Earnings call transcript: ELF Beauty Q1 2025 sees 9% sales growth

ELF Beauty Inc. (ELF) reported its first-quarter earnings for fiscal year 2026, showcasing a solid performance with net sales reaching $354 million, marking a 9% year-over-year increase. The company also reported an earnings per share (EPS) of $0.89, surpassing the forecasted $0.84 by 5.95%. Despite the revenue falling slightly short of expectations, the stock price remained stable, closing at $110.39, reflecting a modest 0.5% increase in the aftermarket session. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score of 3.12 out of 5, with particularly strong profitability metrics.

Key Takeaways

• ELF Beauty’s Q1 net sales grew by 9% year-over-year, driven by strong international performance.
• The company reported an EPS of $0.89, exceeding the forecast by 5.95%.
• The stock price experienced a slight increase of 0.5% in aftermarket trading.
• ELF Beauty continues its market share gains, marking 26 consecutive quarters of growth.
• The company completed the acquisition of Rhode skincare for $800 million.

Company Performance

ELF Beauty demonstrated robust growth in the first quarter of fiscal 2026, with net sales increasing by 9% compared to the previous year. This growth was largely fueled by a 30% surge in international sales, while U.S. sales rose by 5%. The company continues to hold a strong position in the color cosmetics market, capturing a 15% unit share. InvestingPro data reveals impressive gross profit margins of 71.24% and a robust five-year revenue CAGR of 36%, indicating sustained operational efficiency.

Financial Highlights

• Revenue: $354 million, up 9% year-over-year
• EPS: $0.89, up from the forecasted $0.84
• Adjusted EBITDA: $87 million, a 12% increase
• Gross margin: 69%, down 215 basis points year-over-year
• Cash on hand: $170 million
• Free cash flow: $20 million in Q1

Earnings vs. Forecast

ELF Beauty’s EPS of $0.89 surpassed the forecast of $0.84, representing a 5.95% positive surprise. However, the actual revenue of $353.7 million fell slightly short of the forecasted $355.26 million, resulting in a minor negative surprise of 0.44%.

Market Reaction

Following the earnings release, ELF Beauty’s stock experienced a 0.5% increase in aftermarket trading, closing at $110.39. This movement reflects investor confidence in the company’s continued growth and market share gains, despite the slight revenue miss. Based on InvestingPro’s Fair Value analysis, the stock appears fairly valued at current levels. Notably, the stock has shown significant volatility with a beta of 1.56, while delivering a strong 55.19% return over the past six months. InvestingPro subscribers have access to 20 additional exclusive insights about ELF’s valuation and growth prospects.

Outlook & Guidance

ELF Beauty anticipates net sales growth above 9% for the first half of the fiscal year, with adjusted EBITDA margins expected to be around 20%. The company is optimistic about its future prospects, driven by the recent acquisition of Rhode skincare and planned expansion into new retail channels like Sephora and Dollar General.

Executive Commentary

CEO Tarang Amin emphasized the company’s potential for growth, stating, "We see the potential to more than double our business over the coming years." He also highlighted ELF Beauty’s unique position, noting, "E.l.f. is the only brand of nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 26 consecutive quarters." This optimistic outlook is supported by InvestingPro’s comprehensive analysis, which shows strong financial metrics including a healthy current ratio of 3.05 and moderate debt levels. For detailed insights into ELF’s growth trajectory and peer comparison, investors can access the exclusive Pro Research Report, available as part of the InvestingPro subscription.

Risks and Challenges

• Tariff uncertainties remain a significant concern, with current rates at 55%.
• The company’s gross margin has decreased, which could impact profitability if not addressed.
• The integration of Rhode skincare poses potential operational challenges.
• Currency fluctuations could affect international sales performance.
• Increased competition in the cosmetics market may pressure market share gains.

Q&A

During the earnings call, analysts inquired about the company’s strategy to mitigate tariff impacts, to which management responded with plans for a $1 price increase across its product line. Additionally, questions were raised about the Rhode brand’s launch in Sephora, with executives expressing excitement about the potential for growth in this new channel.

Full transcript - ELF Beauty Inc (ELF) Q1 2026:

Casey Catton, Vice President of Corporate Development and Investor Relations, e.l.f. Beauty: Us I’m Casey Catton, Vice President of Corporate Development and Investor Relations. With me today are Tarang Amin, Chairman and Chief Executive Officer and Mandy Fields, Senior Vice President and Chief Financial Officer. We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.elfbeauty.com. Since many of our remarks today contain forward looking statements, please refer to our earnings release and reports filed with the SEC, where you’ll find factors that could cause actual results to differ materially from these forward looking statements. In addition, the company’s presentation today includes information presented on a non GAAP basis.

Our earnings release contains reconciliations of the differences between the non GAAP presentation and the most directly comparable GAAP measure. With that, let me turn the webcast over to Thuring.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty: Thank you, Casey, and good afternoon, everyone. Today, we will discuss our first quarter results and our approach to fiscal twenty twenty six. I’m proud of our incredible e. F. Beauty team for delivering another quarter of industry leading results.

In Q one, we grew net sales 9% on top of 50% growth in Q1 of last year, delivered adjusted EBITDA of $87,000,000 up 12%, and gained two ten basis points of market share. Q1 marked our twenty sixth consecutive quarter of both net sales growth and market share gains. E. F. Is the only brand of the nearly 1,000 cosmetics brands tracked by Nielsen to gain share for twenty six consecutive quarters.

As we look ahead, we see the potential to more than double our business over the coming years given the significant white space we see in color cosmetics, skin care, and international. We believe the acquisition of Road, which closed yesterday, enhances our position as a leading player in accessible beauty. Let me update you on our progress in Q1. First, in color cosmetics. Nationally, e.

