The cosmetics seller noted higher market share in its fiscal Q2 report on Wednesday.Shares of e.l.f Beauty (ELF -1.11%) erased some of their year-to-date losses this week. The makeup products stock rose 13% through Thursday trading, according to data provided by S&P Global Market Intelligence, easily beating the 4.3% surge in the S&P 500.That broad market rally played a role in e.l.f Beauty's stock price spike. However, the bigger factor was the cosmetic specialist's Wednesday earnings report that showed im ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides essential filing details for e.l.f. Beauty, Inc., including registrant information, cautionary notes on forward-looking statements, and a summary of material business risks [Registrant Information](index=1&type=section&id=Registrant%20Information) This chapter provides basic information about e.l.f. Beauty, Inc. as the registrant, including its SEC file number, state of incorporation, principal executive offices, telephone number, registered securities, and status as a large accelerated filer | Metric | Detail | | :--- | :--- | | **Company Name** | e.l.f. Beauty, Inc. | | **SEC File Number** | 001-37873 | | **State of Incorporation** | Delaware | | **Principal Executive Offices** | 570 10th Street, Oakland, CA 94607 | | **Telephone Number** | (510) 778-7787 | | **Registered Securities** | Common Stock, par value $0.01 per share (ELF, New York Stock Exchange) | | **Filing Status** | Large accelerated filer | | **Common Stock Outstanding (as of October 31, 2024)** | 56,331,038 shares | [CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS](index=3&type=section&id=CAUTIONARY%20NOTE%20ABOUT%20FORWARD-LOOKING%20STATEMENTS) This chapter warns investors that forward-looking statements are based on current expectations, involve known and unknown risks, and actual results may differ materially, with no obligation for the company to update them - Forward-looking statements in the report are based on management's current expectations, estimates, forecasts, and assumptions, are not guarantees of future performance, and involve known and unknown risks, uncertainties, and other factors beyond the company's control[4](index=4&type=chunk) - Actual results and timing of events may differ materially from expectations, and investors should carefully consider the factors listed in the 'Risk Factors' section[4](index=4&type=chunk) - The company undertakes no obligation to update or revise these forward-looking statements, except as required by law[4](index=4&type=chunk) [SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS](index=3&type=section&id=SUMMARY%20OF%20MATERIAL%20RISKS%20ASSOCIATED%20WITH%20OUR%20BUSINESS) This chapter outlines key risks and uncertainties affecting the company's business, including intense industry competition, unsuccessful new product launches, reputational damage, product quality issues, growth strategy implementation difficulties, reliance on a few retailers, and risks of operating in China - The beauty industry is highly competitive, and the company's performance will be harmed if it cannot compete effectively[5](index=5&type=chunk) - New product launches may not be as successful as anticipated, harming the company's business, financial condition, and results of operations[5](index=5&type=chunk) - Damage to the company's reputation or brands could have a material adverse effect on its business, financial condition, and results of operations[5](index=5&type=chunk) - The company's success is partly dependent on the quality, performance, and safety of its products[6](index=6&type=chunk) - The company may not successfully implement its growth strategies, and historical growth is not indicative of future growth[6](index=6&type=chunk) - Acquisitions or investments (such as Naturium) may disrupt business and harm financial condition[7](index=7&type=chunk) - Operating disruptions (including supply chain disruptions) could have a material adverse effect on the business[7](index=7&type=chunk) - Reliance on third-party suppliers, manufacturers, and distributors, whose service quality may not meet standards, could harm the brand[8](index=8&type=chunk) - Economic adversity in the U.S. or other key operating countries could negatively impact business, financial condition, and results of operations[9](index=9&type=chunk) - The company's net sales are highly dependent on a few retailers, and losing these retailers or their business challenges could adversely affect results of operations[10](index=10&type=chunk) - Significant operations in China expose the company to inherent operating risks and uncertainties of international business[10](index=10&type=chunk) - Inability to protect intellectual property could weaken brand value and intangible assets, adversely affecting the business[11](index=11&type=chunk) - The company's success depends on its ability to operate without infringing on third-party trademarks, patents, copyrights, and other proprietary rights[11](index=11&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited financial statements of e.l.f. Beauty, Inc., including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with management's discussion and analysis of financial condition and results of operations [Item 1. Financial statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20statements%20(unaudited)) This chapter provides e.l.f. Beauty, Inc.'s unaudited condensed consolidated financial statements as of September 30, 2024, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with related notes, detailing the company's financial position, operating performance, and cash flows [Condensed consolidated balance sheets](index=6&type=section&id=Condensed%20consolidated%20balance%20sheets) As of September 30, 2024, total assets were $1,237,015 thousand, a 9.5% increase from March 31, 2024, driven by increases in inventory, accounts receivable, and intangible assets, while total liabilities were $509,320 thousand, a 4.6% increase, and stockholders' equity increased to $727,695 thousand | Metric (in thousands) | September 30, 2024 | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | 96,768 | 108,183 | 167,763 | | Accounts receivable, net | 146,559 | 123,797 | 86,683 | | Inventory, net | 238,798 | 191,489 | 147,228 | | Total current assets | 554,039 | 477,077 | 435,446 | | Intangible assets, net | 216,396 | 225,094 | 73,986 | | Goodwill | 340,582 | 340,600 | 171,620 | | **Total assets** | **1,237,015** | **1,129,247** | **746,936** | | **Liabilities** | | | | | Total current liabilities | 310,897 | 299,115 | 152,371 | | Long-term debt | 156,648 | 161,819 | 57,735 | | **Total liabilities** | **509,320** | **486,675** | **230,508** | | **Stockholders' Equity** | | | | | Common stock | 562 | 555 | 545 | | Additional paid-in capital | 954,455 | 936,403 | 851,634 | | Accumulated deficit | (227,761) | (294,336) | (335,751) | | **Total stockholders' equity** | **727,695** | **642,572** | **516,428** | | **Total liabilities and stockholders' equity** | **1,237,015** | **1,129,247** | **746,936** | - As of September 30, 2024, total assets were **$1,237,015 thousand**, an increase of **9.5%** from **$1,129,247 thousand** as of March 31, 2024[15](index=15&type=chunk) - As of September 30, 2024, total liabilities were **$509,320 thousand**, an increase of **4.6%** from **$486,675 thousand** as of March 31, 2024[15](index=15&type=chunk) - As of September 30, 2024, total stockholders' equity was **$727,695 thousand**, an increase of **13.2%** from **$642,572 thousand** as of March 31, 2024[15](index=15&type=chunk) [Condensed consolidated statements of operations](index=7&type=section&id=Condensed%20consolidated%20statements%20of%20operations) For the three months ended September 30, 2024, net sales and gross profit both increased by 40%, but a 66% surge in selling, general, and administrative expenses led to year-over-year declines in operating income and net income | Metric (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 301,075 | 215,507 | 625,552 | 431,846 | | Cost of sales | 87,016 | 63,142 | 180,210 | 126,909 | | Gross profit | 214,059 | 152,365 | 445,342 | 304,937 | | Selling, general and administrative expenses | 186,141 | 112,186 | 366,716 | 204,125 | | Operating income | 27,918 | 40,179 | 78,626 | 100,812 | | Net income | 19,020 | 33,271 | 66,575 | 86,248 | | Basic net income per share | 0.34 | 0.61 | 1.19 | 1.59 | | Diluted net income per share | 0.33 | 0.58 | 1.14 | 1.50 | - For the three months ended September 30, 2024, net sales increased by **40%** to **$301,075 thousand**, and gross profit increased by **40%** to **$214,059 thousand**[17](index=17&type=chunk) - For the three months ended September 30, 2024, selling, general and administrative expenses increased by **66%** to **$186,141 thousand**, leading to a **30.5%** year-over-year decrease in operating income to **$27,918 thousand** and a **42.8%** decrease in net income to **$19,020 