e.l.f. Beauty (ELF) FY 2025 Annual General Meeting August 21, 2025 11:30 AM ET Company ParticipantsTarang Amin - CEO & ChairmanScott Milsten - SVP, General Counsel & Chief People OfficerOperatorHello, and welcome to the Annual Meeting of Stockholders of e. L. F. Beauty Inc. Please note that today's meeting is being recorded.During the meeting, there will be a question and answer session. Stockholders of record as of the record date may submit questions or comments at any time by clicking on the Q and A tab ...

Financial Data and Key Metrics Changes - The preliminary results indicate that all nominees for class three director have been duly elected for a three-year term, and the compensation of named executive officers has been approved on an advisory basis [7] - The appointment of Deloitte and Touche LLP as the independent registered public accounting firm for the fiscal year ending March 31, 2026, has been ratified [7] Business Line Data and Key Metrics Changes - No specific data or metrics regarding individual business lines were discussed during the meeting [9] Market Data and Key Metrics Changes - No specific market data or metrics were provided during the meeting [9] Company Strategy and Development Direction and Industry Competition - The company did not provide detailed insights into its strategic direction or competitive landscape during this meeting [9] Management's Comments on Operating Environment and Future Outlook - Management expressed gratitude for the support from stockholders and indicated that updates on continued progress would be provided in the upcoming FY26 Q2 earnings call scheduled for November [10] Other Important Information - The annual meeting was conducted without any additional business to address, and the final voting results will be included in a Form 8-K to be filed with the SEC [8] Q&A Session Summary Question: Were there any questions submitted during the meeting? - No questions were submitted during the meeting [9]

Core Viewpoint - E.L.F. Cosmetics faces backlash for featuring controversial comedian Matt Rife in its latest advertisement, which aims to promote beauty justice while defending against overpriced beauty products [1][4][7]. Group 1: Advertisement Details - The new ad, released on August 11, features drag queen Heidi N Closet as "e.l.f.ino" and comedian Matt Rife as "schmarnes" [1][2]. - The advertisement is part of a legal-themed campaign that builds on a previous Superbowl 2024 campaign [1][2]. Group 2: Company Statement - Kory Marchisotto, Chief Marketing Officer of e.l.f. Beauty, emphasized the brand's commitment to making beauty accessible and standing with the community for beauty justice [2][4]. - The company promotes "high quality beauty without compromise" in its messaging [4]. Group 3: Public Reaction - Many consumers expressed disappointment over Rife's inclusion due to his past controversial joke about domestic violence in his 2023 Netflix special [4][5]. - Social media users criticized the brand for not choosing a comedian who aligns better with positive values and for potentially disrespecting women [7][9][12]. - Some customers stated they would no longer support E.L.F. Cosmetics due to this decision, highlighting a disconnect between the brand and its audience [11][13].

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions, highlighting the inherent risks involved in trading [3]. Group 1 - The analysis is intended solely for informational purposes and should not be interpreted as professional investment advice [3]. - There is a clear disclaimer regarding the lack of any stock, option, or similar derivative positions in the companies mentioned, indicating a neutral stance [2]. - The article expresses that past performance does not guarantee future results, underscoring the uncertainty in investment outcomes [4].

Company Focus - The company is a cosmetics company with rights to the "road" cosmetic line from Hailey Bieber [1] - The "road" cosmetic line will be available in Sephora next month [1] - The company is heavily shorted, but Morgan Stanley recommends a "buy" [1] Market & Distribution - Anticipation for the "road" launch at Sephora is high, potentially leading to long lines [2] - Ulta may not significantly benefit from the Sephora launch [2] - Elf products are now available in Dollar General stores, expanding rural distribution [3]