F. Is the number one unit share brand with approximately 15% share and the number $2 share brand with approximately 13% share, more than double where we were just three years ago. The combination of our value proposition, powerhouse innovation, and disruptive marketing engine continue to fuel our market share gains. Looking to our value proposition. The average price point for e.

F. Cosmetics is about $6.5 today as compared to nearly $9.5 for legacy mass cosmetics brands and over $20 for prestige brands. As we spoke about last quarter, to help mitigate the impact from tariffs, we took a dollar increase on our entire product assortment effective August 1. This is only the third price increase we’ve taken in our twenty one year history. With 75% of e.

F. Product portfolio remaining under $10 post increase, our community continues to praise our commitment of making the best of beauty accessible to every eye, lip, and face. In Target, our longest standing national retail customer, we’re the number one cosmetics brand with approximately 21% share, growing by a 190 basis points in q one. We’re making great progress on replicating our success at Target with other key retailers. We posted triple digit share gains with all of our major tracked channel retail partners in Q1.

We’re also finding success with newer retailers like Dollar General. Dollar General has a stated strategy of serving the underserved, with 80% of stores serving rural markets. Their partnership has been a win win. E. F.

Is attracting new buyers into the channel, with 60% of e. L. F. Purchases at Dollar General coming from shoppers who never bought cosmetics at Dollar, and 53% of these shoppers are new to the e. L.

F. Brand. We’re excited to expand our footprint to additional Dollar General stores this fall. Looking to innovation, we have a unique ability to deliver a steady stream of holy grails, taking inspiration from our community and the best products in prestige and bringing them to market at an extraordinary value. As consumers continue to seek multi benefit products and skin forward cosmetics, we’re answering the call with our Halo Glow Skin Tint Mineral SPF 50 priced at an incredible value of $18 compared to prestige items at $48 or more.

Speaker 2: Elf just dropped an $18 skin tint. Let’s see if this is worth $18. This is stunning. My skin looks like literal glass, like perfection. There’s also, like, an on a pour in sight.

It, like, blurred my texture while making my skin super radiant. You know what my reaction to this is? I am shocked that this is e. F. This is giving like luxury foundation.

This reminds me of the $290 La Prairie Foundation. I do not say this lightly. This is e. F. Best product to date.

Hands down.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty: Halo Glow Skin Tint was our top selling cosmetics product in q one on e.f.cosmetics.com. Our Holy Grail innovation approach is driving share gains across segments. In Q1, we delivered triple digit share gains across face, lip, and eye makeup. We’ve more than doubled our share in each of these segments over the last five years. As compared to the 22% share and number one ranking we have in face, we have a 13% share in the number three ranking in lip and a 9% share in the number four ranking in eye.

We believe we have the innovation engine to grow share in these large segments. We’re also leaning into our disruptive marketing engine to fuel brand awareness. E. F. Unified marketing engine fuses insights, innovation, and entertainment and elevates e.

L. F. As one of the most talked about beauty brands in the world. We move at the speed of our community. Sparked by the insight that seven of the top 10 most viewed lip gloss videos on TikTok featured TikTokers customizing their own jumbo Halo Glow lip gloss, we turned fandom into innovation at e.

F. Speed. From insight to action in under four weeks, we launched a DIY Halo Gloss kit exclusively on TikTok shop that’s sold out in under twenty four hours. Turning to skincare. Skincare today drives nearly 20% of our global consumption, more than double the level we had a few years ago, and we continue to see significant runway for growth.

We have two of the fastest growing mass skincare brands with e. F. Skin and Naturium that are distinct yet complementary in price points, positioning, and audiences. We’re leaning into our value proposition and power us innovation with our latest e. F.

Skin product launch. Our bright icon vitamin C E Ferulic serum priced at an incredible value of $16 compared to a prestige item at a $185.

Speaker 3: Mikaela said that e. F. Made an affordable version of the $182 vitamin c serum. I’ve never added something to my cart so quick in my life. At this point, we just need e.

F. To get to the lab and make all of our favorite

Speaker 4: This will brighten up your skin tone and lighten up any dark spot that you have. This literally feels so good on the skin, you guys, and it doesn’t smell like anything. Can we just take a moment for the glow, you guys? Like, my skin is glowing. This glow for $16?

Absolutely, yes.

Speaker 3: So if you did not notice, the packaging is getting very luxurious. And the price, $16 unlike the other one that’s over 100. You know e. F. Is always here to give baddie on a budget.

I am in love with this serum.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty: This serum was our best selling skincare product on elfcosmetics.com in q one. E. F. Skin is cultivating cultural relevance with the premiere of Sunhinged. We reimagine SPF education with a comedy roast of the sun at the intersection of humor and health to drive awareness.

Consumer research finds that 91% of people prefer brands that are funny, and 90% are more likely to recall a brand that uses humor.

Speaker 5: When you’re a stand up, there are things you dream of doing. SNL, The Tonight Show, maybe a Netflix special, but above all, it’s the e. F. Sunscreen show.

Speaker 6: This is all I’ve ever wanted.

Speaker 3: As we know, we’re here to roast the sun.

Speaker 7: Oh my god.

Speaker 3: The sun is

Speaker 8: baking me out. There are a lot of risks to not wearing sunscreen, like getting very tan and sexy and skin cancer. So yeah.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty: Looking to international. Our international net sales grew 30% in q one, fueled by growth in our existing markets as well as expansion into new markets. In The UK, our largest market outside The US, e. F. Cosmetics outpaced category growth by three x in q one, increasing our rank from the number four brand to the number three brand.

As we look to new international markets, we’ve seen success with our engagement model across social platforms, driving consumer demand well before we enter a country. We saw this play out in q one with the launch of e. F. In over 1,200 stores of Krautwat, the number one beauty retail in The Netherlands and Belgium. E.

