Q1 2025 elf Beauty Inc Earnings Call

[inaudible] let's open, let's open,

Kristina Katten, Mandy Fields, Unknown Executive

Casey Katten: Thank you for joining us today to discuss e.l.f. Beauty's first quarter fiscal 25 results. I'm Casey Katten, Vice President of Corporate Development and Investor Relations. With me today are Tarang Amin, Chairman and Chief Executive Officer, and Mandy Fields, Senior Vice President and Chief Financial Officer. We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.lfbud.com. Since many of our remarks today contain forward-looking statements, please refer to our earnings release and reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements.

Kasey Katten: Thank you for joining us today to discuss e.l.f. Beauty's first quarter fiscal 25 results. I'm Kasey Katten, Vice President of Corporate Development and Investor Relations.

Speaker Change: With me today are Tarang Amin, Chairman and Chief Executive Officer, and Mandy Fields, Senior Vice President and Chief Financial Officer.

Kasey Katten: We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.elfbeauty.com.

Speaker Change: Since many of our remarks today contain forward-looking statements, please refer to our earnings release and reports filed with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements.

Casey Katten: In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliations of the differences between the non-GAAP presentation and the most directly comparable GAAP measure. With that, I will turn the webcast over to Tarang.

Speaker Change: In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliations of the differences between the non-GAAP presentation and the most directly comparable GAAP measure.

Speaker Change: With that, let me turn the webcast over to Tarang.

Tarang Amin: Thank you, Casey, and good afternoon, everyone. Today, we will discuss the drivers of our first quarter results and our raised outlook for fiscal 25.

Tarang Amin: I want to start by recognizing the e.l.f. Beauty team.

Speaker Change: We're off to a strong start this fiscal year, delivering Q1 results ahead of our expectations. In Q1, we grew net sales 50%, increased gross margin by approximately 80 basis points, and delivered $77 million in adjusted EBITDA.

Tarang Amin: Q1 marked our 22nd consecutive quarter of both net sales growth and market share gains putting e.l.f. Beauty in a rarefied group of high growth companies.

Tarang Amin: Beauty is in a rarefied group of high-growth companies. We're one of only five public consumer companies out of 274 that have grown for 22 straight quarters and average at least 20% sales growth per quarter. We've continued to prioritize three areas with significant runway for growth.

Tarang Amin: We are one of only five public consumer companies out of 274 that has grown for 22 straight quarters and averaged at least 20% sales growth per quarter.

Tarang Amin: We've continued to prioritize three areas with significant runway for growth, color cosmetics, skin care, and international. Let me update you on our progress in Q1.

Tarang Amin: Skincare and International, Let me update you on our progress in Q1. In color cosmetics, we continue to significantly outperform the category. In Q1, e.l.f.

Tarang Amin: In color cosmetics, we continue to significantly outperform the category. In Q1, e.l.f. Cosmetics grew 26% in tracked channels as compared to a category that was down 1%, increasing our market share by 260 basis points.

Tarang Amin: Cosmetics grew 26% in tracked channels as compared to a category that was down 1%, increasing our market share by 260 basis points. Nationally, Elf is the number two mass brand on a dollar basis with approximately 12% share, more than double the level we had three years ago.

Tarang Amin: Nationally, e.l.f. is the number two mass brand on a dollar basis with approximately 12% share, more than double the level we had three years ago.

Tarang Amin: As great as this year's growth has been, we see an opportunity to double our market share over the next few years. In Target, our longest-standing national retail customer, we've been the number one brand for six consecutive quarters, with our share increasing from nearly 13% to over 20% today. We're focused on replicating our success at Target across other key retailers and believe we're making great progress towards that ambition. In skin care, we also continue to meaningfully outperform the category. In Q1, L skin grew 45% in track channels, 32 times category growth of 1.4%.

Tarang Amin: As great as this share growth has been, we see an opportunity to double our market share over the next few years.

Tarang Amin: In Target, our longest-standing national retail customer, we've been the number one brand for six consecutive quarters, with our share increasing from nearly 13% to over 20% today.

Tarang Amin: We're focused on replicating our success at Target across other key retailers and believe we're making great progress towards that ambition.

Tarang Amin: In skin care, we also continue to meaningfully outperform the category. In Q1, e.l.f. skin grew 45% of tract channels, 32 times category growth of 1.4%.

Tarang Amin: We grew our share by 60 basis points, driving e.l.f. Skin to be a top 10 brand for the first time. We achieved the number 9 rank as compared to the number 13 rank a year ago. Health Skin Today holds about a 2% share and has significant runway with a number one brand holding a 14% share. With the acquisition of Natarium last October, we now have two of the fastest growing mass skincare brands that are complementary in their price points, positioning, and audiences.

Tarang Amin: We grew our share 60 basis points, driving Elfskin to be a top 10 brand for the first time. We achieved the number 9 rank as compared to the number 13 rank a year ago.

Tarang Amin: e.l.f. Skin today holds about a 2% share and has significant runway with the number one brand holding a 14% share.

Tarang Amin: With the acquisition of Notorium last October , we now have two of the fastest growing mass skincare brands that are complementary in their price points, positioning, and audiences. Notorium contributed approximately 16 points to our net sales growth in Q1.

Tarang Amin: Natarium contributed approximately 16 points to earn that sales growth in Q1. Turning to international, our net sales grew 91% in Q1, fueled by growth in our existing markets as well as our expansion into new markets. Our international expansion strategy is anchored in partnering with leading beauty retailers to bring our brands to life in each country we pursue. We continue to see significant runway to grow our footprint in our largest existing market, e.l.f.

Tarang Amin: Turning to international, our net sales grew 91% in Q1, fueled by growth in our existing markets as well as our expansion into new markets.

Tarang Amin: Our international expansion strategy is anchored in partnering with leading beauty retailers to bring our brands to life in each country we pursue.

Tarang Amin: We continue to see significant runway to grow our footprint in our largest existing markets. The UK, where we are now the number four brand as compared to the number eight a year ago, and in Canada, we're now the number four brand as compared to number six a year ago.

Tarang Amin: The UK, where we're now the number four brand as compared to the number eight a year ago. And in Canada, we're now the number four brand as compared to number six a year ago. As we look to new markets, we've seen success with our engagement model across social platforms, driving Consumer Demand well before we enter a particular country.

Tarang Amin: As we look to new markets, we've seen success with our engagement model across social platforms, driving consumer demand well before we enter a particular country.

Tarang Amin: We're pleased that we've maintained our number one brand rankings since launch; we're both active from the Netherlands and do gloss in Italy. International drove 16% of our total sales in Q1, up from 13% a year ago, and with significant runway to grow as compared to our global peers at over 70% on average. Let me put the strength of our results in the context of the broader beauty industry. While beauty has comparatively low barriers of entry, very few brands have been able to scale. Of the over 1,900 cosmetics and skincare brands tracked by Nielsen, only 61 have surpassed $25 million in annual retail sales. Only 26 have surpassed $100 million in retail sales, and e.l.f.

Tarang Amin: We're pleased that we've maintained our number one brand rankings since launch, with both active and the Netherlands and due gloss in Italy.

Tarang Amin: International drove 16% of our total sales in Q1, up from 13% a year ago, and with significant runway to grow as compared to our global peers at over 70% on average.

Tarang Amin: Let me put the strength of our results in the context of the broader beauty industry. While beauty has comparatively low barriers of entry, very few brands have been able to scale.

Tarang Amin: Of the over 1,900 cosmetics and skincare brands tracked by Nielsen, only 61 have surpassed $25 million in annual retail sales.

Tarang Amin: only 26 have surpassed a hundred million dollar retail sales and e.l.f. is one of only five brands to achieve over 700 million in retail sales

Tarang Amin: is one of only five brands to achieve over 700 million in retail sales, e.l.f. has been one of the few brands able to scale through our five unique areas of advantage that form our competitive moat. Let me take a moment to walk you through each.

Tarang Amin: e.l.f. has been one of the few brands able to scale through our five unique areas of advantage that form our competitive moat. Let me take a moment to walk you through each. Our first area of advantage is our passionate team of owners and high-performance team culture.

Tarang Amin: Our first area of advantage is our passionate team of owners and high-performance team culture. We've got just over 500 employees and have intentionally sought out people with diverse experiences who are humble and hungry and thrive at e.l.f.'s speed.

Tarang Amin: We have just over 500 employees and have intentionally sought out people with diverse experiences who are humble and hungry and thrive at e.l.f. speed.

Tarang Amin: We believe there are really only public consumer companies that grant every employee equity every year. This aligns our employees' interests with our shareholders and provides wealth creation opportunities across the entire team. Since our IPO, excluding our executive officers, we've granted approximately $180 million in equity in a stock that has gone up more than tenfold. Our unique one team, one dream consultation model and high performance team culture have led to exceptionally high employee engagement of 90 percent, 18 points above the consumer industry benchmark.

Tarang Amin: We believe we are the only public consumer company that grants every employee equity every year. This aligns our employees' interests with that of our shareholders and provides wealth creation opportunities across the entire team.

Tarang Amin: Since our IPO, excluding our executive officers, we've granted approximately $180 million in equity in a stock that has gone up more than tenfold.

Tarang Amin: Our unique one team, one dream consultation model and high performance team culture has led to exceptionally high employee engagement of 90%, 18 points above the consumer industry benchmark.

Tarang Amin: The Strength, Curiosity, and Resilience of our team has allowed us to execute at an exceptionally high level for the last five plus years. The second area of advantage is our value proposition. The average price point for e.l.f. is about $6.50 today, as compared to nearly $9.50 for legacy mask cosmetics brands and over $20 for prestige brands.

Tarang Amin: The strength, curiosity and resilience of our team has allowed us to execute at an exceptionally high level of the last five plus years. The second area of advantage is our value proposition.

Speaker Change: The average price point for e.l.f. is about $6.50 today, as compared to nearly $9.50 for legacy mask cosmetics brands, and over $20 for prestige brands.

Tarang Amin: While there are other brands with low price points, our real advantage is the ability to deliver prestige quality at those price points. We have a unique asset-like supply chain model that delivers the best combination of quality, cost, and speed in our industry. Our quality scores have gone up every year over the past five years.

Speaker Change: While there are other brands with low price points, our real advantage is the ability to deliver prestige quality at those price points.

Speaker Change: We have a unique asset light supply chain model that delivers the best combination of quality, cost, and speed in our industry. Our quality scores have gone up every year over the past five years.

Tarang Amin: We have a closed feedback loop that allows us to make ongoing improvements across our portfolio. We're hearing from consumers that we're not only delivering an incredible price point but also delivering quality that is often better than prestige. Our value proposition is evidenced by our strong unit growth. Elf was again the only top five cosmetic brand to grow units in Q1. Our third area of advantage is our powerhouse innovation. Our innovation approach is focused on building franchises behind our holy grail.

Speaker Change: We have a closed feedback loop that allows us to make ongoing improvements across our portfolio.

Tarang Amin: We're hearing from consumers that we're not only delivering an incredible price point, but also deliver quality that is often better than prestige.

Tarang Amin: Our value proposition is evidenced in our strong unit growth. e.l.f. was again the only top five cosmetics brand to grow units in Q1.

Tarang Amin: Our third area of advantage is our powerhouse innovation.

