elf Beauty, Inc (ELF) Q4 2025 Earnings Call Transcript

elf Beauty, Inc (NYSE: ELF) Q4 2025 Earnings Call dated May. 28, 2025

Corporate Participants:

Unidentified Speaker

Mandy Fields — Senior Vice President and Chief Financial Officer

Tarang Amin — Chairman; Chief Executive Officer

Analysts:

Unidentified Participant

Olivia Tong — Analyst

Dara Mohsenian — Analyst

Jonna Kim — Analyst

Susan Anderson — Analyst

Corinne Wolfmeyer — Analyst

Andrea Teixeira — Analyst

Mark Altschwager — Analyst

Bonnie Herzog — Analyst

Rupesh Parikh — Analyst

Jon Andersen — Analyst

Anna Lazula — Analyst

Peter Grom — Analyst

Sydney — Analyst

Jon Anderson — Analyst

Presentation:

operator

Chairman and Chief Executive Officer and Mandy Fields Senior Vice President and Chief Financial Officer.

Tarang Amin — Chairman; Chief Executive Officer

Beauty Team and Partners for delivering another year of industry leading Results. In fiscal 25, we grew net sales 28% and adjusted EBITDA by 26%. We gained share globally across our largest geographies including 190 basis points of share in the US, 170 basis points of share in Canada and 270 basis points of share in the UK. Q4 marked our 25th consecutive quarter of both net sales growth and market share gains, putting Elf Beauty in a rarefied group of high growth companies. We’re one of only six public consumer companies out of 546 that has grown for 25 straight quarters and average at least 20% sales growth per quarter.

Elf is the only brand of the nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 25 consecutive quarters. The combination of our value proposition, powerhouse innovation and disruptive marketing engine continue to fuel our market share gains and deepen the connection we have with our community. In Piper Sandler’s latest Taking Stock with Teens survey, Elf Cosmetics is ranked the number one teen favorite brand for the seventh consecutive season. Our 35% mindshare is now three and a half times the number two brand. Elf Skin increased its ranking to the number six favorite teen brand, up two spots relative to last year and we continue to grow our audience beyond Gen Z.

Recent surveys show Elf ranks number one in purchases amongst Millennials and Gen Alpha. Elf today is purchased by more than one of every three households in the US with our household penetration growing almost 400 basis points relative to last year, our marketing is working, delivering ROIs multiples above industry benchmarks and expanding our unaided brand awareness from 13% in 2020 to 33% in 2024. For context, the leading US mass cosmetics brand has 55% unaided awareness, which gives us confidence in our Runway for growth. In fiscal 25 we made further progress in our key areas of white space, color cosmetics, skin care and international in cosmetics.

Elf is the number one brand in the US by unit share and number two by dollar share and is the fastest growing among the top 20 brands this year by a wide margin. We expanded our number one rank in target with 21% of their entire cosmetics category. We also increased from the number four brand to the number two brand in Walmart. In skincare, we now hold two of the fastest growing mask skincare brands with Elf Skin and Natorium. We expanded Naturium to Ulta Beauty this year, seeing strong results and already achieving the number one rank in Body Wash.

Internationally we grew share in our largest existing markets, the UK and Canada, executed our biggest international launch to date with Rossman in Germany and achieved a top three brand ranking in new retailers in the Netherlands, Italy and Mexico. We continue to see global demand for our brands. Let me spend a few minutes taking you through the topics that are likely top of mind the impact of tariffs, our mitigation efforts and the actions we’re taking to deliver continued category leading growth and market share gains starting with tariffs and our mitigation efforts to set the foundation. About 75% of our global production today comes from China as of May 14, product imports of the US are now subject to tariffs at the 55% level, 25% that was put in place in 2019 plus an incremental 30% that’s now in place through mid August.

While we’re hopeful of having some long term resolutions, the timing of a more permanent rate is not known and the range of outcomes is broad. If tariffs were to remain at this incremental 30% level, we estimate the gross impact to our cost of goods sold to be approximately $50 million on an annualized basis. If tariffs were to go back up to the 145% level that was in place earlier this year, the impact would be much higher. Given the broad range of outcomes on tariffs, we’re not providing a fiscal 26 outlook at this time. Our tariff mitigation plans are underway through three key pricing, supply chain optimization and business diversification.

First, pricing to partially mitigate the impact from tariffs, we plan to take a dollar increase on our entire products assortment globally effective August 1st. We were intentional in not going beyond that $1 to preserve our value proposition and fulfill our mission to make the best of beauty accessible to every eye, lip and face. This is only the third price increase we’ve taken in our 21 year history. Unlike many of our competitors who regularly take price increases, historically consumers have been able to accept a dollar increase. We are transparent with our community in our pricing actions and hope to see long term tariff relief so we don’t have to take further pricing action next Supply Chain Optimization we believe our unique China based supply chain is an area of competitive advantage we’ve been honing for the past 21 years.

It underpins our value proposition, delivering the best combination of quality, cost and speed in our industry. We’re the only fair trade certified beauty company and are committed to our China team and suppliers. Given our growing global business, we’ve been diversifying our supply chain over the years, well ahead of recent tariff news. Recall, back in 2019 nearly 100% of our product was sourced from China. Today, about 75% comes from China and we expect this will come down further by the end of fiscal 26 as we continue to work with our key suppliers to set up additional operations outside the country.