thousand**[17](index=17&type=chunk) [Condensed consolidated statements of comprehensive income](index=8&type=section&id=Condensed%20consolidated%20statements%20of%20comprehensive%20income) For the three months ended September 30, 2024, comprehensive income was $19,468 thousand, comprising $19,020 thousand in net income and $448 thousand in foreign currency translation adjustments, representing a year-over-year decrease with the addition of foreign currency translation adjustments | Metric (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net income | 19,020 | 33,271 | 66,575 | 86,248 | | Foreign currency translation adjustment | 448 | — | 489 | — | | Comprehensive income | 19,468 | 33,271 | 67,064 | 86,248 | - For the three months ended September 30, 2024, comprehensive income was **$19,468 thousand**, a **41.4%** decrease from **$33,271 thousand** in the prior year period[19](index=19&type=chunk) - A new foreign currency translation adjustment in 2024 contributed **$448 thousand** and **$489 thousand** to other comprehensive income for the three and six months, respectively[19](index=19&type=chunk) [Condensed consolidated statements of stockholders' equity](index=9&type=section&id=Condensed%20consolidated%20statements%20of%20stockholders'%20equity) As of September 30, 2024, total stockholders' equity was $727,695 thousand, a 13.2% increase from March 31, 2024, primarily due to net income, increased stock-based compensation, and common stock repurchases | Metric (in thousands) | March 31, 2024 | September 30, 2024 | | :--- | :--- | :--- | | Common stock | 555 | 562 | | Additional paid-in capital | 936,403 | 954,455 | | Accumulated other comprehensive income (loss) | (50) | 439 | | Accumulated deficit | (294,336) | (227,761) | | **Total stockholders' equity** | **642,572** | **727,695** | - As of September 30, 2024, total stockholders' equity was **$727,695 thousand**, an increase of **13.2%** from **$642,572 thousand** as of March 31, 2024[21](index=21&type=chunk) - For the six months ended September 30, 2024, net income contributed **$66,575 thousand**, and stock-based compensation increased by **$34,612 thousand**[21](index=21&type=chunk)[23](index=23&type=chunk) - For the three months ended September 30, 2024, the company repurchased **108,753 shares** of common stock for **$17,076 thousand**[21](index=21&type=chunk) [Condensed consolidated statements of cash flows](index=11&type=section&id=Condensed%20consolidated%20statements%20of%20cash%20flows) For the six months ended September 30, 2024, net cash from operating activities significantly decreased to $12,449 thousand due to increased working capital, while investing cash outflow slightly increased and financing cash outflow significantly rose to $21,976 thousand, driven by stock repurchases and debt repayments | Metric (in thousands) | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | 12,449 | 51,270 | | Net cash from investing activities | (2,502) | (1,465) | | Net cash from financing activities | (21,976) | (2,820) | | Cash and cash equivalents - end of period | 96,768 | 167,763 | - For the six months ended September 30, 2024, net cash from operating activities was **$12,449 thousand**, a significant decrease from **$51,270 thousand** in the prior year period, primarily due to a **$114,200 thousand** increase in working capital[25](index=25&type=chunk)[106](index=106&type=chunk) - Net cash used in investing activities was **$2,502 thousand**, primarily for the purchase of property and equipment[25](index=25&type=chunk)[106](index=106&type=chunk) - Net cash used in financing activities was **$21,976 thousand**, primarily driven by **$17,076 thousand** in common stock repurchases and **$5,375 thousand** in long-term debt repayments[25](index=25&type=chunk)[106](index=106&type=chunk) [Notes to condensed consolidated financial statements (unaudited)](index=12&type=section&id=Notes%20to%20condensed%20consolidated%20financial%20statements%20(unaudited)) This chapter provides detailed notes to the condensed consolidated financial statements, covering the nature of business, significant accounting policies, Naturium acquisition, goodwill and intangible assets, accrued expenses, debt structure, commitments and contingencies, income taxes, stock-based compensation, common stock repurchases, net income per share calculation, and lease information [Note 1—Nature of operations](index=12&type=section&id=Note%201%E2%80%94Nature%20of%20operations) e.l.f. Beauty, Inc. is a multi-brand beauty company offering inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products, aiming to make the best of beauty accessible to all, and differentiates itself through its value proposition, innovation, and consumer engagement in a competitive beauty market - e.l.f. Beauty is a multi-brand beauty company offering inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products[27](index=27&type=chunk) - Company brands include e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People, and Keys Soulcare, sold online and through leading beauty, mass market, and specialty retailers[29](index=29&type=chunk) - The company is well-positioned in the competitive beauty market through its value proposition, innovation engine, ability to attract and engage consumers, and rapid execution by a world-class team[28](index=28&type=chunk) [Note 2—Summary of significant accounting policies](index=12&type=section&id=Note%202%E2%80%94Summary%20of%20significant%20accounting%20policies) This chapter outlines the basis of financial statement preparation, use of accounting estimates, single operating and reporting segment, revenue recognition policies, and recent accounting pronouncements, with disaggregated revenue by geographic area and expected disclosure-only impact from new accounting updates - Financial statements are prepared in accordance with U.S. GAAP and SEC rules, including all necessary adjustments[30](index=30&type=chunk) - The company manages its business as one operating segment and one reportable segment, unable to provide revenue by product line[33](index=33&type=chunk) | Net Sales (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | United States | 236,655 | 181,857 | 508,022 | 370,451 | | International | 64,420 | 33,650 | 117,530 | 61,395 | | **Total Net Sales** | **301,075** | **215,507** | **625,552** | **431,846** | - ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) issued by FASB are expected to only impact company disclosures, with no effect on results of operations, cash flows, or financial condition[41](index=41&type=chunk)[42](index=42&type=chunk) [Note 3—Acquisition](index=14&type=section&id=Note%203%E2%80%94Acquisition) On October 4, 2023, the company acquired Naturium LLC for $333 million in a cash and stock combination to expand its skincare product line, generating $168,962 thousand in goodwill primarily attributed to Naturium's potential for future distribution expansion and new product development - On October 4, 2023, the company acquired Naturium LLC for **$333 million** (**$275,266 thousand** cash, **$57,772 thousand** stock) to expand its skincare product line[43](index=43&type=chunk)[46](index=46&type=chunk) - The acquisition generated **$168,962 thousand** in goodwill, primarily attributed to Naturium's potential for future distribution expansion and new skincare product development[46](index=46&type=chunk)[49](index=49&type=chunk) | Intangible Asset Class | Fair Value (in thousands) | Estimated Useful Life (years) | Fair Value Valuation Method | | :--- | :--- | :--- | :--- | | Customer relationships – Retailers | 20,000 | 10 | Excess Earnings Method | | Customer relationships – E-commerce | 17,600 | 3 | Excess Earnings Method and With-and-Without Method | | Trademarks | 124,500 | 15 | Relief-from-Royalty Method | | **Total Identified Intangible Assets** | **162,100** | | | [Note 4—Goodwill and intangible assets](index=16&type=section&id=Note%204%E2%80%94Goodwill%20and%20intangible%20assets) As of September 30, 2024, the company's total net book value of goodwill and intangible assets was $556,978 thousand, comprising $152,596 thousand in finite-lived intangible assets, $63,800 thousand in indefinite-lived trademarks, and $340,582 thousand in goodwill, with no impairment occurring during the period | Asset Class (in thousands) | September 30, 2024 Net Book Value | | :--- | :--- | | Customer relationships – Retailers | 22,767 | | Customer relationships – E-commerce | 11,733 | | Trademarks (finite-lived) | 118,096 | | **Total Finite-Lived Intangible Assets** | **152,596** | | Trademarks (indefinite-lived) | 63,800 | | Goodwill | 340,582 | | **Total Goodwill and Other Intangible Assets** | **556,978** | - As of September 30, 2024, goodwill had a net book value of **$340,582 thousand**, and indefinite-lived trademarks were **$63,800 thousand**[51](index=51&type=chunk) - Amortization expense for finite-lived intangible assets was **$4.3 million** and **$8.7 million** for the three and six months ended September 30, 2024, respectively[53](index=53&type=chunk) - As of September 30, 2024, total estimated future amortization expense is **$152,596 thousand**, with **$8,698 thousand** remaining for fiscal year 2025[54](index=54&type=chunk) [Note 5—Accrued expenses and other current liabilities](index=18&type=section&id=Note%205%E2%80%94Accrued%20expenses%20and%20other%20current%20liabilities) As of September 30, 2024, total accrued expenses and other current liabilities were $117,030 thousand, largely consistent with March 31, 2024, but significantly up from September 30, 2023, with increases in accrued expenses and inventory, and decreases in accrued marketing and compensation | Item (in thousands) | September 30, 2024 | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | :--- | | Accrued expenses | 44,535 | 37,782 | 28,249 | | Accrued inventory | 21,103 | 16,478 | 19,247 | | Accrued marketing | 20,887 | 29,282 | 17,084 | | Current operating lease liabilities | 8,192 | 7,016 | 4,172 | | Accrued compensation | 11,864 | 17,423 | 8,199 | | Taxes payable | 8,204 | 5,814 | 4,343 | | Other current liabilities | 2,245 | 3,938 | 2,113 | | **Total Accrued expenses and other current liabilities** | **117,030** | **117,733** | **83,407** | - As of September 30, 2024, total accrued expenses and other current liabilities were **$117,030 thousand**, a **40.3%** increase from **$83,407 thousand** as of September 30, 2023[56](index=56&type=chunk) [Note 6—Debt](index=18&type=section&id=Note%206%E2%80%94Debt) As of September 30, 2024, the company's total debt was $257,500 thousand, primarily comprising a revolving credit facility and term loans, with $115 million in incremental term loans borrowed in August 2023 for the Naturium acquisition and increased restricted payment capacity via the Third Amendment in August 2024, while remaining in compliance with all financial covenants | Debt Item (in thousands) | September 30, 2024 | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | :--- | | Revolving credit facility | 89,500 | 89,500 | — | | Term loan | 168,000 | 173,375 | 63,750 | | Finance lease obligations | — | 57 | 228 | | **Total Debt** | **257,500** | **262,932** | **63,978** | | Less: Debt issuance costs | (806) | (1,015) | (1,015) | | **Net Debt** | **256,898** | **262,126** | **62,963** | | Less: Current portion | (100,250) | (100,307) | (5,228) | | **Long-term debt** | **156,648** | **161,819** | **57,735** | - As of September 30, 2024, the company's total debt was **$257,500 thousand**, including a **$89,500 thousand** revolving credit facility and **$168,000 thousand** in term loans[57](index=57&type=chunk) - On August 28, 2023, the company borrowed **$115 million** in incremental term loans via the Second Amendment for the Naturium acquisition[64](index=64&type=chunk) - On August 26, 2024, the company increased its restricted payment capacity via the Third Amendment, subject to compliance with specific consolidated net total leverage ratios[67](index=67&type=chunk) - As of September 30, 2024, the interest rate for the revolving credit facility and term loan was approximately **6.0%**, and for the incremental term loan, approximately **6.2%**[63](index=63&type=chunk)[65](index=65&type=chunk) [Note 7—Commitments and contingencies](index=20&type=section&id=Note%207%E2%80%94Commitments%20and%20contingencies) The company is involved in legal proceedings, claims, and disputes in the ordinary course of business, but management does not expect any current matters to have a material adverse effect on its consolidated financial position, results of operations, or cash flows - The company faces legal proceedings, claims, and disputes from time to time, but management does not expect any current matters to have a material adverse effect on its consolidated financial position, results of operations, or cash flows[68](index=68&type=chunk) [Note 8—Income taxes](index=20&type=section&id=Note%208%E2%80%94Income%20taxes) For the three months ended September 30, 2024, income tax expense was $8.9 million with an effective tax rate of 31.9%, a significant increase from the prior year, while the six-month period saw $8.6 million in expense at 11.4%, with the difference from the U.S. statutory rate primarily due to reduced deferred tax benefits from stock-based compensation | Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense (in thousands) | 8,928 | 6,469 | 8,603 | 13,145 | | Effective tax rate | 31.9% | 16.3% | 11.4% | 13.2% | - For the three months ended September 30, 2024, income tax expense was **$8.9 million**, with an effective tax rate of **31.9%**, a significant increase from **16.3%** in the prior year period[69](index=69&type=chunk) - The difference between the effective tax rate and the U.S. statutory rate is primarily attributed to reduced deferred tax benefits related to stock-based compensation[69](index=69&type=chunk) [Note 9—Stock-based compensation](index=20&type=section&id=Note%209%E2%80%94Stock-based%20compensation) For the three months ended September 30, 2024, stock-based compensation expense was $11,217 thousand, and for the six-month period, it was $34,612 thousand, a significant year-over-year increase, with total unrecognized costs of $109.1 million expected to be recognized over 1.0 to 1.8 years | Item (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Service options | — | 41 | — | 87 | | Restricted stock and RSUs | 11,176 | 11,176 | 34,575 | 18,330 | | **Total Stock-based compensation expense** | **11,217** | **11,217** | **34,612** | **18,417** | - For the six months ended September 30, 2024, stock-based compensation expense was **$34,612 thousand**, an **87.9%** increase from **$18,417 thousand** in the prior year period[70](index=70&type=chunk) - As of September 30, 2024, unrecognized stock-based compensation costs related to unvested service options and restricted stock/RSUs were **$0.1 million** and **$109.0 million**, respectively, expected to be recognized over **1.0 year** and **1.8 years**[70](index=70&type=chunk) [Note 10—Repurchase of common stock](index=20&type=section&id=Note%2010%E2%80%94Repurchase%20of%20common%20stock) The company completed its 2019 authorized $25 million stock repurchase program during the three months ended September 30, 2024, repurchasing 108,753 common shares for $17.1 million, and on August 27, 2024, the Board authorized a new $500 million stock repurchase plan with $500 million remaining available - For the three months ended September 30, 2024, the company repurchased **108,753 shares** of common stock for **$17.1 million**, completing the **$25 million** stock repurchase program authorized in 2019[71](index=71&type=chunk) - On August 27, 2024, the Board of Directors authorized a new **$500 million** stock repurchase program (the 2024 Stock Repurchase Program)[72](index=72&type=chunk) - As of September 30, 2024, **$500 million** remained available under the 2024 Stock Repurchase Program, with no repurchases made during the quarter[74](index=74&type=chunk) [Note 11—Net income per share](index=21&type=section&id=Note%2011%E2%80%94Net%20income%20per%20share) For the three months ended September 30, 2024, basic net income per share was $0.34 and diluted net income per share was $0.33, both lower than the prior year period, with similar year-over-year decreases for the six-month period | Metric | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Basic net income per share | 0.34 | 0.61 | 1.19 | 1.59 | | Diluted net income per share | 0.33 | 0.58 | 1.14 | 1.50 | | Basic weighted-average shares outstanding | 56,345,648 | 54,425,384 | 56,160,796 | 54,183,091 | | Diluted weighted-average shares outstanding | 58,482,530 | 57,438,152 | 58,517,993 | 57,308,342 | - For the three months ended September 30, 2024, basic net income per share was **$0.34** and diluted net income per share was **$0.33**, representing decreases of **44.3%** and **43.1%** respectively from the prior year period[75](index=75&type=chunk) - For the six months ended September 30, 2024, basic net income per share was **$1.19** and diluted net income per share was **$1.14**, representing decreases of **25.2%** and **23.9%** respectively from the prior year period[75](index=75&type=chunk) [Note 12—Leases](index=21&type=section&id=Note%2012%E2%80%94Leases) As of September 30, 2024, total lease assets were $43,289 thousand and total lease liabilities were $44,368 thousand, with operating lease costs increasing to $3,046 thousand and $5,563 thousand for the three and six months respectively, and a weighted-average remaining lease term of 6.6 years at a 5.9% discount rate | Lease-Related Metric (in thousands) | September 30, 2024 | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | :--- | | Operating lease assets | 43,289 | 27,415 | 17,269 | | Finance lease assets | — | — | 35 | | **Total Lease Assets** | **43,289** | **27,415** | **17,304** | | Current operating lease liabilities | 8,192 | 7,016 | 4,172 | | Long-term operating lease obligations | 36,176 | 21,459 | 14,559 | | **Total Lease Liabilities** | **44,368** | **28,532** | **18,959** | | Lease Cost (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | 3,046 | 1,425 | 5,563 | 2,702 | | Amortization of finance lease assets | — | 105 | — | 210 | | Interest on lease liabilities | — | 3 | — | 7 | | **Total Lease Cost** | **3,046** | **1,533** | **5,563** | **2,919** | | Lease Term and Discount Rate | September 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Weighted-average remaining lease term (years) - Operating leases | 6.6 | 5.9 | | Weighted-average discount rate - Operating leases | 5.9% | 3.7% | [Item 2. Management's discussion and analysis of financial condition and results of operations.](index=24&type=section&id=Item%202.