Tarang Amin: Our innovation approach is focused on building franchises behind our holy grails, taking inspiration from our community and the best products in prestige, adding our e.l.f. twist, and bringing them to market at an extraordinary value.

Tarang Amin: Taking inspiration from our community and the best products in prestige, adding our elf twist, and bringing them to market at extraordinary value. This Holy Grail innovation approach has built category leadership over time. Five years ago, Elf had the number one or two positions across eight segments of the color cosmetics category. Today, Elf has the number one or two positions across 18 segments, which collectively make up over 80% of Elf cosmetic sales.

Tarang Amin: This holy grail innovation approach is built category leadership over time.

Tarang Amin: Five years ago, e.l.f. had the number one or two position across eight segments of the color cosmetics category.

Alpha: Today, e.l.f. has a number one or two position across 18 segments, which collectively make up over 80% of e.l.f. cosmetic sales.

Tarang Amin: We continue to deliver strong sales growth and share gains across these segments. We're also innovating in the industry's top segments where we under-index on share, like foundations. For context, as compared to the 12% share we have across cosmetics, we have less than 2% share in foundation, a $675 million category in the U.S. In Q1, we launch our Soft Glam Satin Foundation, priced at an incredible value of $8 compared to a prestige item at $39.

Tarang Amin: We continue to deliver strong sales growth and share gains across these segments.

Tarang Amin: We're also innovating in the industry's top segments where we under-index on share, like foundation.

Tarang Amin: For context, as compared to the 12% share we have across cosmetics, we have less than 2% share in foundation, a $675 million category in the U.S.

Tarang Amin: In Q1, we launch our Soft Glam Satin Foundation, priced at an incredible value of $8 compared to a prestige item at $39.

Unknown Speaker: When was the last time we saw a good foundation under $10? In this economy where everybody's raising prices, I feel like it's been ages since I've seen a foundation under 10 bucks. This is the new E.L.F.

Speaker Change: When was the last time we saw a good foundation under $10 in this economy where everybody's raising prices? I feel like it's been ages since I've seen a foundation under $10. This is the new e.l.f. Soft Glam Satin Foundation. I feel like it's all everybody's been talking about and just saying that they absolutely love it.

Unknown Speaker: I feel like it's all everybody's been talking about and just saying that they absolutely love it. I just put it on, and I already love it.

Tarang Amin: The Soft Glam Satin Foundation was amongst the best-selling products on our site in Q1. We're also excited about the innovation we've launched under Notorium. The brand recently celebrated one million bottles sold of its best-selling Glow Getter Body Wash, its first product to hit the one million unit mark. We're extending our franchise approach to Nitorium with the launch of the Glow Getter body oil. The launch sold out in just 10 days on Aturium.com and was recently re-stocked on our site.

Tarang Amin: I just put it on and I already love it.

Speaker Change: Soft Glam Satin Foundation was amongst the best selling products on our site in Q1.

Speaker Change: We're also excited about the innovation we've launched in a notorious, the brand recently celebrated 1 million bottle sold of the best selling glow-getter body wash. It's first product to hit the 1 million unit mark.

Speaker Change: We're extending our franchise approach to Notorium with the launch of the Glow Getter Body Oil.

Speaker Change: The launch sold out in just 10 days on Arturium.com and was recently restocked on our site.

Tarang Amin: Our fourth area of advantage is our disruptive marketing engine. Our marketing organization is structured and covers all consumer touch points. From product concepts to consumer purchase, this N10 breath gives us the agility to go from insight to action with speed and fosters increasing emotional resonance as our community becomes a stakeholder, essentially co-creating the brand with us. Recently launched bronzer and drops, a terrific example, bronzing drops which have been the number one product requested from our community turned into our best product launch ever on e.l.f. Cosmetics.com We turned our consumers' passionate pleas for bronzing drops into action with a debut of peculiar behavior to accompany the product launch.

Tarang Amin: Our fourth area of advantage is our disruptive marketing engine. Our marketing organization is structured to encompass all consumer touchpoints, from product concept through consumer purchase.

Tarang Amin: This N10 breath gives us the agility to go from insight to action with speed and fosters increasing emotional resonance as our community becomes a stakeholder, essentially co-creating the brand with us.

Tarang Amin: Our recently launched bronzing drops is a terrific example.

Speaker Change: Bronzing Drops, which have been the number one product requested from our community.

Speaker Change: Turned into our best product launch ever on e.l.f. Cosmetics.com. We turned our consumers' passionate pleas for bronzing drops into action with the debut of Peculiar Behavior to accompany the product launch.

Amin: Amin, unless you've been living under a rock and perhaps you have, I don't know your life. You'd know that elf skin from being dropped have, right? But, access to these new farm drops created some peculiar behaviour amongst her Nathan.

Speaker Change: After it appears that Amin's apply has run dry, the brave hunter begins her mission, and it is sorely unparalleled.

Speaker Change: I'm going to take a look at what I'm going to do.

Speaker Change: Grab your popcorn. It's just quite exciting. Migration. What a marvelous phenomenon. Our radian jet set was just taken like for nearly 10 hours and still have a minute. Yes, the flow. The others unfortunately. There is strike in seven inches only. Good grief. That's scary. It's really fucking tired. Well, we're in luck. The disorientated work from home professional emerges from hibernation. But that's no match for her brother in drops.

Tarang Amin: Thank you, Casey, and good afternoon, everyone. Today we will discuss the drivers of our first quarter results and our raised outlook for fiscal 25. I want to start by recognizing the e.l.f. Beauty team. We're off to a strong start this fiscal year, delivering Q1 results ahead of our expectations. In Q1, we grew net sales by 50%, increased gross margin by approximately 80 basis points, and delivered $77 million in adjusted EBIT. Q1 marked our 22nd consecutive quarter of both net sales growth and market share gains, putting e.l.f.

Unknown Speaker: If you haven't seen the sun in five days, it's only been four days.

Speaker Change: She hasn't seen the sun in five days. Rude. It's only been four days.

Speaker Change: [inaudible]

Unknown Speaker: Remarkably, this single bottle can enhance the natural glow and vitality of all Homer's VPNs.

Unknown Speaker: What's happening? Oh, my God! Oh, my God! Oh, my God!

Tarang Amin: We believe our marketing engine is best in class in creating culturally relevant output. In the seven months since calendar 2024 began, we've executed 15 unique campaigns, from a 14 minute documentary parody to a big game commercial to a record-breaking collaboration with Liquid Death. Our approach transcends product and deepens brand love through purpose. Earlier this year, we released our So Many Dicks campaign, which instantly went viral, garnering a billion organic media impressions and almost 100% positive sentiment. Our research found that there are more men named Richard, Rick, or Dick serving on public company boards than entire groups of underrepresented people.

Speaker Change: We believe our marketing engine is best in class in creating culturally relevant output.

Speaker Change: In the seven months since Calendar 2024 began, we've executed 15 unique campaigns, from a 14-minute documentary parody, to a big game commercial, to a record-breaking collaboration with Liquid Death.

Speaker Change: Our approach transcends product and deepens brand love through purpose.

Speaker Change: Earlier this year, we released our so many Dix campaign, which instantly and viral, garnering a billion organic media impressions and almost 100% positive sentiment.

Speaker Change: Our research found that there are more men named Richard, Rick, or <expletive> serving on public company boards than entire groups of underrepresented people.

Tarang Amin: Consistent with our brand values, our call to action was not to single out leaders by these names but rather to inspire companies to give a bigger voice to everyone else to drive positive business results so that everyone wins. We practice what we preach. Elf is one of only four publicly traded U.S. companies with a board of directors that is at least two-thirds women and one-third diverse. We've solidified our reputation as a purpose-led, results-driven brand across product, purpose, and pioneering platforms. Since the launch of our e.l.f., on Roblox, one of the world's most popular virtual playgrounds among Gen Z and Alpha,

Speaker Change: Consistent with our brand values, our call to action was not to single out leaders with these names, but rather inspire companies to give a bigger voice to everyone else to drive positive business results so that everyone wins.

Speaker Change: We practice what we preach. e.l.f. is one of only four publicly traded U.S. companies with a board of directors that is at least two-thirds women and one-third diverse.

Speaker Change: We've solidified our reputation as a purpose-led, results-driven brand across product, purpose, and pioneering platforms.

Speaker Change: On Roblox, one of the world's most popular virtual playgrounds among Gen Z and Alpha, since the launch of our e.l.f. Up experience last year, we have the number one branded experience with a 95% positivity rating in almost 14 million plays.

Tarang Amin: Last year, we had the number one branded experience with a 95% positivity rating in almost 14 million plays. In Q1, Elf became the first beauty brand to test real world commerce on roadblocks, adding credibility and visibility among key audiences. Our marketing is working, delivering our wise multiples above benchmarks and expanding our unrated brand awareness from 13% in 2020 to 33% in 2024. I've been in the consumer space for over 30 years and have never seen a 20-point jump in unaided awareness in just a few years.

Speaker Change: In Q1, Elf became the first beauty brand to test real world commerce on roadblocks, adding credibility and visibility among key audiences.

Speaker Change: Our marketing is working, delivering our wise multiples above benchmarks, and expanding our unated brand awareness from 13% in 2020 to 33% in 2024.

Speaker Change: I've been in the consumer space over 30 years and have never seen a 20-point jump in unaided awareness in just a few years. As greatest that is, the leading U.S. mass cosmetics brand has 55% unaided awareness, demonstrating significant runway for growth.

Tarang Amin: As great as that is, the leading U.S. mask cosmetics brand has 55% unaided awareness, demonstrating significant runway for growth. Our fifth area of advantage is our productivity model. Founded as a digitally native brand, e.l.f. remains the only top five mass cosmetics brand with its own direct-to-consumer site. We leverage insights from our site and Beauty Squad loyalty program to proactively change out up to 20% of our retail assortment each year. Looking at the last five years, our SKU count has remained relatively consistent, and we have doubled our average sales per SKU.

Speaker Change: Our fifth area of advantage is our productivity model.

Speaker Change: Founded as a digitally native brand, e.l.f. remains the only top five mass cosmetics brand with their own direct-to-consumer site.

Speaker Change: We leverage insights from our site and Beauty Squad loyalty program to proactively change out up to 20% of our retail assortment each year.

Speaker Change: Looking at the last five years, our SKU count has remained relatively consistent, and we have doubled our average sales per SKU.

Tarang Amin: This approach has led us to be the most productive brand on a dollar per foot basis with our largest retail customers in both the U.S. and U.K. Our strong productivity has been rewarded by more space with our global retail partners. In the US, as previously announced, the elf-brand game space in spring, with CVS, and in summer, with Walmart. And we're beginning additional spaces in fall with CVS. We're also excited about the recent launch of Notorium in Ulta Beauty, marking the brand's first retailer expansion in the U.S. outside of Target. Newtorium is now available in all 1,400 ultra beauty stores with a full assortment across skin, body, and lip care.

Speaker Change: This approach has led us to be the most productive brand on a dollar-perfect basis with our largest retail customers in both the US and UK.

Speaker Change: Our strong productivity has been rewarded by more space with our global retail partners.

Speaker Change: In the U.S., as previously announced, the e.l.f. brand gains space in spring with CVS and in summer with Walmart, and will be gaining additional space this fall with CVS.

Speaker Change: We're also excited about the recent launch of Natarium in Alta Beauty, marking the brand's first retailer expansion in the US outside of Target.