Additionally, we are pursuing cost savings and supplier concessions. Lastly, on business diversification, our international sales, which are not currently subject to tariffs, continue to be the fastest growing part of our business. We grew our international net sales 60% in fiscal 25. Six years ago we sold $28 million internationally or about 10% of our sales. Today we sell $250 million internationally, representing nearly 20% of our sales. We expect that mix to continue to grow as we aim to gain share in existing markets and expand into new markets. To that end, we’re excited to launch ELF this month in over 1200 stores with Crowdwalt, the number one beauty retailer in the Netherlands and Belgium, further expanding our presence in these countries over the coming months.

We’ll also be launching Elf into a thousand stores with Rossman in Poland, our first entry into that country. This builds upon our successful partnership with Rossman in Germany. We’re continuing to lean into our value proposition, powerhouse innovation and disruptive marketing engines to drive category leading growth and market share gains. Looking to our value proposition, the average price point for elf is about $6.50 today as compared to nearly $9.50 for legacy mass cosmetics brands and over $20 for prestige brands. As we look ahead, we expect many brands to take pricing in response to tariffs and macro environmental pressures, further accentuating our core value proposition from an innovation standpoint, we’re excited about our latest product launch.

Our Glow Reviver Melting Lip Balms priced at an incredible value of $9 compared to a prestige item at $24. Based on requests from our community, we accelerated this launch to April from the fall and are pleased with the response we’re seeing.

Unidentified Speaker

Elf has new lip balms and I. Have a lot of thoughts. The pigment looks insane. This is giving inclusivity. Did we need one more lip balm situation in the market? Probably not. But when Elf gives you a $9 lip butter balm situation and is so spicy about it, we have to review it. They are like we are cheaper. We are better. Deal with it.

Tarang Amin — Chairman; Chief Executive Officer

Glow Reviver Lip Balm is one of the top selling products in recent weeks on both ELF cosmetics.com and with our largest global retail partners. As we look ahead, we feel great about the pipeline of innovation we have coming in the fall. We’re also leaning into our ability to entertain and engage consumers to fuel our core product launches. For example, our latest Many Trick Pony campaign is a moment to spotlight Halo Glow Liquid Filter. This is our third largest product family, driving our 63% share of the highlighter category. The genesis of the campaign is rooted in community insights on the many ways they use Halo Glow.

This multitasking product is the definition of a workhorse.

[Video Presentation]

Within its first few weeks, the campaign is fueling Halo Glow franchise momentum, delivering an 80% boost in organic traffic and double digit lift in sales of both Halo Glow Liquid Filter and Halo Glow beauty wands. On elfcosmetics.com we’ve delivered strong growth over the past 25 quarters by continuing to leverage our many areas of competitive advantage, our passionate team of owners and high performance team culture, value proposition, powerhouse innovation, disruptive marketing engine and productivity model. These areas of advantage have propelled consistent growth enabling us to strengthen our market share in both stable and uncertain macroeconomic environments.

As we look ahead, we remain confident in our ability to continue to gain market share and capture the significant white space ahead of us, which we believe is further accelerated with our acquisition of road. I’ll now turn the call over to Mandy to talk more about our fourth quarter results and our approach to fiscal 26.

Mandy Fields — Senior Vice President and Chief Financial Officer

Thank you, Tarang. Q4 net sales grew 4% year over year on top of 71% growth in Q4 of last year. We experienced growth across both digital and retail channels. Looking to our geographical regions, our net sales in the US grew 1% year over year in Q4 while international sales grew 19% higher. Unit volume contributed approximately 8 points to growth in Q4, which was partially offset by a 4 point decline from price and product mix. Q4 gross margin of 71% was up approximately 50 basis points compared to prior year. Gross margin benefits were primarily driven by favorable foreign exchange impacts on goods purchased from China and lower transportation costs.

On an adjusted basis, SGA as a percentage of sales was 52% in Q4 as compared to 61% in Q4 last year. The primary driver of that year over year decline was our plan for a more normalized rate of marketing and digital investment throughout the year. Marketing and digital investment for the quarter was 23% of net sales in line with our expectations and as compared to 34% last year. Q4 adjusted EBITDA was $81 million, up 99% versus last year. Adjusted net income was $45 million or $0.78 per diluted share compared to $31 million or $0.53 per diluted share a year ago.

The increase across profitability metrics was driven by our net sales growth, gross margin expansion and leverage in our marketing and digital spend. Now let’s turn to our full year results. In fiscal 25, we grew net sales 28%, adjusted EBITDA by 26% and increased our US market share by 190 basis points. We achieved new market share highs in US mass cosmetics and skin care while thoughtfully continuing our international expansion strategy. Moving to the Balance Sheet and Cash Flow Our balance sheet remains strong and we believe positions us well to execute our long term growth plans. We ended the year with $149 million in cash on hand compared to a cash balance of $108 million a year ago.

I’m also pleased with the approximately $115 million in free cash flow we generated in fiscal 25, up from $62 million a year ago. Our liquidity position remains strong. In March, we refinanced our credit facility into a $500 million revolver to give us greater flexibility and improve terms. We ended the year with less than 1 times leverage in terms of net debt to adjusted EBITDA and availability on our revolver of approximately $243 million. Now let’s turn to fiscal 26. As Tarang discussed, there are a broad range of potential tariff outcomes balancing all factors. We don’t believe it’s prudent to provide an outlook and then have to adjust it if tariffs were to move from where they are today.

As a result, we are not providing an initial full year fiscal 26 outlook. With that said, I’d like to provide some color on how we’re approaching the year starting with the top line as we look ahead. We remain focused on share gains in the US and expanding our business internationally and we continue to make progress in each. Looking at Q1 to date, we are seeing our consumption trends better than what we saw in Q4 and continuing to trend well ahead of the category. In the month of April, we were the only top five cosmetics brand to post growth growth, with Elf gaining an additional 130 basis points of market share in the U.S.

turning to gross margin, we expect gross margin benefits from price increases, cost savings and supplier concessions to be offset by the incremental tariff costs Tarang spoke about. Given the timing of our inventory turns, some of that tariff headwind will start to impact our gross margin in Q1. Turning to SGA, we continue to invest in our high ROI, marketing initiatives, team and infrastructure to support the significant white space we see ahead. We plan to maintain marketing and digital spend at approximately 24 to 26% of net sales in fiscal 26 in line with the range we targeted in fiscal 25.

Looking to non marketing SGA, we expect to see dollar growth on a year over year basis, primarily as we annualize the investments we made in our team and infrastructure last year, SAP rollout and continue our international expansion. I’ll now turn it back to Tarang to talk about today’s exciting announcement.

Tarang Amin — Chairman; Chief Executive Officer

Thank you Mandy At Elf Beauty, our vision is to be a different kind of company by building brands that disrupt norms, shape culture and connect communities through positivity, inclusivity and accessibility. We disrupted the beauty industry from our inception in 2004, selling premium cosmetics for $1 over the Internet and democratizing access to the best of beauty for millions of consumers. We’ve been disrupting and driving industry leading growth for 21 years in service to our growing communities around the world. We have a very high bar for M and A given the strong organic growth we’ve been able to deliver and only act when we find a win win force multiplier.

Our acquisition of naturium in 2023 doubled down on the white space we see in skincare and brought us the vision of founder Susan Yara bringing the science of consistent skin care to everyone everywhere every day. We kept Naturium’s entire team and leveraged each company’s strengths to further accelerate the combined business. Naturium leveraged ELF Beauty’s capabilities to expand into Ulta Beauty in the US Shoppers, Drug Mart in Canada and Boots in the uk and in turn we benefited from the expanded expertise in skincare to further accelerate elf skin. Fiscal 25 was one of the strongest growth years ever for both Natorium and Elf Skin.

We believe the acquisition of Rhode is a unique opportunity bringing together two like minded disruptors who are best in class at delivering high quality innovation to highly engaged communities. The unique partnership accelerates our collective potential to transform the beauty industry. Founder Haley Rhode Bieber, a fellow bold disruptor, saw a clear white space opportunity to bring a lifestyle approach to beauty. I’ve been in the consumer space 34 years and have been blown away by what Hailey and her team are building. In just under three years since its founding, Rhode is seen exceptional growth achieving $212 million of net sales in the last 12 months.

DTC only with just 10 products Rhodes Unique fashion Forward aesthetic and lifestyle approach to beauty has driven success and scale across multiple product categories cosmetics, skin care and accessories. Rhode has a powerful engagement model that has cultivated an incredibly enthusiastic and vocal community of brand champions. The type of fervent community engagement that people will camp out overnight and stand in line for 14 hours at a pop up event in LA, not just to buy product but to buy into the brand lifestyle. The brand ranks number one in earned media value amongst its skin care peers.

With less than 1% of Rhodes Social media content being sponsored, the strength of this brand caught our attention and the attention of the world’s leading global beauty retailer Sephora. They see almost every beauty brand and are a destination of choice for many top brands. Sephora’s standard approach is to test a brand in a subset of stores before scaling. Given Rhodes breakthrough DTC success and Sephora’s belief in the potential of the brand, RODE is planned to launch in all Sephora stores across the US and Canada this fall and in the UK by the end of the year.

Sephora sees Hayley well beyond her celebrity status. They view her as a thoughtful founder with a unique vision, incredible instinct and desirable aesthetic. Our time getting to know Hayley affirms this as we look ahead, we see massive Runway for growth and are excited to partner together with Rhode island to bring the brand to more faces, places and spaces. We see potential to leverage our mutual strengths. Both ELF and Rhode are known for their strong digital community engagement. We look forward to enhancing this strength by helping to accelerate Rhodes brand awareness for context. Rhodes aided awareness is 20% today in the US which is impressive for a brand this young and is half the level of other premium skincare brands which average 40% or more awareness.

Looking outside the US international drives nearly 20% of Rhodes DTC sales while 74% of the brand’s social followers are from international markets, there is significant pent up global appetite for this brand. We plan to invest in marketing and fuel their distribution disruptive marketing engine to further Rhode’s brand awareness and further build its community of loyalists. We also plan to leverage our expertise and help RD further move into retail distribution. We have deep relationships with Sephora’s top management and are excited to accelerate ELF Beauty’s global presence with Sephora, building upon the successful partnership we’ve had since launching ELF in Sephora Mexico last year.

Lastly, we see potential to provide Rhode with opportunities to broaden its product assortment and innovation in the skincare and hybrid makeup categories and expand into new adjacent categories in the future. Hailey’s instincts have proven to break through the most crowded categories and we look forward to supporting her and the team at each lifestyle stage. I want to close by extending a special thank you to the ELF Beauty and Road teams. We each owe our success to the power of our teams on the roadside. Haley is a visionary and her unique perspective, tenacity and passion to reinvent beauty come through in every aspect of the business.

She surrounded herself with an exceptional team to bring the vision of Road to Life for millions of consumers, further fueling fandom. In addition to Haley, we intend to retain co founders Michael and Lauren Ratner, experienced CEO Nick Flahos and their passionate team. We plan to continue to operate RODE from its headquarters in Los Angeles and build that team further to realize the global opportunity we both see. This approach will also allow the ELF Beauty team to remain focused on the significant white space we see ahead for our existing brands. We’re confident our combined companies have a bright future ahead of us.

