Good discussion so far, some key take aways from me,
Guides/Actuals (revised full year guidance),
Full year 55-57% sales growth, revised up, 69-71%
Adj EBITDA 197-200M, revised up, 218-220M
Adj net income 144-146M, revised up, 164-166M
Adj EPS 2.47 - 2.50, revised up, 2.84 - 2.87
The year over year growth of revenue for the last number of quarters goes like, 13% → 26% → 33% → 49% → 78% → 76% → 76% → 85%.
Those same quarters in actual dollars terms are, 105M → 122M → 122M → 146M → 187M → 216M → 215M → 271M.
This is a company that has been in business over 20 years, and the growth is actually ramping up even more.
They are spending massively on advertising and sales. Entertainment they introduced this quarter,
Cosmetics Criminals - https://www.youtube.com/watch?v=bxGKZ6lfJ7A - a true crime comedy skit about stolen makeup
Song by Manuel Turizo, ojos. labios. cara. - Latin singer title is Spanish for eyes, lips, face. Had a lot of views, probably paid promotion for in part by ELF. https://www.youtube.com/watch?v=uwkuHHmmjPg
Roblox game - e.l.f. UP! - I went into Roblox myself and played this game. A bit disappointed to be honest, because of the focus on in game purchases. Not all Roblox are this aggressive in paid content. Looking on youtube there is only a single video of one person playing this game.This game looks like a bust to me with heavy paid spend to buy the likes. Even within the game, it said I could not access certain parts of levels until I clicked like and upvoted the game.
I am trying to understand the implications of this company being an entertainment company as well. Their expertise doesn’t lie in film making and PC gaming. The CEO does say "I’ve been in the consumer space for over 30 years. It’s the first brand of seeing where you take up your marketing levels and actually get better ROIs.
International expansion seems to be going great. The elf brand is number one already at the store Douglas in Italy. That seems like a huge market to me with Italy having a population of ~60M, and considering the rest of Europe looks to Italy for fashion. I could see the trend for affordable makeup going into the rest of Europe very easily. Just selling into Europe alone could probably double or triple their market. They also “saw terrific growth into the UK”.
The company seems to have reasonable explanations for the inventory balance, basically they are scaling up and have some inventory from the acquisition. I’m fine with them taking a little debt to go heavy into sales. If we take the CEO at his word, the advertising is driving a ROI like he has never seen before in 30 years of industry.
My guess for the market reaction is the guide for next quarter is 48-53% (276-286M) growth which is a lot lower than the current quarter of 85%. While significantly lower I believe there is some seasonality here with Christmas/Q4 being a big sale week. They openly admit on the call they are conservative with their guidance. Seems like they are already hinting they are going to easily beat the guide again.