What changed in this filing

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Item 1. Financial Statements

2023-05-25 compared with 2022-12-01 · 46 added, 87 removed, 218 unchanged (38% of the section changed)

32 unchanged sentences

49,932 , 50,364 , and 52,038 shares outstanding;

at October 29, 2022 (unaudited), January 29, 2022, and October 30, 2021 (unaudited), respectively

at April 29, 2023 (unaudited), January 28, 2023, and April 30, 2022 (unaudited), respectively

Treasury stock-common, at cost

7 unchanged sentences

13 Weeks Ended

39 Weeks Ended

(In thousands, except per share data)

3 unchanged sentences

Operating income

Interest expense (income), net

Interest (income) expense, net

Income before income taxes

32 unchanged sentences

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

Supplemental information

Cash paid for interest

Income taxes paid, net of refunds

11 unchanged sentences

Balance – April 30, 2022

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – July 30, 2022

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – October 29, 2022

See accompanying notes to consolidated financial statements.

Ulta Beauty, Inc.

Consolidated Statements of Stockholders’ Equity

Comprehensive

Stockholders'

(In thousands)

Income (Loss)

Balance – January 28, 2023

Stock-based compensation

Foreign currency translation adjustments

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – May 1, 2021

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – July 31, 2021

Stock-based compensation

Stock options exercised and other awards

Purchase of treasury shares

Repurchase of common shares

Balance – October 30, 2021

Repurchase of common shares, including excise tax

Balance – April 29, 2023

See accompanying notes to consolidated financial statements.

5 unchanged sentences

was founded in 1990 to operate specialty retail stores selling cosmetics, fragrance, haircare and skincare products, and related accessories and services.

The stores also feature full-service salons.

Nearly every store features a full-service salon.

As used in these notes and throughout this Quarterly Report on Form 10-Q, all references to “we,” “us,” “our,” “Ulta Beauty,” or the “Company” refer to Ulta Beauty, Inc.

and its consolidated subsidiaries.

As of October 29, 2022, the Company operated 1,343 stores across 50 states, as shown in the table below.

As of April 29, 2023, the Company operated 1,359 stores across 50 states, as shown in the table below.

New Hampshire

10 unchanged sentences

The Company’s business is subject to seasonal fluctuation, with significant portions of net sales and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season.

The results for the 13 and 39 weeks ended October 29, 2022 are not necessarily indicative of the results to be expected for the fiscal year ending January 28, 2023, or for any other future interim period or for any future year, in particular as a result of the uncertainty around the continuing effects of the COVID-19 pandemic, geopolitical events, and inflationary cost pressures on future periods.

The results for the 13 weeks ended April 29, 2023 are not necessarily indicative of the results to be expected for the fiscal year ending February 3, 2024, or for any other future interim period or for any future year.

These unaudited interim consolidated financial statements and the related notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended January 28, 2023.

5 unchanged sentences

The Company’s quarterly periods are the 13 weeks ending on the Saturday closest to April 30, July 31, October 31, and January 31.

The third quarter in fiscal 2022 and 2021 ended on October 29, 2022 and October 30, 2021, respectively.

The first quarter in fiscal 2023 and 2022 ended on April 29, 2023 and April 30, 2022, respectively.

Use of estimates

3 unchanged sentences

The Company considers its accounting policies relating to inventory valuations, vendor allowances, impairment of long-lived tangible and right-of-use assets, loyalty program and income taxes to be the most significant accounting policies that involve management estimates and judgments.

Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, geopolitical events, and inflationary cost pressures, will be reflected in the consolidated financial statements in future periods.

Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

Net sales include retail stores and e-commerce merchandise sales as well as salon services and other revenue.

3 unchanged sentences

13 Weeks Ended

39 Weeks Ended

(Percentage of net sales)

5 unchanged sentences

In addition, breakage on gift cards is recognized proportionately as redemption occurs.