We look forward to partnering with RODE to continue to disrupt the industry and further our vision to create a different kind of company. I’ll now turn the call over to Mandy to talk about the financial details of the transaction.

Mandy Fields — Senior Vice President and Chief Financial Officer

Thank you Terrain I’ll start with valuation. The billion dollar headline price breaks out into two components. The upfront purchase price of 800 million at closing represents approximately 3.8 times Rhode’s latest 12 months net sales, which compares favorably to precedent transactions in Beauty. The transaction also includes additional potential earn out consideration of $200 million based on the future growth of the brand over a three year time frame. We expect to finance the transaction using fully committed debt financing of approximately $600 million as well as $200 million or approximately 2.6 million shares of newly issued shares of Elf Beauty common stock issued directly to the equity holders of Rhode.

We expect our liquidity position to remain strong with relatively low leverage post the transaction. The transaction, which is subject to customary closing conditions, is expected to close in our second quarter of fiscal 2026. Turning to Rhode’s financials, in the last 12 months RDE generated $212 million in net sales and very strong profitability levels. We expect the addition of RD to be accretive to our top line growth, adjusted EBITDA margins and earnings. Given the expected timing of the transaction close, we expect RODE to contribute to our results. Starting in our fiscal Q2 when we have more certainty on the tariff front, we plan to issue guidance inclusive of Rhode’s contribution.

In summary, we’re excited to welcome Rhode to the ELF Beauty family. We have remained highly disciplined in assessing material and looking for opportunities that can leverage our strengths and bring complementary capabilities to elf. Finding a brand that has achieved this unique combination of disruption, curation, scale and profitability is rare and we are equally excited about the global opportunity we still see ahead with this acquisition. We’re further diversifying ELF Beauty with a distinct yet complementary brand that we expect to be accretive to both our growth profile and earnings with that operator, you may open the call to questions.

Questions and Answers:

operator

And your first question today will come from Olivia Tong with Raymond James. Please go ahead.

Olivia Tong

Great, thanks. Good afternoon. A couple of questions here. First, just on the quarter, realizing that. You’Re not giving a fiscal 26 outlook. But sounds like for June quarter at least you’re still working off of pre tariff inventory. So is there anything you can tell us about performance? I mean we’ve got two quarters in the books at this point, so that would be helpful. You also talked about performance across a number of channels but didn’t mention Dollar General. So just wanted to see how that was going. And then in terms of road, if you could just talk about your thought process in terms of further expansion and. Whether it will be run independently or. Integrated into the ELF business.

Mandy Fields

Thanks so much. Hi Olivia. I’ll take the question on kind of Q1 and any additional color there. As you said, we are not giving guidance at this time and really that’s rooted in until we get more certainty from a tariff perspective. Just given such a wide range of outcomes on that front, I can tell you we feel great about our business as we are in Q1. As we noted on the call, we continue to build share even into this quarter. We will be cycling our space expansion in Walmart, the launch of the Naturium and Ulta Beauty and some outsized growth from an international perspective in Q1.

But overall we’re feeling great about where we are.

Tarang Amin

And then Olivia, you had a question on Dollar General as well. That continues to go extremely well. We’re well above their expectations. We’re building a ton of share and we’re really pleased with how it’s doing, particularly serving the underserved in rural areas that didn’t have access to ELF before. So we’re feeling great about that. And then switching gears to Rhode. I can’t tell you how excited we are with the acquisition of Rhode. If you take a look at Elf Beauty, we just finished our 25th consecutive quarter of net sales and market share growth. Elf. Elf Beauty’s on fire and we’re further fueling that fire with the acquisition of rde.

Rode is going to continue to be run out of Los Angeles. They have an incredible team with Haley, her co founders Michael D. Ratner, Lauren Ratner and experienced CEO Nate Flahos. And so we’ll continue to run that team out of Los Angeles. We’ll supplement the team and particularly increase the level of hiring to go after the global expansion opportunities that we see. The near term priorities will be really to execute with excellence the Sephora rollout It’s a massive rollout at Sephora in all US Stores and Canadian doors, followed later this year by rollout into Sephora the UK as well.

And so we’ll be looking to help the team really make sure that that’s an awesome launch. I can tell you Sephora couldn’t be happier or more excited of being able to get Rhode. It’s an incredible brand. I mean, being able to go from 0 to $212 million of net sales direct to consumer only with only 10 products. I don’t think any of us have seen anything like it. So extremely excited. And you’ll continue to hear the news in terms of particularly once it closes, in terms of our future expansion plans.

operator

And your next question today will come from Dara Mohsenian with Morgan Stanley.

Please go ahead.

Dara Mohsenian

Hey guys. So Mandy, just wanted to follow up. Obviously you’re not giving guidance for fiscal 26, but just given we’re two months into fiscal Q1. Any additional perspective? Your answers, Olivia, were helpful, but you know Q1 revenue is probably not as impacted by tariffs at this point, so was just hoping for any more detail there and perhaps also given the comp issue you mentioned, the U.S. could you talk about your U.S. top line growth potential relative to the scanner data and then on the ROAD acquisition? Turang, obviously you’re very excited by the growth opportunities here. Can you also just discuss organizationally the key incremental capabilities that ELF can bring to the brand and just vice versa, what you think RD can bring to your organization and how you think about the biggest potential opportunities on that front.

Thanks.

