e.l.f. Beauty, Inc. Q2 FY2025 earnings call

• Q2 marked 23rd consecutive quarter of net sales growth and market share gains. Net sales grew 40%, adjusted EBITDA was $69 million, and U.S. market share increased by 195 basis points. • International net sales grew 91% in Q2, with international driving 21% of net sales (up from 16% a year ago). • Digital consumption trends were up nearly 40% year-over-year, with Beauty Squad Loyalty Program having 5.3 million members. • Expanding distribution, including launching in a subset of Dollar General Stores in November. • Five areas of advantage: passionate team, value proposition, powerhouse innovation, disruptive marketing, and productivity model.

In Q2, e.l.f. Beauty grew net sales 40%, delivering $69 million in adjusted EBITDA. International net sales grew 91% in Q2, driving 21% of net sales (up from 16% a year ago). Digital channels drove 20% of net sales in Q2, up from 17% a year ago. U.S. tracked channel trends were slightly below expectations but still saw growth, with e.l.f. gaining 195 basis points of market share.

• Raised full-year net sales growth outlook to 28%-30% from 25%-27% previously. • Second half net sales growth outlook is 16%-20%. • Adjusted EBITDA outlook for full year is $304 million to $308 million, up from $297 million to $301 million previously. • Gross margin outlook improved to up approximately 30 basis points year-over-year.

• Potential impact of tariffs, though management has levers to offset. • Category volatility, as seen with a 5% pullback in Q2. • ERP transition risks, with focus on minimizing execution risk through preparation and training.

Q: As makeup or mask cosmetics has slowed, have you guys reconsidered marketing spend as a percentage of sales? And any info on drug channel?

A: Tarang Amin said they remain bullish on the category, feel good about normalizing marketing spend in the 24%-26% range, and e.l.f.'s business is different from legacy mass brands in drug, with expansion ongoing.

Q: Can you talk about key drivers of market share gains, key categories, retailers, and adjusting strategy?

A: Tarang Amin cited value proposition, power of innovation (six of top 10 new item launches in color cosmetics), and disruptive marketing engine as key drivers, with significant opportunity across retail customers and categories.

Q: Question on tariffs and how dealt with?

A: Mandy Fields said they had levers like cost savings, FX, supplier concessions, and diversification, with international growth helping offset tariffs; Tarang added tariffs will have no impact in FY2025.

Q: Shift in guidance approach prioritizing consistency of delivery?

A: Mandy Fields said guidance strategy remains consistent, anchoring on annual guidance and taking it quarter at a time, with magnitude of beats and raises smaller as company grows.

Q: Follow-up on Dollar General, timing, and brand equity risk?

A: Tarang Amin said distribution plans started over a year ago, e.l.f. is elastic and can play in value and prestige, with strong presentation in Sephora Mexico; excited about serving underserved consumers in rural areas.

Q: Question on sell-in, sell-out, and Dollar General doors?

A: Mandy Fields said no issues seen on sell-in/sell-out, Tarang Amin said Dollar General launch is a subset of stores in November, incremental and complementary.