Speaker Change: Newtorium is now available in all 1,400 ultra beauty stores with a full assortment across skin, body, and lip care.

Tarang Amin: Internationally, we continue to grow our footprint in existing markets. As we previously announced, we gained space to spring with boots in the UK and with Shopper's Drug Mart in Canada, and will be gaining space to fall with superdrug in the UK. We're also expanding our international reach into newer markets. We recently expanded our existing distributor relationship in Australia with the launch of Elf and Coles, marking Elf's first introduction into the channel in Australia. As previously announced, we'll be bringing back e.l.f.

Speaker Change: Internationally, we continue to grow our footprint in existing markets.

Speaker Change: As we previously announced, we gained space this spring with Boots in the UK and with Shoppers Drug Mart in Canada, and will be gaining space this fall with Superdrug in the UK.

Speaker Change: We're also expanding our international reach into newer markets. We recently expanded our existing distributor relationship in Australia with the launch of e.l.f. in coals, marking e.l.f.'s first introduction into the grocery channel in Australia.

Tarang Amin: to Sephora in Mexico this fall, marking the e.l.f. brand's first partnership with Sephora. We're also excited to announce that we'll be launching e.l.f. in Germany this fall with Rossmann.

Speaker Change: As previously announced, we'll be bringing e.l.f. to Sephora Mexico this fall, marking the e.l.f. brand's first partnership with Sephora.

Speaker Change: We're also excited to announce that we'll be launching ELF in Germany this fall with Rossmann.

Tarang Amin: Germany is the largest cosmetics market in Europe, and we expect our launch with Rossmann to be our biggest international launch to date. In summary, we have five areas with an advantage that have enabled us to consistently drive sales and share in cosmetics and skincare. Our passionate people, a team of owners with a high-performance culture. Our value proposition, powered by an asset-light supply chain, delivering the best combination of quality, cost, and speed in our industry.

Speaker Change: Germany is the largest cosmetic market in Europe, and we expect our launch with Rossman to be our biggest international launch today.

Speaker Change: In summary, we have five areas of advantage that have enabled us to consistently drive sales and share in cosmetics and skincare.

Speaker Change: Our passionate people, a team of owners with a high performance culture.

Speaker Change: Our value proposition, powered by an asset light supply chain, delivering the best combination of quality, cost and speed in our industry.

Tarang Amin: Our powerhouse innovation, delivering premium, holy grail products at accessible price points. Our disruptive marketing engine, activating millions of consumers around the world, and our unique productivity model. bring this to life at retail globally. While other brands may seek to imitate parts of our strategy, it's how each of these areas of advantage reinforces each other that forms our competitive mode. And we expect they will continue to fuel our industry-leading growth. I'll now turn the call over to Mandy.

Speaker Change: Our Powerhouse Innovation, delivering premium holy grail products at accessible price points.

Speaker Change: Our disruptive marketing engine, activating millions of consumers around the world.

Speaker Change: and our unique productivity model, bring this to life at retail globally.

Speaker Change: While other brands may seek to imitate parts of our strategy, it's how each of these areas of advantage reinforce each other that forms our competitive moat. And we expect they will continue to fuel our industry-leading growth.

Speaker Change: I'll now turn the call over to Mandy.

Mandy Fields: I'll now cover the highlights of our first quarter results, as well as our raised outlook for fiscal 25. Our first quarter results were outstanding. Q1 net sales grew 50% year-over-year, on top of 76% growth in Q1 of last year, driven by broad-based strength across national and international retailers as well as digital commerce. Our net sales growth continues to be led by higher unit volume, which contributed approximately 34 points to growth, with mix adding approximately 16 points.

Mandy Fields: Thank you, Tarang. I'll now cover the highlights of our first quarter results, as well as our raised outlook for Fiscal 25.

Mandy Fields: Our first quarter results were outstanding.

Mandy Fields: Q1 net sales grew 50% year-over-year, on top of 76% growth in Q1 of last year, driven by broad-based strength across national and international retailers, as well as digital commerce.

Speaker Change: Our net sales growth continues to be led by higher unit volume, which contributed approximately 34 points to growth, with mix adding approximately 16 points.

Mandy Fields: Q1 digital consumption trends were up over 40% year over year, on top of triple-digit trends in Q1 of last year. Digital channels drove 21% of our consumption in Q1, as compared to 18% a year ago. The momentum we're seeing is supported by enhancements across our loyalty program within our app and on digital and social platforms. Our Beauty Squad loyalty program hit a milestone this quarter, reaching over 5 million members with enrollment growing 30% year over year.

Speaker Change: Q1 digital consumption trends were up over 40% year-over-year, on top of triple-digit trends in Q1 of last year.

Speaker Change: Digital channels drove 21% of our consumption in Q1 as compared to 18% a year ago.

Speaker Change: The momentum we're seeing is supported by enhancements across our loyalty program within our app and on digital and social platforms. Our Beauty Squad loyalty program hit a milestone this quarter, reaching over 5 million members with enrollment growing 30% year over year.

Mandy Fields: Recall, our beauty squad loyalists have higher average order values, purchase more frequently, have strong retention rates, and we have a rich source of first-party data. We're fueling new member enrollment with exclusive early access to product launches and unique integrations with our digital partners, and in Q1, we ran our first ever Beauty Squad Challenge within Roblox, allowing our elf-up players to connect their Beauty Squad account to their Roblox account. Nearly 100% of those Roblox connections were new Beauty Squad members.

Speaker Change: Recall, our Beauty Squad Loyalists have higher average order values, purchase more frequently, have stronger retention rates, and are a rich source of first-party data.

Speaker Change: We're fueling new member enrollment with exclusive early access to product launches and unique integrations with our digital partners.

Speaker Change: In Q1, we ran our first ever Beauty Squad challenge within Roblox, allowing our e.l.f. Up players to connect their Beauty Squad and Roblox accounts.

Speaker Change: Nearly 100% of those Roblox connections were new Beauty Squad members.

Mandy Fields: We also expanded Beauty Squad to Amazon to continue to fuel new member sign-ups and reward our community for their e.l.f. purchases on Amazon. Q1 gross margin of 71% was up approximately 80 basis points compared to the prior year. We saw gross margin benefits from favorable foreign exchange impact. Lower transportation costs, price increases, and our international market Call Savings in Mix, Partially Offset by Inventory Adjustments, Q1 Ghost Margin was better than we expected, in part due to floor flow through of higher transportation costs.

Speaker Change: We also expanded Beauty Squad to Amazon to continue to fuel new member sign-ups and reward our community for their e.l.f. purchases on Amazon.

Speaker Change: Do one gross margin of 71% was up approximately 80 basis points compared to prior year.

Speaker Change: We saw Grossmargin benefits from favorable foreign exchange and tax.

Speaker Change: Lower Transportation Costs.

Speaker Change: Price increases in our international markets, cost savings and mix, partially offset by inventory adjustments.

Speaker Change: Q1 gross margin was better than we expected, in part due to slower flow-through of higher transportation costs.

Mandy Fields: As a reminder, we experienced higher container costs related to the Red Sea disruption at the end of last year, and those costs have continued to rise more recently. We expect these transportation cost headwinds to partially offset the gross margin benefit we're projecting throughout fiscal 25, on an adjusted basis. SG&A as a percentage of sales was 51% in Q1 compared to 39% last year. The primary driver of the year over year increase was a plan to step up marketing and digital investment.

Speaker Change: As a reminder, we experienced higher container costs related to the Red Sea disruption at the end of last year, and those costs have continued to rise more recently.

Speaker Change: We expect these transportation costs headwinds to partially offset the gross margin benefit we're projecting throughout fiscal 25.

Speaker Change: Basis, SGA as a percentage of sales was 51% in Q1 compared to 39% last year.

Speaker Change: The primary driver of the year-over-year increase was a planned step up in marketing and digital investment.

Mandy Fields: Marketing and digital investment for the quarter was approximately 23% of net sales, as compared to 16% last year. The remaining increase in adjusted SG&A was driven primarily by the inclusion of noturium in our consolidated financials and Impact that will continue through Q2 of Fiscal 25, as well as ongoing investments in our team and infrastructure. Given those planned investments, Q1 adjusted Eva Dahl revenue was $77 million, up 4% versus last year, and adjusted Eva Dahl margin was 24% of net sales.

Speaker Change: Marketing and digital investment for the quarter was approximately 23% of net sales, as compared to 16% last year.

Speaker Change: The remaining increase in adjusted SG&A was driven primarily by the inclusion of Noturium in our consolidated financials, an impact that will continue through Q2 of Fiscal 25, as well as ongoing investments in our team and infrastructure.

Speaker Change: Given those planned investments, Q1 adjusted EBITDA was $77 million, up 4% versus last year. An adjusted EBITDA margin was 24% of net sales.

Mandy Fields: We expect adjusted EBITDA growth to accelerate into the back half of fiscal 25 as we cycle the inclusion of noturium in our financials and see more normalized rates of marketing investment year over year. Adjusted net income was $64 million, or $1.10 per diluted share, compared to $63 million, or $10 per diluted chair a year ago.

Speaker Change: We expect adjusted EBITDA growth to accelerate into the back cap of fiscal 25, as we cycle the inclusion of Neuturium in our financials and see more normalized rates of marketing investment year over year.

Speaker Change: Adjusted net income was $64 million, or $1.10 per diluted share.

Speaker Change: compared to $63 million, or $1.10 per diluted share, a year ago.

Mandy Fields: Moving to the balance sheet and cash flow. Our balance sheet remains strong, and we believe it positions us well to execute our long-term growth plan. We ended the quarter with $109 million in cash on hand, compared to a cash balance of $143 million a year ago. Our ending inventory balance was $200 million, in line with our expectations and up from $98 million a year ago. The difference is primarily a combination of three things.

Speaker Change: Moving to the balance sheet and cash flow.

Speaker Change: Our balance sheet remains strong, and we believe positions us well to execute our long-term growth plans.

Speaker Change: We ended the quarter with $109 million in cash on hand compared to a cash balance of $143 million a year ago.

Speaker Change: Our ending inventory balance was $200 million, in line with our expectations, and up from $98 million a year ago.

Speaker Change: The difference is primarily a combination of three things.

Mandy Fields: First, as we said in the past few quarters, we continue to build back our inventory levels to support strong consumer demand. Second, our consolidated results now include Noturium, which added approximately $26 million in inventory. Lastly, an additional $23 million of the increase is the result of taking ownership of inventory from China when it ships versus when it enters our distribution center here in the U.S. Our liquidity position remains strong. We entered the quarter with less than one times' leverage in terms of net debt to adjust the debit dot.

Speaker Change: First, as we said in the past few quarters, we continue to build back our inventory levels to support strong consumer demand.

Speaker Change: Second, our consolidated results now include Noturium, which added approximately $26 million of inventory.

Speaker Change: Lastly, an additional $23 million of the increase is the result of taking ownership of inventory from China when it ships versus when it enters our distribution sector here in the U.S.

Speaker Change: are liquidity position remains strong.

Speaker Change: We ended the quarter with less than one times leverage in terms of net debt to adjusted EBITDA.

