e.l.f. Beauty (ELF) 12 Nov 172017 Q3 Earnings call transcript

Greetings, and welcome to the e.l.f. Beauty Third Quarter Fiscal 2017 Earnings Call. At this time, all participations are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions].

As a reminder, this conference is being recorded. to conference like host, to now Ms. would turn over the your I Malkin. Allison Thank you.

begin. You may

Thank everyone. results. days for Good the of e.l.f.'s today's you. the afternoon, release on Investor third to joining press also elfcosmetics.com. quarter elfcosmetics.com. discuss Relations us call section XXXX A available will XX earnings is A of of Thank copy in you recording for available be

estimates and beliefs and results contains forward-looking forward-looking detailed These in uncertainties, Important statements actual are and As assumptions, to related materially. differ reminder, management's expectations, are the differ subject today's those fiscal press this call from statements including are unknown release or to results SEC and a such therefore, and filings. company's known year those may by projections. cause outlook, based statements, factors that the and on that company's may to risks XXXX expressed actual implied

non-GAAP presented John Tarang company's the President reconciliation differences addition, In presentation are and release between With for directly GAAP and us a today Officer. today's Executive and of Chief measures. a presentation Financial refer management from a the comparable non-GAAP Chairman includes and information you to most press the Amin, on Officer; basis. today Chief We Bailey,

is our to will to for over It Q&A against John and guidance. Tarang made will performance and Tarang by For sharing be now related strategies, results call turn and progress my to the today's followed a begin additional will details we with us, financial call, as then an our and This pleasure overview session. typical Tarang. our of the providing alternate growth

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to channels. continue see also We growth in strong non-track

our our For share growth year revising remain sales the of $X.XX, adjusted $XXX to earnings the timing category versus growth we're distribution This current our growth X ago. approximately year, We over and of to on net trends. We're XX% pipeline well as reflects full guidance increasing focused execution of new as strategies. per million.

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Tarang. Thanks,

strategy lead launched innovation. XX our to other QX, from extraordinary second value an us breadth In XX brands. apart Our of depth products. first-to-mass high-quality is at and we including innovation items, sets We believe

new capability. a day, and had launch innovation During highlighting we the month each our of robust September, every

innovate We at our opening also points with to $X. continue the introduction of price

question Jefferies. Steph [Operator with from Our comes Instructions] Wissink first

into tailwind? we eventually bit about become customer comment talk how a gross to should how is more Could business you're and mix fourth clarification, opportunity headwind. shipment. you the third my and that the the about just then John, related at thinking margin mix your of expect of Could about think give whether what QX. the in point to little a being a you evolving on was question Just in And timing us a you on play and quarter, detail then on

in noted timing to of the talk our think parts the revision we about pipeline. question, the guidance, two just of in is first shift reset sales, our timing that of So you overall did I

of seen in retailers pipeline we into actually part as that relative or to resets later, the take want Steph, year, goes familiar out QX depending therefore, our XXXX, later We've it. of a on to resets. those retailer of that majority be you'd those one QX year, was each of on first the shelf do have pipeline that depending so and do the So piece and the

a, and of piece timing of QX you impact I this well heard year, frankly, shipped as and QX. QX was was took holiday both which a think of talk look our program. holiday QX The us other year to, last if as we you more the the each And in

hearing more was the converse year, call. of on program what shipping roughly size. We less little up therefore, prior in we than than prior-year, a in we ended overall did similar did last we would which Our what bit were in and QX expected will the QX is and of have ship terms we

period, we're its of in overall at continued drivers of in gross In the the only margin, quarter, same. our not the remain happy the core, certainly, and but year-to-date and quite margin the terms expansion with the really

the to a lesser mentioned, piece, and extent, I that biggest some freight customer FX, other and items innovation's terms. of So the

just discontinued company's through from of items put of the more our through portion we've impact and each coming the the the onto We move bit that on wall as also history, in product saw we discounters, In little that's some as had mix new context and off we some wall. a customer that. sales year every offsetting quarter go

saw business sales in It year than so X% weighting If you our happens no just that couple those of of a the third the look last different. been we greater at this quarter. will be that's years, and less of

from of comes Chen & Company. Oliver next Our question Cowen

of forward question. at a headwinds, and thoughts breadth kinds the grew different within market on be Regarding your terms then, a that as you're faster juxtapose depth what in products build and out to of modeling what sales. against categories great. and than they trend and what to you're that would comments rate that experiencing about seeing any you're in how about details choosing your you we expect going innovation, emphasize the what just you Should Inventories, are And on innovate. continue? And focused

