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

The analysis of the quarterly financial data reveals several notable trends across inventory management, receivables, payables, and working capital efficiency over the observed periods.

Inventory Turnover

Inventory turnover shows fluctuations across the periods, starting at 2.2 in March 2020, declining to a low of 1.29 in September 2023, and recovering slightly to 1.65 by June 2024. The ratio generally indicates moderate movement of inventory, but the downward trend toward late 2023 suggests slower inventory turnover during that timeframe.

Receivables Turnover

Receivables turnover remains fairly stable, mostly oscillating between 7 and 9 over the periods. There are minor dips, such as 6.74 in March 2020 and around 7.27 in June 2024, indicating slightly longer collection periods at these times. Overall, the company maintains a consistent ability to collect receivables at a moderate pace.

Payables Turnover

Payables turnover exhibits high variability, with a significant drop from 8.21 in March 2020 to lows around 3.6 in late 2023, reflecting an increasing average duration to settle payables. Notably, peaks occur in mid-2022 (9.04) which suggests occasionally faster payment cycles, but the trend over recent quarters signals elongation in payables payment periods.

Working Capital Turnover

Working capital turnover generally declines from levels above 3 in the early periods to a brief spike beyond 5 in late 2023, followed by a drop to 4.91 in mid-2024. This fluctuation indicates varying efficiency in how well the company uses its working capital to generate sales, with improved efficiency during the spike and a decline afterward.

Average Inventory Processing Period (days)

The average inventory processing period increased sharply from 166 days in March 2020 to a peak of 283 days in September 2023, signaling slower inventory movement and potential buildup. It then reduces slightly to 221 days by June 2024, but remains elevated compared to earlier periods.

Average Receivable Collection Period (days)

The collection period mostly fluctuates between 38 and 54 days, with an upward shift evident around 2020 and persisting with some variance. Peaks occur near 50 days in September 2023 and June 2024, denoting slightly longer times to collect receivables in recent quarters.

Operating Cycle (days)

The operating cycle follows a similar pattern to inventory and receivables, increasing from 204 days in March 2020 to a peak of 333 days in September 2023, indicating extended cash conversion processes. Although it declines afterward to 271 days by June 2024, it remains higher than earlier periods, suggesting longer operational cycles.

Average Payables Payment Period (days)

The average payment period for payables shows significant lengthening from 44 days in March 2020 to a peak of 101 days in December 2023, before slightly decreasing to 89 days by June 2024. This lengthening implies the company is taking longer to pay its suppliers, which may affect vendor relationships but improves short-term liquidity.

Cash Conversion Cycle (days)

The cash conversion cycle mirrors the trends in inventory and receivables, increasing from 160 days in March 2020 to 232 days in September 2023, highlighting growing delays in converting investments into cash. Although it decreases to 182 days by June 2024, the prolonged cycle suggests challenges in operational cash flow management in recent years.

Overall, the data indicates that the company experienced lengthening in inventory holding, receivables collection, and payables payment periods over the analyzed timeframe, culminating in extended cash conversion cycles particularly around late 2023. This points to decreased operational efficiency and liquidity strain during that period, with partial improvements noted in early 2024.

The data reveals several key trends in the company's cost of sales, inventory levels, and inventory turnover ratios over the examined periods. These metrics provide insight into operational efficiency and inventory management dynamics.

Cost of Sales

The cost of sales exhibits a general upward trajectory throughout the periods. Starting from approximately $22.6 million in mid-2019, it fluctuates with moderate increases and dips through early 2021. From mid-2021 onward, a pronounced accelerating increase is apparent, culminating in a peak near $93.2 million by mid-2024. This substantial rise in cost of sales indicates either increased production volume or rising input costs, with the sharp escalation in the most recent periods suggesting significant growth or inflationary pressures impacting costs.

