e.l.f. Beauty, Inc. Q4 FY2025 earnings call

• Fiscal 2025 saw net sales grow 28% and adjusted EBITDA by 26%, with 25 consecutive quarters of net sales growth and market share gains. Gained share globally in key geographies.
• Tariff mitigation efforts include pricing (plan to take $1 increase globally effective August 1), supply chain optimization (diversifying supply chain from China, pursuing cost savings), and business diversification (international sales growing 60% in fiscal 2025, plan to launch in new markets).
• Innovation highlights: Glow Reviver Melting Lip Balms launched to strong response, Mini-Trick Pony campaign fueling Halo Glow franchise momentum.
• Acquisition of Rhode: A high-growth beauty brand with $212M net sales in 12 months, to be run out of Los Angeles, with focus on Sephora rollout and global expansion.

In fiscal 2025, e.l.f. Beauty grew net sales 28% and adjusted EBITDA by 26%. In Q4, net sales grew 4% year-over-year, with international sales growing 19% and U.S. sales growing 1% year-over-year. Higher unit volume contributed approximately 8 points to Q4 growth, partially offset by a 4-point decline from price and product mix. Q4 gross margin was 71%, up approximately 50 basis points compared to prior year. Adjusted EBITDA in Q4 was $81 million, up 99% versus last year. e.l.f. is the number one brand in the U.S. by unit share in cosmetics, holds two of the fastest-growing mass skincare brands with e.l.f. SKIN and Naturium, and grew share in key international markets like the UK, Canada, and executed a big launch in Germany with Rossmann.

• Not providing fiscal 2026 outlook due to broad range of tariff outcomes. In Q1, seeing better consumption trends than Q4, with marketing and digital spend planned at 24%-26% of net sales. Gross margin expected to be offset by incremental tariff costs, with some tariff headwind impacting Q1.
• Plan to maintain marketing and digital spend in line with fiscal 2025, with non-marketing SG&A expected to grow as they annualize team and infrastructure investments.

• Tariffs pose a significant risk, with an estimated $50M annualized gross impact to COGS if tariffs remain at 55% level, and much higher impact if tariffs go back to 145% level. Broad range of outcomes on tariffs creates uncertainty.

Q: Just on the quarter, realizing not giving fiscal 2026 outlook, but any color on Q1 performance? Also on Dollar General and Rhode's operation?

A: Mandy Fields said feeling great about Q1 business, building share, and Tarang Amin said Dollar General is doing extremely well, and Rhode will continue to be run out of Los Angeles with focus on Sephora rollout.

Q: On tariffs, when will the impact start to be felt and about Naturium's shelf-space gains?

A: Mandy Fields said tariff impact will start in Q1, and Tarang Amin said Naturium is doing well with expansion in Ulta Beauty and Boots.

Q: On pricing in August, how to think about incremental sales lift and timing?

A: Mandy Fields said pricing effective August 1st, across all brands, with 90-day window requirement for retailers, and Tarang Amin said it's an opportunity to build market share while preserving value proposition.

Q: On adjacent categories for Rhode and trade down trend?

A: Tarang Amin said adjacent categories not disclosed yet, and Mandy Fields said mass outperformed prestige in Q1 but e.l.f.'s success is about bringing access to new consumers.

Q: On worst-case scenario for tariffs and priority to drive margins vs market share?

A: Mandy Fields said due to broad tariff outcomes, not providing detailed worst-case scenarios, and Tarang Amin said e.l.f. has a balanced plan to gain market share and improve margins over time.