e.l.f. Beauty, Inc. (NYSE:ELF)

The financial leverage and debt ratios of the company over the analyzed periods reveal distinct trends in its capital structure and leverage management.

Debt to Equity

The debt to equity ratio shows a gradual decline from 0.55 in June 2020 to a low of around 0.12 by September 2023, indicating a reduction in reliance on debt relative to shareholders' equity over this time. However, an increase is observed beginning December 2023, rising towards 0.37 by June 2024, suggesting renewed leverage growth.

Debt to Equity (Including Operating Lease Liability)

This metric follows a similar trajectory to the basic debt to equity ratio but consistently holds slightly higher values due to the inclusion of operating lease liabilities. It decreases from 0.59 in June 2020 to about 0.15 in September 2023, then rises again to 0.42 by mid-2024, mirroring the rebound in broader debt exposure.

Debt to Capital

A declining trend in debt to capital ratio is evident, falling from 0.35 in mid-2020 to a low near 0.11-0.12 around mid to late 2023. The ratio then climbs moderately to 0.27 by June 2024, indicating a shift toward increased debt funding within the overall capital structure after a period of deleveraging.

Debt to Capital (Including Operating Lease Liability)

When operating lease liabilities are included, debt to capital mirrors the declining pattern from 0.37 to about 0.13 in late 2023, followed by an increase to 0.30 in mid-2024, reinforcing the general trend of diminishing leverage with a recent upturn.

Debt to Assets

The debt to assets ratio steadily decreases from 0.29 in the middle of 2020 to a low of approximately 0.08-0.10 during 2023, showing a reduction in debt burden relative to total assets. With a subsequent rise to 0.22 by June 2024, the pattern again suggests an easing of deleveraging and build-up in debt levels.

Debt to Assets (Including Operating Lease Liability)

Including operating lease liability slightly raises this ratio but maintains the overall trend: a decrease from 0.32 in mid-2020 to around 0.10 in 2023, then a rebound up to 0.25 by mid-2024.

Financial Leverage

Financial leverage shows a gentle downward trend from 1.86 in June 2020 to a low near 1.39 by December 2023, indicating a gradual strengthening of equity relative to debt and assets. However, a noticeable rise occurs afterward, reaching about 1.71 by June 2024, consistent with increased leverage ratios observed concurrently.

Overall, the company's leverage indicators depict a multi-year phase of deleveraging and reduction in debt dependency up to late 2023, followed by a reversal with an increase in leverage starting in the last quarter of 2023 through mid-2024. This inflection point may reflect strategic decisions to increase financial flexibility or respond to market conditions. The consistent gap between ratios including operating lease liabilities and those excluding them highlights the material impact of lease obligations on the company's financial structure.

The analysis of the financial trends indicates several important movements in the company’s capital structure over the measured periods.

Total debt

The total debt consistently declined from June 30, 2020, through September 30, 2023, dropping from approximately $136 million to around $63 million. This represents a significant reduction in leverage over this timeframe. However, a notable reversal occurs beginning December 31, 2023, where total debt spikes dramatically to approximately $265 million and remains at similar elevated levels through June 30, 2024.

Stockholders’ equity

Stockholders’ equity demonstrates a steady increasing trend from about $249 million at June 30, 2020, through June 30, 2024, surpassing $700 million by the end of the period. The growth is incremental and consistent, reflecting continuous accumulation of retained earnings or capital injections.

Debt to equity ratio

The debt-to-equity ratio decreases steadily from 0.55 at June 30, 2020, reaching a low of 0.12 by September 30, 2023. This decline signals a reduction in relative financial leverage and indicates a stronger equity base supporting the company’s operations. Post-September 2023, this ratio increases to 0.43 by December 31, 2023, and stabilizes around 0.37 by June 30, 2024, mirroring the surge in total debt observed in the same period.

Overall, the company exhibited a consistent deleveraging trend for over three years, characterized by declining total debt and strengthened equity. The sudden increase in debt toward the end of 2023 suggests a strategic change, potentially to finance new projects, acquisitions, or other operational needs. Despite this increase, equity continued its upward trajectory, maintaining a relatively solid capital base. The debt-to-equity ratio’s spike, although significant, remains below the levels seen at the beginning of the examined period, indicating that while leverage increased, it is moderate relative to historical levels.

The analysis of the financial ratios and balance sheet components over the reviewed periods reveals distinct trends in the company’s leverage and equity structure.

Total Debt (including operating lease liability)

Total debt exhibited a gradual decline from mid-2020 through late 2022, falling from approximately $147 million to around $80 million. This reduction indicates a consistent effort to deleverage the balance sheet. Throughout 2023, the total debt levels remained relatively stable, fluctuating slightly between $75 million and $78 million. However, the first half of 2024 saw a notable increase in debt, more than tripling to nearly $296 million by the end of Q1 2024, signaling a significant change in financing strategy or possibly increased borrowing for expansion or other corporate actions.

