Q1 2026 elf Beauty Inc Earnings Call

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Hey, hey.

Thank you for joining us today to discuss elf. Beauties first quarter fiscal, 26 results. I'm Casey Ken vice president of corporate development and investor relations with me today are terrain Amin, chairman and chief executive officer and Mandy Fields, senior vice, president and Chief Financial Officer.

We encourage you to tune in to our webcast presentation for the best viewing experience, which you can access on our website at investor.fb.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,

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. Let me turn the webcast over to Terrain

Thank you, Casey, and good afternoon, everyone.

Today, we will discuss our first quarter results and our approach to fiscal 2026. I'm proud of our incredible elf beauty team for delivering, another quarter of industry-leading results.

In q1, we grew net sales 9% on top of 50% growth in q1 of last year.

Delivered adjusted. Ebita of 87 million up. 12%.

And gained 210 basis points of market share.

Q1 marked. Our 26th consecutive quarter of both net sales growth and market share gains.

e.l.f. is the only brand of the nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 26 consecutive quarters.

As we look ahead, we see the potential more than double our business over the coming years. Given the significant white space, we see in color cosmetics,

Skin care and International.

We believe the acquisition of road, which closed yesterday, enhances our position as a leading player in accessible Beauty.

Let me update you on our progress in q1.

First, In Color cosmetics.

Nationally elf is the number 1 unit. Share brand with approximately. 15% share.

And the number 2 dollars here brand with approximately 13% share.

More than double where we were just 3 years ago.

The combination of our value proposition Powerhouse, Innovation, and disruptive, marketing engine continued to fuel our market share gains.

Looking to our value. Proposition, the average price point for Elf Cosmetics is about 6.50 cents today as compared to nearly 9.50 for legacy, Mass Cosmetics Brands and over twenty dollars for Prestige brands.

As we spoke about last quarter to help mitigate the impact from tariffs, we took a dollar increase on our entire product assortment effective, August 1st.

This is only the third price increase we've taken in our 21-year history.

With 75% of e.l.f. Product Portfolio remaining under $10, our community continues to praise our commitment to making the best of beauty accessible to every eye, lip, and face.

in Target, our longest standing National Retail customer where the number 1 cosmetic approximately 21%, share growing by 190 basis points in q1,

We're making great progress on replicating our success at Target with other key retailers.

We posted triple digit, share gains with all of our major track Channel. Retail Partners in q1.

We're also finding success with newer retailers like Dollar General.

Dollar General has a stated strategy of serving the underserved with 80% of stores, serving rural markets.

Their partnership has been a win-win.

Elf is attracting new buyers into the Channel with 60% of Elf purchases. At Dollar General, coming from Shoppers who never bought Cosmetics at dollar and 50 of these Shoppers are new to the elf brand.

We're excited to expand our footprint to additional Dollar General stores this fall.

Looking to Innovation, we have a unique ability to deliver a steady stream of holy Grails.

Taking inspiration from our community and the best products in Prestige and bringing them to Market in extraordinary value.

As consumers continue to seek multi-benefit products and skin-forward cosmetics, we're answering the call with our Halo Glow Skin Tint Mineral SPF 50, pricing at an incredible value of $18, compared to prestige items at $48 or more.

Else, just dropped an 18th.

My skin looks like literal glass like perfection.

There's also like not a pore in sight.

It like blurred, my texture, while making my skin super radiant, you know what my reaction to this is I am shocked that this is elf.

This is giving like luxury Foundation. This reminds me of the 290 La Prairie Foundation. I do not say this lightly.

This is e.l.f.'s best product to date.

Hands down.

Halo glow. Skin tint was our top selling Cosmetics product, in q1, on elf cosmetics.com.

Our Holy Grail, Innovation approach is driving, share games across segments.

In Q1, we delivered triple-digit share gains across face, lip, and eye makeup.

We've more than doubled our share in each of these segments of the Last 5 Years.

As compared to the 22% share and number one ranking, we have, in fact, a 13% share in the number three ranking in lip, and a 9% share in the number four ranking in.

We believe we have the innovation engine to grow share in these large segments.

We're also leaning into our disruptive marketing engine to fuel brand awareness.

Else, unified marketing engine, fuses insights Innovation, and entertainment. And elevates elf is 1 of the most talked about Beauty Brands in the world.