L. F. Quickly ascended to the number one brand in Belgium and the number two brand in The Netherlands. We’re excited for the international expansion we have planned this fall. E.

F. Is launching with Rossmann in Poland and Sephora in the six countries of the Golf Cooperation Council. Notarium is also expanding into additional boot stores in The UK and launching with Sephora in Australia. For context, six years ago, we sold $28,000,000 internationally, or about 10% of our sales. Today, we sell $266,000,000 internationally, representing 20% of our sales.

We expect that mix to continue to grow as we gain share in existing markets and expand into new markets. As we look ahead, we remain confident in our ability to continue to gain share and capture the significant white space ahead of us. We believe that opportunity is further accelerated with our acquisition of Rhode, a breakthrough high growth beauty brand founded by Hayley Rhode Bieber. The acquisition closed yesterday, and we’re thrilled to officially welcome the talented Rhode team to the e. F.

Beauty family. I’ve been in the consumer space thirty four years and have been blown away by what Hailey and her team are building. In just under three years since its founding, Road has seen exceptional growth, achieving $212,000,000 of net sales in the twelve months ended 03/31/2025, DTC only with just 10 products. We believe the acquisition of Rode brings together two like minded disruptors who are best in class in creating highly desirable brands that deliver high quality innovation to highly engaged communities. As we combine, our initial focus will be to help in two areas: first, to accelerate Rhodes brand awareness.

For context, Rhodes aided awareness is 20% today in The U. S, half the level of other premium skincare brands which average 40% or more awareness. Second, we plan to leverage our deep retail expertise and help Rhode expand their distribution footprint. The team is focused on executing its launch with Sephora, the world’s leading global beauty retailer. Sephora’s standard approach is to test a brand in a subset of stores before scaling.

Given Rode’s breakthrough DTC success and Sephora’s belief in the potential of the brand, Rode is launching in all Sephora stores across The US and Canada in September and The UK by the end of the year. We’re excited to accelerate e. F. Beauty’s global presence with Sephora, building upon the successful partnership we’ve had since launching e. L.

F. In Sephora Mexico last year. We’ve been disrupting and driving industry leading growth for twenty one years in service to our growing communities around the world. As we look ahead, and now further fueled by road, we see an opportunity to more than double our business over the coming years with significant white space we see in color cosmetics, skin care, and international across our portfolio of brands. I’ll now turn the call over to Mandy to talk more about our first quarter results and our approach to fiscal twenty twenty six.

Mandy Fields, Senior Vice President and Chief Financial Officer, e.l.f. Beauty: Thank you, Tarang. Q1 net sales of $354,000,000 grew 9% year over year on top of 50% growth in Q1 of last year, primarily driven by continued growth in unit volume. Our net sales in The U. S. Grew 5% year over year in Q1, while international net sales grew 30%.

We are pleased to see continued momentum in consumption with our growth outpacing category trends leading to two ten basis points of market share gains in the quarter. Q1 gross margin of 69% was down approximately two fifteen basis points compared to prior year. The year over year decline was driven by incremental tariff costs, partially offset by favorable foreign exchange impacts on goods purchased from China and Mix. On an adjusted basis, SG and A as a percentage of sales was 50% in Q1 as compared to 51% in Q1 last year. Marketing and digital investment for the quarter was 22% of net sales as compared to 23% in Q1 last year.

Marketing spend for the quarter was lower than planned as campaign spend shifted into Q2. We continue to expect marketing and digital spend at approximately 24% to 26% of net sales in fiscal twenty twenty six, in line with the range we targeted in fiscal twenty twenty five. Q1 adjusted EBITDA was $87,000,000 up 12% versus last year. Approximately seven points of that year over year growth was driven by an unanticipated foreign currency gain of approximately $5,000,000 due to quarter over quarter fluctuations between the British pound and the U. S.

Dollar. Adjusted net income was $51,000,000 or $0.89 per diluted share compared to $64,000,000 or $1.1 per diluted share a year ago. The decrease in adjusted net income and EPS metrics was primarily driven by a more normalized tax rate as compared to Q1 last year, which included discrete tax benefits related to stock based compensation. Moving to the balance sheet and cash flow. Our balance sheet remains strong and we believe positions us well to execute our long term growth plans.

We ended the quarter with $170,000,000 in cash on hand compared to a cash balance of $109,000,000 a year ago. I’m also pleased with the $20,000,000 in free cash flow we generated in Q1, up from $05,000,000 a year ago. Subsequent to quarter end, we closed on our acquisition of Road. As a reminder, we financed the $800,000,000 upfront transaction with an incremental term loan of approximately $600,000,000 as well as $200,000,000 or approximately 2,600,000.0 shares of e. F.

Beauty common stock issued directly to the equity holders of Road. Our liquidity position remains strong with relatively low leverage post the transaction. We expect our cash priorities for the year to remain on investing behind our growth initiatives and supporting strategic extensions. The specific initiatives we’re focused on this year include investing in our people and infrastructure, our ERP transition to SAP, and our international expansion. In July, we officially went live on SAP.

While it’s still early days, I’m pleased to report that our go live was successful and our business is transacting. As you all know, these are significant undertakings. Our smooth go live is a testament to the exceptional talent and dedication of our e. F. Beauty team members and partners.

Now let’s turn to fiscal twenty six. As we spoke about last quarter, we are planning to provide a full year fiscal twenty six outlook once we have greater certainty on tariffs. Unfortunately, there continues to be a broad range of potential outcomes. To set the foundation, about 75% of our global production today comes from China. Between April 9 and May 13, we were subject to tariffs at the 170% level.