Inventory, Net

Inventory levels show considerable variability but a noticeable long-term upward trend. Initially around $51 million in mid-2019, inventory decreases slightly before rising gradually toward late 2020. Significant growth occurs from late 2021 onwards, with inventory reaching nearly $200 million by mid-2024. This rapid inventory accumulation could signal increased stockpiling, potential supply chain adjustments, or preparation for higher sales volumes. The peak in late 2023 to early 2024 suggests substantial buildup, which may raise concerns about inventory turnover efficiency.

Inventory Turnover Ratio

The inventory turnover ratio manifests some volatility, with insufficient data prior to March 2020. Starting at 2.2 in March 2020, the ratio declines to a low of 1.52 by December 2020, indicating slower inventory movement relative to cost of sales. It recovers somewhat through early 2021, reaching around 2.32, before trending downward again in the latest periods. By mid-2024, the turnover ratio stands at approximately 1.65, considerably below earlier peaks. The decreasing turnover amid rising inventory could reflect slower sales relative to inventory levels or potential inefficiencies in inventory management.

Overall, the simultaneous escalation in cost of sales and inventory with a declining inventory turnover ratio suggests that while business volumes or costs are increasing, inventory management may be lagging, potentially leading to higher holding costs or obsolescence risks. Monitoring these trends closely will be imperative to ensure operational efficiency and maintain healthy working capital levels.

The net sales demonstrate a generally upward trajectory over the observed periods. Starting from approximately 59.8 million US dollars in mid-2019, net sales increased with some fluctuations, reaching over 324 million US dollars by mid-2024. This points to significant growth in revenue, particularly evident from mid-2022 onward, where a sharp increase is noticeable.

Accounts receivable, net, also exhibit growth over the same timeframe, rising from around 22.6 million US dollars in mid-2019 to approximately 155.7 million US dollars by mid-2024. The growth in accounts receivable aligns with the increase in net sales, indicating that while sales have increased, the amount of credit extended to customers has also expanded correspondingly.

The receivables turnover ratio, which reflects how efficiently receivables are being collected, shows some variability but does not indicate a consistent trend. Starting from a ratio of 9.52 in early 2020, it fluctuates mainly between about 6.74 and 8.83 through mid-2024. This variability suggests periodic changes in collection efficiency, but overall, the ratio remains within a moderate range, implying that collection periods may have slightly lengthened in some quarters as sales and receivables expanded.

Net Sales

Show substantial growth over the period, more than quintupling from 2019 to 2024 with a particularly strong rise starting in mid-2022.

Accounts Receivable, Net

Increase in proportion to net sales, indicating extended credit to customers but necessitating monitoring to ensure timely collections.

Receivables Turnover Ratio

Exhibits some fluctuations without a clear upward or downward trend, reflecting variable collection efficiency amidst rising sales and receivables balances.

Overall, the financial data indicate strong sales growth accompanied by a significant increase in accounts receivable. However, the fluctuating receivables turnover ratio suggests that while sales have grown impressively, there may be intermittent challenges in maintaining consistent collection efficiency. It would be prudent to further investigate credit policies and collection processes to sustain liquidity and minimize potential collection delays as sales volumes continue to increase.

The cost of sales demonstrates a generally upward trajectory over the observed periods, with some fluctuations. Initially, from June 2019 to March 2020, values ranged between approximately 21,000 and 28,000 thousand US dollars, followed by a noticeable increase post-March 2021, peaking around 93,000 thousand US dollars by June 2024. This indicates a substantial growth in the cost associated with goods sold, suggesting either increased sales volume, higher input costs, or both.

Accounts payable exhibit variable movements throughout the periods analyzed. Early data points show values around 12,000 to 21,000 thousand US dollars from mid-2019 to mid-2020. Subsequent quarters reveal more pronounced increases, particularly from late 2022 onwards, reaching levels close to 80,000 thousand US dollars by mid-2024. The substantial rise in accounts payable in recent quarters may reflect extended payment terms, increased purchasing activity, or both.