Mandy Fields: We expect our cash priorities for the year to remain investing in our growth initiatives and supporting our strategic extensions. The specific initiatives we're focused on this year include investing in our people and infrastructure. R-E-R-P-Transition to F-A-P, as well as increased distribution capacity to support strong consumer demand. Now, let's turn to our Raised Outlook for Fiscal 25. For the full year, we now expect net sales growth of approximately 25 to 27 percent, up from 20 to 22 percent previously.

Speaker Change: We expect our cash priorities for the year to remain on investing behind our growth initiatives and supporting our strategic extensions.

Speaker Change: The specific initiatives we're focused on this year include investing in our people and infrastructure, our ERP transition to SAP,

Speaker Change: as well as increased distribution capacity to support strong consumer demand.

Speaker Change: Now let's turn to our Raised Outlook for Fiscal 25.

Speaker Change: For the full year, we now expect net sales growth of approximately 25-27%, up from 20-22% previously.

Speaker Change: Adjusted EBITDA between $297 million to $301 million, up from $285 million to $289 million previously.

Unknown Speaker: I'm left you've been living under a rock, and perhaps you have. I don't know your life. You'd know that Elf's skin from the drops has.

Speaker Change: Adjusted net income between $198 million to $201 million, up from $187 million to $191 million previously.

Speaker Change: and Adjusted ETS of $3.36 to $3.41 per diluted chair.

Speaker Change: Up from $3.20 to $3.25 previously. Let me provide you with additional color on our planning assumptions for Fiscal 25.

Mandy Fields: Adjusted EBITDA between $297 million and $301 million, up from $285 million to $289 million previously. Adjusted net income between $198 million and $201 million, up from $187 million to $191 million previously. An adjusted EPS of $3.36 to $3.41 per diluted share, up from $3.20 to $3.25 previously. Let me provide you with additional color on our planning assumptions for fiscal 25. Starting with the top line.

Mandy Fields: Our raised outlook reflects the outperformance in Q1 relative to our expectations, as well as an improved outlook for the balance of the year. In Q2, we expect our net sales growth to be slightly above our 25 to 27% annual growth outlook. As we look at track channels, we would expect trends for e.l.f.

Speaker Change: Starting with the top line.

Speaker Change: Our raised outlook reflects the outperformance in Q1 relative to our expectations, as well as an improved outlook for the balance of the year.

Speaker Change: and Q2, we expect our net sales growth to be slightly above our 25 to 27% annual growth outlook.

Mandy Fields: to be in the 20% range throughout Q2 as we continue to cycle strong compares in the base. Recall, track channels represent approximately half of our net sales. Turning to Ghost Marge, In Fiscal 25, we now expect our gross margin to be up approximately 20 basis points year-over-year, as compared to approximately 10 basis points previously. The improved outlook is largely a result of our outperformance in Q1. In terms of the key puts and takes for the year, we expect gross margin benefits from favorable FX rates, margin of creative mix, and cost savings to be partially offset by higher transportation costs and costs related to retailer activity and space expansion. From a cadence standpoint, we expect gross margin to be flat year over year in Q2, largely due to the timing of retailer activity and space expansion costs. I am turning now to AdjustedEBIT.com.

Speaker Change: As we look at track channels, we would expect trends for e.l.f. to be in the 20% range throughout Q2 as we continue to cycle strong compares in the base.

Speaker Change: Recall, track channels represent approximately half of our net sales.

Speaker Change: Turning to gross margin.

Speaker Change: In fiscal 25, we now expect our gross margin to be up approximately 20 basis points year over year, as compared to approximately 10 basis points previously.

Speaker Change: The improved outlook is largely a result of our outperformance in Q1.

Speaker Change: In terms of the key puts and takes for the year, we expect gross margin benefits from favorable FX rates

Speaker Change: margin accretive mix and cost savings to be partially offset by higher transportation costs and costs related to retailer activity and space expansion.

Speaker Change: From a cadence standpoint, we expect gross margin to be flat year-over-year in Q2, largely due to the timing of retailer activity and space expansion costs.

Mandy Fields: For the full year, our outlook now implies adjusted EBITDA growth of approximately 26 to 28 percent versus the prior year. This is up from 21 to 23% previously, and on top of the strong 101% growth we delivered in fiscal 24. We continue to expect adjusted EBITDA margin leverage of approximately 20 basis points year over year. Additionally, we still expect marketing and digital investment at approximately 24-26% of net sales in FY25, as compared to 25% in FY24. From a cadence standpoint, we are planning for a more balanced pace of marketing and digital spend throughout fiscal 25. Looking to impress you too.

Speaker Change: Turning now to a Jeopardy!

Speaker Change: For the full year, our outlook now implies adjusted EBITDA growth of approximately 26% to 28% versus prior year.

Speaker Change: Up from 21 to 23 percent previously, and on top of the strong 101 percent growth we delivered in fiscal 24.

Speaker Change: We continue to expect adjusted EBITDA margin leverage of approximately 20 basis points year-over-year.

Speaker Change: We still expect marketing and digital investment at approximately 24-26% of net sales in FY25, as compared to 25% in FY24.

Speaker Change: From a cadence standpoint, we are planning for a more balanced pace of marketing and digital spend throughout fiscal 25.

Mandy Fields: That implies a step up in our marketing on a year-over-year basis as marketing spend was approximately 21% of net sales in Q2 last year. We are still annualizing the acquisition of material and continue to invest in our team. As a result, we expect our adjusted EBITDA margin could be in the low teens range in Q2, with more meaningful adjusted EBITDA margin expansion to be realized in the second half of fiscal 25, as marketing comparisons normalize, and as we anniversary the acquisition of Naturium starting in October.

Speaker Change: Looking to Q2.

Speaker Change: That implies a step up in our marketing on a year-over-year basis as marketing spend was approximately 21% of net sales in Q2 last year.

Speaker Change: In addition, we are still annualizing the acquisition of Naturium and continue to invest in our team.

Speaker Change: As a result, [inaudible]

Speaker Change: We expect our adjusted EBITDA margin could be in the low teens range in Q2, with more meaningful adjusted EBITDA margin expansion to be realized in the second half of fiscal 25 as marketing compares normalized and as we anniversary the acquisition of Natarium starting in October.

Speaker Change: In summary, our first quarter results underscore our ability to drive exceptional, consistent, category-leading growth.

Speaker Change: We believe we have a winning strategy, as reflected in our raised outlook for the full year, and continue to believe we are in the early innings of unlocking the full potential for our brands.

Mandy Fields: In summary, our first quarter results underscore our ability to drive exceptional, consistent, category-leading growth. We believe we have a winning strategy, as reflected in our raised outlook for the full year, and continue to believe we are in the early innings of unlocking the full potential for our brand. With that operator, you may open a call to ask questions.

Speaker Change: With that, Operator, you may open the call to questions.

Speaker Change: You may open the call to questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw it, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Speaker Change: Thank you, we will now begin the question and answer session.

Speaker Change: To ask a question, you may press a star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Operator: And today's first question comes from Olivia Tong with Raymond James. Please proceed.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: The first question. And today's first question comes from Olivia Tongue with Raymond James, please proceed.

Olivia Tong: Great, good afternoon, and congratulations on a great quarter. I was wondering if you could break it down a little bit more, both the quarter and the guide. First, if you could give us a sense of how much of the growth was driven by new distribution versus your existing distribution, you know, we obviously know Wal-Mart was a part of that this quarter, and how that compares to the second half when you have some new distribution internationally, like the plants in Mexico and, as you mentioned, during the pre-markets in Germany.

Olivia Tongue: Great. Good afternoon and congrats on the great quarter.

Olivia Tongue: I was wondering if you could break it down a little bit more, both the quarter and the guide. First, if you could give us a sense of how much of the growth was driven by...

Speaker Change: New Distribution Versusuring Distribution.

Speaker Change: You know, we obviously know Walmart was a part of that this quarter.

Speaker Change: , and how that compares into second half when you have food distribution internationally like the plants in Mexico and as you mentioned during the Prague march in Germany.

Olivia Tong: And then the bigger picture with, you know, we've seen challenges with the consumer, slower growth in what you're seeing, whether your analytics show any signs of slowdown or amongst different, particularly amongst your different cohorts, perhaps, and how does, and perhaps how does that influence your Q2 guide? Thank you.

Speaker Change: And then bigger picture with, you know, we've seen challenges with the consumer, slower growth in behavior, what you're seeing, whether your analytics show any signs of slowdown or amongst, particularly amongst your different cohorts, perhaps, and how does, and perhaps how does that influence your Q2 guide? Thank you.

Unknown Executive: Hi Olivia. Thanks for the question. So in terms of growth that we saw in quarter one, I'm super proud of the 50% net sales growth that we just delivered. It's really incredible.

Olivia Tongue: Hi Olivia.

Speaker Change: Thanks for the question. So in terms of growth that we saw in the quarter one, I'm super proud of the 50% net sales growth that we just delivered. It's really incredible. I'm also proud of the fact that we were able to raise our guidance on the top line, up to 25 to 27% for the full year. We are having some growth driven by new distribution. As we talked about, we had a number of space expansions in the spring, the summer, and are certainly outlooking more as we look into the fall. So that is included in our guidance. But we're also seeing strength in our existing distribution.

Speaker Change: and so really pleased with that as well. And international continued to play a role in that. You saw international growth at 91 percent for the quarter. It certainly expect international continue to drive growth for us as we look out into the second half of the year.

Tarang Amin: Hi, Olivia. This is Tarang. On your second question on consumer, any consumer slowdown or sentiment, overall, I would say, you know, we are seeing some commentary of consumers being more choosy, but they're choosing e.l.f. I would say that we're particularly well-positioned. We saw growth across all of our channels.

Speaker Change: Digital, all of our national retailers and international customers. So we remain quite bullish in our ability to continue to drive market share both in color as well as skin care and our continued expansion nationally.

Olivia Tongue: Great, thanks. And then if I could follow up on the international growth, which obviously continues to be pretty phenomenal. Can you talk about the opportunities going forward?

Speaker Change: how you go about deciding which markets, whether any of these are exclusive relationships, particularly with Douglas and a few others. And if they are exclusive, are they by regions or specific countries, just helping us understand that. Thank you.

Unknown Executive: I'm also proud of the fact that we were able to raise our guidance on the top line up to 25 to 27% for the full year. We are experiencing some growth driven by new distribution. As we talked about, we had a number of space expansions in the spring, this summer, and are certainly planning more as we look into the fall.

Speaker Change: As our strategy for international, when it comes to retailers is to partner with a leading retailer and a market.

Unknown Executive: So that is included in our guidance, but we're also seeing strength in our existing distribution, and I'm really pleased with that as well.

Speaker Change: to help build the brand. We thought, DuGloss, Italy did a great job of really establishing a number one in that customer, same with Atos and the Netherlands, and we're extremely excited about the launch with Rossman in Germany. Germany is largest.

Speaker Change: Market for Color Cosmetics in Europe . Rossman has, I believe, over 1,500 doors that we'll be in. So we feel really great in terms of how that looks.

Speaker Change: i

Speaker Change: Thank you.

Speaker Change: and the next question comes from Andrea Tashara with JP Morgan, please proceed.

Andrea Tashara: Thank you, Operator, and good afternoon, everybody. I was hoping to see...

Andrea Tashara: to hear from a little bit more on the 20% growth in Q2. I understand that you historically have been extremely conservative.

Speaker Change: And you don't flow through all the beach to the guide, but knowing that it will faster both internationally and off track channels and fact channels are growing at least consumption wise, twenty two percent, according to me, I think, July .

