e.l.f. Beauty, Inc. (ELF) Earnings

Management highlights

- Overall Portfolio & Diversification Progress - e.l.f. Beauty achieved its 30th consecutive quarter of net sales growth, averaging 20%+ net sales growth per quarter over 7+ years, placing it among the top 1% of public consumer companies for this performance metric - The company has four brands that have surpassed $200 million in retail sales, out of only 14 such brands among 1,800 tracked by Nielsen - Business diversification: non-e.l.f. sales grew from <1% to over 30% of total sales in three years; skincare grew from 10% to nearly 25% of total sales; digital penetration grew from 18% to 30%; supply chain diversification grew non-China production from 1% to ~60% by the end of fiscal 27, improving robustness while maintaining quality, cost and speed targets - e.l.f. Brand Strategic Updates - Completed a broad price discovery test: 90% of e.l.f. SKUs were confirmed to be appropriately priced, while 10% of SKUs will permanently stay at lower prices to drive unit growth; remaining SKUs will return to pre-test prices - Fall 2026 innovation outperformed expectations, with e.l.f. holding four of the top ten new mass cosmetics launches by dollar and five of the top ten by unit; additional community-requested innovation is scheduled to launch before the holidays - Disruptive marketing has grown unaided awareness of e.l.f. Cosmetics from 13% to 45%, making it the most purchased brand among Gen Z, Gen Alpha, and Millennials, reaching 1 in 3 U.S. women, leaving 2/3 of the market untapped - International expansion: doubled international penetration to 21% of net sales over five years; announced upcoming expansion in Boots (UK) and launch with Sephora in Brazil (the world's third-largest cosmetics market), building on its #1 cosmetics ranking at Sephora Mexico - Category adjacencies: launched e.l.f. Hair, a six-product assortment priced at $10 or less, in a $17 billion U.S. hair care category that grows faster than cosmetics and skincare; early results show nearly half of e.l.f. Hair purchasers are new to the e.l.f. brand - Other Brand Operational Updates - Notorium: launched a new brand campaign for its best-selling Glow Getter collection, achieved the #1 ranking in body at Sephora Australia/New Zealand, and will launch with Sephora Canada and Mexico this fall - RODE: achieved the #1 beauty brand ranking at Sephora North America/UK and Mecca Australia/New Zealand after acquisition; will launch across 19 European countries with Sephora this September; only currently present in <20% of global Sephora stores, leaving significant room for expansion

Guidance

- Management raised full fiscal 27 net sales growth guidance to 18-20% from 12-14% previously, driven by strong performance across all portfolio brands - Organic net sales growth guidance was raised to 6-7% from 4-5% previously, with 10-12% organic growth expected for the balance of the fiscal year, up from 7-9% prior guidance - RODE is now expected to contribute 13 percentage points to full-year net sales growth, up from 9 percentage points previously - Adjusted EBITDA guidance was raised to $401-$407 million from $379-$385 million previously, representing 20-21% year-over-year growth, up from 13-15% prior guidance - Adjusted net income guidance was raised to $212-$215 million from $198-$201 million previously, and adjusted diluted EPS guidance was raised to $3.50-$3.55 from $3.27-$3.32 previously - Full-year gross margin is now expected to be up ~200 basis points year-over-year, compared to prior guidance of flat gross margin; excluding the $50 million tariff refund, full-year gross margin guidance remains unchanged at flat year-over-year - Q2 fiscal 27 total net sales growth is expected to be in the mid-30s, outperforming prior guidance on both a total and organic basis - The full $50 million of Q1 tariff refunds will be fully reinvested in the business across Q2-Q4, resulting in a net zero impact to full-year adjusted EBITDA; marketing spend will move to the higher end of the 23-25% of net sales range after Q1 underspend

Segment performance

Overall company Q1 fiscal 27 net sales grew 36% year-over-year to an undisclosed total, with 30 consecutive quarters of net sales growth. RODE contributed approximately $160 million in net sales in the quarter, accounting for a large portion of total top-line growth, and is expected to contribute 13 percentage points to full-year fiscal 27 net sales growth. U.S. net sales grew 29% year-over-year, while international net sales grew 61%, representing 21% of total company net sales. By brand portfolio: e.l.f. Cosmetics holds the #1 rank in unit share and #2 rank in dollar share in its category; e.l.f. Skin, recently launched into Dollar General, has grown to the #11 mass skincare brand in the U.S. with only 2% category share; Notorium is the fastest-growing skincare brand among the top 50, with successful expansion in Australia and New Zealand; RODE, acquired one year prior, delivered a record $27 million in direct-to-consumer sales in a single day for its summer launch, with 70% of sales from repeat consumers. Gross margin for the quarter was 83%, up 1400 basis points year-over-year, with $50 million in IEPA tariff refunds accounting for 1050 basis points of the increase; adjusted gross margin excluding the tariff benefit was still up 350 basis points. Adjusted SG&A as a percentage of sales was 54%, up from 50% year-over-year, driven by increased investments in team, infrastructure, merchandising and distribution. Adjusted EBITDA was $168 million, up 93% year-over-year, with adjusted EBITDA up 36% excluding the tariff refund benefit.

Risks & headwinds

There were no explicit material risks or operational failures discussed during the earnings call. Management framed all ongoing strategic initiatives as low-risk and on track to deliver expected results, and noted that current cost pressures, including higher freight costs, are already baked into the updated guidance.

Analyst Q&A

• Q: What were the outcomes of e.l.f.'s recent pricing test, what synergies exist between RODE and e.l.f. Beauty, and what is the pace of RODE's geographic expansion? /

  A: The pricing test found 90% of e.l.f. SKUs were appropriately priced, while 10% of SKUs will stay at permanently lower prices to drive significant unit momentum. Management expects gross profit dollars on this 10% of SKUs to grow over time despite lower prices, due to higher volume. / A: RODE has brought exceptional growth and new consumers to e.l.f. Beauty, aligns with e.l.f.'s culture and innovation-focused approach, and has delivered unprecedented results including $27 million in one-day DTC sales. e.l.f. has provided distribution and execution capabilities to accelerate RODE's expansion, doubled the size of the RODE team, and is investing incremental marketing to grow RODE's still-low unaided awareness. RODE will next expand to 19 European countries via Sephora, with significant white space for future growth as it is only in 20% of global Sephora stores.

• Q: What is the channel and shelf strategy for the new e.l.f. Hair launch, and what is the long-term expansion roadmap? /

  A: e.l.f. Hair will be placed in hair care aisles (not cosmetics aisles), with strong dedicated placement at launch partner Target. It is exclusive to Target for all of fiscal 27, following the same go-to-market model that was used to successfully launch e.l.f. Skin. The brand will be nurtured at Target before expanding to additional channels in future years, similar to e.l.f. Skin's expansion trajectory.

• Q: What drove the decision to raise full-year guidance by the current amount, and what is the long-term positioning for the new e.l.f. Hair category? /

  A: The guidance raise reflects core business momentum, not just the one-time Q1 tariff refund. The full $50 million tariff refund will be reinvested across Q2-Q4, so the underlying adjusted EBITDA guidance increase is driven entirely by core business strength, resulting in 21% projected full-year adjusted EBITDA growth. / A: e.l.f. Hair is a high-potential strategic adjacency into a $17 billion U.S. category that grows faster than cosmetics and skincare, with 75% purchase intent from e.l.f.'s existing community. It follows e.l.f.'s proven model of prestige-inspired products priced at extreme value, and early consumer reception has been very positive and ahead of internal expectations.

• Q: What drove the upward revision to organic sales guidance, and is hair care contribution included in the current organic outlook? /

  A: The higher organic sales outlook reflects improved trends across the entire brand portfolio, particularly stronger-than-expected momentum for e.l.f. following pricing actions and better-than-forecast fall innovation performance, alongside continued strength from Notorium and RODE ahead of RODE's upcoming European launch. All brands are expected to grow for the remainder of the fiscal year. e.l.f. Hair's early contribution is included in the current organic sales outlook.