments and contingencies (Note 7)

Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of September 30, 2021, March 31, 2021 and September 30, 2020; 52,035,864, 51,590,830 and 50,972,425 shares issued and outstanding as of September 30, 2021, March 31, 2021 and September 30, 2020, respectively	511		504		494
Additional paid-in capital	784,881		774,441		763,731
Accumulated deficit	(491,299)		(505,299)		(509,572)

Total stockholders' equity	294,093		269,646		254,653
Total liabilities and stockholders' equity	$	493,012	$	487,393	$	473,424

The accompanying notes are an integral part of these condensed consolidated financial statements.

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of operations and comprehensive income

(unaudited)

(in thousands, except share and per share data)


	Three months ended September 30,				Six months ended September 30,
	2021		2020		2021		2020
Net sales	$	91,855	$	72,350	$	188,902	$	136,877
Cost of sales	33,870		25,212		69,011		46,398
Gross profit	57,985		47,138		119,891		90,479
Selling, general and administrative expenses	50,447		45,170		101,196		85,502
Restructuring expense	96		—		82		—
Operating income	7,442		1,968		18,613		4,977
Other expense, net	(646)		(859)		(808)		(889)
Interest expense, net	(597)		(905)		(1,342)		(2,373)
Loss on extinguishment of debt	—		—		(460)		—
Income before provision for income taxes	6,199		204		16,003		1,715
Income tax (provision) benefit	(475)		243		(2,003)		244
Net income	$	5,724	$	447	$	14,000	$	1,959
Comprehensive income	$	5,724	$	447	$	14,000	$	1,959

Net income per share:
Basic	$	0.11	$	0.01	$	0.28	$	0.04
Diluted	$	0.11	$	0.01	$	0.26	$	0.04
Weighted average shares outstanding:
Basic	50,875,618		49,147,366		50,711,000		49,036,519
Diluted	53,541,724		51,748,437

SEC Form 10-Q filed by e.l.f. Beauty, Inc.