%20Management's%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations%2E) This chapter provides management's detailed discussion and analysis of the company's financial condition and operating performance, covering business overview, operating trends, seasonality, financial performance comparison, liquidity, capital resources, debt, key accounting policies, and recent accounting pronouncements, noting significant net sales and gross profit growth but a substantial rise in selling, general, and administrative expenses leading to decreased net income [Overview and Business Trends](index=24&type=section&id=Overview%20and%20Business%20Trends) e.l.f. Beauty is a multi-brand beauty company offering inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products, distinguishing itself through its value proposition, innovation, and consumer engagement in a competitive beauty market, with seasonal business typically showing higher net sales in the third and fourth fiscal quarters - e.l.f. Beauty is a multi-brand beauty company offering inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products[84](index=84&type=chunk) - Company brands include e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People, and Keys Soulcare, sold online and through leading beauty, mass market, and specialty retailers[86](index=86&type=chunk) - Operating results are subject to seasonal fluctuations, with net sales typically higher in the third and fourth fiscal quarters due to holiday season retailer purchases and customer shelf resets[87](index=87&type=chunk) [Results of operations](index=24&type=section&id=Results%20of%20operations) For the three months ended September 30, 2024, net sales and gross profit both grew 40% to $301.1 million and $214.1 million respectively, maintaining a 71% gross margin, but a 66% surge in selling, general, and administrative expenses to $186.1 million led to year-over-year declines in operating and net income, with a similar trend for the six-month period | Metric (in thousands) | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 301,075 | 215,507 | 625,552 | 431,846 | | Cost of sales | 87,016 | 63,142 | 180,210 | 126,909 | | Gross profit | 214,059 | 152,365 | 445,342 | 304,937 | | Selling, general and administrative expenses | 186,141 | 112,186 | 366,716 | 204,125 | | Operating income | 27,918 | 40,179 | 78,626 | 100,812 | | Net income | 19,020 | 33,271 | 66,575 | 86,248 | | Percentage of Net Sales | Three Months Ended September 30, 2024 | Three Months Ended September 30, 2023 | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 100% | 100% | 100% | 100% | | Cost of sales | 29% | 29% | 29% | 29% | | Gross margin | 71% | 71% | 71% | 71% | | Selling, general and administrative expenses | 62% | 52% | 59% | 47% | | Operating income | 9% | 19% | 13% | 23% | | Net income | 6% | 15% | 11% | 20% | - For the three months ended September 30, 2024, net sales increased by **$85.6 million** (**40%**), primarily driven by strong performance in retail and e-commerce channels[90](index=90&type=chunk) - For the three months ended September 30, 2024, selling, general and administrative expenses increased by **$74.0 million** (**66%**), primarily due to a **$26.9 million** increase in marketing and digital spend, an **$18.7 million** increase in compensation and benefits (including **$5.7 million** in stock-based compensation), and increased operating costs, retail storefront, and visual merchandising costs[92](index=92&type=chunk) - For the three months ended September 30, 2024, net interest expense was **$3.8 million**, compared to net interest income of **$0.6 million** in the prior year period, primarily due to additional borrowings, higher interest costs, and reduced interest income on cash balances[94](index=94&type=chunk) - For the six months ended September 30, 2024, net sales increased by **$193.7 million** (**45%**), and gross profit increased by **$140.4 million** (**46%**)[96](index=96&type=chunk)[97](index=97&type=chunk) - For the six months ended September 30, 2024, selling, general and administrative expenses increased by **$162.6 million** (**80%**), primarily due to a **$66.9 million** increase in marketing and digital spend, and a **$33.8 million** increase in compensation and benefits (including **$7.6 million** in stock-based compensation)[98](index=98&type=chunk) [Financial condition, liquidity and capital resources](index=28&type=section&id=Financial%20condition%2C%20liquidity%20and%20capital%20resources) As of September 30, 2024, the company had $96.8 million in cash and cash equivalents and $10.5 million available under its revolving credit facility, expecting to meet its next 12 months' operating, investing, and financing needs through these resources, while working capital (excluding cash) increased to $146.4 million - As of September 30, 2024, the company had **$96.8 million** in cash and cash equivalents and **$10.5 million** of available borrowing capacity under its revolving credit facility[104](index=104&type=chunk) - The company expects to meet its operating, investing, and financing needs for the next **12 months** through existing cash, cash generated from operations, and the revolving credit facility[104](index=104&type=chunk) - As of September 30, 2024, working capital (excluding cash and cash equivalents) was **$146.4 million**, a significant increase from **$69.8 million** as of March 31, 2024[104](index=104&type=chunk) [Cash flows](index=29&type=section&id=Cash%20flows) For the six months ended September 30, 2024, net cash from operating activities was $12.4 million, a significant decrease from the prior year due to increased working capital, with net cash used in investing activities at $2.5 million and financing activities at $22.0 million, mainly influenced by stock repurchases and debt repayments | Cash Flow Category (in thousands) | Six Months Ended September 30, 2024 | Six Months Ended September 30, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | 12,449 | 51,270 | | Net cash from investing activities | (2,502) | (1,465) | | Net cash from financing activities | (21,976) | (2,820) | - For the six months ended September 30, 2024, net cash from operating activities was **$12.4 million**, primarily impacted by a **$114.2 million** increase in working capital[106](index=106&type=chunk) - Net cash used in financing activities was **$22.0 million**, driven by **$17.1 million** in common stock repurchases and **$5.4 million** in long-term debt repayments[106](index=106&type=chunk) [Description of indebtedness](index=29&type=section&id=Description%20of%20indebtedness) The company's debt primarily includes a revolving credit facility and term loans under its 2021 Amended Credit Agreement, with $115 million in incremental term loans borrowed in August 2023 for the Naturium acquisition and increased restricted payment capacity via the Third Amendment in August 2024, while remaining in compliance with all financial covenants - The company's debt primarily includes a **$100 million** revolving credit facility and a **$100 million** term loan under its 2021 Amended Credit Agreement[107](index=107&type=chunk) - On August 28, 2023, the company borrowed **$115 million** in incremental term loans via the Second Amendment for the Naturium acquisition[111](index=111&type=chunk) - On August 26, 2024, the company increased its restricted payment capacity via the Third Amendment, subject to compliance with specific consolidated net total leverage ratios[114](index=114&type=chunk) - As of September 30, 2024, the company was in compliance with all financial covenants under the Amended Credit Agreement[114](index=114&type=chunk) [Contractual obligations and commitments](index=31&type=section&id=Contractual%20obligations%20and%20commitments) This chapter states that the company's contractual obligations and commitments have not materially changed from those disclosed in its annual report - The company's contractual obligations and commitments have not materially changed from those disclosed in its annual report[115](index=115&type=chunk) [Off-balance sheet