Oliver, the and Tarang. the category Nielsen the to terms in part what's the if take is on on then X%. it a tracked, down it was period, close question. about take I'll question X%. category in the to In over John latest look turn in category, this the first of grew inventory XXXX, Overall, the of you

then, us can there importance Now is, we we believe we're headwinds the by tell taking and our overall until is taking this category. stance. What a expect makes our the time, core to consumers conservative us some eventually better the one positioned, many you better more of over innovation. resiliency as in category On elements, rates, expect and bounce you but back, it what would of given talked would which we'd we're share, than are positioned growth but the about

year, forward. well consumers of this XX think that's we year, positioned far and that XX and in items both against innovation. Like launched so are cosmetics we've items, of up that the innovations as last look we're terms terms getting about I the well new as over care, and of to very speed from year-to-date, faster also skin responding So in we're color as

customer.coms look the well seeing elfcosmetics.com, at strong well, well have a We overall our in category. very that in see our as I channels, do continue those regardless channels and non-track whether also as what stores, as business we'll in own We international. quite to you're

allowed I'd us question, terms just overall your inventory say with great key on And fulfillment customers. do then to Oliver, in our about we what feel including of it's rates generally, our position,

in the using it would as artificially that baseline, XXXX Tarang fulfillment XX% those over still on given was the shelf You on caution to books, pipeline with group quarter. that's low heard we warehouse had QX, we related resets. mentioned, that have year our I last will to our a move in and continue

a So calculations. of start sort to guide doing will, everybody XXXX you year, I'd if as cleaner some of those to

you and terms from -- step back, you permanent, first was the that on for it why what do outside category. slowed investors, And category Tarang the about the question the my to of just happening Just e.l.f.? When sense -- on your characterize think is of sounds you it it, versus saying. factors help like in temporary were is this of down what

particularly, has in temporary, discretionary is enthusiasts, it time within consumer consumer and isn't is the category brands on and you best when at over been I categories, sense some importance base the our makeup the the look like you look again, period long and to it's purchase. really a one us, this for of at when whom My back that goes color of it a cosmetics,

but XXXX this would it few quarters a time you We soft. and have came previous mentioned saw back, the periods expect roaring bounce seen in I some the we we so last did have at category current back where where as category's to was what to just We category get and to are look, well in it I point, don't positioned, is. a but that there out have we there. certainly be to the take have might suffering brands headwinds be is

Blair. Our from Andersen of next William Jon question comes

well. guess here parter two I'll as a try I

So I the below and single brand high data think of is implied bit I for up QX a kind think digits scanner growth latest the been the has that.

think I of rapidly blush. Are of media expansion, not QX, the Kylie a and color again, category if like first that scanner the space in cosmetics conservative brands takes you could puts just some broadly slowdown data influencers with Or social above you from implied some around of about and do in feels you, And kind consider a can I on little the factor? of about mass? think mass talk and ask the part comment clarity that talk these then growth I because the number shelf competition you cosmetics. the -- the growing in just would of If plus the talked more shipping some trending bit

the take Jon. take of Yes, I'll let question. second first Tarang the part and the then

which as tie the what our QX. at go the QX trend. sales a I dynamics versus optical that and QX we're trying broader on seeing back we generally QX we of growth some over in what that anniversary-ing, of that difficulty of Just single Nielsen quarter the back business 'XX up that to end we touched hurting comparable were of of back to to on any prior to speaking, well go rate pipeline holiday and we're quarter the saw timing looking in 'XX but mainly to year, benefit as the in in that

frankly, positioned regarding competition. that are the brands I the resonating time, the some we've they're including trend enthusiasts, the you're in on than which core a for overall seeing marketplace. with are believe what strongly been then e.l.f. certain makeup and is some better And in marketplace brands there of question legacy seeing is these

The you'll of look I'd a products you of brands users lines bags, other understanding is prestige often standpoint and which where mass. from to consumer brands resonate at see to other positioned. of are real are or our our in and at in with of kind savvy thing some look and tell the like be ours makeup of her, between When prestige blurring definitions traditional, there's these which a them brands her incredibly kind we winning, well their brands continue own terms find in that brands addition speak in to consumers you'll e.l.f. so for work

from Humphrey. Our of SunTrust next Bill Please Chappell question question. Robinson with proceed comes your

there's little a talk of add were way there it understand into that XX% pull Did quarter. kind any you into of just third growth? quarter? forward September the X%, pulled what sales line to you of more bit of Is saw to just, I that top the shipments the quantify Can some percentage

break on that QX we're QX it Bill, Yes, between timing. that able you, to to not but is that just be holiday way for a going shift again, down and

