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

Management highlights

- **Portfolio and Growth Track Record** * Delivered 7 consecutive years of industry-leading results, and 29 consecutive quarters of net sales growth, joining an elite group of only 6 public consumer companies out of 546 to achieve this streak with over 20% quarterly sales growth. * Has 4 brands surpassing $200 million in annual retail sales, a milestone only 14 other brands out of 1,800 tracked by Nielsen have achieved. * Acquisitions have meaningfully diversified the business over 3 years: skincare increased from 9% to 23% of global consumption, and manufacturing outside of China increased from 1% to over 45% of total production. The company transferred the underperforming Keys Soulcare brand back to founder Alicia Keys to focus resources on higher-growth core brands. - **e.l.f. Brand Growth Challenges and Corrective Actions** * e.l.f. brand global consumption growth moderated to low single digits in the 12 weeks ending Q4, down from high single digits in full fiscal 26, due to slower-than-expected uptake of Spring 26 innovation that failed to deliver the historic halo lift to core products. * Four key corrective actions are underway: (1) Value: Tested targeted price cuts to reverse post-price-increase unit declines; a cut to Halo Glow Skin Tint from $18 to $14 delivered 38% unit lift on Amazon and 36% across all retailers, and the company is exploring additional targeted price adjustments. (2) Innovation: Fast-tracking unplanned new innovation to launch before the 2027 holiday season. (3) International: Focus on growing share in core large markets (UK, Canada, Germany) with increased marketing activation, where early green shoots of improvement have already emerged. (4) Leadership: New executive appointments to sharpen focus on e.l.f. brand growth, including a new President of e.l.f. Brands, Chief Marketing Officer, and Chief Technology and AI Officer. - **Strategic Expansion Opportunities** * **Brands & Marketing**: e.l.f. has grown unaided awareness from 13% in 2020 to 45% in 2025, and is the most purchased beauty brand among Gen Z, Gen Alpha, and millennials, with significant room to grow awareness for Naturium and Rhode. Both e.l.f. Cosmetics and Rhode successfully activated at the 2026 Coachella festival, driving outsized social conversation and consumer engagement. * **Categories**: Skincare is a core focus, with three of the fastest growing skincare brands in the portfolio (Rhode, Naturium, e.l.f. SKIN). Limited entry into adjacent categories (fragrance via H&M partnership, hair care via Power Grip styling collection) delivered strong results: the hair care collection sold out in 48 hours, with 65% new-to-e.l.f. consumers, confirming the brand's elasticity into new categories. * **Geographies**: International currently contributes only ~20% of total net sales, compared to over 70% for legacy peer brands, creating massive long-term expansion room. 50% of e.l.f. social followers and 74% of Rhode social followers are based outside the US. Rhode's recent launch with Mecca in Australia/New Zealand was the biggest launch in Mecca history, and Rhode will launch across 19 European countries with Sephora in September 2026.

Guidance

- Full fiscal 27 net sales growth is expected to be 12% to 14% year over year. Annualization of the Rhode acquisition is expected to contribute approximately 9 percentage points of this growth, bringing organic net sales growth to 4% to 5% for the full year. - Adjusted EBITDA is guided to $379 million to $385 million, representing 13% to 15% year over year growth, with adjusted EBITDA margins expanding 20 basis points to ~21%. Adjusted EPS is guided to $3.27 to $3.32 per diluted share, with an adjusted tax rate of 25% to 26%. - Quarterly cadence expectations: Q1 organic net sales are expected to decline high single digits year over year, due to lapping a 2026 Q1 pull-forward of shipments ahead of the SAP ERP cutover. Q2 organic growth is expected to rebound to mid-teens, as the company laps the 2026 Q2 temporary shipping shutdown, and Rhode rolls into organic growth calculations. First half organic growth is expected to land within the full year 4% to 5% range. - Gross margin is expected to be approximately flat year over year: benefits from lower 35% average tariff rates (down from 55% in fiscal 26) and prior price increases are expected to be offset by product mix shift as Rhode grows its retail penetration. - Marketing and digital spend is expected to be 23% to 25% of net sales, delivering overall SG&A leverage compared to fiscal 26. - Guidance does not include the impact of potential incremental $15 to $20 million in cost headwinds from sustained $100 per barrel oil prices, nor the potential $58.5 million in IEPA tariff refunds the company is pursuing, as both factors remain fluid. Any tariff refunds received would be invested in value initiatives and unit growth acceleration, and these upside actions are not baked into the base guidance.