The following table provides a summary of the changes included in deferred revenue during the 13 and 39 weeks ended October 29, 2022 and October 30, 2021:

13 Weeks Ended

The following table provides a summary of the changes included in deferred revenue during the 13 weeks ended April 29, 2023 and April 30, 2022:

13 Weeks Ended

6 unchanged sentences

(2) Revenue recognized in the current period related to the beginning liability .

Other amounts included in deferred revenue were $ 8,141 and $ 9,405 at October 29, 2022 and October 30, 2021, respectively.

Other amounts included in deferred revenue were $ 7,094 and $ 12,335 at April 29, 2023 and April 30, 2022, respectively.

Goodwill and other intangible assets

Goodwill, which represents the excess of cost over the fair value of net assets acquired, was $ 10,870 at October 29, 2022, January 29, 2022, and October 30, 2021.

No additional goodwill was recognized during the 13 and 39 weeks ended October 29, 2022.

Goodwill, which represents the excess of cost over the fair value of net assets acquired, was $ 10,870 at April 29, 2023, January 28, 2023, and April 30, 2022.

No additional goodwill was recognized during the 13 weeks ended April 29, 2023.

The recoverability of goodwill is reviewed annually during the fourth quarter or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

1 unchanged sentence

The recoverability of intangible assets is reviewed whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable.

The Company leases retail stores, distribution centers, fast fulfillment centers, corporate offices, and certain equipment under non-cancelable operating leases with various expiration dates through 2034.

The Company leases retail stores, distribution centers, fast fulfillment centers, market fulfillment centers, corporate offices, and certain equipment under non-cancelable operating leases with various expiration dates through 2035.

All leases are classified as operating leases and generally have initial lease terms of 10 years and when determined applicable, include renewal options under substantially the same terms and conditions as the original leases.

Leases do not contain any material residual value guarantees or material restrictive covenants.

The majority of operating lease cost relates to retail stores, distribution centers, and fast fulfillment centers and is classified within cost of sales.

The majority of operating lease cost relates to retail stores, distribution centers, fast fulfillment centers, and market fulfillment centers and is classified within cost of sales.

Operating lease cost for corporate offices is classified within selling, general and administrative expenses.

2 unchanged sentences

13 Weeks Ended

39 Weeks Ended

(In thousands)

6 unchanged sentences

Operating lease assets obtained in exchange for operating lease liabilities (non-cash)

(1) Excludes $ 21,347 and $ 24,570 related to cash received for tenant incentives for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

(1) Excludes $ 9,593 and $ 6,701 related to cash received for tenant incentives for the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

Commitments and contingencies

The Company is involved in various legal proceedings that are incidental to the conduct of the business including both class action and single plaintiff litigation.

In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the consolidated financial position, results of operations or cash flows.

On March 11, 2020, the Company entered into Amendment No.

In the opinion of management, the amount of any liability with respect to these proceedings, either individually or in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

On February 27, 2023, the Company entered into Amendment No.

2 to the Second Amended and Restated Loan Agreement (as so amended, the Loan Agreement) with Wells Fargo Bank, National Association, as Administrative Agent, Collateral Agent and a Lender thereunder;

3 unchanged sentences

and the other lenders party thereto.

The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $ 1,000,000 or a percentage of eligible owned

inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $ 50,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $ 100,000 , subject to the consent by each lender and other conditions.

The Loan Agreement matures on March 11, 2025, provides maximum revolving loans equal to the lesser of $ 1,000,000 or a percentage of eligible owned inventory and eligible owned receivables (which borrowing base may, at the election of the Company and satisfaction of certain conditions, include a percentage of qualified cash), contains a $ 50,000 subfacility for letters of credit and allows the Company to increase the revolving facility by an additional $ 100,000 , subject to the consent by each lender and other conditions.

The Loan Agreement contains a requirement to maintain a fixed charge coverage ratio of not less than 1.0 to 1.0 during such periods when availability under the Loan Agreement falls below a specified threshold.

