elf-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_______________________________________________________________

FORM 10-Q

_______________________________________________________________

(Mark One)


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

For the Quarterly Period Ended September 30, 2024


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

For the Transition Period from ______ to ______

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)(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, a 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.


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 31, 2024 was 56,331,038 shares.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (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 of this Quarterly Report 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 continue to grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

•Acquisitions or investments, such as our acquisition of Naturium LLC, could disrupt our business and harm our financial condition.

•A disruption in our operations, including a disruption in the supply chain for our products, 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.

•Adverse economic conditions in the United States or any of the other countries in which we conduct significant business could negatively affect our business, financial condition and results of operations.

•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.

•We are subject to international business uncertainties.

•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 titled “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 titled “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			6

Condensed consolidated statements of comprehensive income			7
Condensed consolidated statements of stockholders’ equity			8
Condensed consolidated statements of cash flows			10
Notes to condensed consolidated financial statements (unaudited)			11

Item 2. Management’s discussion and analysis of financial condition and results of operations			22

Item 3. Quantitative and qualitative disclosures about market risk			28

Item 4. Controls and procedures			28

PART II. OTHER INFORMATION			29

Item 1. Legal proceedings			29

Item 1A. Risk factors			29

Item 2. Unregistered sales of equity securities and use of proceeds			58

Item 3. Defaults upon senior securities			58

Item 4. Mine safety disclosures			58

Item 5. Other information			58

Item 6. Exhibits			59

SIGNATURES			60

Table of Contents

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, 2024		March 31, 2024		September 30, 2023
Assets
Current assets:
Cash and cash equivalents	$	96,768	$	108,183	$	167,763
Accounts receivable, net	146,559		123,797		86,683
Inventory, net	238,798		191,489		147,228
Prepaid expenses and other current assets	71,914		53,608		33,772
Total current assets	554,039		477,077		435,446
Property and equipment, net	15,563		13,974		7,624
Intangible assets, net	216,396		225,094		73,986
Goodwill	340,582		340,600		171,620
Other assets	110,435		72,502		58,260
Total assets	$	1,237,015	$	1,129,247	$	746,936

Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt	$	100,250	$	100,307	$	5,228
Accounts payable	93,617		81,075		63,736
Accrued expenses and other current liabilities	117,030		117,733		83,407
Total current liabilities	310,897		299,115		152,371
Long-term debt	156,648		161,819		57,735
Deferred tax liabilities	4,833		3,666		4,901
Long-term operating lease obligations	36,176		21,459		14,559
Other long-term liabilities	766		616		942
Total liabilities	509,320		486,675		230,508

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, 2024, March 31, 2024 and September 30, 2023; 56,331,038, 55,583,660 and 54,621,561 shares issued and outstanding as of September 30, 2024, March 31, 2024 and September 30, 2023, respectively	562		555		545
Additional paid-in capital	954,455		936,403		851,634
Accumulated other comprehensive income (loss)	439		(50)		—
Accumulated deficit	(227,761)		(294,336)		(335,751)
Total stockholders' equity	727,695		642,572		516,428
Total liabilities and stockholders' equity	$	1,237,015	$	1,129,247	$	746,936

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

Table of Contents

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

Condensed consolidated statements of operations

(unaudited)

(in thousands, except share and per share data)


	Three months ended September 30,				Six months ended September 30,
	2024		2023		2024		2023
Net sales	$	301,075	$	215,507	$	625,552	$	431,846
Cost of sales	87,016		63,142		180,210		126,909
Gross profit	214,059		152,365		445,342		304,937
Selling, general and administrative expenses	186,141		112,186		366,716		204,125
Operating income	27,918		40,179		78,626		100,812
Other income (expense), net	3,791		(1,062)		3,978		(663)
Impairment of equity investment	—		—		—		(1,720)
Interest (expense) income, net	(3,761)		623		(7,426)		964
Income before provision for income taxes	27,948		39,740		75,178		99,393
Income tax provision	(8,928)		(6,469)		(8,603)		(13,145)
Net income	$	19,020	$	33,271	$	66,575	$	86,248

Net income per share:
Basic	$	0.34	$	0.61	$	1.19	$	1.59
Diluted	$	0.33	$	0.58	$	1.14	$	1.50
Weighted average shares outstanding:
Basic	56,345,648		54,425,384		56,160,796		54,183,091
Diluted	58,482,530		57,438,152		58,517,993		57,308,342

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

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

Condensed consolidated statements of comprehensive income

(unaudited)

(in thousands)


	Three months ended September 30,				Six months ended September 30,
	2024		2023		2024		2023
Net income	$	19,020	$	33,271	$	66,575	$	86,248
Other comprehensive income, net of tax
Foreign currency translation adjustment	448		—		489		—
Other comprehensive income, net of tax	448		—		489		—
Comprehensive income	$	19,468	$	33,271	$	67,064	$	86,248

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

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

Condensed consolidated statements of stockholders’ equity

(unaudited)

(in thousands, except share data)