arrangements](index=31&type=section&id=Off-balance%20sheet%20arrangements) The company is not involved in any off-balance sheet arrangements - The company is not involved in any off-balance sheet arrangements[115](index=115&type=chunk) [Critical accounting policies and estimates](index=31&type=section&id=Critical%20accounting%20policies%20and%20estimates) This chapter notes that the company's critical accounting policies and estimates have not materially changed from those disclosed in its annual report, and financial statement preparation requires management's estimates and assumptions, where actual results may differ - The company's critical accounting policies and estimates have not materially changed from those disclosed in its annual report[117](index=117&type=chunk) - The preparation of financial statements requires management to make estimates and assumptions, and actual results may differ from these estimates[115](index=115&type=chunk) [Recent accounting pronouncements](index=33&type=section&id=Recent%20accounting%20pronouncements) This chapter refers to recent accounting pronouncements detailed in Note 2 to the financial statements, which are expected to only impact disclosures and will not affect the company's operating results, cash flows, or financial condition - Recent accounting pronouncements (ASU 2023-07 and ASU 2023-09) are expected to only impact company disclosures, with no effect on results of operations, cash flows, or financial condition[41](index=41&type=chunk)[42](index=42&type=chunk)[118](index=118&type=chunk) [Item 3. Quantitative and qualitative disclosures about market risk.](index=33&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk%2E) This chapter states that the company's primary market risk exposures and market risk management have not materially changed from those disclosed in its annual report - The company's primary market risk exposures and market risk management have not materially changed from those disclosed in its annual report[118](index=118&type=chunk) [Item 4. Controls and procedures.](index=33&type=section&id=Item%204.%20Controls%20and%20procedures%2E) As of September 30, 2024, the company's management assessed and determined its disclosure controls and procedures to be effective, with no changes in internal control over financial reporting occurring during the quarter that materially affected financial reporting - As of September 30, 2024, the company's Chief Executive Officer and Chief Financial Officer assessed and determined that disclosure controls and procedures are effective, providing reasonable assurance for timely disclosure of required information[119](index=119&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2024, that materially affected financial reporting[120](index=120&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers additional information not included in the financial statements, such as legal proceedings, detailed risk factors, equity security sales, defaults, mine safety disclosures, other information, and a list of exhibits [Item 1. Legal proceedings.](index=34&type=section&id=Item%201.%20Legal%20proceedings%2E) The company is involved in legal proceedings, claims, and disputes in the ordinary course of business, but management does not expect any current matters to have a material adverse effect on its consolidated financial position, results of operations, or cash flows - The company faces legal proceedings, claims, and disputes from time to time, but management does not expect any current matters to have a material adverse effect on its consolidated financial position, results of operations, or cash flows[122](index=122&type=chunk) [Item 1A. Risk factors.](index=34&type=section&id=Item%201A.%20Risk%20factors%2E) This chapter details various risks that could materially adversely affect the company's business, financial condition, and results of operations, encompassing beauty industry competition, growth and profitability, Naturium acquisition, business operations, macroeconomic conditions, financial condition, retail customers, seasonality, information technology, cybersecurity, international business, legal and regulatory compliance, legal proceedings, intellectual property, marketing activities, and stockholder ownership [Risk factors related to the beauty industry](index=34&type=section&id=Risk%20factors%20related%20to%20the%20beauty%20industry) The beauty industry is highly competitive, with challenges from large multinational corporations and emerging brands, where unsuccessful new product launches, reputational damage, and product quality and safety issues could materially adversely affect the business, requiring continuous innovation and effective competition to sustain growth - The beauty industry is highly competitive, with the company facing challenges from large multinational consumer product companies and independent beauty brands, which may have more resources and stronger brand recognition[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - New product launches may be unsuccessful or delayed due to low product acceptance, pricing, ineffective marketing strategies, or supply chain disruptions, impacting sales targets[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Damage to brand reputation could have a material adverse effect on the business, stemming from loss of consumer confidence in product ingredients, product contamination, quality or safety issues, and failure to meet consumer expectations[132](index=132&type=chunk)[133](index=133&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) [Risk factors related to our growth and profitability](index=38&type=section&id=Risk%20factors%20related%20to%20our%20growth%20and%20profitability) The company's future growth and profitability depend on successfully executing business strategies, including brand building, digital investment, innovation, retailer partnerships, and strategic expansion, but historical growth does not guarantee future performance, and challenges like losing key retail customers, supply chain disruptions, China business risks, regulatory actions, talent loss, and macroeconomic adversity could hinder effective growth - The company's future growth and profitability depend on successfully executing business strategies, including brand building, digital investment, innovation, retailer partnerships, and strategic expansion, but there is no guarantee these will be achieved as anticipated[138](index=138&type=chunk)[139](index=139&type=chunk) - Historical growth does not indicate future performance, and the company may face challenges such as losing key retail customers, supply chain disruptions, China business risks, regulatory actions, talent loss, and macroeconomic adversity[140](index=140&type=chunk)[141](index=141&type=chunk)[144](index=144&type=chunk) - Continued business growth places strain on management, personnel, financial and information systems, supply chain, and distribution capabilities, and failure to effectively manage expansion could materially adversely affect the business[146](index=146&type=chunk)[147](index=147&type=chunk) [Risk factors related to our acquisition of Naturium](index=40&type=section&id=Risk%20factors%20related%20to%20our%20acquisition%20of%20Naturium) The acquisition of Naturium may disrupt business and harm financial condition due to integration difficulties, higher-than-expected costs, or failure to realize anticipated benefits, while Naturium may also have unknown liabilities and face raw material supply interruptions, all potentially adversely affecting the company's business, financial condition, and results of operations - Acquisitions or investments (such as Naturium) may disrupt business and harm financial condition due to integration difficulties, higher-than-expected costs, or failure to realize anticipated benefits[148](index=148&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - The company's assumptions for the Naturium acquisition may be inaccurate, including failure to achieve anticipated revenue growth rates and higher-than-expected operating, transaction, and integration costs[152](index=152&type=chunk)[153](index=153&type=chunk) - Naturium may have unknown or contingent liabilities not discovered during due diligence, or face investigations and litigation from regulatory authorities[154](index=154&type=chunk) - Raw material supply for Naturium products may be interrupted, and establishing alternative suppliers could be time-consuming and costly, affecting product manufacturing and distribution[155](index=155&type=chunk)[156](index=156&type=chunk) [Risk factors related to our business operations and macroeconomic conditions](index=44&type=section&id=Risk%20factors%20related%20to%20our%20business%20operations%20and%20macroeconomic%20conditions) Company operations face risks from supply chain disruptions, loss of key talent, reliance on third-party suppliers, poor inventory management, and