I Or October? meaningful meaningful and the it from it got to versus guess, -- from it sometime was in happens September that? just change a retailers fall

a you where take more week traditional and of it. retailers it they of impact think have holiday can periods an vary mean for terms in as the by year-over-year latter. that Yes, it's I about those

holiday get And and adding in just a of holiday this that, I see up they starting faster product and great retailers wanted to really as to off get presentation their to program and about of to own happy them some some year, start start the well as of think we a support our show to faster overall we're you're holiday. on the obviously, to both being on kind that leading to feel

from it lot was back expected to brands and of behind and understand it, on prior spending And on then make I understand was an a obviously certainly Or SG&A the quarters where sure lower move side, the with been timing plan? in was money acceleration than kind do in always I with I'm trying just expect had orders that we of just the as this timing? or to the Should to forward? that purpose just you've of

Yes.

I three say we're the take expectations. consistent infrastructure. So obviously, the quarters, own And on consistent roughly on would last our talking about if we and brand, over in at discussed levels a SG&A and the that we back with represents year-over-year basis were the look each investment been that of spend areas it's into a namely significant people business you

given line go-forward in the is do we on in so we What see higher consistent elevation volumes QX, with tell that just overall, you that but some see SG&A you a what you investing basis expected. will quarter. very And continued third the I'd of

comes Our proceed Please with BMO question. from Shannon with Coyne next Markets. Capital your question

channel So not on whether need think market are Target rolling some haven't or new your technology. excited most formats, -- to about including making back? they at path bumping to you staffing big thoughts in you share? are gain the and they mass to in share Can right you Walmart, about? roll do store already you us And and give beauty they out What the up order that they're to bucks what looked look regain at, on think out

mean, like core long of Yes, as see the I'd and that treated them call, category. box, beauty. foremost, in category initiative beauty presentation to quarterly really within I many creating very of the a as is way. Walmart's think you continue light is last positioned see destination seen I important be say position of kind we and enthusiasts. beauty retailers long I Target and beauty, Beauty the wall amongst overall destination and investment Ulta mean, continue first really players a the their on core We for to talked these themselves well invest and these better

tell customers able key our I'll is each you we're given of and help what the this are them grow. everyone to we partner So overall be in importance again, to category is one where to going after a to

And the I you you in amount customer can new think is out this of shelf there? of half just [indiscernible] And when space a just getting about getting guess, roll first talk channel? you're in do mass Ulta 'XX? Or the you then lastly, you're

why think for so I brand we're of Yes, in the can't what they is so with a the e.l.f. you made presentation customer, subset do. both what that's customer the we XXXX, as you beauty really see I'd think enthusiast it's and resonates stores. we reasons ulta.com excited strongly with Ulta in terms of as is then strong that really Ulta and those but tell as Ulta I it with already a enthusiast And natural very what of subset talk and about a with And and fit. happy Beauty since in one core what well the stores, this in space about saw in of the well we're can overlap stores really, their as

next question. comes from question D.A. proceed Bolton-Weiser Our Please Linda your with Davidson. of

that, you now benefit can to comment excluding space XX% on quarter And is the was you so, us year-over-year still footage to revenue then you looks the you would expansion? it that, rates? like originally could on Walmart be fourth think Walmart growth had a the going Walmart case? your said at that. to given space. so that the comment, fourth down Can And And and I the little in Target that comment new incremental bit looked linear if So second related increase the equivalent related maybe your probably quarter to shipments to your guidance and just

other like is that that to? get Girl the from the harder Cover jump would if accurate? be retailers AC going to more, at to And would footage so, be those Maybelline the In So space. like significantly in or next up words,

there that that longer Walmart could achieve? increments to and what already? for make would you you are take above Target Or have still you So at

Yes.