Unknown Executive: And international will continue to play a role in that. You saw international growth of 91% for the quarter. Certainly, expect international to continue to drive growth for us as we look out into the second half of the year.

Speaker Change: So I was trying to see if there is anything in terms of shipments and timing of consumption and shipments, anything that we should be aware of.

Speaker Change: and that would inform that, you know, the celebration.

Speaker Change: And then on top of that, if you can explain, there is a lot of noise on the tariff, potential tariff increase, just to explain.

Speaker Change: that, you know, your strategy to increase prices is usually one dollar and you've been historically, you only increase prices in no inter-level price points and how you should be able.

Speaker Change: Given your large gross margin, explain to investors how, you know, like, a 60 cent impact would be diluted, if anything, across your your price pointing is to keep your price point at a very attractive level. So if you can help me help investors on those two points, thank you.

Tarang Amin: Hi Olivia, this is Trang. On your second question about consumers, any consumer slowdown or sentiment, overall, I would say, you know, we're seeing some commentary of consumers being more choosy, but they're choosing e.l.f. I would say that we're particularly well positioned. We saw growth across all of our channels, digital, all of our national retailers, and international customers. So we remain quite bullish about our ability to continue to drive market share, both in color as well as skin care, and our continued expansion nationally.

Unknown Executive: Great, thanks. And then I could follow up on the international growth, which obviously continues to be pretty phenomenal. Can you talk about the opportunities going forward? How do you go about deciding which markets, whether any of these are exclusive relationships, particularly with Douglas and a few others? And if they are exclusive, are they by regions or specific countries? Just helping us understand that. Thank you. It's our strategy for international when it comes to

Speaker Change: Absolutely. Hi, Andrea. So I'll take the first question. On Q2, we actually said on our prepared remarks that we expect Q2 to be slightly above the 26 to 28% range that we outlook for the year. So we do expect Q2 to be better than our annual outlook, which we feel great about. And you know that we typically take a balanced approach when it comes to our guidance. So we always want to put something out there that we feel great about, very balanced in our approach. And we are pleased with what we're seeing out of our retailers, digitally, internationally, all of those that we mentioned on the call. So continue to think that we have momentum there. Expect Q2 to be a little bit above our annualized range.

Tarang Amin: Our strategy for international retail when it comes to retailers is to partner with a leading retailer in a market to help build the brand. We thought Degloss Italy did a great job really establishing us as number one in that customer, same with Atos in the Netherlands, and we're extremely excited about the launch with Rossmann in Germany. Germany is the largest market for color cosmetics in Europe. Rossmann has, I believe, over 1,500 stores that we'll be in, so we feel really great in terms of how that looks.

Operator: And the next question comes from Andrea Teixeira of J.P. Morgan. Please proceed.

Andrea Teixeira: Thank you, Farida, and good afternoon, everybody. I was hoping to see or hear a little bit more on the 20% growth in Q2. I understand that you historically have been extremely conservative, and you don't flow through all the beats to the guide. But knowing that you grow faster, both internationally and on-track channels, and that track channels are growing at least 22%, according to Nielsen in July. So I was trying to see if there is anything, in terms of shipments and timing of consumption and shipments, anything that we should be aware of, and that would inform that, you know, slowdown.

Andrea Teixeira: And then on top of that, if you can explain, there's a lot of noise about the tariff, potential tariff increase, just to explain that, you know, your strategy to increase prices is usually $1, and you've been, historically, you only increase prices in non-inter-level price points, and how you should be able, given your large gross margin, explain to investors how, you know, like a $0.60 impact would be diluted, So if you can help me, help the investors on those two points. Thank you.

Speaker Change: And and we'll take it from there.

Speaker Change: Hi Andrea, I'll take your second question on tariffs or potential tariffs. First of all, if there were tariffs, it would not impact FY25 just given how long it takes for inventory to flow through. So this is really an FY26

Speaker Change: Issue, Potentially. And so our approach is very similar to what we did in 2019, if you recall in 2019.

Speaker Change: We faced 25% tariffs.

Speaker Change: We use a combination of select price increases, help from FX, and supplier concessions to be able to address that tariff issue. As we look forward, you know, we've heard

Speaker Change: Rumors as high as 60% tariff. So if we look to how we we saw for that additional 35 points of tariff, we feel pretty confident in terms of that same balanced approach. Certainly we take selective pricing on on elf. In addition, we would expect additional effects help and additional supplier concessions.

Speaker Change: And then the fourth thing that we didn't have back in 2019 is continued diversification. And back in 2019, almost 100% of our production came out of China. As of today, it's a little less than 80%.

Speaker Change: by next year, it'd be even lower than that, and so that continued diversification will be yet another weaver will have to be able to decide what level of price and when it takes versus how much we need to rely on some of these other levers. Again, it's premature right now, nothing's happened from an election standpoint. We don't know what the level of tariff star, but we've already gone through a number of different scenario of planning and feel confident we can continue to use that balance approach to address.

Speaker Change: Any tariff that we might face.

Speaker Change: That's super helpful in just to clarify and appreciate Mindy, you will correct me on the range.

Speaker Change: Is it fair to assume that when you move guidance, you move guidance mostly and partially just for the beat of the first quarter?

Speaker Change: and you know where you kind of left the second half of them touched.

Speaker Change: From what it was before, just because we don't have visibility and I think we've seen

Speaker Change: Most companies do that when they beat guidance these days because they're very limited to the ability how the consumer will be at that point

Speaker Change: So given your, basically what you just described as being like a lot of new places you're coming to, obviously in the fall you're coming to Mexico and now Germany and the other countries that you're still growing, is there any way you can kind of help investors frame the way, the ones that are relatively new when it became a large cap,

Speaker Change: to the story and haven't seen you guide for all these years very conservatively so if you can kind of like explain how your guiding process works.

Unknown Executive: On Q2, we actually said in our prepared remarks that we expect Q2 to be slightly above the 26% to 28% range that we expect for the year. So we do expect Q2 to be better than our annual outlook, which we feel great about. And you know that we typically take a balanced approach when it comes to our guidance. So we always want to put something out there that we feel great about, very balanced in our approach, and we are pleased with what we're seeing from our retailers, digitally, internationally, all of those that we mentioned on the call. So continue to think that we have momentum there. Expect Q2 to be a little bit above our annualized range, and we'll take it from there.

Speaker Change: Yes, so for this quarter, we actually did flow through more than the Q1 beat as we continue to feel confident about where the year is headed for e.l.f.

Speaker Change: But we do take it a quarter at a time to your point Andrea so we will say very balanced in our approach for the current quarter and actually don't give specific quarterly guidance but we do try to help give some color around what we're seeing and what we expect.

Speaker Change: But again, it has flowed through, at least for this quarter, more than that beat out of Q1 as we have increased confidence on the year.

Tarang Amin: Hi Andrea, I'll take your second question on tariffs or potential tariffs. First of all, if they were tariffs, they would not impact FY25, just given how long it takes for inventory to flow through. So this is really an FY26 issue, potentially.

Andrea Tashara: Okay, perfect. Thank you. I'll pass it on. Congrats again. Thank you.

Tarang Amin: And so our approach is very similar to what we did in 2019. If you recall, in 2019, we faced 25% tariffs. We used a combination of select price increases, help from FX, and supplier concessions to be able to address that tariff issue. As we look forward, we've heard rumors as high as 60%. So if we look at how we solve for that additional 35 points of tariff, we feel pretty confident in terms of that same balanced approach we take on selective pricing on elf.

Andrea Tashara: And our next question is from Anna Lizzul with Bank of America. Please proceed.

Tarang Amin: In addition, we would expect additional FX help and additional supplier concessions. And then the fourth thing that we didn't have back in 2019 is continued diversification. In Back in 2019, almost 100% of our production came out of China. As of today, it's a little less than 80%, and by next year, it'd be even lower than that. And so that continued diversification will be yet another way we will have to be able to decide what level of pricing it takes versus how much we need to rely on some of these other levers.

Tarang Amin: Again, it's premature right now. Nothing's happened from an election standpoint. We don't know what the level of tariffs will be, but we've already gone through a number of different scenarios of planning and feel confident we can continue to use that balance approach to address any tear of that we might face.

Andrea Teixeira: Yeah, that's super helpful. And just to clarify, and I appreciate Mandy, you correct me on the on the on the range. Is it fair to assume that when you move guidance, you move guidance mostly and partially, just for the beat of the first quarter, and in a way you kind of laugh the second half of touch from what it was before, just because you don't have the ability, and I think we've seen most companies do that when they beat guidance these days, because they're very limited the ability how the consumer will be at that point, but given you are basically what you're just described as being like a lot of new places you're coming to, obviously the fall you're coming to Mexico and now Germany and the other countries that you're still growing, is that anyway, you can kind of help investors frame the way, the ones that are relatively new when it became a large cap to the story and haven't seen you guide for all these years, very conservatively, so if you can kind of like explain how your guiding process works.

Unknown Executive: Yes. So for this quarter, we actually did flow through more than the Q1 beat as we continue to feel confident about where the year is headed for e.l.f. But we do take it a quarter at a time, to your point, Andrea. So we will stay very balanced in our approach for the current quarter and actually don't give specific quarterly guidance, but we do try to help give some color around what we're seeing and what we expect. But again, they have flowed through, at least for this quarter, more than that beat out of Q1 as we have increased confidence for the year.

Anna Lizzul: Hi, good afternoon, and thank you so much for the question.

Anna Lizzul: I was wondering if you could comment on any benefits you're seeing so far from trade down in both color cosmetics and mask skincare and separately I was wondering if you can comment on the ROI of your increased marketing spend in the quarter and where exactly you're allocating those dollars whether it's to support new product launches, international expansions

Speaker Change: or to increase demographic awareness of your brands. Thank you.

Unknown Executive: Perfect. Thank you. I'll pass it on. Congratulations again. And our next question is from Anna Lizzul with Bank of America. Please proceed. Hi, good afternoon. And thank you so much for the question. I was wondering if you could comment on any

Speaker Change: Hi Anna, this is Tarang, in terms of if we're seeing any consumer trade down.

Tarang Amin: We don't believe we're seeing trade down. I think the prestige category is still strong. We're seeing our ability to expand the category as we have done in terms of each every time we launch a Holy Grail. It gives millions of consumers greater access to a particular category who may not be participating in it. A great example being our bronzing drops, one of the most...

Tarang Amin: Requested items we had are bronzing drops of $12 versus a prestige item at $38 or even our soft glam satin foundation at $8 versus a prestige item at $40. We believe give some more consumers the opportunity to participate in the category and we feel that's really the main driver of our sales. We certainly are continuing to pick up quite a bit of share of the 260 basis points in color cosmetics of share that we picked up.

Speaker Change: obviously comes across different mass players.

Tarang Amin: We're the only brand that we've seen out of 800 that are tracked by Nielsen and Color Cosmetics.

Tarang Amin: that have grown share for 22 consecutive quarters and are quite bullish in our ability to continue to drive share, not only in color cosmetics

Tarang Amin: , but also skin care.

Tarang Amin: This quarter we hit an important milestone of L skin, not only growing 60 basis points of share but being a top 10 brand for the first time coming in at number 9.