Mandy Fields

Right, so I did provide some color there, Dara, on Q1 top line. Like I said, we feel great about what we’re seeing from a consumption standpoint and we will be cycling those items. I already noted as we go through so feeling great about Q1 overall. Now one thing that we did note on the call is that the impact of tariffs will start to hit us in Q1 and so that’s something to be mindful of as you all think about how you’re modeling profitability for the quarter.

Tarang Amin

Hi Darren, in terms of your question on road, from an organizational capability standpoint, we’ve obviously built up a set of capabilities across marketing innovation, our retail approach that we can apply to road. More specifically, we’ve made the switch. Both brands are digitally native brands. We’ve made the switch successfully a number of years ago in expanding into retail and so we’ll be able to help rd, particularly as they expand into Sephora and then beyond that as they look to improve, increase the global footprint of the brand. Second, from a marketing standpoint, it’s amazing what they’ve been able to do.

The engagement model they have again, I’ve never seen anything like it where consumers are willing to camp out overnight, stay in line 14 hours in a pop up event, not just to buy product but to buy into the entire lifestyle. And so it’s very much reminiscent of the type of community engagement we have and leveraging that strength. But in addition, we see an opportunity to increase the awareness of road. As I mentioned, their aided awareness is only 20%. So our ability to invest more into the brand, increased awareness. And then third, I would say from a people standpoint, it’s an incredible team, but it’s a small team.

So our ability really across every function to be able to enhance that team and bring the capabilities we so successfully applied to ELF to Rogue will be there. So everything from retail to marketing to the overall team and expansion globally are things that we hope to help them with and help realize Haley’s vision. In terms of what we get in return, we get one of the most beautiful brands I’ve ever seen that is on rocket ship growth. We get to enhance our relationship and presence with Sephora globally over time and to learn from each other.

I think every acquisition we’ve done, if I take a look at what we got out of Notoria, which is a home run acquisition we did just in 2023, it brought us Susan Yara’s vision in terms of the science behind consistent skin care everywhere for everyone. And we’ve been able to help that business too, both in terms of expanding distribution, in terms of building out the team and being able to really leverage each other’s strengths such that not only is Natorium growing really fast, but ELF Skin just had its strongest growth year as well.

operator

And your next question today will come from Oliver Chen with TD Cowan.

Please go ahead.

Jonna Kim

This is Jonna. Now Oliver, thanks for taking our question. First question, just on the domestic shelf. Space gains, obviously you have a bigger. Base now to work off of what’s. Sort of the right pace of growth in the US in terms of distribution? And then the second question around Rhode. Is there potential for cross selling between Rhode and Elf given the younger consumers. Gravitate towards both brands. Is there any sort of customer overlap, sort of exercise you’ve done that could be some adjusted cost, both brands. Thank you very much.

Mandy Fields

Hi Jonna. So I’ll take the first question on domestic shelf space gains. We’re very pleased with the shelf space gains that we’ve gotten over this last year. And as we’ve talked usually we do have some expansion. So as we talked on the call today, we’re launching in Crowdvet in Belgium and the Netherlands. We also talked about Rossman Poland from an international standpoint. And here in the US we just had the space expansion in Target this past spring that we’re very pleased with. And so there’s still a lot of potential out there for us as we think about domestic shelf space expansion.

We talked about Walmart last year. Getting that 50% shelf space increase still remains an opportunity for us on the road ahead to continue to increase space there as well, really across all of our top retailers. And so that’s something you have to stay tuned for as we go through.

Tarang Amin

And then in terms of your second question, in terms of Rhode and any consumer crossover, I would say both ELF and Rhode have exceptional engagement efforts with our communities and we both care deeply about each of our communities. As you know, ELF is the number one brand amongst teens. I think our share of gen Z is 3 1/2 times the next highest brand. We’re also the most purchased brand amongst Gen Alpha and Millennials. We see a skew with road also to Gen Z and the younger consumers. But both brands have multi generational appeal. You find really rich consumer set on both brands that we continue that will continue to build.

operator

And your next question today will come from Susan Anderson with Canaccord Genuity. Please go ahead.

Susan Anderson

Hi, good evening. Thanks for taking my questions. I guess just a follow up really quick on the tariff. I think you said, Mandy, that you’ll. Start to feel the impact in the first quarter. I guess is that just some inventory. That you didn’t kind of have built up? Because I think this whole year you kind of built some inventory in the balance sheet. So just curious how long that’s going to last. And then you know, at what point in first quarter are you having to flow through new inventory with additional tariffs? And then I assume as the price increases go through in August, the second quarter won’t be as impacted. And then just one quick question on Naturium, I was curious if you had any new shelf space gains there for Naturium or any international plans. Thanks.

Mandy Fields

All right. Hi Susan. So on the tariff impact, why I’m saying that it’s going to start in Q1, we were mindful on the shipments that we brought in, you know, from the April period when the tariffs were at that higher rate through May when they went to the lower rate. But we Will, because we were mindful about that. It’s really the product that we needed to ship out most immediately. So we will feel some of that tariff impact in Q1. And to your point, pricing will not be in effect, so that will not be a mitigating factor in Q1.

And then on Naturium and we didn’t have anything new to share there. But outside that, it was a great year for Naturium that we’re very proud of. And I’ll let Turing add, and I.