As of May 14, product imports to The US are subject to tariffs at the 55% level. 25% of that was put into place in 2019 plus an incremental 30% that is now in place through mid August. Beyond this date, the tariff rate remains subject to ongoing negotiations. For these reasons, we are waiting for greater clarity to issue a full year fiscal twenty six outlook. For context, if tariffs were to remain at this incremental 30% level, we estimate the gross impact to our cost of goods sold to be approximately $50,000,000 on an annualized basis.

And as we spoke about last quarter, our tariff mitigation plans are already underway through three key vectors: pricing, supply chain optimization and business diversification. With that said, we do have better visibility into how we expect the first half of the year to shape up, and I’d like to provide some color on our approach. From a top line perspective, we expect to deliver net sales growth in the first half of the year above the 9% growth that we delivered in Q1, primarily given the incremental contribution from Road for about two months of Q2. Note, we are not benefiting from the Road sell in to Sephora as that occurred prior to closing. From a profitability standpoint, we expect adjusted EBITDA margins to be approximately 20% in the first half of the year, which we believe is quite strong in this macroeconomic environment.

On a quarterly basis versus Q1, this accounts for flowing through more of our higher tariffed COGS, the timing shift in marketing campaign spend, and the inclusion of Road in our consolidated financials. In summary, we’re pleased to have delivered another quarter of industry leading sales and market share growth. We believe we have a winning strategy and are in the early innings of unlocking the full potential we see as we welcome Road to our growing portfolio of disruptive brands. With that, operator, you may open the call to questions.

Speaker 8: We will now begin the question and answer session. The first question today comes from Susan Anderson with Canaccord. Go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty0: Good afternoon. Alex Legg on for Susan. A question on the tariffs. Can you talk about how much inventory might be trapped in at the 170% rate versus the 50% rate? And if there’s any way to talk about the potential timing of it flowing through the P and L?

Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Hi. This is Mandy. So on the tariffs, we talked a little bit about this last quarter. There was a period of time that we were purchasing at that 170% level. And so right now, what we have in inventory is a mixture of that one seventy and the 50 fives plus some that is even at the 25% level that we were previously subject to.

What we expect for q two is more of that 170% to flow through, and so that’s why we we called that out on the just expecting more of that flow through in q two. So would expect to see kind of a lower gross margin quarter over quarter as we go through.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Thanks. And then just

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty0: a follow-up. So the first half EBITDA margin guide, it kind of implies a 500 to 600 basis points deleverage for EBITDA margins in second quarter. How much of that should we think about is coming from gross margin versus SG and A when you include there’s a lot of moving pieces of the tariffs, the Road acquisition, maybe some incremental investment? Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. So that first half EBITDA margin that we called out, the implications on q two really driven by three factors. One is the gross margin as we just talked to flowing through more of those tariffs in q two. Secondly is the shift in marketing spend. So we did have some campaign spend shift from q one into q two.

And then lastly is the addition of road into our SG and A, again, without that benefit of the sell in to Sephora from a top line standpoint. Overall, still quite strong, I would say, from an EBITDA margin standpoint at approximately 20% just given kind of the macro that we’re operating in.

Speaker 8: The next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty3: Hi. I was just hoping, Mandy or Trang, you could expand a bit on the greater than the 9% sales growth that was posted in fiscal Q1 comment for the first half. A, does that comment hold without Road? I think Mandy, you mentioned that Road was in there, so just a clarification there. And maybe just through some of the key puts and takes as you think about fiscal Q2 versus fiscal Q1, just conceptually how you’re thinking about the business.

I know we won’t get quantification, but a lot of moving pieces with pricing, the consumer demand reaction to pricing, the retailer ordering patterns, the base business volatility. So just any conceptual thoughts around those areas would be helpful just as you think about the underlying business sequentially fiscal Q2 relative to fiscal Q1? Thanks.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Thanks for the question, Dara. So on your first question, we have not broken out what else versus road. We just wanted to acknowledge that for q two, we will have the addition of road into our financials, and so that will help to drive, q two higher than what we saw in q one. On on the e. F.

Business in particular, we’re really pleased with what we’re seeing on the e. L. F. Business. One, I would say, our fall innovation continues to perform well.

We talked about pulling our melting lip balms up to launch earlier. Our community was asking for that. And so when you think about that that performance and now we’re cycling fall in the base, you know, fall last year in the base, we’re still seeing a positive result overall for fall twenty five innovation. So we are feeling very pleased with that. And I would say that our our objective is just to continue to build share just like we did in q one.

We built 210 basis points of share in q one across all three segments, eyes, lips, and face. And so feeling very good about the e. F. Business, the underlying e. L.

F. Business as we go through. And to your point, pricing will be something that that kicks in. We’ll see where the consumer nets out on that. But as you know, when we talked about issuing pricing or having to take that dollar price increase back in May, consumer sentiment was positive for us.

And so we’ll we’re really gonna be watching for the elasticity and the response there itself.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty3: Okay. Great. And then just as a follow-up, broad EPS accretion as we think about this fiscal year separate from the base business, it looks like the acquisition will be significantly accretive. Just give us a sense for how you’re managing that. Is there a lot of spend back behind the business near term there, given the expansion in Sephora?

And maybe just touch on the underlying level of revenue growth for the business versus how it existed last year just just with the Sephora launch coming up and obviously the strong base business growth trends on top of that? Thanks.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. So we we’re quite excited about the road launch into Sephora. And and as we talked last quarter, even with the investments that we wanna make back into the business, we still expect this to be accretive overall. So very pleased with that. And and we’re pleased with what we’re seeing out of road.