Tarang Amin: The reason why that's significant is most of the brands in the top ten have been there for decades, so for us to do that just in a few years with the momentum we have both on e.l.f. Skin and Notorium gives us a lot of confidence there. And then in terms of the ROIs, what we see on our increase in marketing, we continue to see exceptional ROIs, many multiples above industry benchmarks.

Tarang Amin: And that is, in turn, driving the strong top line momentum.

Tarang Amin: What a marketing is also doing is really driving our unrated awareness.

Tarang Amin: So if you take a look in the last few years, we've grown in unaided awareness from 13% to 33%.

Speaker Change: I've been in the consumer space for over 30 years, and I've never seen a 20-point increase in unaided awareness.

Speaker Change: at the market leaders to less 55%. So the strategy you'll see is continue to fall for marketing standpoint, is continue to disrupt continued tests on new platforms, you know, we set in our prepared remarks.

Speaker Change: Since the beginning of this year, we've launched 15 unique campaigns, and those campaigns go across product, purpose,

Speaker Change: Our overall awareness build. And we feel really good about kind of our both the pace as well as our capabilities in that area, to be able to continue to branch and bring in new users. We're not only the number one brand amongst Gen Z and Gen Alpha,

Speaker Change: We're increasingly picking up many more Millennials and Gen X as well. So we love what our marketing is doing, both in the top line from awareness standpoint, equity and new audiences, and you'll continue to see us be quite strong there.

Speaker Change: Great, very helpful, thanks so much.

Tarang Amin: Hi Anna, this is Tarang. In terms of if we're seeing any consumer trade down, we don't believe we're seeing any trade down. I think the prestige category is still strong. We're seeing our ability to expand the category as we have done in terms of each every time we launch a Holy Grail, it gives millions of consumers greater access to a particular category who may not be participating in it. A great example being our bronzing drops, one of the most requested items we had. Our bronzing drops at $12 versus a prestige item at $38, or even our Soft Glam Satin Foundation at $8 versus a prestige item at $40, we believe gives more consumers the opportunity to participate in the category, and we feel that's really the main driver of our sales.

Operator: And our next question is from Anna Lizzul with Bank of America. Please proceed. Hi, good afternoon. And thank you so much for the question. I was wondering if you could

Speaker Change: The next question is from Ashley Helgen's with Jeffries. Please proceed.

Ashley Helgen: Hey, thanks for taking our questions and congrats on the nice quarter. It was great to see Walmart go to 12 feet from 8 feet. Just looking out over the next couple of years,

Speaker Change: Do you see more kind of shelf space opportunities like this for the e.l.f. brand in the U.S.? And then Mandy, just a clarification on guidance. I think last we spoke you said you don't include countries that have not yet been announced. So I just want to confirm that Germany and Australia are both new to the guide. Thanks.

Tarang Amin: We certainly continue to pick up quite a bit of share; the 260 basis points in color cosmetics of share that we picked up obviously comes across different mass players. We're the only brand that we've seen out of 800 that are tracked by Nielsen in color cosmetics that has grown share for 22 consecutive quarters and is quite bullish in our ability to continue to drive share not only in color cosmetics but also in skin care. This quarter, we hit an important milestone for e.l.f.

Tarang Amin: Skin not only growing 60 basis points of share but being a top 10 brand for the first time, coming in at number 9. The reason why that's significant is most of the brands in the top 10 have been there for decades, so for us to do that just in a few years with the momentum we have both on e.l.f. Skin and Notorium gives us a lot of confidence there.

Tarang Amin: In terms of the ROIs, what we see on our increase in marketing, we continue to see exceptional ROIs, many multiples above the industry benchmarks, and that is, in turn, driving the strong top line momentum. What marketing is also doing is really driving our unrated awareness. So if you take a look at the last few years, we've grown our unrated awareness from 13% to 33%. I've been in the consumer space for over 30 years, and I've never seen a 20 point increase in unrated awareness.

Tarang Amin: Yet the market leaders still have 55%. So the strategy you'll see is continue to fall from a marketing standpoint that is continued to disrupt continued tests on new platforms. You know, we set in our prepared remarks that since the beginning of this year, we've launched 15 unique campaigns and that those campaigns go across product, purpose, and overall awareness building, and we feel really good about both the pace as well as our capabilities in that area to be able to continue to branch out and bring in new users.

Speaker Change: So Ashley, I'll take the first part of it. We are also pleased with the space gains that we got at Walmart. You're right, it's about a 50% increase from a predominant 8-foot set to a 12-foot set predominantly. And we're seeing great results right off the bat. It usually takes us a couple seasons to fully optimize productivity, but we like the trajectory we're seeing. We already passed CoverGirl for the number three position at Walmart within striking distance of L'Oreal Paris at number two. And we continue to see more space opportunities even in the U.S. For all of the space that we've picked up, we're still dramatically under space, Walmart being a great example. While 12 feet is a good increase in the space we have, many of the legacy players out there can have 16 to 20-foot runs, if not more. So just given our

Tarang Amin: We're not only the number one brand amongst Gen Z and Gen Alpha, but we're increasingly picking up many more millennials in Gen X as well. So we love our marketing is doing both in the top line from an awareness standpoint equity and new audiences, and you'll continue to see us be quite strong. Great, very helpful, thanks a lot. The next question is from Ashley Helgans with Jeffreys Police.

Operator: The next question is from Ashley Helgans with Jeffrey's permission to proceed.

Speaker Change: Rankings, our productivity, we would foresee more space gains in the future, not only at Walmart, but even target where the number one brand with over 21% share of Target and we have had that. Now I think six consecutive quarters.

Operator: So actually, I'll take the first part of it. We are also pleased with the space gains that we got at Walmart. You're right, it's about a 50% increase from a predominant eight foot set to a 12 foot set predominantly, and we're seeing great results right off the bat. It usually takes us a couple seasons to fully optimize productivity, but we like the trajectory we're seeing. We've already passed CoverGirl for the number three position at Walmart, within striking distance of L'Oreal Paris at number two.

Operator: And we continue to see more space opportunities, even in the US. For all of the space that we've picked up, we're still dramatically under-space, Walmart being a great example. While 12 feet is a good increase in the space we have, many of the legacy players out there can have 16 to 20 foot runs, if not more.

Speaker Change: If you take a look, we have nowhere near 21% of the space, nor do we need it, we have, but we do feel there's opportunities at Target, Ulta, Walmart, and then especially in drug. Drug has been on a good path in terms of giving more space. You heard about the space increases at CVS.

Tarang Amin: So, just given our rankings, and our productivity, we would foresee more space gains in the future, not only at Walmart, but even at Target. We're the number one brand with over a 21% share at Target, and we have had that for now, I think, six consecutive quarters. If you take a look, we have nowhere near 21% of the space, nor do we need it. We do, but we do feel there's opportunities at Target, Ulta, Walmart, and then especially in drug.

Speaker Change: Walgreens last year, but our footprint's still quite small and drug and certain grocery. And so we just see lots of opportunity there. And then the last thing I'll say is, it's great to space gains are what gives me the greatest confidence in our business. Our ability to drive productivity, the productivity model we have, of proactively changing out.

Speaker Change: Up to 20% of the SKUs based on the data, the insights we get from beauty squad and our digital business. That's driven the vast majority of our growth and space has been a kind of top-run on that.

Tarang Amin: Drug has been on a good path in terms of giving more space. You heard about the space increases at CVS and Walgreens last year, but our footprint is still quite small in drug stores and certain grocery stores. And then the last thing I'll say is, as great as space gains are, what gives me the greatest confidence in our business is our ability to drive productivity, the productivity model we have of proactively changing out up to 20% of the SKUs based on the data, and the insights we get from Beauty Squad and our digital business. That's driven the vast majority of our growth, and space has been a nice kind of topping on that.

Tarang Amin: And then to answer your question, Ashley:

Unknown Speaker: And then to answer your question, Ashley, on Germany and Australia, yes, those are new to the guide, and so that has already been reflected in the guidance we just provided.

Speaker Change: and then to answer your question, Ashley, on Germany and Australia, yes, those are new to the guide and so that has already now been reflected in the guidance we just provided.

Speaker Change: Unknown Speaker 0

Ashley Helgen: Great, thanks so much.

Operator: And the next question is from Oliver Chen's with Cowin. Please proceed.

Speaker Change: i

Speaker Change: i

Speaker Change: And the next question is from Oliver Chen with Callen. Please proceed.

Oliver Chen: Hi Tarang and Mandy, the quarter was outstanding. What drove the nice beat in terms of the quarter? And on your guidance, do you expect units to outpace mix? Will that complexion remain the same?

Oliver Chen: Hi, Tarang and Mandy. The quarter was outstanding. What drove

Oliver Chen: The nice beat in terms of the quarter and your guidance you expect

Unknown Speaker: You do a really great job with inventory management. So how did you have enough inventory this quarter to drive such an outstanding performance? And going forward, I assume that you have an inventory position to beat in the event that things trend better. Also, Mandy, you mentioned ERP and distribution capacity. I would love your take on what's happening there and ways in which you're managing for risk, as those can be changes that can cause disruption. And I'm sure you have a lot of contingencies.

Speaker Change: Unit to our pacemics will that complexion remain the same.

Oliver Chen: You do a really agile job with inventory management just so how did you have enough inventory in this quarter to drive such an outstanding performance and going forward I assume that you have an inventory position to be in the events that things turn better.

Speaker Change: Also, Mandy, you mentioned ERP and distribution capacity, and we'd love your take on what's happening there and ways in which you're managing for risk, as those can be changes that can cause disruption. And I'm sure you have a lot of contingencies.

Unknown Speaker: And lastly, Tarang, the Holy Grail strategy has been a compelling approach to thinking about your product assortment and also growing incrementally. How does that apply to skincare? And what do you see as your hero products within skincare and also placement? It's been in different parts of the store. I know you've been innovating constantly in the skincare category. Thank you.

Speaker Change: and lastly Tarang. The Holy Grail Strategy has been a compelling approach to...

Tarang Amin: Thinking about your product assessment and also growing incrementally. How does that apply to skin care?

Speaker Change: What do you see as your hero products within skin care and also placement? It's been in different parts of the store. I know you've been innovating constantly in skin care. Thank you.

Tarang Amin: Thanks for the question, Oliver. So first, on the quarter, thank you so much. 50%, we believe, was a pretty tremendous quarter. And what came in better than our expectations, I mean, really, it starts with our value proposition, which continues to stand out in this environment. You couple that with our Holy Grail innovation.

Speaker Change: Thanks for the question Oliver. So first on the quarter, thank you so much. 50% we we do believe was a pretty tremendous quarter and what

Speaker Change: came in better than our expectations. I mean, it starts with our value proposition. Continue to stand out in this environment. You couple that with our Holy Grail Innovation, we talk about bronzing drops this quarter. We continue to see momentum behind our lip oils, which we launch not too long ago. And so that innovation then amplified by our marketing and digital engine, which turning just walked through, really helped to drive results for the quarter.

Unknown Speaker: We talked about bronzing drops this quarter. We continue to see momentum behind our lip oils, which we launched not too long ago. And so that innovation, then amplified by our marketing and digital engine, which Tarang just walked through, really helped to drive results for the quarter.

Speaker Change: The great thing about our results is that they continue to be unit-led. We were among the only ones in the top five able to grow units this quarter, and so we continue to expect that to be.