public health crises, while macroeconomic adversity (e.g., inflation, rising interest rates, banking crises) could reduce consumer spending, impacting business and financial condition, and financial market volatility may also affect financing capabilities - Operating disruptions, including supply chain interruptions (e.g., port congestion, container shortages, labor disputes, natural disasters, international conflicts), could have a material adverse effect on the business[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - The company's success depends on attracting and retaining key employees, including executives; a competitive labor market and talent loss could materially adversely affect the business[162](index=162&type=chunk)[164](index=164&type=chunk) - The company heavily relies on third-party suppliers, manufacturers, and distributors, and their failure to meet standards or service interruptions could harm the brand and lead to consumer dissatisfaction[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Failure to effectively manage inventory could lead to obsolete inventory, decreased value, and significant write-downs, impacting results of operations and liquidity[173](index=173&type=chunk) - Public health crises (e.g., COVID-19 pandemic) could lead to retail customer closures, supply chain disruptions, labor shortages, and global financial market turmoil, adversely affecting the business[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - Macroeconomic adversity in the U.S. or other key operating countries (e.g., inflation, rising interest rates, banking crises, economic recession) could lead to reduced consumer spending and confidence, negatively impacting net sales and profitability[179](index=179&type=chunk)[180](index=180&type=chunk) - Financial market volatility may make future financing difficult or expensive, and bank failures or insolvencies could lead to reduced borrowing capacity, affecting business operations[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) [Risk factors related to our financial condition](index=51&type=section&id=Risk%20factors%20related%20to%20our%20financial%20condition) The company's substantial debt may limit cash flow for growth, increase interest rate risk, and subject it to restrictive covenants, and if operating cash flow is insufficient, liquidity issues could force investment cuts or additional financing, potentially leading to equity dilution or increased debt burden, while tax law and exchange rate fluctuations may also adversely affect financial condition - As of September 30, 2024, the company had **$257.5 million** in debt, which could result in a significant portion of cash flow being used for debt service, limiting funds for growth, increasing interest rate risk, and subjecting it to restrictive covenants[187](index=187&type=chunk)[188](index=188&type=chunk) - If operating cash flow is insufficient to meet operational needs and debt obligations, the company may face liquidity issues, forcing it to cut investments or seek additional financing, potentially leading to equity dilution or increased debt burden[189](index=189&type=chunk)[190](index=190&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) - Changes in tax laws, tax rates, or additional income tax liabilities or assessments, as well as exchange rate fluctuations (Euro, British Pound, Chinese Yuan, Canadian Dollar), could materially adversely affect the company's business, financial condition, and results of operations[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Risk factors related to our retail customers, consumers and the seasonality of our business](index=53&type=section&id=Risk%20factors%20related%20to%20our%20retail%20customers%2C%20consumers%20and%20the%20seasonality%20of%20our%20business) The company heavily relies on a few retail customers, and losing them or their business challenges could severely impact operating results, with quarterly performance affected by seasonality, major retail customer order patterns, and inventory policies, potentially leading to volatility, and failure to meet seasonal working capital needs or forecasting errors could adversely affect liquidity - The company's net sales are highly dependent on a few retail customers, and losing these customers or their business challenges (e.g., reduced foot traffic, credit risk, industry consolidation, inventory reductions) could materially adversely affect results of operations[198](index=198&type=chunk)[199](index=199&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - Quarterly operating results are subject to seasonal fluctuations, with higher sales typically in the third and fourth fiscal quarters, but adverse events during these periods could disproportionately impact full-year results[203](index=203&type=chunk)[204](index=204&type=chunk) - Changes in major retail customer order patterns and inventory policies could lead to significant quarterly performance fluctuations, and if significant sales or profitability shortfalls occur, the company may lack sufficient liquidity to support its business[205](index=205&type=chunk)[206](index=206&type=chunk) [Risk factors related to information technology and cybersecurity](index=55&type=section&id=Risk%20factors%20related%20to%20information%20technology%20and%20cybersecurity) The company heavily relies on information technology systems, facing risks of service interruptions, data corruption, cyberattacks, and security breaches, which could lead to operational disruptions, data leaks, reputational damage, and legal liabilities, while failure to timely upgrade IT systems, adapt to new technologies, or effectively manage AI use could also adversely affect the business, and third-party payment processing fraud risks and compliance requirements also pose challenges - The company heavily relies on information technology networks and systems for marketing, sales, financial processing, and business management, which are vulnerable to damage, interruptions, or shutdowns, potentially leading to operational disruptions, increased costs, and delayed financial reporting[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Data security and privacy threats are increasingly frequent and severe, including cyberattacks, human error, and malware, potentially leading to unauthorized access, disclosure, or misuse of intellectual property, proprietary information, or customer data, harming reputation and triggering lawsuits and fines[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) - Failure to maintain and upgrade information technology systems, or encountering difficulties in implementing new systems (such as SAP software), could lead to business disruptions, increased operating costs, and a material adverse effect on the business[215](index=215&type=chunk)[216](index=216&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk) - Failure to adopt new technologies or adapt e-commerce websites and systems to evolving consumer needs and industry standards could impact competitiveness, consumer acquisition, and financial performance[220](index=220&type=chunk)[221](index=221&type=chunk) - The company uses AI, but its improper management could lead to accuracy issues, bias, discriminatory outcomes, harming brand and reputation, and increasing cybersecurity and data privacy risks[222](index=222&type=chunk)[223](index=223&type=chunk) - Payment methods used on e-commerce websites expose the company to risks related to third-party payment processing, including fraud, high fees, and failure to comply with Payment Card Industry rules, potentially harming reputation and business[232](index=232&type=chunk)[233](index=233&type=chunk) [Risk factors related to conducting business internationally](index=63&type=section&id=Risk%20factors%20related%20to%20conducting%20business%20internationally) The company has significant operations in China, facing risks such as rising labor costs, regulatory changes (e.g., Uyghur Forced Labor Prevention Act), intellectual property leakage, and political-economic uncertainties, while international sales and operations also face various risks including changes in political, regulatory, legal, and economic conditions, difficulties in personnel management, trade restrictions, supply chain disruptions, and Brexit, all of which could adversely affect the business - The company has significant operations in China, facing risks such as rising labor costs, regulatory changes (e.g., Uyghur Forced Labor Prevention Act), intellectual property leakage, and political-economic uncertainties[234](index=234&type=chunk)[235](index=235&type=chunk)[237](index=237&type=chunk) - International sales and operations face risks from changes in political, regulatory, legal, or economic conditions, difficulties in personnel management, trade restrictions, supply chain disruptions, differing employment practices and laws, government controls, inadequate intellectual property