don't I more what the bit on a why and space talk one about quarter. then little take the on sales So John question have

majority expansion, that of point performs of space. in. space, X at would in work based see we tell where then space, of and not of Walmart, those any note as on, space, satisfied QX is optimize So in terms terms is have that a in leverage linear to say the then so an that customers you in but results on Target brand gain impact that of QX. talk have it within I'd land we about quite increments seen overall and actually what the assortment feet and our it's that you'll of time in of Important as of Walmart is variety what an there's to terms space do expansion space of see that merchandising to or a we terms it data continue setting a in I more well planograms ability come And space, variety what kind as the space we're footage to whether earn of in always to just and other the with to we of so we chunks, nuance, for on at both how goes we'll you Walmart in see QX did us this actually what retailer, think

sure a to we year, you actually until sales benefit material into not see I'm Linda. So next would got that

your with proceed Please question. Morgan. JP of Teixeira Andrea from comes question next Our

distribution as over you terms seeing any just category for is seeing related cut 'XX, sell-in period will and versus doors better into the to and It's softness then the of Ulta the fiscal next data, sales the all like expectations of of compare you're to so was how performance year? kind are your Nielsen be productivity slow just kind color stores, versus incremental in does helpful. thinking that the how much Christina the trends especially for how how parsing for back of in your in out Andrea. timing down like of there? we about the productivity an implied timing for be rollout, through And And going should I’m Ulta Ulta

that's into these impact some pipeline we announcement Yes, of the we so been positioned terms obviously that in some throughout have in context, up part and a last that strategically on has as few well pause a was evidenced certainly, revision and assumptions our been and we that. A to of partnership a good category long-term XXXX. broader category that opportunities we're and happy full the but the shipments into quarters that of immune distribution ones from we've for the incredibly reality share really obviously, overall, that we're points down the we including had, a to progress of well we've as timing chain guidance the seeing whenever made, in decided from new really terms few that our bigger about 'XX distribution against but so the to able not saw which as points, goes 'XX, Ulta few take, see with you that

Jaffray. Erinn question comes Murphy your of with proceed from Please Instructions] next Piper Our [Operator question.

I have couple of questions. a guess I

year? enough year? get end that think little follow it sales or that as I could kind talk the your you rate you up on secondly, saw growth similar from in guidance, from in there quarter? perspective of stores more a a see pipeline just to own of to Do there this then to you guys performed year are the beyond bit you'll that how perspective beyond you newness can full back wholesale? about confident shape reaccelerate third And kind a a sellout XX%. you Did category XX% the need How this is this around reaccelerate on First

of rates overall so imply an obviously, XXXX, Erinn. the guidance, that year. growth the for But, the for Yes, into provided latest good figures XX% think us on growth just I lot a we

not say figure about In that on obviously XXXX All are future terms XX% I'd a that from referenced the period, early. of call. and to XXXX it's we is a in talk from is next that, you that are to until CAGR together figure position that 'XX we

stores? And it. on your just Got then

stores are well. Yes, incredibly so doing

the store heard think in commentary I the Square. including behind that open in call to invest to we Time stores, our recent you continue most our

important question, to the consumers, of results to insights continue productivity. stores. performance the associates of obviously, into importantly, than reasons, we that they to brands in the our and We that our of talk productivity off productivity, their incredible our I us numbers quite of us with and second I XXXX. passion then, I continues expanded Ulta that as to Beauty relative performance, those were we expectations would have including in good in competitive was terms there before, a and actually very probably believe can't one engagement question And feel us get. don't our asking we the overall I stores all continue other space relative the most but, attractive think think for from otherwise, locations, there's we well. from of And our part see happy of is, really about more is to many see what that specific Growth be and the about versus thing

from comes question of Stifel. Mark next Astrachan Our

for Mark. on Claire is This

one ask on to about wanted Just comment the category. other

the might, on So any on categories makeup care. can how focus if you if you offset what into might need skin refocus on give and you slowing, comments the like beef be is or might next continues year, different up that to some and

long feel has the first of long at category, it's look believe color we it term. on for we importance believe, great of the as as mentioned consumers, don't we I a and cosmetics all, history the -- for earlier category we So

that that we the skin coverage, respond need e.l.f. more with kind and makeup good of good it very care are We as when line, seeing and excited as you launches more to are and insight and have well particularly Ulta how to our Active, to comes Shield well of about kind as specific about as XXXX, as for pipeline we're products we're about well well in have given well can't that care. cosmetics both you'll amount Again, but in positions of care. talk most more we future that we calls, us hear about I the but skin have innovation we're overall our skin the skin consumers recent own the excited again, positioned as Beauty across color positioned,

gentlemen, Mr. I Ladies closing we Amin the to turn of end and reached to like would have question-and-answer our call remarks. the for session. Tarang back

Conference Well, thanks January. season, seeing look for joining you a holiday us. we forward at ICR that We have to hope you the wonderful and in

We also Thanks, and our everyone. forward in to February. outlook results discussing full XXXX XXXX you with year look

Thanks, all.

today's concludes This conference.

your for your You wonderful day. at you and may Thank have lines participation disconnect a time. this