	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Balance as of March 31, 2024	55,508,536	$	555	$	936,403	$	(50)	$	(294,336)	$	642,572
Net income	—	—		—		—		47,555		47,555
Stock-based compensation	—	—		12,958		—		—		12,958
Exercise of stock options and vesting of restricted stock	878,925	8		456		—		—		464
Foreign currency translation adjustment	—	—		—		41		—		41
Balance as of June 30, 2024	56,387,461	$	563	$	949,817	$	(9)	$	(246,781)	$	703,590
Net income	—	—		—		—		19,020		19,020
Stock-based compensation	—	—		21,644		—		—		21,644
Exercise of stock options and vesting of restricted stock	52,330	—		69		—		—		69
Repurchase of common stock	(108,753)	(1)		(17,075)		—		—		(17,076)
Foreign currency translation adjustment	—	—		—		448		—		448
Balance as of September 30, 2024	56,331,038	$	562	$	954,455	$	439	$	(227,761)	$	727,695

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

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

Condensed consolidated statements of stockholders’ equity

(unaudited)

(in thousands, except share data)


	Common stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Balance as of March 31, 2023	53,571,577	$	535	$	832,481	$	—	$	(421,999)	$	411,017
Net income	—	—		—		—		52,977		52,977
Stock-based compensation	—	—		7,223		—		—		7,223
Exercise of stock options and vesting of restricted stock	754,953	8		477		—		—		485

Balance as of June 30, 2023	54,326,530	$	543	$	840,181	$	—	$	(369,022)	$	471,702
Net income	—	—		—		—		33,271		33,271
Stock-based compensation	—	—		11,190		—		—		11,190
Exercise of stock options and vesting of restricted stock	203,982	2		263		—		—		265

Balance as of September 30, 2023	54,530,512	$	545	$	851,634	$	—	$	(335,751)	$	516,428

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

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)


	Six months ended September 30,
	2024		2023
Cash flows from operating activities:
Net income	$	66,575	$	86,248
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and non-cash lease expense	23,803		12,311

Stock-based compensation expense	34,612		18,417
Amortization of debt issuance costs and discount on debt	276		149
Deferred income taxes	1,324		1,159
Impairment of equity investment	—		1,720



Other, net	18		221
Changes in operating assets and liabilities:
Accounts receivable	(21,221)		(18,812)
Inventory	(45,071)		(65,904)
Prepaid expenses and other assets	(48,863)		(27,090)
Accounts payable and accrued expenses	5,188		45,112
Other liabilities	(4,192)		(2,261)
Net cash provided by operating activities	12,449		51,270

Cash flows from investing activities:

Purchase of property and equipment	(2,409)		(1,465)

Other, net	(93)		—
Net cash used in investing activities	(2,502)		(1,465)

Cash flows from financing activities:



Repayment of long-term debt	(5,375)		(2,500)
Debt issuance costs paid	—		(665)
Repurchase of common stock	(17,076)		—
Proceeds from exercise of stock options	533		750



Other, net	(58)		(405)
Net cash used in financing activities	(21,976)		(2,820)

Effect of exchange rate changes on cash and cash equivalents	614		—

Net (decrease) increase in cash and cash equivalents	(11,415)		46,985
Cash and cash equivalents - beginning of period	108,183		120,778
Cash and cash equivalents - end of period	$	96,768	$	167,763

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

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

Notes to condensed consolidated financial statements (unaudited)

Note 1—Nature of operations

e.l.f. Beauty, Inc., a Delaware corporation (“e.l.f. Beauty” and together with its subsidiaries, the “Company”), is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and cruelty-free cosmetics and skin care products. The Company's mission is to make the best of beauty accessible to every eye, lip, face and skin concern.

The Company believes its ability to deliver cruelty-free, clean, vegan and premium-quality products at accessible prices with broad appeal differentiates it in the beauty industry. The Company believes the combination of its value proposition, innovation engine, ability to attract and engage consumers, and its world-class team’s ability to execute with speed, has positioned the Company well to navigate the competitive beauty market.

The Company's family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People and Keys Soulcare. The Company's brands are available online and across leading beauty, mass-market and specialty retailers. The Company has strong relationships with its retail customers such as Target, Walmart, Ulta Beauty and other leading retailers that have enabled the Company to expand distribution both domestically and internationally.

Note 2—Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, these interim financial statements contain all adjustments, including normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2024, March 31, 2024 and September 30, 2023, and its results of operations and stockholders' equity for the three and six months ended September 30, 2024 and September 30, 2023 and its cash flows for the six months ended September 30, 2024 and September 30, 2023. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024 (the “Annual Report”). Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Segment reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Utilizing these criteria, the Company manages its business on the basis of one operating segment and one reportable segment. It is impracticable for the Company to provide revenue by product line.

Significant accounting policies

The Company made no material changes in the application of its significant accounting policies that were disclosed in Note 2, “Summary of significant accounting policies,” to the audited consolidated financial statements as of and for the fiscal year ended March 31, 2024 included in the Annual Report.

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