Unknown Speaker: The great thing about our results is that they continue to be unit-led. We were among the only ones in the top five able to grow units this quarter. And so we continue to expect that to be a key driver of our growth as we move forward. In fact, when we broke down the units versus mix component, that mix portion was largely driven by the inclusion of Noturium in our financials, as e.l.f. Mix has pretty much stayed in low single digits as we've started the year.

Speaker Change: a key driver of our growth as we move forward. In fact, when we broke down the units versus mix component, that mix portion largely was driven by the inclusion of noturium in our financials as ELF mix has pretty much stayed in low single digits as we've started the year.

Unknown Speaker: In terms of inventory management, we feel great about our inventory position. As we've talked about for the last several quarters, we've proactively taken our inventory levels up to support the demand that we're seeing, and additionally, we added Noturium and changed some terms with our vendors to take possession of that inventory earlier. So we feel great about being able to service the demand that we're seeing on the inventory that we have. On the second question, because you had three questions in there, Oliver.

Speaker Change: In terms of inventory management, we feel great about our inventory position. As we've talked for the last several quarters, we've proactively taken our inventory levels up to support the demand that we're seeing, and additionally added in noturium and changed some terms with our vendors to take possession of that inventory earlier. So we feel great about being able to service the demand that we're seeing on the inventory that we have.

Speaker Change: On the second question, because you had three questions in there, Oliver. Second question on ERP and distribution. So on the ERP, we are continuing to move forward on our ERP transition. We're continuing to test that. We have shifted our timelines a bit more to out to the spring. We were originally looking to launch in the fall. We've shifted that out to the spring just to allow for enough testing cycles as we go through. So we're feeling great about that.

Unknown Speaker: Second question on ERP and distribution. So on the ERP front, we are continuing to move forward on our ERP transition. We're continuing to test that. We have shifted our timelines a bit more out to spring. We were originally looking to launch in the fall, but we've shifted that out to the spring just to allow for enough testing cycles as we go. So we're feeling great about that. And then, from a distribution standpoint, we're continuing to expand our distribution footprint, getting additional capacity in the U.K. and in Asia, looking to set up a warehouse in Asia as well to start to service some future distribution. We're laying the groundwork now so that we have the capacity in place as we look out longer term.

Unknown Speaker: And then from a distribution standpoint, we're continuing to expand our distribution footprint, getting additional capacity in the UK. Also,

Speaker Change: in Asia looking to set up a warehouse in Asia as well to start to service some future distribution. We're laying the groundwork now so that we have the capacity in place as we look out longer term.

Tarang Amin: And then your last question, in terms of our holy grail approach, not only in color cosmetics, but we're using that same approach on skin care. Bron and drops is probably our best latest example of an absolute holy grail product at $12 versus the prestige inspiration at $38. And in terms of not only the holy grail approach we're replicating on elf skin but also the franchise approach. If I look at our current skin care franchises or main franchises of holy hydration, some touchables have both been doing extremely well.

Tarang Amin: Yeah, and then you last question on terms of our Holy Grail approach, not only in color cosmetics, but we're using that same approach on skin care. Brons and drops is probably our best latest example of absolute Holy Grail product at $12 versus the Prestige inspiration at $38.

Tarang Amin: And in terms of not only the Holy Grail approach we're replicating on e.l.f. Skin, but also the franchise approach. If I look at our current skin care franchises, our main franchises of Holy Hydration and Sun Touchables have both been doing extremely well. We'll see if Bronzing Drops becomes a third franchise or not, but we're continuing that not only in e.l.f. Skin, but also on Naturium. You heard about us expanding our Glow Getter body wash into the body oil category as well. You'll continue to see those two consistent themes of Holy Grails and franchises that can grow year after year.

Unknown Speaker: Okay. One quick follow-up. International margins, how should investors think about that? It looks like you're really investing in a nice infrastructure in London, and you have a capital-light approach to approaching the best-of-class partners, but what's the evolution? There's a big opportunity in all these countries. Thank you.

Unknown Speaker: Okay, one quick follow up international margins, how should investors think about that? You look like you're pretty, you're really investing in a nice infrastructure in London and you have a capital line approach to approaching the best of class partners but let's see evolution, there's a big opportunity in all these countries. Thank you.

Unknown Speaker: I would say from a margin perspective, as we scale internationally, there is an opportunity for those margins to be accretive overall. If you think about it, we are not tariffed as we import into those countries. And so that's a big piece of the pie that we don't have to incur as we spread out across the globe. And so, something to keep in mind. But again, international is a smaller part of our business, and it's something that we're watching as we continue to scale.

Unknown Speaker: Yeah, I would say from a margin perspective, as we scale internationally, there is an opportunity for those margins to be accretive overall. If you think about we are not tariffed as we import into those countries, and so that's a big

Speaker Change: Kristina Katten, Mandy Fields, Unknown Executive

Operator: Our next question is from Peter Grom with UBS. Please proceed.

Speaker Change: That's your birds.

Operator: Our next question is from Peter Grom with UBS. Please proceed.

Unknown Speaker: Thanks, Operator. Good afternoon, everyone. I hope you are doing well.

Peter Grom: Thanks, operator. Good afternoon, everyone. I hope you are doing well. I wanted to just go back to the 2Q sales guidance.

Speaker Change: So, slightly above the full year range, but when you consider, you know, to make US track channels grow at least 20% which isn't really all that different from what you saw in my Q, you still get a benefit from the Turium, it really seems to imply pretty big.

Peter Grom: Step down and maybe non-track channels, or maybe a weaker contribution from international despite kind of expanding doors and markets. Can you maybe just unpack that of it, are you just simply being conservative, or is there something you're seeing that that's really driving that to you?

Peter Grom: I wanted to just go back to the 2Q sales guidance, so slightly above the full year range. But when you consider you anticipate U.S. track channel growth of at least 20%, which isn't really all that different from what you saw in 1Q, you still get a benefit from Naturium. It really seems to imply a pretty big step down in maybe non-track channels or maybe a weaker contribution from international despite kind of expanding doors and markets. Can you maybe just unpack that a bit? Are you just simply being conservative? Or is there something you're seeing that's really driving that view?

Unknown Speaker: Hi Peter. So I would say we're being very consistent in our guidance approach. We again always take a balanced approach as we come into a quarter. We don't give hard and fast guidance, but we try to provide some color as to what to expect. We talked about track channels.

Peter Grom: Hi Peter.

Unknown Speaker: So I would say we're being very consistent in our guidance approach. We, again, always take a balanced approach as we come into a quarter. We don't give hard and fast guidance, but we try to provide some color as to what to expect.

Unknown Speaker: Yes, we expect that to be in the 20% range over the course of the quarter. You might see some ebbs and flows there as you go through, but I'm feeling good about that. Notorium will continue to be a contributor, as you pointed out, and we also continue to feel good about international and our untracked channels. And so, as we see it today, we feel great about indicating that the total sales growth for Q2 could be slightly above that range that we've provided for the year. And we'll take it, like I said, one quarter at a time.

Unknown Speaker: We talked about tracked channels. Yes, we expect that to be in the 20% range over the course of the quarter. Might see some ebbs and flows there as you go through, but feeling good about that. Noturium will continue to be a contributor, as you pointed out. And we also continue to feel good about international and our untracked channels. And so, as we see it today, we feel great about indicating that the total sales growth for Q2 could be slightly above that for Q2.

Unknown Speaker: Range that we've provided for the year, and we'll take it, like I said, one quarter at a time.

Unknown Speaker: Great And then maybe following up on the profit guidance, I think you said flattish gross margin for the second quarter. So can you maybe just bridge us from the 28% adjusted EBITDA margin last year to the low teens you mentioned? It seems like a lot of SG&AD leverage. You totally get your reinvesting and stepping up marketing and kind of the non-marketing piece around Ethereum, but it just seems like you almost need 1500 basis points of SG&AD leverage to hit this number. So just, I think any color would be helpful on just kind of drivers like that.

Unknown Speaker: Great. And then just maybe following up on the profit guidance, I think you said flattish gross margin for the second quarter. So can you maybe just bridge us from the 28% adjusted EBITDA margin last year to the low teens you mentioned?

Unknown Speaker: Things like a lot of SG-80s library totally get your reinvesting and serving it marketing and kind of the non-marketing piece around the carry on. But it just seems like you almost need 1,500 basis points of SG-80s leverage to hit this number. So I think any color would be helpful on just kind of drivers about.

Unknown Speaker: Yeah, so it's really more of a first half, second half story when you think about the EBITDA margins. EBITDA margins in the first half, we forecasted would be lower, one, driven by the marketing investment that we're making. So in Q1, you saw that increase by 700 basis points. Last year in Q2, marketing was 21% of net sales. We're targeting that higher end of the range, closer to 26 for the second quarter.

Unknown Speaker: Yeah, so it's really more of a first half second half story when you think about the EBITDA margins. EBITDA margins in the first half we outlooked would be lower, one, driven by the marketing investment that we're making. So in Q1, you saw that up 700 basis points. Last year in Q2, marketing was 21% of net sales. We're targeting that higher end of the range closer to the 26 for the second quarter. And so you're going to continue to see investment there. And then as we walk through, we talked about noturium, annual annualizing that spend, and continuing to invest in people and infrastructure, of which once we get to the second half, we will have a more normalized level of spend. So you're going to start cycling marketing in the 25-26% range.

Unknown Speaker: And then as we walk through, we talked about noturium, annualizing that spend, and continuing to invest in people and infrastructure, of which once we get to the second half, we will have a more normalized level of spend. So you're going to start cycling marketing in the 25, 26% range already in that base. And so you don't have that as an incremental.

Speaker Change: Transcription by Transcription Outsourcing, LLC.

Eva: Better, much better, Eva Dammargin, growth as we get into.

Unknown Speaker: And then we start to have noturium in the base again, so you get to a little bit normalized place. So we do expect better, much better EBITDA margin growth as we get into the second half of the year, better EBITDA, I would say adjusted EBITDA growth overall, and margin expansion as we get into the second half of the year. So it's just a little bit of a rebalancing of how we're spending this year to get to that 20 basis points of expansion for the full year.

Unknown Speaker: The second half of the year, better EBITDA, I would say adjusted EBITDA growth overall and margin expansion as we get into the second half of the year. So it's just a little bit of a rebalancing of how we're spending this year to get to that 20 basis points of expansion on the full year.

Unknown Speaker: Great, I'll pass it on. Thank you so much.

Unknown Speaker: Great, I'll pass it on. Thank you so much.

Operator: The next question is from Linda Bolton Weiser with DA Davidson. Please proceed.

Operator: The next question is from Linda Bolton, a wiser with the A Davidson Police Proceed.

Linda Bolton Weiser: Yes, hi. I have two questions. I guess the first one is just a check on Notarium. I guess, you know, it seemed like it contributed a little less to the growth in the quarter than I thought. At one point, you had given a revenue projection for the year for Notarium. Maybe you could update that for us. So we've got that modeling correct.

Linda Bolton Weiser: Hi, I have two questions, I guess the first one is just...

Linda Bolton Weiser: A check on Noturium. I guess, you know, it seemed like it contributed a little less to the growth in the quarter than I thought. At one point you had given a revenue projection for the year for Noturium. Maybe you could update that for us.

