Business Context and Reporting Period
This Form 8-K was filed by e.l.f. Beauty, Inc. on June 12, 2018. The filing serves as a Regulation FD disclosure to reaffirm the company's fiscal 2018 financial outlook ahead of its presentation at the William Blair 38th Annual Growth Stock Conference. The company is designated as an emerging growth company.
Key Financial Metrics and Guidance
The filing provides a comparison between Fiscal 2017 actual results and the reaffirmed Fiscal 2018 outlook. The company utilizes non-GAAP measures (Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS) for its guidance.
| Metric | Fiscal 2018 Outlook (Approx.) | Fiscal 2017 Actual | % Change |
|---|---|---|---|
| Net Sales | $286 - $291 million | $270 million | 6% - 8% |
| Adjusted EBITDA | $65 - $66.5 million | $62 million | 6% - 8% |
| Adjusted Net Income | $30 - $31 million | $32 million | (1)% - (4)% |
| Adjusted Diluted EPS | $0.59 - $0.61 | $0.64 | (5)% - (8)% |
| Fully Diluted Shares Outstanding | 51.4 million | 49.4 million | — |
Note on Non-GAAP Measures: The filing does not provide specific GAAP revenue, profit, cash flow, debt, or liquidity figures for the current period. Adjusted Net Income and Adjusted Diluted EPS for 2018 exclude amortization of acquired intangible assets, a change in methodology from prior periods. Fiscal 2017 adjusted net income included $4.4 million in such amortization.
Material Changes and Methodology
- Share Count Increase: Fully diluted shares outstanding are projected to increase from 49.4 million in 2017 to 51.4 million in 2018, contributing to the decline in Adjusted Diluted EPS despite revenue growth.
- Accounting Methodology Change: Beginning in Q1 2018, the company excluded amortization of acquired intangible assets from its adjusted net income and EPS metrics. This adjustment is not comparable to the 2017 reported figures without reconciliation.
- Profitability Trend: While Net Sales and Adjusted EBITDA are expected to grow by 6-8%, Adjusted Net Income and EPS are projected to decline slightly year-over-year due to the share count increase and the specific adjustments to the income metric.
Outlook, Risks, and Management Commentary
Management reaffirmed the fiscal 2018 outlook but explicitly stated that investors should not expect interim updates to this guidance prior to scheduled quarterly earnings announcements. The company noted it cannot provide a quantitative reconciliation of the non-GAAP guidance to GAAP measures without unreasonable effort due to the forward-looking nature of the estimates.
Key Risks Identified:
- Ability to grow net sales and Adjusted EBITDA as anticipated.
- Competitive landscape within the beauty industry.
- Success in introducing new products.
- Ability to attract new retail customers or expand with existing ones.
- Loss of key retail customers or decline in their general business performance.
- Effectiveness in managing expenses.
Investor Verification Checklist
- Reconciliation Data: Verify the reconciliation of non-GAAP measures to GAAP measures in Exhibit 99.1 of the Form 8-K/A filed on February 28, 2018, as current GAAP figures are not provided in this text.
- Share Dilution: Confirm the source of the increase in fully diluted shares outstanding (from 49.4m to 51.4m) and its impact on per-share metrics.
- Amortization Impact: Review the specific impact of excluding amortization of acquired intangible assets on the year-over-year comparison of net income.
- Interim Updates: Note the company's policy against providing interim outlook updates, which may limit visibility between quarterly reports.