You know, they had their lemon teeny launch of their lip peptide, and that went really well for them. We’re just so excited about all the signals that we’re seeing on road. And and from a financial standpoint, we’ll be back to you next quarter, hopefully, in a position to give guidance once we have more clarity on tariffs to really give you a a more fulsome picture on what we’re seeing.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty3: Okay. Thank you, guys. Yeah.

Speaker 8: The next question comes from Olivia Tong with Raymond James. Please go ahead.

Speaker 7: Great. Thanks. Good afternoon. I wanted to dig a little bit deeper into The U. S.

Core business and whether you could talk about your top line growth expectations there, particularly in comparison to scanner, has decelerated a little bit of late. And then your view on the 9% target, 9% plus target, excuse me, for first half. Clearly, above 9% has no upper limit. But if we take the 9% end of that, it would suggest that ex road results could be down year over year. And, I guess, could you tell us in your view, is that on the table,

Speaker 8: for for q two? Thanks.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yep. So as I said, Olivia, we still feel great about the e. F. Business that includes our US core business. The deceleration from a from a Nielsen standpoint, again, is really driven by us starting to, you know, cycle a full fall in the base.

So we had the benefit earlier on of launching that our melting lip balms earlier, and so now we’re still seeing fall overall positive. So that is that’s fantastic for us. I would say for on a x road basis, there is not a scenario that we’re contemplating as as we talk about the better than 9% that would have e. F. Business down on a year over year basis.

We just talked about in q one seeing our US business up 5%. Our international business is up 30% in q one and picked up 210 basis points of share in the quarter. So we really see a lot of strength behind the e. L. F.

Business.

Speaker 7: Great. That’s that’s super helpful. And then can we talk about the further expansion into Sephora, which sounds great, you know, Mexico, now Middle East. So, know, Notorious as well. Could you talk about your conversations with Sephora as you build more and more in international markets?

If you could give us a sense in terms of the lineup that’s going into the into those markets, is it more the hero products? Is it across the board? Just to give us a sense of what the opportunity is there for us for you. Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Hi, Olivia. This is Tarang. We’re extremely excited about our expanding partnership with Sephora. Let me just back us up a little bit. It was last year that we entered our first with the e.

F. Brand, our first Sephora market with Sephora Mexico. Was one of the best launches they’ve seen. I think we’ve continued to maintain a top three position across all of Sephora in Mexico. And one of the things that they really liked about the e.

F. Launch is we brought in a whole new consumer set, our younger, more diverse, engaged consumer. And so they really like that dynamic. So we’ve been talking to them about a number of different markets. We’re quite obviously biggest thing that we’re excited about is Rhodes launch into all US and Canadian.

Sephora doors in September followed by The UK end of year. We’re also excited about entering the six Gulf Cooperation Council countries, with e. F, and that’s gonna be the full assortment, similar to what we did with Sephora Mexico. It’s all of our core franchises, in in that. It’s gonna be the the launch, again, similar to Mexico.

We’re expecting a big launch there. And then, last but not least, Notorium entering Sephora in Australia, we feel really great about too. So we can see potentially additional Sephora markets over time. And as we confirm plans, we’ll we’ll talk about it. But overall, feel really good about the expansion with Sephora.

Speaker 8: Got it. Thank you. The next question comes from Andrea Teixeira with JPMorgan. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty4: Thank you and good afternoon. I wanted to follow-up on the answer regarding The U. S. Based business. Mindy, you mentioned that it’s been growing about 5% for The U.

S. I was curious to see what is the exit rate in the quarter? And then also with the price increase, the $1 over your average price of $650 is roughly it’s a mid teens price increase. And understandably, you’re banking some assuming some elasticity there, but you’re still going to have July and August I’m sorry, August and September, the benefit of that. So I was curious to see really in a scenario where you see this 5% accelerating given the price increases and also the innovation that you spoke about?

Or is that too too optimistic given how the consumer has been behaving?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Hi, Andrea. It’s great to hear from you. So on on The US business and taking into account the price increases, as you know, our approach is to always take a balanced approach. And in this instance, we’re being a bit conservative on how we’re modeling that internally. In our past price increases, we have done better than we’ve modeled from an elasticity standpoint.

But with these increases just going in on August 1, we’re still reading how the consumer will respond to that. It will take a couple weeks for that to fully roll out within retail, and so that is something that we’re watching for. And I also acknowledge, you know, the consumer overall sentiment right now. As heard you from another of consumer companies, they’re just continuing to be choiceful with how they’re spending. I think from our perspective, the great thing is even with this price increase, 75% of our portfolio will be at $10 or below.

So still very much a value for our community, and and we’re feeling great about that.

Speaker 8: Thank you. The next question comes from Mark Altschwager with Baird. Please go ahead.

Speaker 3: Good afternoon. Thanks for taking my question. Another question regarding the price increases. I’m curious how your retail partners have reacted to that. What’s the feedback you’ve received?

And as they’re placing their orders, are you seeing them temper units orders in anticipation for some consumer elasticity?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Hi, Mark. This is Tarang. Overall, acceptance has been good for our price increase. I think part of the reason why is we’re very choiceful when we take price increases. We’ve only taken three increases in our twenty one year history and have had a really good track record in terms of how that’s executed.

We take quite seriously our responsibility to deliver an extraordinary value to our community. And so even the way we’ve taken pricing of first letting our community know being transparent has been well received by our community, well received by our customers. The other thing I will tell you is we are hearing of a number of brands that are gonna be taking pricing. So I think we in that environment right now with the uncertainty of tariffs and the tariff impact that you will probably see more more more companies take pricing. We tend to lead, and then we will see how many more kind of follow us.

Speaker 3: Thank you. And then I understand, Mandy, there’s a lot of noise in q two on gross margin given there’s some goods flowing through at the the much higher rates. But as we think kind of moving forward, if the 30% were to stay in place, is the doubt book enough to neutralize the margin impact?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: So we haven’t given any color into that, Mark, because as I just talked about earlier on the pricing piece, we’re looking to see how that elasticity plays out in order to be able to more fully answer that question. And, again, with the wide range of outcomes on tariffs, we we’re watching to what happens on August 12 next week when there is supposed to be further talks on China tariffs. And so, I think we’ll we’re just gonna have to wait and see how things play out there.

Speaker 3: Got it. Thank you.

Speaker 8: Yeah. The next question comes from Oliver Chen with Cowen. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty5: Hi, Tarang and Mandy. Within The US E. F. Brand, what channels or partners have been stronger or weaker in terms of what you’re seeing in U. S.

Market and the choice for U. S. Consumer? And then as we think about Road, which is very exciting, how what is your what are your thoughts on on international global development and also, potential exclusive product for Sephora and initial thoughts on, what might be most exciting for categories? There’s a lot of tons of opportunity for you to pursue many things with Road.

Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: So, Oliver, great to hear from you. On The US e. F. Brand, from a channel standpoint, we had growth in our brick and mortar channels, our core retailers, as well as in ecommerce. And so I’m very pleased with what we’re seeing there.

Like I said earlier, from a net sales standpoint in The US, had 5% growth in q one overall.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty5: Were there channels that were

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty6: Yes. Sorry. Go ahead, Oliver. Go ahead, Oliver.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty7: Oh, I

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty5: was were there channels that were which ones were weaker? Which ones were were were less positive to those if you if you could share with that that with us as well?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. We’ve just not breaking out that level of detail, other than to say, you know, we we continue to make progress in q one in The US, again, picking up share 210 basis points in the quarter across all segments, and so really pleased with our performance.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Thanks. And then, Oliver, to your second question on road, our near term, focus is really to execute with excellence, the launch into Sephora in all US and Canadian doors followed by The UK. There certainly will be other opportunities for further international expansion. I think we mentioned last time on the call that the vast majority of her of Hailey’s followers are outside The US, but that business still only has about 20% outside The US. So we have massive runway for growth for road similar to the pent up demand that we see for e.

F. Every time we go into a new country.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty5: Great. Thanks. Best regards.

Speaker 8: The next question comes from Peter Grom with UBS. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty8: Thanks, operator. So I wanted to just ask on Road and trying clearly a lot of growth for the brand the last few years, but touched on, this in response to Darren’s question that the brand is performing well. But we’ve seen some pretty exponential growth over the last few years. As we think about modeling the brand, getting that to sell in and before isn’t going to be any results. But maybe just could you help us understand bigger picture the level of growth that you’re seeing or that we should expect?

And then you mentioned that you would expect the brand to double over the next few years. Is that a broad based comment? Or do you kind of have a clear target in mind in terms of when you would expect that to happen?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Yes. So hi, Peter. We haven’t disclosed specific growth rate on road other than to say it went from zero to $212,000,000 in three years, DTC only with just 10 products. So it has massive potential ahead of it, particularly with the launch into Sephora. And I would say in terms of and, you know, we’re gonna continue to accelerate it similar to how we’ve accelerated growth on Notorium, getting Notorium Intel to beauty, into boots, into shoppers and continue to expand.

The other thing we’re gonna do on road is we’re gonna take since it is quite accretive, we are gonna invest back into more marketing to drive that awareness. The aided awareness is 20%, which is great for a brand that’s just three years old, but still about less than half what some of the prestige skincare brands are. And then certainly, I mentioned executing Sephora well, and then they have a very strong innovation program. So really bullish on road and what we can achieve there. And then in the commentary of doubling the business, we’re talking about the overall e.

F. Company, that with the white space we have in color cosmetics, skincare, and international, we see in the coming years the ability to more than double up our overall business.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty8: Okay. Thanks for that. And Mandy, I I just want to ask you around margins. Just in the context of the weaker second quarter, and I I get tariffs and the last disease remain a wildcard here. But can you maybe just help us understand how you would anticipate margin performing in the back half of the year?

I guess, when you look at the second quarter, what costs could be transitory, what could say? And I guess it just seems like it would be a pretty big step up from mid teens to kinda get back to to 20% plus on on the surface sequentially. So just if you could help us understand that, that would be great.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. So that what we’re looking at for the first half of the year, remember, for majority of the first half of the year, that’s pretty much an unmitigated tariff that that we haven’t put the pricing into place until August 1. We are continuing to work on the other two aspects of tariff mitigation, our supply chain diversification as well as our business diversification continuing to expand internationally. So all of those things are at play. But I would say for q one and q two, you’re flowing through those higher rate of tariffs without a real offset from a mitigation standpoint.

And so as I think about the second half, you’ll have to wait until we get give full year guidance to get a a a full answer there. But I can just tell you what we’re seeing for the first half is, you know, that that margin, gross margin pressure in Q2 mainly because we’re flowing through those tariffs without a lot of the offsets yet firing.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty8: Got it. Thanks so much. I’ll pass it on.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yes.

Speaker 8: The next question comes from Ashley Helges with Jefferies. Please go ahead. Hi. This is Sydney on for Ashley. Thanks for taking our question.

Just wondering, we’ve seen a bit of a gap with unit sales outperforming dollar sales in the scanner data. Wondering if you can speak to kind of what’s driving the gap in that trend possibly connected. What are you seeing in terms of promotion in the channel? And then if you can share expectations for innovation in q two and how that will compare to what we saw last year. Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. So we’re really pleased with the volume growth that we’ve seen both in our total business. So on our on the call, we talked about volume really helping to drive our net sales growth in q one, and we’ve seen that as well from a scanner standpoint continuing to be volume driven, which is which is great to see. From a category standpoint, I wouldn’t say that we’ve seen an acceleration of promotion in the category. You do see from from here and there, you know, certain certain retailers or or categories going on promotion, but I wouldn’t say that that is exponentially higher than what we’ve seen normally in this category.

And I would say from an innovation standpoint, we’re very pleased with the innovation. Our fall innovation that we’ve launched, we’ve talked a lot about the melting lip balms. We also have our skin tint with s p s 50, that you heard on the call, Mikaela, saying it’s pretty much the best product we’ve ever launched, which is fantastic. And then also continuing to speak to value for our consumers with the sheer for it blush, which is priced at $6. That that’s really resonating in the market as well.

And so really pleased with what we’re seeing from an innovation standpoint.

Speaker 8: The next question comes from Bill Chappell with Truist Securities. Please go ahead.

Speaker 6: Thanks. Good afternoon.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty8: Good afternoon. Hey. Just just kind of

Speaker 6: as we look at at 1Q versus 4Q, we were back several months ago. The thought was in January, February, there was a little bit of slowdown of the overall category in

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty8: The U. S.

Speaker 6: Your holy grails weren’t, I guess, performing as well as the prior year ones were. And there was just honestly, a, tougher comps. As you look at the acceleration these past three months in The U. S, maybe give a little color on what changed. Did the new batch of Holy Grail start to pick up?

Did the existing ones start to gain traction? Did the comps just get easier? You know, how did the category get better? Any thoughts on kinda why we saw the the progression over these past, three, four months?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. Hi, Bill. So I would say that you’re right. In q four, we were up against a lot of things. We talked about the social chatter around beauty was down.

You had the wildfires in LA. You had TikTok potentially going away. And our spring innovation, we had talked, while great, was at about half the rate as it was the prior year. And so, we had a lot of things going on in that time frame. Fast forward to q one, I do think the category found a little bit of stability as we went through.

Our fall innovation is better as I spoke to on the whole, and and the earlier launch of that that melting lip balm certainly helped that. And so we we are feeling like e. F. Is in in a better place. As you saw, we picked up continue to pick up market share, which we’ve done now for twenty six consecutive quarters.

And so really still focused on on the main things, which are making sure that we are a value to our community. And like I said, even with the dollar price increase, still 75% of our portfolio, $10 or less. Making sure that we’re continuing to launch powerhouse innovation, and we we have shown that and getting a lot of positive feedback from the community on our fall innovation. And then just making sure that we’re continuing to invest in high ROI marketing, making sure that we’re being the first to do things that as we talked about being funny and bringing humor into the category is is a big thing and helps consumers remember who we are. And so really continuing to do to do the things that have worked well for us and keeping our eye on how we continue to grow share here in The US and also in our international markets.

Speaker 6: Got it. Well, then just got followed up on innovation. I mean, do you feel like the spring innovation just took a little bit longer and took and and step now is taking off, or we just moved to the summer innovation and fall innovation and those were bigger wins?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: So for spring innovation, it was still at around the same performance as it had been. Remember, the prior year’s innovation was exceptional. It was the best class of innovation that we’ve ever launched as a company. And so the spring innovation is still great. Second best year that we’ve had from a spring innovation, but just not as much.

And that and that prior year innovation was really driven by the lip oils, which, has been one of our most successful launches that we’ve had.

Speaker 6: Great. Thanks for the color.

Speaker 8: The next question comes from Rupesh Parikh with Oppenheimer. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty9: Good afternoon. Thanks for taking my question. So I’m going ask two questions. I’m not sure if you’re going to answer. I’m going to try since I’ve been getting emails on it.

So just for Q2, for Road, is there any way to help us understand like the revenue contribution for that business? And then also for Road, I know EBITDA margins are expected to be down in Q2, but is Road expected to be diluted to your Q2 margins?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Hi, Rupesh. Great questions, but detail that we have not provided overall. Other than to say that we feel great about road, we believe over the longer term, you know, as we talk about a full year and thinking about how road comes in and will it be accretive, we have said that we believe it will still be accretive overall. As we think about bringing in that s g and a in q two, I think we called that out specifically because we don’t have the sell in to Sephora to match with those expenses. And so I wanted to be clear on calling those out.

That’s why we included those in the prepared remarks.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty9: Okay. That’s helpful color. And then just on international, strong momentum this quarter. Is there any way to help us frame some of the puts and takes as we think about Q2 in your international business and your ability to sustain that momentum?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Yeah. So one thing that we talked about last quarter was that in the first half of last year, we had a lot more international activity sell in than we do this year. And so, I think that still holds true as we look at q two and just thinking about a first half or second half dynamic. Other than that, you know, we’re continuing to be pleased with what we’re seeing from international. We talked about the launches that we’re gonna have with Sephora coming up both on the on the e l f and Naturium sides of the house well as the expansion further expansion in boots on Naturium, and just continue to expand in Poland with Rossmann.

And so very pleased with what we’re seeing from an international standpoint.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty9: Great. Thank you. Best of luck.

Speaker 8: Yes. Thanks. The next question comes from Steve Powers with Deutsche Bank. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty7: Great. Thank you very much. Maybe I just wanted to circle back on 2Q gross margins if I could. I understand the tariff flow through, but on the other hand, you mentioned not that many offsets. I just want to press on that a little bit because you will have effectively two months of pricing benefits this quarter that you didn’t have in the first quarter.

And even without the sell into Sephora, I would assume that two kind of two months of road sales also gross margin accretive. So just maybe a little bit more context on the puts and takes in two q gross margin if I could.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Sure. So I think I think you’ve got it right, Steve. You know, we are taking the approach that we will see more of that higher tariff flow through and, wanna make sure we’re being balanced in that expectation. You’re right. We will have the pricing benefits in in q two, and then we also will have road coming in to to the fold as well.