Unknown Speaker: And then secondly, just to kind of dig in some more on the growth projection for the second quarter, the prior year track channel comparisons do become easier, and in September, they're even in the 50% range. Um, so it seems that if you're projecting only 20% TOS growth, it's quite a deceleration on a two-year stack basis. And I know these are crazy numbers to think you can even grow 20% against 50%.

Unknown Speaker: So we've got that modeling correct. And then secondly, just to kind of dig in some more on the growth projection for the second quarter, the prior year

Unknown Speaker: Track channel comparison, do become easier, and in September, they're even in the 50% range in prior year.

Unknown Speaker: Um...

Unknown Speaker: So it seems that if you're projecting only 20% TOS growth, it's quite a deceleration on a two year stack basis. And I know these are crazy numbers to think you can even grow 20 against 50%. But that's a deceleration on a two year stack from 100% to 70%.

Unknown Speaker: But that's a deceleration on a two-year stack from 100% to 70%. So again, I think growth investors just kind of want to understand, you know, like what is causing you to think that you can only do 20% POS when the prior year comps actually get quite a bit easier.

Unknown Speaker: So, again, I think growth investors just kind of want to understand, you know, like what is causing you to think that you can only do 20% POS when prior to your comp they actually get quite a bit easier. Thank you.

Unknown Speaker: Hi Linda. So I'll go ahead and take this question. So on Naturium, Naturium contributed 16 percentage points to our net sales growth for this quarter. We had not provided any revenue projections for Naturium for the year, so it continues to track right in line. And maybe even slightly better than where we saw it for the year.

Unknown Speaker: Thank you. I'll go ahead and take this question. So on the tour, I'm soon becoming a tourist.

Unknown Speaker: Hi, Linda. So I'll go ahead and take this question. So on Noturium, so Noturium contributed 16 percentage points to our net sales growth for this quarter. We had not provided any revenue projections for Noturium on the year. So Noturium continues to track right in line, maybe even slightly better than where we saw it for the year. And so that is really on track and very proud to see them having launched in Ulta and really pleased with what we're seeing there.

Speaker Change: On the growth projections for Q2, you know, I hear you on the deceleration, but we're actually seeing this as strength upon strength.

Unknown Speaker: Even if 50% in the base or 76% in the base, to continue to build upon that, shows the strength of our brand, it shows that we are continuing to build market share in this environment and lead the growth for the category. And so we feel great about how we're positioned and the growth that we're driving overall.

Speaker Change: Episode 2

Operator: And our next question comes from Mark Astrachan with Beard Police Proceed.

Operator: i

Speaker Change: And our next question comes from Mark Altschwager with Baird. Please proceed.

Mark Astrachan: Good afternoon. Thank you for taking my question. First, I just wanted to follow up on the price-mix contribution. I think you said e.l.f. tracking up low single digits in the first quarter below what we've seen in some recent periods, and I believe this is because some of the recent innovations are coming in at lower price points. Is that right? And then how should we be thinking about that price-mix contribution moving forward here, both in Q2 and then in the back half as you start to cycle the notarian?

Mark Astrachan: Good afternoon. Thank you for taking my question. First, just wanted to follow up on the price mix contribution. I think you said outtracking up low single digits in the first quarter, you know, below what we've seen in some recent periods. I believe because some of the recent innovations are coming in at lower price points.

Mark Astrachan: Is that right? And then how should we be thinking about that price-mix contribution moving forward here, both Q2 and then back half as you start to cycle the notarium?

Unknown Speaker: Yep, so on the price mix contribution, yes, you're right. If this year we did introduce some lower price innovation, again, staying true to our value proposition, I wanted to make sure that we had some well-priced items out there in the market, and they're continuing to perform very well. That has taken down some of our price mix, but again, with Naturium coming into the fold, that price mix was about 16 percentage points for the quarter overall.

Unknown Speaker: Yep, so on the price mix contribution, yes you're right, this year we did introduce some lower price innovation, again staying true to our value proposition, wanted to make sure that we had some well priced items out there in the market and they're continuing to perform very well. That has taken down some of our price mix, but again, with Naturium coming into the fold, that price mix was about 15 percentage points for the quarter overall. So feeling great about that, the things that's even better is that our growth continues to be led by unit volumes, and that's what we want to continue to see on the road ahead, speaks to the demand that we're seeing for the brand.

Unknown Speaker: If you haven't seen the sun in sight,

Unknown Speaker: Thank you. And then with some of the sluggish growth you're seeing in the mass cosmetics industry overall, I thought you were taking a lot of share here, but what are you seeing? And what are you expecting on the promotional front?

Speaker Change: Thank you. And then with some of the sluggish growth you're seeing in the mass cosmetics industry-wide, obviously you're taking a lot of share here, but what are you seeing or what are you expecting on the promotional front?

Tarang Amin: Hi Mark. I'll take that. You know, I would say first of all, on the mass color cosmetic side, the low single-digit decline that you're seeing is also up against a much higher period. So on a two-year stack basis, the category is still up. From a promotional standpoint on the mass side, we're not seeing increased promotion on the mass side. I think you are a little bit on the prestige or in the specialty channel.

Tarang Amin: Hi, Mark. I'll take that. You know, I would say, first of all, on the mass color cosmetic side, the low single-digit decline that you're seeing is also up against a much higher period. So, on a two-year stack basis, the category is still up.

Tarang Amin: From a promotional standpoint on the mass side, we're not seeing increased promotion on the mass side. I think you are a little bit on the prestige or in specialty channel, but overall I would say...

Speaker Change: We're not really seeing much and it hasn't really bothered us in the past mainly because of our superior value proposition. We're a great value every single day.

Speaker Change: A lot of, I think, the promotions, the high-low players really, they end up trading amongst themselves more than us. We've been able to continue to pick up market share and pretty confident in terms of our ability to continue to do so.

Operator: The next question comes from Susan Anderson with Canaccord Genuity. Please proceed. Hi Kitty

Unknown Speaker: But overall, I would say we're not really seeing much, and it hasn't really bothered us in the past, mainly because of our superior value proposition. We're great value every single day. So a lot of I think the promotions and the high-low players really end up trading amongst themselves more than us. We've been able to continue to pick up market share, and we are pretty confident in terms of our ability to continue to do so. And the next question comes from Susan Anderson with Canaccord Genuity; please proceed. Hi, good evening. Thanks for fitting me in here. I guess maybe just a little.

Speaker Change: Thanks for watching, and don't forget to like, share, and subscribe to our channel.

Speaker Change: The next question comes from Susan Anderson with Canaccord Genuity. Please proceed.

Susan Anderson: Hi, good evening. Thanks for joining me in here. I just may be just a little bit of color on nature and the roll out at Ulta. It sounds like it's going pretty well. I guess I'm curious if you're seeing a similar customer uptick that you see at Targetten.

Susan Anderson: Probably not there yet, but, you know, how does the productivity on the shelf compare? And then also, do you have plans this year or in the next year to roll Nature Amin out to further retower six?

Operator: Hi Susan, we're really pleased with what we're seeing in Ethereum. It's too early to tell, in terms of the productivity where we set facial skin care just a couple weeks ago. We're in the process right now of finishing our body. We wrote a body and lip reset.

Operator: We're really pleased with what we're seeing in Victorium. facial skin care.

Operator: Just a couple weeks ago, we're in the process right now of finishing our body.

Operator: World Ambodian lip resets, and so we'll take a little while for us to see it, but so far.

Speaker Change: Both we and Altar are pleased and there's a lot of excitement for Neutarium at Altid Ud, and not only Altid Ud, but also at Target, you know, we're up against a big period last year, where we had expanded distribution and yet Target is also leaning in. So we feel great about the momentum that we're seeing with Neutarium and continue to do it's ahead of our...

Operator: at own expectations will be made the acquisition in terms of acquisition models, so continued to be really, really excited. And then in terms of further rollout, Ajay our focus right now, it's all 1,400 altas beauty stores. We also have a track record on L for when you expand, making sure you're...

Speaker Change: Existing customers remain happy and well supported, so I'd say near-term focus in the U.S. will be target Amazon ultibutie, which will have that's plenty for the team to execute and continue to go on. There are opportunities internationally on the Turium.

Speaker Change: Right now, we're mainly in Space NK in the UK, so, you know, I think in subsequent quarters, you'll hear a little bit more about our plans in terms of how we take Neuterium into other markets as well.

Tarang Amin: This concludes our question and answer session for today's conference. I would now like to turn the conference back over to Tarang Amin for any closing remarks.

Tarang Amin: i'm

Tarang Amin: And this concludes our question and answer session for today's conference. I would now like to turn the conference back over to Tarang Amin for any closing remarks.

Tarang Amin: Well, thanks for joining us today. I'm so proud of our incredible team for delivering another quarter of industry-leading growth. Thank you to every e.l.f. and e.l.f. supporter. partner for your passion and dedication to our vision of creating a different kind of beauty company. We look forward to seeing some of you at our upcoming investor meetings and speaking with you in November when we'll discuss our second quarter results. Thank you, and be well.

Tarang Amin: Well, thanks for joining us today. I'm so proud of our incredible team for delivering another quarter of industry leading growth. Thank you to every else and else partner for your passion and dedication to our vision of creating a different kind of beauty company.

Tarang Amin: We look forward to seeing some of you at our upcoming investor meetings and speaking with you in November when we'll discuss our second quarter results. Thank you and be well.

Operator: The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.

Operator: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

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Unknown Executive: Absolutely. Hi Andrea. So I'll take the first question.

Tarang Amin: And so, it'll take a little while for us to see it, but so far, both we and altar are pleased, and there's a lot of excitement for Neterium, Edel to Beauty, and not only Ulta Beauty but also Target. Target, you know, we're up against a big period last year where we had expanded distribution, and yet Target is also leaning in. So we feel great about the momentum that we're seeing with Neterium and will continue to do so.

Unknown Speaker: And so that is really on track, and I'm very proud to see them having launched in Ulta and really pleased with what we're seeing there. On the growth projections for Q2, I hear you on the deceleration, but we're actually seeing this as strength upon strength. Even if 50% of the base or 76% of the base to continue to build upon, that shows the strength of our brand. It shows that we are continuing to build market share in this environment and lead the growth for the category. And so we feel great about how we're positioned and the growth that we're driving overall.

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Unknown Speaker: So feeling great about that, the thing that's even better is that our growth continues to be led by unit volume, and that's what we want to continue to see on the road ahead, speaks to the demand that we're seeing for the brand.

Tarang Amin: We'll see if Brons and drops becomes a third franchise or not, but we're continuing that not only in elf skin but also on the terrain. You heard about expanding our glow getter body wash into the body oil category as well. And so you'll continue to see those two consistent themes of holy grails and franchises that can grow year after year.

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Tarang Amin: It's ahead of our own expectations when we made the acquisition in terms of our acquisition model, so we continue to be really, really excited. And then in terms of further rollout, I'd say our focus right now is all 1,400 Ulta Beauty stores. We all have a track record on L for when you expand, making sure your existing customers remain happy and well supported. So I'd say, our near-term focus in the U.S. will be on Amazon and Ulta Beauty.

Tarang Amin: We feel like that's plenty for the team to execute and continue to go on. There are opportunities internationally for Turium. Right now, we're mainly in space and K in the U.K. So, you know, I think in subsequent quarters, you'll feel a bit more about our plans in terms of how we take Neterium into other markets.