Tarang Amin

Would say on Naturium we continue to make progress. We feel extremely great about our performance in Ulta Beauty, both in the facial skin care as well as body sections. We did take Naturium expanded distribution at Boots and we’re actually increasing the store count pretty significantly there as well. We’ll continue to talk about other expansion with Notorium as well.

operator

And your next question today will come from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

Corinne Wolfmeyer

Hey, good afternoon. Thanks so much for taking the question. I’d like to touch a little bit. On the pricing that you’re planning here in August. How should we be thinking about the. Incremental sales lift that could come from that and what kind of elasticity you think that that that could bring and. Then any context on why timing of. August for that pricing and then also. Can you confirm I think the prepared. Mark portfolio and all geographies. So does that include all brands or just elf? Thanks so much.

Mandy Fields

Hi Corrine. So yes, pricing. We just announced our pricing moves last Friday and it’s been as usual we’re transparent with our community and we posted that on our social channels. And so the pricing that we’re taking effective August 1st and why that’s August 1st is because many of our retailers require a 90 day window on any pricing moves. And so that’s why we landed at August 1st. That’s going to be across all of our SKUs globally. So every item within the ELF portfolio going up a dollar. We also had social posts across well people Naturium as well and as well as Key Soul Care.

So we will be across all of our brands taking some form of pricing. We have, you know, as we think about it from a sales lift standpoint we have incorporated as we look at from our internal models some elasticity just given that this is a unique macro that we’re operating in. But what we’ve seen so far from community response is like a 99% positive sentiment on our pricing. So I think more to come post August as we see how consumers react and the sales lifts from pricing.

Tarang Amin

And the only other thing I would add there is we think this is an opportunity for us to continue to build market share by taking our prices up just $1. We still will have a superior value proposition, especially as we expect a lot of other people to take pricing. So it’s a great opportunity for us not only to preserve the value for our community, but also continue to drive market share.

operator

And your next question today will come from Andrea Teixeira with JP Morgan. Please go ahead.

Andrea Teixeira

Thank you operator. And good afternoon everyone. So can you comment a little bit more about the most recent? I understand Mandy and you, Taran too, you both sounded positive about the most recent trends. But we have been seeing, I think. All of us on this call, the. Track channel consumption in April was now back to low to mid teens for. The Elf Beauty side of the business. Is that would you say reflective of. The performance across all channels? That’s the first question. And then on road, can you comment. Factually on how much was the growth pace most recently and then also how. Diversified they are into some of the products? Some of them are obviously very popular and viral. Just curiosity in terms of like the skincare side of the business against the. Color cosmetics side, how diversified they are. And how obviously complementary they can be against the Elf Beauty legacy portfolio. Thank you.

Mandy Fields

All right. So Andrea, thanks for the question on top line trends. As I’ve said, we’re very pleased with the consumption trends that we’re seeing as we think about that from a net sales standpoint for the quarter, calling out those three items again, we will be cycling the space expansion in Walmart, the launch of Naturium at Ulta Beauty and outsized growth from an international standpoint. And so I think with those pieces that you can kind of get to where we’re where we’re thinking from a Q1 standpoint, but again, not providing guidance at this time.

Tarang Amin

And then on your question on road, we’re not disclosing the specific growth rate other than they went from zero to $212 million in net sales in three years. So it’s a very fast growing brand and we have very high hopes as they expand into Sephora as well. In terms of the product assortment, one of the things we really like about Rhode is just how tight the product assortment is. It’s only 10 products across skincare, color, cosmetics and accessories. And you see power SKUs across their entire entire lineup. Just given how tight that range is. One of the things that we plan to do on one of the earlier questions on capabilities is we have an incredible innovation capability and being able to really help Haley and the team advance their vision in terms of their lifestyle, approach to beauty and other product categories that they can get into, as well as broadening out some of the ranges here over time.

We look forward to being able to help them with that as well.

operator

And your next question today will come from Anna Lazula with Bank of America. Please go ahead.

Anna Lazula

Hi, good afternoon. Thank you so much for the question. I was wondering here with the acquisition. Of Rhode, do you see any potential. For other brands or products you have. To benefit from, you know, potentially added distribution in Sephora? And then as we take a step. Back and look at, you know, the. ELF parent company now, do you see. The company becoming more of a portfolio. Of brands with maybe additional acquisitions over time? Thank you.

Tarang Amin

Hi, Anna. In terms of Rhode and Sephora, you know, we already were making progress at Sephora. I mentioned we had one of the best launches ever last year with ELF in Mexico. We’ve been in discussions with Sephora about other markets around the world that we could take the Elf brand in. This just accelerates our presence with Sephora in even a bigger scale. And certainly there are opportunities for other parts of our brand portfolio. And Sephora just there as they are with every. There isn’t a retailer in the world right now that doesn’t want Elf or a portfolio of brands.

And so for us, it’s really about making sure we’re taking a disciplined, sequential approach with each retailer as we go through. And then I had a broader question. We are a portfolio of brands. One of the things that I’m really proud of is every one of our brands grew in a fiscal 25 and they’re distinct yet complementary to each other. And so we love what we have with our brand portfolio, especially with the addition of road. We have a really powerful overall portfolio that meets different consumer needs, different segments. And we really like that. In terms of future acquisitions, I would say our primary focus is always going to be to realize the white space we see for existing brands portfolio and the strong organic growth we see there.

Our second priority is to make sure we close and successfully integrate in Rhode. So I’d say those are our two main priorities right now, is we just couldn’t be more excited with what Rhode is going to bring to ELF Beauty and what we can do together.

operator

And your next question today will come from Peter Grom with UBS. Please go ahead.