The payables turnover ratio fluctuates considerably over the periods with no consistent trend. Initially, the ratio was relatively high at 8.21 but declined sharply in mid-2020 to values around 4.5 to 5.5. The ratio then experienced intermittent rises and falls, with some quarters showing peaks above 7, while others fell to near 3.5. More recently, this ratio remains below early levels, suggesting slower turnover of payables. A decreasing payables turnover may indicate longer payment periods or slower supplier payments, which aligns with the noted increase in accounts payable balances.

Cost of Sales

Overall increasing trend with a significant rise in the last three years, indicating increased business activity or cost pressures.

Accounts Payable

Fluctuating values with a marked increase from late 2022, suggesting changes in payment practices or procurement volume.

Payables Turnover Ratio

Variable pattern with a general decline in recent periods, hinting at slower payments or altered supplier terms.

The analysis of the quarterly financial data reveals several notable trends across working capital, net sales, and working capital turnover over the examined periods.

Working Capital

Working capital demonstrates a generally upward trajectory from mid-2019 through mid-2024, though it exhibits some fluctuations. Starting at approximately $95.2 million in June 2019, it dips to about $81.2 million in March 2020, coinciding with the onset of the pandemic period. After this trough, the figure climbs steadily, reaching a peak of approximately $283.1 million in September 2023. Subsequently, there is a significant decline to around $152.0 million in December 2023, followed by a recovery to nearly $230.7 million by June 2024. This pattern suggests a period of rapid accumulation of working capital before a sharp reduction and subsequent rebound.

Net Sales

Net sales exhibit consistent growth over the period, notwithstanding some short-term variations. From about $59.8 million in June 2019, sales increase steadily, with noticeable acceleration starting from mid-2021. The highest recorded sales occur in June 2024, reaching approximately $324.5 million. There is a brief plateau or minor dip observed in late 2021 and early 2022. Overall, net sales more than quintuple over the given timeframe, signaling substantial revenue growth.

Working Capital Turnover

The working capital turnover ratio, available from March 2020 onward, indicates operational efficiency relative to working capital. Initially, the ratio hovers around 3.2 to 3.5, showing stability during the early pandemic phase. However, from early 2022, the ratio gradually declines to near 2.55 by September 2022, implying a potential reduction in the efficiency of using working capital to generate sales during this period. Subsequently, the ratio recovers somewhat, fluctuating between 2.7 and just under 3.0 until late 2023. A sharp increase is observed at the end of 2023 and into mid-2024, with turnover ratios spiking to approximately 5.86 in December 2023 before settling to around 4.91 by June 2024. This spike corresponds with the sharp decrease in working capital and continued sales growth, suggesting a more efficient use of working capital or a temporary change in operational dynamics.

In summary, the company exhibits strong and consistent sales growth over the monitored quarters, paralleled by an overall increase in working capital with some volatility. The working capital turnover ratio indicates varying efficiency in capital use, with a notable improvement in late 2023 and early 2024. The sharp movements in working capital and turnover during this recent period likely reflect strategic or market-driven shifts impacting liquidity and operational management.

The inventory turnover ratio exhibits moderate fluctuations over the observed periods, indicating variability in how efficiently inventory is managed. Beginning from a ratio of 2.2 in the quarter ended March 31, 2020, there is a gradual decline through the end of 2020, reaching a low of approximately 1.52. This decrease suggests a slowing in the rate at which inventory is sold or used during that timeframe.

Subsequently, the ratio recovers somewhat in 2021 and early 2022, rising to values above 2.0 in several quarters, implying improved inventory turnover efficiency. However, from late 2022 through mid-2023, the turnover ratio declines again, reaching lows near 1.29 by September 30, 2023. A slight recovery is visible toward the last reported quarters, yet the ratios remain below the earlier higher levels, indicating persistent challenges in maintaining faster inventory turnover.

Corresponding to these trends, the average inventory processing period, measured in days, inversely reflects these changes. It begins at 166 days in March 2020 and increases steadily to peaks of more than 230 days through late 2020 and parts of 2021, signifying longer holding periods for inventory. The period shortens during times when turnover improves, dropping close to 158 days in mid-2021 and early 2023, suggesting faster movement of inventory.

Nevertheless, the processing period again extends significantly in recent quarters, peaking at approximately 283 days in September 2023 before moderately declining to 221 days by June 30, 2024. This lengthening indicates a slower inventory turnover and a potential buildup of stock or inefficiencies in inventory management during these times.

Overall, the data points to cyclical inventory management performance, with phases of accelerated turnover and reduced inventory days offset by periods of deceleration and extended inventory holding times. These fluctuations may reflect external market conditions, operational adjustments, or changes in demand patterns affecting inventory efficiency.

Receivables Turnover Ratio

The receivables turnover ratio exhibits a fluctuating pattern over the analyzed periods. Starting near a high level around 9.52 in mid-2020, the ratio declined to a low of 6.74 by the end of the first quarter of 2020. This was followed by a recovery and stabilization mostly between approximately 7.3 and 8.8 in the subsequent quarters through mid-2024. Notably, the ratio did not return to the initial peak but showed moderate oscillations, indicating variability in the effectiveness of receivables collection.

Average Receivable Collection Period (Days)

The average collection period, inversely related to the turnover ratio, increased significantly in early 2020, reaching a peak of 54 days in the first quarter of 2020. Thereafter, it declined to a range between around 41 and 50 days across subsequent periods, demonstrating a general trend toward longer collection times compared to the early data points. This persistence of longer collection periods suggests some ongoing challenges in accounts receivable management or changes in customer payment behavior.

Trend Analysis and Insights

The inverse relationship between receivables turnover and the average collection period is evident. Initial high turnover ratios gave way to lower values, accompanied by longer collection periods, particularly in early 2020, which could reflect market or operational disruptions during that time. The partial recovery and stabilization in later periods imply improvements in collection efficiency but not a full return to pre-disruption levels. The variability seen in both metrics suggests fluctuating credit and collection conditions, potentially influenced by external economic factors or internal policy changes.

The data reveals several notable trends in the operating efficiency and working capital management over the analyzed periods.

Average Inventory Processing Period

This metric demonstrates a somewhat cyclical pattern with fluctuations over time. Starting at 166 days in June 2020, the period extended to a peak of 240 days by March 2021, indicating slower inventory turnover during that time. Subsequently, it decreased to 158 days by September 2021, suggesting improved inventory management or faster sales fulfillment. However, a gradual increase resumes toward the end of the period, reaching 283 days in September 2023, the highest in the dataset, before slightly declining again. These variations imply alternating phases of inventory accumulation and liquidation, possibly reflecting supply chain challenges or demand shifts.

Average Receivable Collection Period

This value remains relatively stable, fluctuating mostly between approximately 38 and 54 days. An increase is observed around March 2020 to March 2021, peaking at 54 days, which may indicate slower collections during that period. Later values show moderate oscillations but generally revert to the 40–50 day range. This consistency suggests relatively steady credit policies and customer payment behavior, albeit with some temporary elongation in collection times during certain quarters.

Operating Cycle

The operating cycle follows a trend closely aligned with the inventory processing period, as it aggregates both inventory and receivables management durations. It starts at 204 days in June 2020, rises to a peak of 294 days by March 2021, mirroring the rise in inventory days. Following this peak, the cycle shortens significantly to 201 days by March 2023, indicating an overall improvement in working capital turnover. Subsequently, the cycle extends sharply to 333 days in September 2023, the highest in the dataset, before declining slightly. These fluctuations indicate variable efficiency in the overall cash conversion process, with periods of extended capital tied up in operations and phases of improved liquidity.

Overall, the analysis indicates periods of both increased and decreased operational efficiency, with significant changes primarily driven by inventory turnover variations. The receivables collection process remains comparatively stable. The recent peaks in both inventory days and operating cycle suggest potential challenges in inventory management or changing market conditions impacting the turnover and cash flow timing.

The payables turnover ratio displays notable fluctuations over the observed periods, beginning with a value of 8.21 on June 30, 2020, and subsequently declining to 4.67 in the following quarter. Thereafter, the ratio experiences moderate increases and decreases, reaching peaks such as 9.04 on June 30, 2022, and lows around 3.62 on December 31, 2023. A general downward trend in the payables turnover ratio is observed from mid-2022 through the latest period ending June 30, 2024.

Conversely, the average payables payment period, expressed in days, exhibits an inverse relationship with the payables turnover ratio, as anticipated. Initially recorded at 44 days on June 30, 2020, it rises sharply to 78 days by September 30, 2020, then declines to 40 days by June 30, 2022. From this point onward, the payment period lengthens substantially, peaking at 101 days by September 30, 2023, before slightly decreasing to 89 days by June 30, 2024.

Interpretation of Trends

The fluctuations in the payables turnover ratio imply variability in the efficiency and speed with which the company settles its accounts payable. The initial decrease after June 2020 suggests a deceleration in payments or an increase in outstanding payables. The peak in mid-2022 indicates a period of relatively rapid payments to suppliers.

The subsequent decrease in turnover ratio alongside the increase in average payment period from mid-2022 to mid-2024 indicates a trend towards longer payment terms or potentially delayed payments. This may impact supplier relationships or the company's cash flow management.

Overall, the inverse correlation between the two metrics aligns with standard financial principles, where an increasing payables turnover reflects faster payments, and a higher average payment period reflects slower payments.

The analysis of the given financial ratios over multiple quarters reveals distinct trends in inventory management, receivables collection, payables payment, and overall cash conversion cycle.

Average Inventory Processing Period

The inventory processing period shows frequent fluctuations, with values ranging roughly between 158 and 283 days across the observed periods. From a low point in the early quarters (around 158 days), it rises sharply to peak at 283 days in Sep 2023 before slightly declining to 221 and 233 days in subsequent quarters. This indicates variability in the time inventory is held, suggesting potential challenges in managing inventory turnover efficiently.

Average Receivable Collection Period

The receivable collection period remains relatively stable with minor fluctuations around the low 40s to low 50s in days. A slight upward trend can be observed from mid-2022 onward, reaching about 50 days in several quarters, indicating a modest increase in the time taken to collect receivables. However, the changes are not drastic, suggesting consistent credit and collection policies with some periods of longer collections.

Average Payables Payment Period

The payables payment period shows considerable volatility, with values varying between 40 and 101 days. Initially increasing sharply from 44 days to a high of 78 days in Sep 2020, it then fluctuates with a notable peak of 101 days in Dec 2023. The extended payables period in recent quarters indicates that the company has been lengthening the time taken to pay suppliers, which could be a strategic move to conserve cash or reflect supplier negotiations.

Cash Conversion Cycle

The cash conversion cycle follows a similar volatile pattern, ranging approximately from 126 to 232 days. After peaking around 224-232 days during late 2020 and mid-2023, it subsequently decreases to a low of 126 days in Mar 2023, before increasing again towards the end of the data timeline. The variations in the cash conversion cycle suggest fluctuating operational efficiency in converting resources into cash, influenced by the movements in inventory, receivables, and payables periods.

Overall, the data indicate an environment of dynamic operational management, with notable challenges in inventory turnover and payment cycles impacting the cash conversion effectiveness. The company appears to manage receivables consistently but leverages longer payment terms in some periods possibly to optimize cash flow. The significant variability in inventory and payables suggests close monitoring and adaptive strategies may be necessary to maintain liquidity and operational efficiency.