protection, tariffs and customs duties, and military conflicts[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - The ultimate impact of Brexit remains difficult to predict, potentially leading to trade disruptions, restricted free movement of goods and services, foreign exchange volatility, and additional legal, political, and economic uncertainties, adversely affecting the company's expansion in the UK and Europe[241](index=241&type=chunk) [Risk factors related to evolving laws and regulations and compliance with laws and regulations](index=67&type=section&id=Risk%20factors%20related%20to%20evolving%20laws%20and%20regulations%20and%20compliance%20with%20laws%20and%20regulations) The company faces evolving laws and regulations and increasingly stringent compliance requirements, particularly regarding product introduction, marketing, and sales, where non-compliance could lead to product recalls, fines, business disruptions, and reputational damage, with the Modernization of Cosmetics Regulation Act (MoCRA), FDA oversight of cosmetics and OTC drugs, and evolving data privacy laws (e.g., CCPA, CPRA, GDPR) potentially increasing compliance costs and legal risks, and failure to comply with the U.S. Foreign Corrupt Practices Act and other anti-corruption laws also risking severe penalties - New laws, regulations, enforcement trends, or changes to existing regulations, particularly concerning product introduction, marketing, and sales, may require the company to reformulate or discontinue products, modify packaging, or adjust operations, leading to increased costs, delayed product launches, and reduced sales[242](index=242&type=chunk)[243](index=243&type=chunk) - The Modernization of Cosmetics Regulation Act (MoCRA) imposes new compliance requirements on cosmetic manufacturers, including labeling, safety substantiation, facility registration, product listing, adverse event reporting, and GMP requirements, potentially increasing manufacturing costs and operational complexity[246](index=246&type=chunk)[248](index=248&type=chunk) - The company sells OTC drugs regulated by the FDA, and non-compliance with FDA monographs or cGMP requirements could necessitate product reformulation, cessation of sales, or regulatory action[249](index=249&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) - Government regulations on product marketing and advertising require reasonable substantiation for marketing claims, and failure to provide adequate substantiation could lead to enforcement actions, fines, or private lawsuits from the FDA, FTC, or other regulatory bodies[255](index=255&type=chunk)[256](index=256&type=chunk) - The company is subject to complex and evolving privacy and data protection laws and regulations in the U.S. and abroad (e.g., CCPA, CPRA, GDPR), with uncertain interpretations, potentially leading to increased compliance costs, changes in business practices, fines, and litigation risks[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - Failure to comply with the U.S. Foreign Corrupt Practices Act, other anti-corruption and anti-bribery laws, and applicable trade control laws could result in investigations, enforcement actions, substantial fines, disgorgement of profits, and reputational damage[265](index=265&type=chunk)[266](index=266&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk) - Government regulation of the internet and e-commerce is evolving, and adverse legal changes or failure to comply with these regulations could hinder the growth of internet and mobile commerce, leading to reputational harm, business loss, and legal proceedings[270](index=270&type=chunk)[271](index=271&type=chunk) [Risk factors related to legal and regulatory proceedings](index=74&type=section&id=Risk%20factors%20related%20to%20legal%20and%20regulatory%20proceedings) The company may be involved in various legal and regulatory proceedings, including personal injury, class action, intellectual property, and product liability claims, which can be costly, time-consuming, and divert management's attention, and unfavorable rulings could lead to settlements, injunctions, or damages, materially adversely affecting the business and financial condition, while product recalls and product liability claims may also incur unexpected costs and reputational damage - The company may be involved in legal proceedings, regulatory actions, or other disputes, including personal injury, class action, intellectual property, privacy, and employment litigation, which can be costly, time-consuming, and divert management's attention[272](index=272&type=chunk)[273](index=273&type=chunk) - Any unfavorable ruling or settlement could result in settlements, injunctions, or damages, materially adversely affecting the business, financial condition, and results of operations[273](index=273&type=chunk) - Product recalls and product liability claims could lead to unexpected costs and reputational damage, especially if products are found to be defective, unsafe, or cause adverse reactions, and insurance coverage is insufficient[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [Risk factors related to intellectual property](index=76&type=section&id=Risk%20factors%20related%20to%20intellectual%20property) The company relies on legal protections like trademarks, copyrights, trade secrets, and patents for its brand and proprietary information, where failure to effectively protect intellectual property could lead to brand value erosion, market dilution, and costly litigation, and the company also faces the risk of infringing third-party intellectual property, which could result in legal claims, business restrictions, or substantial compensation - The company relies on legal protections such as trademarks, copyrights, trade secrets, and patents to protect its brands and proprietary information, but may not successfully assert protection in all jurisdictions or face third-party challenges[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - Limited patent protection and reliance on proprietary technology may allow competitors to develop similar products, and confidentiality agreements may not effectively prevent the disclosure of proprietary information[281](index=281&type=chunk) - Failure to protect intellectual property could lead to diminished brand value, costly litigation, and a material adverse effect on the business, financial condition, and results of operations[283](index=283&type=chunk)[284](index=284&type=chunk) - The company's success depends on its ability to operate without infringing on third-party trademarks, patents, copyrights, and other proprietary rights, facing risks of third-party infringement claims and litigation[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) [Risk factors related to marketing activities](index=78&type=section&id=Risk%20factors%20related%20to%20marketing%20activities) The company heavily relies on social media and email marketing, where negative comments, misinformation, or ineffective platform use could harm reputation and business, and changes in social media platforms, regulatory restrictions, and influencer misconduct also pose risks, while limitations or interruptions in email and messaging services could affect marketing effectiveness and net income - The company heavily relies on online platforms and social media for marketing, where negative comments or misinformation could harm reputation and are difficult to control in real-time[289](index=289&type=chunk)[290](index=290&type=chunk) - Failure to cost-effectively leverage social media platforms (e.g., restrictions on TikTok) could impact new customer acquisition and financial condition, and regulatory changes may lead to fines and legal liabilities[293](index=293&type=chunk)[294](index=294&type=chunk) - Reliance on social media influencer marketing carries risks, as their actions or communications could damage brand reputation[295](index=295&type=chunk) - The company heavily relies on email and other messaging services for brand promotion, and sending limitations or failure to deliver messages in a timely manner could materially adversely affect net income and business[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk) [Risk factors relating to our stockholders and ownership of our common stock](index=82&type=section&id=Risk%20factors%20relating%20to%20our%20stockholders%20and%20ownership%20of%20our%20common%20stock) The company faces ESG risks, wher

The small cosmetics player is taking a bigger and bigger slice of the market.Shares of cosmetics company e.l.f. Beauty (ELF 12.00%) made a big comeback on Thursday after the company released financial results for its fiscal second quarter of 2024. Going into the report, shares had lost more than 50% of their value compared to their highs in 2024. But today, e.l.f. Beauty stock was up 16% as of 2 p.m. ET.Marketing investments pay off with strong growthIn Q2, which ended Sept. 30, e.l.f. Beauty grew net sales ...