Core Viewpoint - The article emphasizes the potential investment opportunity in e.l.f. Beauty (NYSE: ELF), highlighting its status as a premium fast-growing company and suggesting that current market conditions present an excellent buying opportunity [1]. Investment Strategy - The investment approach is value-oriented, focusing on acquiring growth stocks that are reasonably valued, aligning with the philosophy of buying wonderful companies at fair prices [1]. - The portfolio is concentrated in 12 to 15 stocks, allowing for in-depth knowledge and strategic trading based on market conditions [1]. Portfolio Performance - The portfolio has shown significant returns over the years, with a total return of 4,114% since inception in 2016, and an internal rate of return (IRR) of 51.54% per year [1]. - Yearly performance highlights include: - 2016: 1.28% return vs. NASDAQ 7.50% - 2017: 49.40% return vs. NASDAQ 28.23% - 2018: 84.91% return vs. NASDAQ -3.88% - 2019: -1.08% return vs. NASDAQ 35.23% - 2020: 173.62% return vs. NASDAQ 43.63% - 2021: 37.84% return vs. NASDAQ 21.40% - 2022: 20.93% return vs. NASDAQ -33.10% - 2023: 87.60% return vs. NASDAQ 43.42% - 2024: 77.98% return vs. NASDAQ 29.83% [1].

Group 1 - e.l.f. Beauty's Q1 FY 2026 quarterly results led to a sharp decline in stock price post-market, indicating market concerns over slowing core growth and margin pressures [1] - The company has withdrawn its full-year guidance, which has further contributed to investor anxiety regarding decreasing profits [1] Group 2 - Analysts are focusing on the implications of the company's performance on the broader beauty industry, particularly in terms of growth trends and competitive positioning [1]

Company Overview & Strategy - E l f Beauty initially sold affordable makeup products online and grew into a multi-million dollar company, partnering with retailers like Target [6] - The company's strategy is fueled by marketing and offering dupes of popular prestige products at bargain prices [8] - E l f adapts and creates new products based on customer feedback monitored on social media [12][13] - The company shifted production away from China to diversify its supply chain, moving from 100% to 75% sourced from China [15] Financial Performance & Market Position - E l f posted its first billion-dollar year in May 2024 after sales spiked 77% [3] - In fiscal year 2025, net sales grew by 28% to $13 billion, with international sales also growing by 28% [21] - E l f was the number one color cosmetics brand by units sold and number two by dollar share in 2024 [21] Acquisition & Expansion - E l f acquired Hailey Bieber's skincare brand Rhode in a $1 billion deal [2][23] - Rhode grew to $212 million in net sales in three years and more than doubled its customer base in fiscal year 2025 [24] - The Rhode deal was financed with $600 million of debt [26] Challenges & Risks - Heavy reliance on China caused profits to drop 30% in Q1 2026 [4] - Tariffs are expected to increase the cost of goods sold by at least $50 million annually, potentially causing net income and profits to each fall 30% [28]

Financial Performance & Challenges - ELF Beauty's stock experienced a nearly 10% decrease despite delivering a top and bottom-line beat [1][2] - Management declined to issue a full-year forecast due to tariff uncertainties, suggesting potential margin pressure [2] - The company has increased prices by approximately $1 due to tariffs and other cost pressures [5] Market Share & Growth Strategy - ELF Beauty achieved its 26th consecutive quarter of net sales and market share gains in the US cosmetics market [4] - The company is focused on growing market share and pursuing white space opportunities [5] - ELF Beauty is the number one brand amongst Gen Z and is gaining consumers across all age brackets [18] Expansion & Partnerships - Road is joining the ELF Beauty family and will be available in all US and Canadian Sephora stores in September, followed by the UK later this year [8] - ELF Beauty is expanding its partnership with Sephora by introducing ELF in six Gulf cooperation countries and launching a brand experience in Sephora Australia [9] - ELF Beauty is launching in Dollar General, serving an underserved market, with 60% of ELF purchasers being new to cosmetics purchases at Dollar General and 53% being new to ELF [12] Supply Chain & Cost Management - ELF Beauty has been optimizing its supply chain, reducing its production in China from 100% to approximately 75% [15] - The diversification of the supply chain is driven by strong global demand rather than solely by tariffs [15] Competitive Advantage - ELF Beauty aims to make the best of beauty accessible for every eye, lip, and face [17] - ELF Beauty offers superior value, with 75% of its portfolio priced at $10 or less even after the price increase [6][7] - ELF Beauty's vitamin E, C, and ferulic serum is priced at $16, significantly lower than a comparable prestige item at $185 [19]