Substantially all of the Company’s assets are pledged as collateral for outstanding borrowings under the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0 % to 0.125 % or the London Interbank Offered Rate plus a margin of 1.125 % to 1.250 %, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20 % per annum.

As of October 29, 2022, January 29, 2022, and October 30, 2021, there were no borrowings outstanding under the credit facility.

As of October 29, 2022, the Company was in compliance with all terms and covenants of the Loan Agreement.

Outstanding borrowings bear interest, at the Company’s election, at either a base rate plus a margin of 0 % to 0.125 % or the Term Secured Overnight Financing Rate plus a margin of 1.125 % to 1.250 % and a credit spread adjustment of 0.10 %, with such margins based on the Company’s borrowing availability, and the unused line fee is 0.20 % per annum.

As of April 29, 2023, January 28, 2023, and April 30, 2022, there were no borrowings outstanding under the credit facility.

As of April 29, 2023, the Company was in compliance with all terms and covenants of the Loan Agreement.

Fair value measurements

4 unchanged sentences

● Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of October 29, 2022, January 29, 2022, and October 30, 2021, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 34,839 , $ 40,839 , and $ 38,333 , respectively.

As of April 29, 2023, January 28, 2023, and April 30, 2022, there were liabilities related to the non-qualified deferred compensation plan included in other long-term liabilities on the consolidated balance sheets of $ 40,374 , $ 37,501 , and $ 40,792 , respectively.

The liabilities are categorized as Level 2 as they are based on third-party reported values, which are based primarily on quoted market prices of underlying assets of the funds within the plan.

2 unchanged sentences

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period for awards expected to vest.

The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model using the following weighted-average assumptions:

The estimated grant date fair value of stock options was determined using a Black-Scholes valuation model using the following weighted-average assumptions for the periods indicated:

13 Weeks Ended

9 unchanged sentences

The Company does not currently pay a regular dividend.

The Company granted 48 and 61 stock options during the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for stock options was $ 1,646 and $ 2,712 for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for stock options was $ 6,152 and $ 8,710 for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

The weighted-average grant date fair value of these stock options was $ 149.14 and $ 109.72 for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

At October 29, 2022, there was approximately $ 12,073 of unrecognized stock-based compensation expense related to unvested stock options.

There were 58 and 60 restricted stock units issued during the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for restricted stock units was $ 4,544 and $ 4,622 for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for restricted stock units was $ 13,983 and $ 14,606 for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

At October 29, 2022, there was approximately $ 28,260 of unrecognized stock-based compensation expense related to restricted stock units.

There were 37 and 46 performance-based restricted stock units issued during the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for performance-based restricted stock units was $ 3,489 and $ 1,786 for the 13 weeks ended October 29, 2022 and October 30, 2021, respectively.

Stock-based compensation expense for performance-based restricted stock units was $ 12,419 and $ 4,901 for the 39 weeks ended October 29, 2022 and October 30, 2021, respectively.

At October 29, 2022, there was approximately $ 27,039 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

The Company granted 41 and 48 stock options during the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

Stock-based compensation expense for stock options was $ 1,470 and $ 2,342 for the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

The weighted-average grant date fair value of these stock options was $ 200.67 and $ 149.14 for the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

At April 29, 2023, there was approximately $ 16,402 of unrecognized stock-based compensation expense related to unvested stock options.

There were 38 and 50 restricted stock units issued during the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

Stock-based compensation expense for restricted stock units was $ 4,359 and $ 4,452 for the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

At April 29, 2023, there was approximately $ 39,616 of unrecognized stock-based compensation expense related to restricted stock units.

There were 32 and 37 performance-based restricted stock units issued during the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

Stock-based compensation expense for performance-based restricted stock units was $ 3,892 and $ 3,562 for the 13 weeks ended April 29, 2023 and April 30, 2022, respectively.