Key TakeawaysE.l.f. Beauty posted stronger-than-expected earnings as it added market share in the U.S. and boosted international sales.The cosmetics retailer also raised its full-year profit and sales outlook.Shares surged Thursday following the release, though even with Thursday's gains, they remained lower for the year. E.l.f. Beauty (ELF) shares soared Thursday after the cosmetics retailer blew past earnings estimates and raised its outlook on booming sales. The company reported second-quarter fiscal 202 ...

About this content About Oliver Haill Oliver has been writing about companies and markets since the early 2000s, cutting his teeth as a financial journalist at Growth Company Investor with a focusing on AIM companies and small caps, before a few years later becoming a section editor and then head of research. He joined Proactive after a couple of years freelancing, where he worked for the Financial Times Group, ITV, Press Association, Reuters sports desk, the London Olympic News Service, Rugby World Cup ...

Poplar Chick Chip MAKEUP MELTING BALL with hyalur- acid x >> WAN WILL PEOPLE | --- | --- | --- | --- | --- | --- | --- | --- | |-------|---------------------------------|-------|-----------|-------|-------|-------|--------| | | I RISE ABOVE \nJE ME TRANSCENDE | | | | | | | | | | | | | | | | | KE | | | NATURIU C | | | | BEAUTY | As a reminder, this call contains forwardlooking statements that are based on management's expectations – including those relating to the category trends and longer-term outlook – an ...

Wednesday, November 6, 2024Markets were looking for some closure on the election, and boy did they get it! A decisive win for Donald Trump and the Republican Party in both the White House and Congress will likely usher in very aggressive pro-business policies.As a result, new all-time closing highs across the board: the Dow rose +1508 points, or +3.57%, the S&P 500 was up +146 points, +2.53%, the Nasdaq +544, +2.95% and the small-cap Russell 2000 an astonishing +131 points, or +5.83%! Bond yields remained h ...

Financial Data and Key Metrics - Q2 net sales grew 40% YoY, reaching $69 million in adjusted EBITDA [5] - U S market share increased by 195 basis points in Q2 [5] - International net sales grew 91% in Q2, contributing 21% of total net sales, up from 16% a year ago [6] - Digital consumption trends increased nearly 40% YoY, driving 20% of total consumption in Q2 [8] - Gross margin improved by 40 basis points to 71% in Q2 [34] - Adjusted EBITDA was $69 million, up 15% YoY, with an adjusted EBITDA margin of 23% [36] Business Line Performance - The company's Beauty Squad Loyalty Program now has 5 3 million members, growing at a 30% YoY enrollment rate [8] - e l f holds six of the top 10 new product launches in mass cosmetics and three of the top 10 SKUs across mass and prestige [11] - The company's Power Grip and Halo Glow franchises remain strong, with two of the top three SKUs in the cosmetics category [87] Market Performance - In the U S, e l f is the number one color cosmetics brand in unit share and number two in dollar share [10] - The company expanded into Germany with a launch in 1,600 Rossmann stores, quickly becoming the top cosmetics brand in those stores [7] - e l f also launched in Sephora Mexico, becoming the number one cosmetics brand in that market [30] Strategy and Industry Competition - The company raised its FY2025 guidance to 28%-30% net sales growth, reflecting strong Q2 performance and international momentum [40] - e l f's competitive advantages include its value proposition, innovation, disruptive marketing, and productivity model [14][20][22][27] - The company is expanding into new markets like Dollar General, targeting underserved rural areas [19] Management Commentary on Operating Environment and Future Outlook - Management remains confident in the company's ability to gain market share and drive category growth, despite a slowdown in the color cosmetics category [12] - The company is focused on balancing support for core franchises and new innovations [11] - Management highlighted the company's strong position in the beauty industry, with e l f being one of only four brands to achieve over $850 million in retail sales [13] Other Important Information - The company announced a new $500 million share repurchase program [39] - e l f is transitioning to SAP for its ERP system, with a planned go-live in spring 2025 [73] - The company is investing in infrastructure and distribution capacity to support global demand [38] Q&A Session Summary Question: Marketing Spend and Drug Channel Performance [47] - Management plans to maintain marketing spend at 24%-26% of net sales, citing strong ROI and growth [48] - The company is expanding its presence in the drug channel, with plans to increase space in CVS and Walgreens [49] Question: Market Share Gains and Competitive Strategy [51] - Key drivers of market share gains include the company's value proposition, innovation, and disruptive marketing [52] - The company sees significant growth opportunities in international markets and skincare [54] Question: Dollar General Expansion [55] - The expansion into Dollar General aligns with the company's mission to make beauty accessible, particularly in underserved rural areas [55] - The company is not modifying its product assortment for Dollar General, bringing its best products to the channel [96] Question: Tariffs and Supply Chain [57] - The company has a playbook to manage potential tariffs, including cost savings, pricing adjustments, and supply chain diversification [58][59] - Tariffs are not expected to impact FY2025 results [61] Question: Guidance Approach [63] - The company is prioritizing consistency in guidance delivery over the magnitude of top-line beats and raises [63] Question: International Growth and Inventory [108][112] - International growth remains strong, with consistent performance across markets [109] - Inventory levels are higher due to earlier ownership of goods from China and global distribution needs, with no risk of obsolescence [114][115] Question: NATURIUM Performance [118] - NATURIUM is performing well at Ulta Beauty, with plans for further distribution expansion in the U S and internationally [118]

E.l.f. Beauty (ELF) came out with quarterly earnings of $0.77 per share, beating the Zacks Consensus Estimate of $0.45 per share. This compares to earnings of $0.82 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 71.11%. A quarter ago, it was expected that this cosmetics company would post earnings of $0.83 per share when it actually produced earnings of $1.10, delivering a surprise of 32.53%.Over the last four quarters, the c ...

Exhibit 99.1 E.L.F. BEAUTY e.l.f. Beauty Announces Second Quarter Fiscal 2025 Results – Delivered 40% Net Sales Growth – – e.l.f. Cosmetics Gained 195 Basis Points of U.S. Market Share – – Raises Fiscal 2025 Outlook – OAKLAND, California; November 6, 2024 — e.l.f. Beauty (NYSE: ELF) today announced results for the three and six months ended September 30, 2024. "Q2 marked another quarter of consistent, category-leading growth. In Q2, we delivered 40% net sales growth, fueled by 195 basis points of market sha ...