PART I. FINANCIAL INFORMATION [Item 1. Financial statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20statements%20(unaudited)) Net sales rose 9% to $353.7 million, but net income decreased to $33.3 million due to higher taxes, with total assets at $1.31 billion and a subsequent $800 million rhode acquisition [Condensed consolidated balance sheets](index=6&type=section&id=Condensed%20consolidated%20balance%20sheets) Balance Sheet Summary (in thousands) | Account | June 30, 2025 | June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $170,029 | $109,034 | +55.9% | | Total current assets | $602,526 | $530,460 | +13.6% | | Total assets | $1,314,896 | $1,204,832 | +9.1% | | **Liabilities & Equity** | | | | | Total current liabilities | $184,739 | $299,805 | -38.4% | | Total liabilities | $510,044 | $501,242 | +1.8% | | Total stockholders' equity | $804,852 | $703,590 | +14.4% | [Condensed consolidated statements of operations](index=7&type=section&id=Condensed%20consolidated%20statements%20of%20operations) Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 FY2026 (ended Jun 30, 2025) | Q1 FY2025 (ended Jun 30, 2024) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $353,739 | $324,477 | +9.0% | | Gross profit | $244,541 | $231,283 | +5.7% | | Operating income | $48,709 | $50,708 | -3.9% | | Net income | $33,311 | $47,555 | -30.0% | | Diluted EPS | $0.58 | $0.81 | -28.4% | - The decrease in net income was primarily driven by an income tax provision of **$17.8 million** in Q1 FY2026, compared to an income tax benefit of **$0.3 million** in the prior-year period[17](index=17&type=chunk)[106](index=106&type=chunk) [Condensed consolidated statements of cash flows](index=10&type=section&id=Condensed%20consolidated%20statements%20of%20cash%20flows) Cash Flow Summary (in thousands) | Activity | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $27,233 | $1,281 | | Net cash used in investing activities | ($7,559) | ($879) | | Net cash provided by financing activities | $121 | $408 | - Cash from operating activities increased significantly to **$27.2 million**, mainly due to higher net income adjusted for non-cash items, despite an increase in working capital[23](index=23&type=chunk)[113](index=113&type=chunk) [Notes to condensed consolidated financial statements (unaudited)](index=11&type=section&id=Notes%20to%20condensed%20consolidated%20financial%20statements%20(unaudited)) - The company operates as a multi-brand beauty company (e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People, Keys Soulcare) with one reportable segment[25](index=25&type=chunk)[27](index=27&type=chunk)[35](index=35&type=chunk) - On August 5, 2025, the company acquired HRBeauty LLC ("rhode") for **$800.0 million**, consisting of **$600.0 million** in cash and **$200.0 million** in stock, with a potential earnout of up to **$200.0 million**, representing a significant event after the reporting period[87](index=87&type=chunk) - To finance the rhode acquisition, the company entered into a Fifth Amendment to its credit agreement on August 5, 2025, establishing a new term loan facility of **$600.0 million**[88](index=88&type=chunk) - The company is involved in securities class action and stockholder derivative lawsuits filed in March and April 2025, which it intends to vigorously defend[69](index=69&type=chunk)[71](index=71&type=chunk) - As of June 30, 2025, **$450.0 million** remains available for future share repurchases under the **$500.0 million** program authorized in August 2024, with no shares repurchased during the quarter[81](index=81&type=chunk) [Item 2. Management's discussion and analysis of financial condition and results of operations](index=26&type=section&id=Item%202.