Peter Grom

Thanks, Operator. Good afternoon, everyone. So, Manny, you talked and Durant, you both talked about the consumption performance and being pleased quarter to date. Maybe two questions, I guess as you. Look back to kind of the slowdown. That you saw back in kind of the January, February time frame, do you feel like you have a better understanding today in terms of what ultimately drove that weaker performance? And then just as you think about the improvement we’ve seen over the past few weeks here, totally understand that there’s going to be a gap between that sales and what we’re seeing from a consumption perspective. But you know, just as we think about the improvement, what, what is driving that in terms of the consumption and how sustainable is that as we look forward here? Thanks.

Tarang Amin

Yeah, so on your first part, in terms of the slowdown that we saw in the, in the the January kind of March quarter, we know exactly what happened there. We were lapping by far biggest product launch ever with our viral lip oils as well as some of the other innovation we had. We feel really good about the spring innovation about twice the rate of most years any other year. The year before that was almost 4x higher. So that really you’re lapping a big innovation cycle as you go through in terms of the improved trend again, you’re seeing the impact of our overall marketing as well as our innovation.

I talked about our melting lip balms. Those have been a huge hit. They were requested by our community, an incredible value relative to prestige and feel really good about the innovation we have coming this fall too. So really like what we’re seeing on the business right now and like even more what we see coming.

operator

And your next question today will come from Ashley Helgens with Jeffries. Please go ahead.

Sydney

Hi, this is Sydney on for Ashley. Thank you for taking our question. Just wondering if you can share anything more on what adjacent categories you see opportunities in for road. And then the Circana data showed MAS outperformed prestige in Q1. Just curious if you’re seeing any trade down or if you can kind of speak to that trend. And then just on the innovation pace you just commented on, do you plan to keep that kind of two times speed throughout the balance of the year? Thank you.

Tarang Amin

In terms of adjacent categories, we haven’t disclosed that yet. We still don’t own the business till it closes. We’ve had plenty of conversations with Haley and her team about some of the categories. You’re going to have to stay tuned for that. But there’s plenty of room with just 10 main projects for them to continue to expand Haley’s vision and we look forward to helping her. In terms of trade down we don’t have a great way of seeing trade down two different data sets between prestige and mas. What I can tell you is the secret of our success has less to do with trade down or taking share.

It’s more our ability bringing access to millions of consumers who previously couldn’t afford a particular segment. And that’s really what I think if I look back over a long arc of time, been our biggest driver of really being able to bring more consumers into a particular segment or franchise they previously didn’t have access to.

Mandy Fields

And then on the innovation. Sorry, I was just going to answer the last question on the pace of innovation. To Tarang’s point, we feel great about our pace of innovation. In fact, he talked about the melting lip balms. We launched our Sheer Fort blush as well. It’s completely sold out on our elfcosmetics.com, so we do have some really nice indicators that our fall innovation is resonating with our community.

operator

And your next question today will come from Mark Altschwager with Baird. Please go ahead.

Mark Altschwager

Good afternoon. Thank you for taking my question. Just first, with respect to the price increase that you announced, what has been the feedback so far from retail partners? And just anything you’re hearing that would suggest you’ll see pressure on volumes and then on international, you talked about the factors affecting the first quarter. You noted cycling outsized growth in international. I guess the year over year growth rate on a percentage basis last year was pretty consistent in Q1 and Q2. The year over year growth on a dollar basis was pretty consistent really in the first three quarters of last year.

So I guess I’m trying to, I’m wondering if, if the comments you’re giving for the first quarter, any reason to think why that wouldn’t carry forward for the next few quarters as we think about just cycling international growth. Thank you.

Tarang Amin

Hey Mark, in terms of your first question on pricing, we’ve heard from our retail partners that a number of different people are going to be taking pricing. I think they’re bracing for it across a number of different consumer categories. That’s why we feel great about our approach in terms of, of just taking it up a dollar, being transparent with our community.

As Mandy said, the response has been overwhelmingly positive, particularly our responsibility to make sure we’re having superior value for our community. And so I’d say, you know, so far no real pushback from a retailer standpoint. They understand. And I think we’re actually grateful that we’re not going all the way to the level that I think they would expect one to take. And so overall, those conversations have gone well and I think we’re going to come through it. We believe we’re going to come through it well, just given the approach.

Mandy Fields

And then on your question on international, Mark, you’re right that, you know, the outsized growth from an international perspective certainly will carry through the first half of the year as we think about what we launched and the number of markets that we opened and things like that. So, you know, I’m answering it in terms of of Q1 because that’s what folks have been asking about. But certainly we may see that trend continue through the first half for sure.

Tarang Amin

And I’d say, you know, you’re going to continue to hear us talk about additional new markets throughout the year crowd that we’re very excited about. We already have the number one position with ATOs in the Netherlands. This will further improve our position both in the Netherlands and Belgium. Particularly excited about our launch coming up in Poland. Rossman has a huge share of the Poland market. And so given our success with Rossman in Germany, you’re going to see that know you’ll continue to hear about other expansion markets throughout the year as we go through. And so we’ll take it one quarter at a time and update you on additional expansion.

operator

And your next question today will come from Bonnie Herzog with Goldman Sachs. Please go ahead.

Bonnie Herzog

All right, thank you. Hi everyone. I actually wanted to go back to Tara with a question. You know, I understand the situation is. Fluid, there’s a ton of uncertainty, but could you tell us in a worst case scenario if you believe you can still generate earnings growth this fiscal year, you know, could you talk about potential mitigation efforts and, you know, what you. Would consider doing in a worst case scenario? I guess I assume you would need. To take further pricing and then possibly shift production faster, you know, any other considerations. And then ultimately turing, I guess I’d. Like to understand your priority to drive margins and earnings growth versus, you know. Balancing market share in a potential worst case scenario. Thank you.

