ELF Beauty, Revival From An Initial Drop
As ELF Beauty released their earnings report, shares initially dropped about 10% before recovering to being positive 2%. A big swing as optimism returned after an initial scare from a softer-than-expected guide. So what were the full earnings? Let’s dive straight into it!
- High expectations for earnings
ELF Beauty has been one of the fastest-growing companies in the past 5 years. However positive that is, it does mean that investors have very high expectations for earnings. Analysts expected ELF to come in with EPS of $0.33 on revenues of $292.57 million. Analysts expected EPS outlook for 2025 of $3.56 on revenues of $1.27 billion.
- Where did the numbers end up?
Adjusted EPS came in at $0.53, growth of 26% year-over-year, while revenues came in at $321,14 million, growth of 71% year-over-year. GAAP EPS was down when compared to the year ago quarter as ELF took an impairment expense on equity investments of $1.155 thousand and an interest expense of $4.002 thousand. Diluted GAAP EPS was $0.25 compared to $0.29 last year.
As these were the Q4 numbers, we need to take a look at the full-year numbers as well. These came in at 1.023 Billion, an increase of 71% from the prior year. EPS for FY23 came in at $3.18, compared to $1.66 in ‘22, an increase of 91.5%.
Outlook for 2025 came in with an EPS guide of $3.20 - $3.25 on revenues of $1.23 to $1.25 billion.
- Was it all positive?
No. To be completely honest, I don’t see how this revival happened. ELF might be doing good for a consumer brand. But this outlook is bad. We can see a good amount of shelf space expansions, but this company is trading at a very rich valuation due to having extreme growth, for next year, they guide for barely any growth.
The balance sheet was also not looking all too great, to sum it up from a year-over-year perspective:
* Cash Down (but did an acquisition in Q3)
* Accounts Receivables up 82%
* Inventory up 135%, but this is also partially due to realizing inventory at the moment it is shipped from China, in stead of when received
* Current Portion of long-term debt now almost equal to cash
* Accounts payable up 157%
Many of these numbers can be put in perspective by the growth the company is having, but in my opinion, the balance sheet went backwards, not forwards. It is all quite sustainable and the company should be able to improve it again next quarter.
- What was positive?
ELF Expects gross margins to increase 10 basis points through favorable FX rates, Margin accretive mix, and cost savings. This is offset by higher transportation costs (red sea conflict), costs related to retailer activity, and space expansion.
Marketing is guided to become 24% to 26% of sales, as they have great engagement from these campaigns, which is only a good thing.
It was also mentioned how the company guides low and then increases guidance throughout the year.
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