%20Management%27s%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations) Management reported a 9% net sales increase driven by retailer and e-commerce growth, though gross margin declined due to tariffs, while highlighting the rhode acquisition and sufficient liquidity for the next twelve months [Results of operations](index=28&type=section&id=Results%20of%20operations) Key Performance Indicators (Q1 FY26 vs Q1 FY25) | Metric | Q1 FY2026 (ended Jun 30, 2025) | Q1 FY2025 (ended Jun 30, 2024) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net Sales | $353.7M | $324.5M | +9% | | Gross Profit | $244.5M | $231.3M | +6% | | Gross Margin | 69% | 71% | -215 bps | | SG&A Expenses | $195.8M | $180.6M | +8% | - The **9%** increase in net sales was driven by higher sales volume, with retailer channels growing **8%** and e-commerce channels growing **17%**[101](index=101&type=chunk) - Gross margin decreased by approximately **215 basis points**, primarily due to tariffs, which was partially offset by favorable foreign exchange rates and cost savings[102](index=102&type=chunk) - The increase in SG&A expenses was mainly due to higher professional fees (**$5.7M**), retail fixturing costs (**$4.7M**), and marketing spend (**$4.5M**)[103](index=103&type=chunk) [Financial condition, liquidity and capital resources](index=29&type=section&id=Financial%20condition%2C%20liquidity%20and%20capital%20resources) - As of June 30, 2025, the company had **$170.0 million** in cash and cash equivalents and an additional **$243.3 million** available under its Amended Revolving Credit Facility[107](index=107&type=chunk) - The company believes its operating cash flow, existing cash, and available financing will be adequate to meet its needs for the next twelve months[110](index=110&type=chunk) - On March 3, 2025, the company entered into the Fourth Amendment to its credit agreement, establishing a new **$500 million** revolving credit facility with a maturity date of March 3, 2030[64](index=64&type=chunk)[123](index=123&type=chunk) - To mitigate risks from tariffs on products sourced from China, the company raised prices globally for all products sold as of August 1, 2025[94](index=94&type=chunk) [Item 3. Quantitative and qualitative disclosures about market risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk) No material changes to the company's primary risk exposures or market risk management have occurred since the last Annual Report - There have been no material changes to the company's primary risk exposures or management of market risks since the last Annual Report[131](index=131&type=chunk) [Item 4. Controls and procedures](index=36&type=section&id=Item%204.%20Controls%20and%20procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[133](index=133&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[134](index=134&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal proceedings](index=37&type=section&id=Item%201.%20Legal%20proceedings) The company is involved in various legal proceedings, including securities class action lawsuits, but believes these will not materially affect its financial condition - The company is currently involved in litigation but believes that no pending lawsuits or claims will have a material adverse effect on its business or financial condition[136](index=136&type=chunk) - Specific legal proceedings are detailed in Note 7 of the financial statements, which describes ongoing securities class action and stockholder derivative matters[69](index=69&type=chunk)[136](index=136&type=chunk) [Item 1A. Risk factors](index=37&type=section&id=Item%201A.%20Risk%20factors) The company faces extensive risks including intense competition, reliance on Chinese manufacturing and tariffs, acquisition integration challenges, supply chain disruptions, cybersecurity threats, and evolving data privacy regulations [Risks related to the beauty industry and growth](index=37&type=section&id=Risks%20related%20to%20the%20beauty%20industry%20and%20growth) - The beauty industry is highly competitive, with pressure from large multinational companies and emerging 'indie' brands, where competition is based on new product introductions, pricing, and brand awareness[138](index=138&type=chunk)[140](index=140&type=chunk) - Future growth depends on the successful implementation of key initiatives, including building brand demand, leading innovation, driving productivity with retailers, and pursuing strategic extensions[152](index=152&type=chunk)[154](index=154&type=chunk) - The acquisition of rhode and other potential investments present risks, including unforeseen operating difficulties, integration challenges, and potential financial harm if anticipated benefits are not realized[159](index=159&type=chunk)[163](index=163&type=chunk) [Risks