Segment performance

This section covers global retail net sales performance for each brand segment in fiscal 26: - **e.l.f. Cosmetics**: ~$1.8 billion in global retail sales. Gained 115 basis points of US market share in fiscal 26, marking 29 consecutive quarters of share gains. Holds 13% national share in US mass color cosmetics, and 21% share at long-time partner Target. This segment contributed approximately 70% of total global consumption at the end of fiscal 26. - **e.l.f. SKIN**: ~$200 million in global retail sales. Holds ~2% share of the US mass skin category, up from #25 to #11 in US mask care over 5 years. - **Naturium**: Nearly $250 million in global retail sales, double pre-acquisition levels. It was the fastest growing brand among the top 50 US skincare brands in Q4 fiscal 26. - **Rhode**: Annualized fiscal 26 net sales of ~$390 million, with over $500 million in annualized global retail sales, growing net sales over 80% year over year. Achieved the #1 beauty brand ranking at Sephora North America. Non-e.l.f. brands (including Naturium, Rhode, e.l.f. SKIN) collectively make up 30% of total global consumption as of fiscal 26. For consolidated company performance: - Q4 fiscal 26: Total net sales grew 35% year over year; the Rhode acquisition contributed 34 percentage points of this growth. Organic net sales (excluding Rhode) grew 1% year over year. US net sales grew 26%, international net sales grew 75%. Q4 gross margin was 73%, up 140 basis points year over year. Adjusted EBITDA was $59 million, down from $81 million year over year. - Full fiscal 26: Total net sales grew 25% year over year, adjusted EBITDA grew 13% to ~$338 million, with 20% adjusted EBITDA margins. The company faced an average tariff rate of 55% in fiscal 26, up from 25% in fiscal 25.

Risks & headwinds

- Core e.l.f. brand growth has slowed more than expected in early fiscal 27, driven by underperformance of Spring 26 innovation that failed to deliver the historic halo lift to core products, and post-price-increase unit declines amid continued consumer sensitivity to pricing. - Sustained oil prices at ~$100 per barrel could create $15 to $20 million in incremental commodity and transportation cost headwinds in fiscal 27, which are not included in base guidance. - The outcome of the $58.5 million IEPA tariff refund claim remains uncertain, with no impact included in current guidance. - Expansion into new international markets (such as the upcoming Rhode launch across 19 European countries) carries execution risk, and results are not guaranteed, leading management to take a conservative approach to guidance upside from these launches. - The company is still optimizing newly expanded retail shelf space at partners like Ulta, which takes multiple quarters to deliver full productivity gains.

Analyst Q&A

• Q: Why did spring innovation miss expectations, what steps are being taken for fall, and how big is the adjacent category opportunity? /

  A: Spring innovation was still strong relative to the overall category, with two top 10 launches this year, but missed the company's internal expectations for offtake and core product lift. Fall innovation launching in one month is tracking well, and the company is fast-tracking additional unplanned innovation to launch before the holidays, drawing on its agile community-led innovation model. The company has tested successful entries into fragrance and hair care adjacencies, but will prioritize the large existing opportunities in color cosmetics and skincare before expanding further into new categories selectively. (283 characters)

• Q: Why is Rhode's fiscal 27 growth guidance lower than current growth rates even with only 20% Sephora global penetration, and what tariff assumptions are built into guidance? /

  A: Management remains very bullish on Rhode's potential, with the upcoming 19-country European Sephora launch, but takes a conservative approach to guidance, preferring to under-promise and over-deliver as the brand expands. The current guidance embeds the existing visible pipeline, with upside for stronger-than-expected performance, and the 9 percentage point growth contribution from annualizing Rhode aligns with the brand's current momentum. Guidance assumes a 35% average tariff rate for fiscal 27, down from 55% in fiscal 26, and does not include any impact from the expected $58.5 million tariff refund, which will be invested in value and unit growth if received. (412 characters)

• Q: Is recent e.l.f. brand pressure from pricing or maturity, and what is the margin impact of planned price cuts? /

  A: The successful test of the Halo Glow price cut delivered a 40% immediate unit lift across all tested channels, confirming that pricing adjustment is a meaningful lever to reverse post-increase unit declines. There is still massive white space for e.l.f. growth in the US: national mass color cosmetics share is 13%, compared to 21% at long-time partner Target, giving a clear roadmap for growth as the company expands share across other retail partners. The expected IEPA tariff refund will be used to offset any margin impact from targeted price adjustments, so the cuts will not pressure overall profitability. (367 characters)

• Q: What is the long-term expected growth trajectory for Rhode, and how much whitespace remains in the US? /

  A: Rhode delivered 80% year over year net sales growth in fiscal 26, and management expects continued very strong growth, though no specific long-term target has been disclosed. In the US, Rhode is only allocated one bay of shelf space at Sephora, compared to 2-3 bays for competing brands, making it dramatically under-spaced relative to its productivity, with significant room for expansion. The biggest operational constraint on US growth has been keeping up with consumer demand and keeping shelves replenished, confirming underlying strength. A September 2026 launch across 19 European countries with Sephora adds another large growth driver for coming years. (391 characters)