Stockholders’ Equity

Stockholders’ equity demonstrated a consistent and robust upward trajectory over the entire period analyzed. Starting at approximately $249 million in June 2020, equity increased steadily each quarter, reaching over $703 million by June 2024. This growth suggests strong retained earnings, possible equity issuances, or appreciation in company value, enhancing the company’s net asset position significantly.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio showed a clear downward trend from mid-2020 until the end of 2023. It declined from 0.59 to a low of approximately 0.15, reflecting a substantial reduction in leverage relative to equity, which highlights improved financial stability and lower risk profile during this period. Contrarily, the ratio experienced a sharp increase in early 2024, rising to 0.42 by June 2024. This increase aligns with the surge in total debt and suggests that while equity continued to rise, the pace of debt growth outstripped equity expansion during this recent interval, resulting in a higher leverage level.

In summary, the company exhibited disciplined debt reduction paired with consistent equity growth through 2023, leading to a strengthening of the capital structure and a lower leverage position. The reversal of this trend in early 2024, with significantly increased borrowing and a consequent rise in the debt to equity ratio, indicates a strategic shift that warrants monitoring to understand its implications for future financial risk and capital management.

Debt Level Trend

The total debt showed a steady decline from June 30, 2020 (approximately $136 million) to March 31, 2023 (approximately $65 million), reflecting a consistent reduction in debt over this period. However, beginning March 31, 2024, there was a substantial increase in total debt, reaching approximately $262 million by June 30, 2024. This marked increase reversed the previous downward trend.

Total Capital Movement

Total capital experienced a gradual upward trajectory from June 30, 2020, starting at around $385 million, and reaching close to $579 million by September 30, 2023. Following this, the capital further surged to nearly $966 million by June 30, 2024. This indicates overall growth in capital resources, especially prominent in the most recent quarters.

Debt to Capital Ratio

The debt to capital ratio steadily decreased from 0.35 in June 2020 to a low of approximately 0.11 by September 2023, indicating a reduction in leverage and improved capitalization over this period. However, correlating with the sharp increase in debt observed in 2024, the ratio rose again to 0.27 by June 2024, suggesting a notable increase in financial leverage.

Overall Financial Insight

The overall financial data reveals a period of deleveraging and strengthening capital base from mid-2020 through late 2023, demonstrating effective debt management and capital growth. The sudden increase in debt and corresponding rise in debt to capital ratio in 2024 could signal new financing activities, possibly for strategic investments or other corporate purposes, which merits additional monitoring to assess impact on financial stability.

The financial data reveals significant trends regarding the company's debt levels, capital structure, and leverage ratio over the observed periods.

Total Debt (Including Operating Lease Liability)

The total debt remained relatively stable from mid-2020 through early 2023, fluctuating slightly but generally declining from approximately $147 million in June 2020 to about $75 million by December 2023. However, beginning in early 2024, there is a sharp and notable increase in total debt, rising dramatically to nearly $296 million by June 2024. This marks a considerable deviation from the previously declining trend and suggests a substantial new borrowing or financial obligation incurred in the latest quarters.

Total Capital (Including Operating Lease Liability)

Total capital consistently trended upward across the entire period, increasing from roughly $396 million in June 2020 to nearly $1 billion by June 2024. The growth in capital appears steady with moderate acceleration starting around late 2022 through mid-2024. This upward movement indicates ongoing investment, retained earnings growth, or equity infusions contributing to the capital base.

Debt to Capital Ratio (Including Operating Lease Liability)

The debt to capital ratio demonstrates a steady decrease from 0.37 in mid-2020 to a low of approximately 0.13 in September 2023, reflecting reduced leverage and a stronger capital structure with less reliance on debt. This downward trend suggests improved financial stability and potentially lower financial risk over this period. However, there is a marked reversal starting in December 2023, with the ratio rising sharply to around 0.30 by June 2024. This increase corresponds with the earlier noted debt surge and indicates a significant shift toward higher leverage and potentially increased financial risk in the recent quarters.

In summary, the overall financial structure displayed increasing capital and decreasing leverage for the majority of the analyzed period, pointing to stronger financial health and prudent management of debt. The recent substantial rise in both total debt and the debt to capital ratio in early 2024 signals a strategic change, most likely accompanied by increased borrowing or new liabilities that warrant close attention for potential impacts on financial risk and cost of capital moving forward.

The analysis of the financial trends over the examined periods reveals several significant patterns regarding debt levels, asset growth, and leverage ratios.