related to our acquisition of rhode](index=45&type=section&id=Risks%20related%20to%20our%20acquisition%20of%20rhode) - The success of the rhode acquisition depends on retaining key personnel, specifically founder Hailey Bieber, who is essential to the brand's marketing and performance[166](index=166&type=chunk) - The company faces risks that its assumptions about the rhode acquisition, such as revenue growth and integration costs, may prove inaccurate[164](index=164&type=chunk) - rhode may have unknown or contingent liabilities that were not discovered during due diligence, which could adversely affect the company's financial condition[165](index=165&type=chunk) [Risks related to business operations and macroeconomic conditions](index=47&type=section&id=Risks%20related%20to%20business%20operations%20and%20macroeconomic%20conditions) - The majority of products are sourced from China and subject to a **25%** US tariff, with additional tariffs announced by the Trump administration in 2025 posing a significant risk that could materially impact financial results[170](index=170&type=chunk)[171](index=171&type=chunk) - The company relies heavily on third-party suppliers and manufacturers, primarily in China, exposing it to risks of supply chain disruption, quality control problems, and geopolitical instability[173](index=173&type=chunk)[178](index=178&type=chunk) - Adverse economic conditions, such as inflation, rising interest rates, and potential recessions, could decrease consumer discretionary spending and negatively impact business[184](index=184&type=chunk) - In connection with the acquisition of rhode, the company borrowed an incremental **$600.0 million** term loan, increasing its total indebtedness and associated financial risks[198](index=198&type=chunk) [Risks related to IT, Cybersecurity, and Privacy](index=61&type=section&id=Risks%20related%20to%20IT%2C%20Cybersecurity%2C%20and%20Privacy) - The company is increasingly dependent on IT systems and is vulnerable to service interruptions, data corruption, and cyber-attacks, with risks heightened by remote work and sophisticated threat actors[215](index=215&type=chunk)[216](index=216&type=chunk)[222](index=222&type=chunk) - The implementation of AI solutions introduces risks related to inaccuracies, biases, cybersecurity, and evolving legal frameworks like the EU AI Act, which could impose substantial compliance costs[228](index=228&type=chunk)[230](index=230&type=chunk)[232](index=232&type=chunk) - The business is subject to complex and evolving US and foreign data privacy laws (e.g., CCPA, GDPR), which could result in claims, increased costs, and changes to business practices[262](index=262&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) [Item 2. Unregistered sales of equity securities and use of proceeds](index=95&type=section&id=Item%202.%20Unregistered%20sales%20of%20equity%20securities%20and%20use%20of%20proceeds) No shares were repurchased during the quarter, with **$450.0 million** remaining available under the **$500.0 million** share repurchase program - The company did not repurchase any of its common stock during the three months ended June 30, 2025[326](index=326&type=chunk) - As of June 30, 2025, **$450.0 million** remains available for future repurchases under the 2024 Share Repurchase Program[326](index=326&type=chunk) [Item 5. Other information](index=96&type=section&id=Item%205.%20Other%20information) Several executive officers, including the CEO and CFO, adopted Rule 10b5-1 trading plans during the quarter Adoption of Rule 10b5-1 Trading Plans (Q1 FY2026) | Officer/Director | Title | Action | Date | | :--- | :--- | :--- | :--- | | Tarang Amin | Chairman, CEO, and President | Adopt | 6/13/2025 | | Mandy Fields | SVP and CFO | Adopt | 6/09/2025 | | Jennie Laar | SVP and CCO | Adopt | 6/12/2025 | | Scott Milsten | SVP, General Counsel and CPO | Adopt | 6/11/2025 | [Item 6. Exhibits](index=97&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the rhode merger agreement, credit agreement amendments, and CEO/CFO certifications - Key exhibits filed include the Agreement and Plan of Merger for the rhode acquisition and the Fifth Amendment to the Amended and Restated Credit Agreement[335](index=335&type=chunk)