And so those those are two good guys in this scenario, but also wanna be mindful that we do have those higher tariffs yet to flow through. And also considering, you know, what happens next week with tariffs. Do we maintain at this 55%, or does that move to a different number? And so, again, just keeping in mind the number of scenarios that can happen from a tariff standpoint.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty7: Yes. Okay. Very good. And then I you know, maybe related to that. So I think early in the call, said you hadn’t talked about whether the pricing would be enough to kind of offset the dollar basis of tariffs, etcetera.

I think Tarang, Tarang, you think you mentioned last quarter that at the 30% incremental tariff rate, was about a $50,000,000 annualized hit to COGS. Right. That that to me, you know, strikes me as like a a mid teens, you know, impact to to base business COGS. The pricing seems to also be a mid teens increase. So it seems to me that unless the last unless elasticity is is such that volumes go negative, all else equal at that 30% rate, you should be pricing to maintain if not if not, you know, exceed a little bit of of coverage there and and maintain gross margin.

Is that math or logic wrong?

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Yes, Steve. You got it right. We we talked to 30% incremental. It’s about $50,000,000,000. The assumption we’re always more conservative on how we model elasticity.

Now last two price increases, we’ve done way better than what we had modeled. And if that held true, then you would see some upside relative to what we talked about. But we also don’t wanna get ahead of ourselves just given the number of brands that we hear are going to be taking pricing. So we’re just being more cautious on that till we see how the pricing is accepted.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty7: Okay. Okay. Very good. Thank you very much.

Speaker 8: Thanks, Steve. The next question comes from Anna Lazul with Bank of America. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: Hi, good afternoon. Thank you so much for the question. I was wondering how you’re thinking about the longer term strategy here with Road. There’s a limited number of products across cosmetics, skincare, accessories. There is also a privately held cosmetics competitor, which recently launched a fragrance line.

So I was wondering how you’re thinking about the product here and the categories where you compete. Thank you.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: One of the things, Anna, we love about Road is just how curated their product assortment is. It’s incredibly thoughtful and has a beautiful aesthetic, and certainly you’re seeing that in terms of the response from consumers and just how much they can’t get enough of road. And so we will approach it is that same thoughtful approach Haley has taken and the team has taken on innovation. We’ll keep continue to do that. And you’ll saw a couple recent launches from road.

There’ll be additional launches as we go forward, but continue to make sure that it match and focus of the brand. So I think, you know, we have a lot of confidence in what we’ve seen in terms of the innovation pipeline as well as other ideas that we’re talking. So I think similar to e. F. Beauty, you’re gonna continue to see game changing innovation on road, and we feel really great about it.

Speaker 8: Great. Thank you so much. The next question comes from Jon Andersen with William Blair. Please go ahead.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty6: Thank you, Trine and Mehdi. Could you I don’t apologize if I didn’t hear it, but did you comment on the digital sales growth in the quarter? I would love to get an update on that. And what digital represents as a percent of the total business at this point? And then on international, you you mentioned it’s about 20% sales today.

But as you look to doubling the business over the next several years, the total business, do you have kind of a target in mind for international contribution overall? And then last on innovation, you’ve pulled forward some innovation, fall innovation earlier in the year at the request of customers, etcetera. Does that create any kind of an air pocket in the pipeline for the second half of the year? Or how to how to think about that? Thank you.

Speaker 8: Yep. So I’ll take I’ll take the first

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty1: question on the digital sales growth. Overall, in our ecommerce channels, we saw close to a 20% growth rate overall, and it represent about 20% of our business. And so fairly consistent with what we’ve seen what we’ve seen over the last several quarters. Digital continues to be very strong, especially with the Amazon business, which in our 10 k you saw creep crept into one of our top customers. And so very pleased with that performance.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: And I’ll take the next two. In terms of the international business, we have very high aspirations for international. And part of where those aspirations come from beyond just only 20% of our businesses outside The US is the success we’re seeing retailer after retailer and country after country. The launches we’ve had in the past year, I think we’ve debuted in the top three spot in every single retailer we’ve entered. And so you do see plenty of pent up consumer demand for e.

F. And so as we continue to roll out into more countries, we see that 20% being much higher over time. I don’t think we’ve disclosed an overall aspiration other than we expect our international business to more than double in the coming years as well as we talked about in terms of the opportunity we have in color and skin. And then from an innovation standpoint, we have that ability, and you’ve seen us do this in the past, whether it be our lip oils, whether it be our bronzing drops, where we’ll take signals from the community, and we will pull something up faster. Like our original timing for bronzing drops, was not when it was gonna launch, but we got so much so many requests from our community of wanting and wanting that incredible formulation at a great value that we moved it up.

We did the same with the melting lip balms where we’re just getting so much consumer for for the that item that we moved it up. But it did not cause a hole in our fall innovation calendar. As Mandy said, fall innovation is stronger than our fall innovation last year. Some of the other items that we talked about are off to a great start, and so we feel great about the overall innovation cadence, including that ability to be able to respond to what our community wants.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty6: Thanks so much.

Speaker 8: This concludes our question and answer session. I would like to turn the conference back over to Tarang Amin for any closing remarks.

Tarang Amin, Chairman and Chief Executive Officer, e.l.f. Beauty2: Well, thank you for joining us today. I’m so proud of our incredible team at e. F. Beauty for delivering another quarter of industry leading results, and I’m thrilled to officially welcome Roe to the e. L.

F. Beauty family. We look forward to seeing some of you at our upcoming investor meetings and speaking to you in November when we’ll discuss our second quarter results. Thank you and be well.

Speaker 8: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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