At April 29, 2023, there was

approximately $ 38,418 of unrecognized stock-based compensation expense related to performance-based restricted stock units.

Income tax expense reflects the federal statutory tax rate and the weighted average state statutory tax rate for the states in which the Company operates stores.

Income tax expense of $ 88,120 for the 13 weeks ended October 29, 2022 represents an effective tax rate of 24.3 %, compared to $ 68,537 of tax expense representing an effective tax rate of 24.1 % for the 13 weeks ended October 30, 2021.

Income tax expense of $ 289,891 for the 39 weeks ended October 29, 2022 represents an effective tax rate of 24.3 %, compared to $ 224,203 of tax expense representing an effective tax rate of 24.4 % for the 39 weeks ended October 30, 2021.

On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law, which, among other things, introduces a 15 % corporate alternative minimum tax on book income of certain large corporations and creates a 1 % excise tax on net share repurchases.

The corporate alternative minimum tax will be effective in fiscal 2024, and the excise tax applies to share repurchases made after December 31, 2022.

The corporate alternative minimum tax and the excise tax are not expected to have a material impact on the consolidated financial statements.

Income tax expense of $ 102,367 for the 13 weeks ended April 29, 2023 represents an effective tax rate of 22.8 %, compared to $ 105,912 of income tax expense representing an effective tax rate of 24.2 % for the 13 weeks ended April 30, 2022.

The lower effective tax rate is primarily due to benefits from income tax accounting for stock-based compensation.

On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law, which, among other things, introduced a 15 % corporate alternative minimum tax on book income of certain large corporations and created a 1 % excise tax on net share repurchases.

The corporate alternative minimum tax will be effective in fiscal 2024 and is not expected to have a material impact on the consolidated financial statements.

The excise tax applies to share repurchases made after December 31, 2022.

Net income per common share

1 unchanged sentence

13 Weeks Ended

39 Weeks Ended

(In thousands, except per share data)

3 unchanged sentences

Net income per common share:

The denominator for diluted net income per common share for the 13 weeks ended October 29, 2022 and October 30, 2021 excludes 50 and 144 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

The denominator for diluted net income per common share for the 39 weeks ended October 29, 2022 and October 30, 2021 excludes 119 and 173 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

The denominator for diluted net income per common share for the 13 weeks ended April 29, 2023 and April 30, 2022 excludes 79 and 143 employee stock options and restricted stock units, respectively, due to their anti-dilutive effects.

Outstanding performance-based restricted stock units are included in the computation of dilutive shares only to the extent that the underlying performance conditions are satisfied prior to the end of the reporting period or would be considered satisfied if the end of the reporting period were the end of the related contingency period and the results would be dilutive under the treasury stock method.

Share repurchase program

In March 2020, the Board of Directors authorized a share repurchase program (the 2020 Share Repurchase Program) pursuant to which the Company could repurchase up to $ 1,600,000 of the Company’s common stock.

The 2020 Share Repurchase Program authorization revoked the previously authorized but unused amount of $ 177,805 from the earlier share repurchase program.

The 2020 Share Repurchase Program did not have an expiration date but provided for suspension or discontinuation at any time.

In March 2022, the Board of Directors authorized a new share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $ 2,000,000 of the Company’s common stock.

The 2022 Share Repurchase Program revokes the previously authorized but unused amounts from the 2020 Share Repurchase Program.

In March 2022, the Board of Directors authorized a share repurchase program (the 2022 Share Repurchase Program) pursuant to which the Company may repurchase up to $ 2,000,000 of the Company’s common stock.

The 2022 Share Repurchase Program revokes the previously authorized but unused amounts from the earlier share repurchase program.

The authorized value of shares available to be repurchased under the 2022 Share Repurchase Program excludes excise tax.

The 2022 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time.

3 unchanged sentences

Shares repurchased

Total cost of shares repurchased

Total cost of shares repurchased, including excise tax

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements