ELF Beauty Inc (ELF)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	130,741	127,492	139,753	149,678	140,693	132,148	107,346	68,143	62,284	47,964	40,029	29,770	25,716	23,036	17,562	9,400	12,308	18,897	26,031	29,950
Interest expense (ttm)	US$ in thousands	3,957	433	436	440	362	366	371	377	367	373	380	394	189	209	230	244	286	297	307	317
Interest coverage		33.04	294.44	320.53	340.18	388.65	361.06	289.34	180.75	169.71	128.59	105.34	75.56	136.06	110.22	76.36	38.52	43.03	63.63	84.79	94.48

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $130,741K ÷ $3,957K
= 33.04

The interest coverage ratio measures a company's ability to meet its interest payments with its operating income. A higher ratio indicates that the company is more capable of servicing its interest obligations.

Analyzing the interest coverage ratios of ELF Beauty Inc over the period from March 31, 2020, to December 31, 2024, we observe fluctuations in the company's ability to cover its interest expenses. The interest coverage ratio was strong in March 31, 2020, at 94.48, and continued to be robust in subsequent quarters until December 31, 2021, where it stood at 136.06. This indicates that ELF Beauty Inc had significant operating income relative to its interest payments during this period.

However, there was a notable decline in the interest coverage ratio starting from March 31, 2022, where it dropped to 75.56, reaching a low of 33.04 by December 31, 2024. This decreasing trend signals a potential strain on the company's ability to cover its interest expenses with operating income.

The drastic decrease in interest coverage ratio since March 31, 2023, highlights a concerning deterioration in ELF Beauty Inc's financial health, as it indicates a higher dependency on operating income to fulfill interest obligations. This decline may raise red flags for investors and creditors as it suggests a higher risk of default on debt payments in the future.

In conclusion, ELF Beauty Inc's interest coverage ratio has shown a fluctuating pattern over the analyzed period, initially strong but declining significantly in recent quarters. It is essential for investors and stakeholders to closely monitor this ratio to assess the company's ability to manage its debt obligations effectively.