Total Debt

The total debt exhibited a generally declining trend from mid-2020 through late 2023, decreasing from approximately $136 million to around $63 million. This represents a substantial reduction in debt over this timeframe. However, starting in the first quarter of 2024, there was a sharp and notable increase in total debt, more than quadrupling to roughly $262 million, where it then stabilized through the second quarter of 2024.

Total Assets

Total assets demonstrated consistent growth throughout the entire period. Beginning at about $462 million in mid-2020, assets increased steadily and reached over $1.2 billion by mid-2024. This reflects a strong asset accumulation strategy and expansion over the nearly four-year span.

Debt to Assets Ratio

The debt to assets ratio showed a steady decline from 0.29 in June 2020 to about 0.08 by the end of 2023, indicating a significant improvement in the company’s leverage position and reduced reliance on debt relative to its asset base. This decreasing ratio aligns with the reduction in total debt alongside increasing assets.

In early 2024, however, the ratio reversed course and increased sharply to 0.24 by March 2024, then slightly decreased to 0.22 by June 2024. Despite the substantial asset base, the ratio's increase reflects the recent surge in debt, impacting the leverage profile negatively.

Overall, the company steadily strengthened its balance sheet by growing assets and reducing debt for several years, improving financial stability and leverage ratios. The abrupt rise in debt in early 2024 marks a departure from this trend, suggesting a significant financing event or strategic shift that resulted in the increased leverage. This shift warrants careful examination to understand the underlying causes and potential implications for future financial health.

The analysis of the quarterly financial data reveals several notable trends concerning the company's debt levels and asset base over the examined periods.

Total Debt (including operating lease liability)

The total debt exhibits a general declining trend from mid-2020 through late 2023, decreasing from approximately $147 million in June 2020 to about $75 million by December 2023. This steady reduction indicates an effort to deleverage or reduce obligations. However, starting from March 2024, a significant rise in total debt is observed, surging sharply to nearly $296 million by June 2024. This abrupt increase suggests a change in financial strategy or the occurrence of substantial new liabilities within a short timeframe.

Total Assets

Total assets have consistently increased throughout the entire period, moving from roughly $462 million in June 2020 to over $1.2 billion by June 2024. The growth in assets appears steady and accelerated over time, particularly from early 2023 onwards, indicating expanded investments, acquisitions, or asset accumulation contributing to a stronger asset base.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio has steadily decreased from 0.32 in mid-2020 to a low of about 0.10 by September 2023, reflecting a reduction in leverage relative to the asset base. This downward trend aligns with the diminishing total debt and growing asset figures, signaling improved financial stability and potentially lower risk. However, paralleling the surge in total debt in 2024, the debt to assets ratio reverses course, rising to approximately 0.25 by June 2024. This increase indicates a renewed higher relative debt level against assets, suggesting an increase in financial leverage or risk during the most recent quarters.

In summary, the company showed a clear deleveraging trend over the several years ending in late 2023, accompanied by steady asset growth. The sudden increase in debt and corresponding rise in the debt to assets ratio in early 2024 may warrant closer examination to understand the causes and implications for future financial stability.

The analysis of the quarterly financial data reveals a consistent growth trajectory in total assets over the analyzed period. Beginning at approximately $462 million, total assets demonstrated steady increases each quarter, reaching over $1.2 billion by the end of the latest quarter. This upward trend indicates ongoing asset accumulation or value appreciation within the company’s balance sheet.

Concurrently, stockholders’ equity exhibited a strong and continuous upward movement. Starting from around $249 million, equity steadily increased quarter over quarter, culminating at approximately $704 million in the most recent quarter. This progression suggests a reinforcement of the company’s net worth, either through retained earnings, issuance of equity, or both, reflecting a strengthening financial foundation.

Regarding financial leverage, expressed as a ratio, there was a noticeable decline over the initial quarters, dropping from about 1.86 to a low near 1.39. This reduction implies a gradual decrease in reliance on debt relative to equity during that time frame, indicating a potentially more conservative capital structure or improved equity base. However, in the latter quarters, the financial leverage ratio rose again, peaking around 1.8 before slightly declining to about 1.71. This increase toward the later quarters may signify a strategic shift to higher debt usage or slower equity growth relative to total assets, which could impact the company’s risk profile.

Total Assets

Consistently increased from $462 million to $1.2 billion over the period, showing strong growth and asset base expansion.

Stockholders’ Equity

Displayed steady growth from $249 million to $704 million, indicating enhanced net worth and financial strength.

Financial Leverage Ratio

Initial decline from 1.86 to 1.39 suggested reduced debt reliance, followed by an increase up to 1.8, indicating a return to higher leverage levels.