Mandy Fields

Hi, Bonnie. So on tariffs, there is a wide range of outcomes on the tariff front, which is why we did not provide guidance today. We have a mitigation playbook, a tariff playbook that we’ve talked about really consists of three things, pricing, supply chain optimization and business diversification, of which we’re making progress across all three of those. And you know, because there are a wide range of outcomes, you know, it’s really, you know, prudent for us not to just talk about a number of different scenarios, but really to focus on the one that we talked about on the call, which is the $50 million impact if tariffs were to stay at the 55% level.

Now, we know that’s only in place for the next 90 days. And so we are going to take. But until we have more certainty on that front, really are not diving into more detail on the impacts of mitigation and what a worst case should be. But rest assured, we’ve run a number of scenarios behind the scenes.

Tarang Amin

And then in terms of your question on margins versus market share, I think the beauty of ELF has been we’ve always had a very balanced plan. We’ve gained market share 25 consecutive quarters. We’re confident of our ability to continue to gain market share. And over the years we’ve made good margin progress. As Mandy said, the range of outcomes are too broad to really speculate on overall margins at this time. Once we have greater resolution on it, we’ll be able to provide that in our guidance.

operator

And your next question today will come from Rupesh Parikh with Oppenheimer. Please go ahead.

Rupesh Parikh

Good afternoon. Thanks for taking my question. So just going back to the acquisition, just curious on sourcing and then if you see any limitations or limiters to growth from a capacity perspective and then just, I guess just going back to tariffs as well. In your base case scenario, do you believe the pricing and other mitigation efforts fully offset at least, I think the $50 million exposure you guys disclosed just based on the current environment?

Tarang Amin

Yes. I’ll take the first question in terms of road, they have an excellent supply base and has been able to meet the demand they see.

We feel confident about continuing to meet that demand. They have suppliers both in Italy and South Korea, as I mentioned, with a ton of capacity. So we feel good about the plans, particularly as we prepare for Sephora here. So don’t see any concerns from an overall capacity standpoint or ability to source? We feel highly confident they have a very good, high quality set of suppliers.

Mandy Fields

And then from a tariff standpoint, Rupesh, we have not gone into the details on how much we’re mitigating of that 50 million doll annualized impact. Again, when we have more certainty on the tariff front, we’ll be back to you with what those impacts are.

operator

And your next question today will come from Jon Anderson with William Blair. Please go ahead.

Jon Anderson

Good afternoon, everybody. Thanks for the questions. I’ve got one for Mandy and one for Turing. Maybe Mandy, on the comments you made around gross margin when you were giving some color around fiscal 26, I think you mentioned that, that price and productivity will help offset tariff impact. Were you talking on a rate basis? So that we should expect kind of the legacy elf beauty gross margins to be relatively flat year over year and then if I could throw it in for Trang Trang.

I’m really curious as you kind of vetted Rhode, how you got comfortable and the whole team got comfortable that this is a brand with, you know, a lifestyle brand with a long sustainable growth trajectory, not a kind of a high flyer, you know, celebrity backed brand that may be a little bit more faddish. I just love to kind of understand your viewpoint on that aspect. Thanks both.

Mandy Fields

Hi John. So on gross margins, we actually are not giving any guidance on gross margin or gross profit from that matter and the impacts and mitigation efforts. All we called out was the 50 million on an annualized basis of the impact of tariffs at a 55% level. We do have, you know, we have pricing as we talked about our mitigation efforts, pricing, cost savings, concessions with our suppliers. But when we get to a point where we are having more certainty from a tariff standpoint, we will be able to come back around with gross margin impact.

Tarang Amin

And then John, in terms of the longevity of Rhode and what gives us confidence, I’d say there are a number of things. First and foremost, Haley. Haley is well beyond a celebrity. She’s one of the most thoughtful founders I’ve ever met. She has great instincts, a desirable aesthetic. She, and it’s not just me, Sephora is thoroughly impressed with her. Everyone who’s met her, the more time we spent with her, just how thoughtful she is in terms of the vision of that brand and where it can go gives us a lot of confidence. Second, it’s incredibly hard to scale a brand in our space.

You know, we cited the stat before. There are 1900 cosmetics and skincare brands shot by Nielsen alone. Only 26 of them have more than 100 million in retail sales. To be able to do $212 million DTC only in net sales is simply incredible and talks to the strength of the consumer conviction behind the brand. The third thing is the quality of the products. The innovation are outstanding. They have amongst the highest repeat rates of any brands, any brand we’ve seen in the category across skincare, color, cosmetics, etc. So there’s real depth of consumer conviction in this brand.

It’s still young, so there’s quite a few more consumers that we can attract to the brand. But the core metrics that we look at in terms of what is the equity of the brand? How does it resonate? What’s the level of community engagement? What is the quality of the products and how are they resonating? What’s the repeat rates there? We feel great about all of those things and see it as a brand for the long term and to help Hayley build it up.

operator

That concludes our question and answer session. I would like to turn the conference back over to Tarang Amin, Chairman and CEO for any closing remarks.

Tarang Amin

Well, thank you for joining us today. I’m so proud of the incredible team at Elf Beauty and at Rhode for delivering another year of industry leading results. Definitely thrilled to welcome Rhode to the Elf Beauty family. We look forward to seeing some of you at some of our upcoming investor meetings and speaking to you in August when we’ll discuss our first quarter results. Thank you and be well.

operator

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