E.L.F. Beauty posts 10% revenue growth, raises guidance as CEO sees 'pent-up demand' ahead

KEY POINTS

• E.L.F. Beauty posted double-digit revenue growth for the fiscal 2021 third quarter and raised guidance for the current quarter.
• "Part of how we've delivered that sales growth is we continued to invest in the business for the long term," CEO Tarang Amin said in a "Mad Money" interview.
• "I think there's a pent-up demand for people to express themselves," he said when discussing his post-pandemic outlook.

E.L.F. Beauty on Wednesday reported double-digit revenue growth in its latest quarter, an increase in business that CEO Tarang Amin said was a vast difference from trends in the overall cosmetics industry.

The Oakland, California personal care products maker posted $88.6 million of revenue in the three-month period that ended Dec. 31. In an appearance on CNBC after the close, Amin said E.L.F. produced year-over-year revenue growth of 10% in a category that's down 20% thanks in part to its online investments.

"Part of how we've delivered that sales growth is we continued to invest in the business for the long term," he told Jim Cramer in a "Mad Money" interview. "Our marketing plus digital investment this quarter was 15% of net sales, up from 12% last year, and we're feeling great about those investments in the business, and you can see it in us picking up market share."

Based on those figures, E.L.F. spent more than $13.29 million, up from about $9.7 million last year, on marketing and digital in the third quarter of its 2021 fiscal year. The company recorded a profit of about $4.3 million, or 9 cents per share, down from $8 million in the same quarter in 2019, a 46% decline.

E.L.F. said its increase in sales was driven by its e-commerce and international businesses, as well as its national retailers. The company counts Walmart, Target, Amazon and Ulta Beauty among its customers.

Gross margin, or what a company retains on each dollar of sales, came in at 64%, down from 65% in the same quarter last year. Amin did not respond directly to Cramer's question about the decline.

Despite the stay-at-home culture spurred by the coronavirus pandemic, consumers have continued to spend on beauty products. E.L.F., which makes makeup and beauty products, saw revenue grow 8% between March and December compared to the same period the year prior.

Amin projects business will continue to grow in a post-pandemic world. The company increased its outlook for the current fiscal year, raising its guidance to between $304 million and $308 million from an initial forecast of $297 million to $303 million.

E.L.F. recorded more than $225 million in revenue in the first nine months of the 2021 fiscal year.

"I absolutely believe the category is going to do much better as we get to normalcy, as we get more vaccine out and people can get out," Amin said. "I think there's a pent-up demand for people to express themselves."

Shares of E.L.F. climbed more than 1% to $22.94 in Wednesday's session. The stock fell more than 5% in after hour trading.

From the start of 2021, the stock is down nearly 9% as of Wednesday's close.

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