We move at the speed of our community.

Sparked by the Insight that 7 of the top 10 most viewed lip gloss videos on Tik Tok featured Tik, tokers customizing their own jumbo Halo glow, lip gloss, we turned fandom into Innovation at elf speed.

From insight to action in under 4 weeks. We launched a DIY Halo gloss, kit exclusively on Tik Tok shop that sold out in under 24 hours.

Turning the skincare.

Skincare today. Drives nearly 20% of our Global consumption more than double the level. We had a few years ago and we continue to see significant runway for growth.

We have 2 of the fastest growing masks, skincare brands with elf skin and atorium that are distinct, yet complimentary in price points, positioning and audiences.

We're leaning into our value proposition and power us Innovation with our latest elf skin product launch.

Our Briiode Icon Vitamin C Furyk serum is priced at an incredible value of $16, compared to a prestige item priced at $185.

All of our favorite products, this will brighten up your skin tone and lighten up any dark spots that you have. This literally feels so good on the skin, you guys, and it doesn't smell like anything. Can we just take a moment for the glow? You guys, like my skin is glowing! This glow for $16? Absolutely, yes! So if you did not notice, the packaging is giving very luxurious, and the price...

$16 don't like the other 1, that's over a hundred. You know, what else is always here to give Daddy on a budget. I am in love with this girl.

This serum was our best selling skincare product on elf cosmetics.com in q1.

Elf's skin is cultivating. Cultural relevance with the premiere of sun hinged.

We reimagine SPF education with a comedy roast to the Sun at the intersection of humor and health to drive awareness.

Consumer research finds that 91% of people prefer brands that are funny, and 90% are more likely to recall a brand that uses humor.

When you're a stand-up.

There are things you dream of doing.

SNL.

It's Nitro. Maybe a Netflix special.

But above all, it's the elf sunscreen shop. It's all I've ever wanted.

As we know we're here to roast the sun. Oh my God. The son is begging me out. There are a lot of risks to not wearing sunscreen like getting very tense and sexy.

And skin cancer. So yeah.

Looking to International.

Our International, net sales, grew 30%, q1 fueled by growth, in our existing markets, as well as expansion into new markets.

In the UK, our largest market outside the US Elf Cosmetics, outpace category growth by 3x and q1.

Increasing our rank from the number 4 Brand to the number 3, brand.

As we look to new international markets, we've seen success with our engagement model across social platforms driving consumer demand. Well before we enter a country,

we saw this play out in q1 with the launch of Elf in over 1200 stores with crowd dot the number. 1 Beauty retail in the Netherlands and Belgium

Brand in Belgium and the number 2 brand in the Netherlands.

We're excited for the international expansion we have planned this fall.

Elf is launching with Rossman in Poland and Sephora. In the 6 countries of the gulf cooperation Council.

Natorium is also expanding into additional boot stores in the UK and launching with Sephora in Australia.

4 contacts. 6 years ago, we sold 28 million internationally or about 10% of our sales.

Today, we sell 266 million, International representing, 20% of our sales.

We expect that mix to continue to grow as we gain, share in existing markets and expand in New Markets.

As we look ahead, we remain confident in our ability to continue to gain, share and capture the significant white space ahead of us.

We believe that opportunity is further accelerated with our acquisition of Road, a breakthrough, high growth Beauty brand founded, by Hailey Rhode Bieber.

The acquisition closed yesterday and we're thrilled to officially welcome, The Talented Road team to the elf Beauty family.

I've been in the consumer space, 34 years, and have been blown away by what Haley and her team are building.

In just under 3 years since its founding road is seen exceptional, growth achieving, 212 million dollars of net sales in the 1231 2025 DTC only with just 10 products.

We believe the acquisition of Road brings together 2 like a disruptors who are best in class and creating highly desirable brands that deliver high quality Innovation to highly engaged communities.

As we combine, our initial Focus will be to help in 2 areas.

First to accelerate roads brand awareness.

for context roads, aided awareness is 20% today in the US, half the level of other premium skincare Brands, which averaged 40% or more awareness,

Second, we plan to leverage our deep retail expertise and help Road expand their distribution footprint.

The team is focused on executing its launches, phora, the world's leading Global Beauty retailer.

Sephora's standard approach is to test a brand in a subset of stores before scaling.

Given roads breakthrough dtc's and Sephora's belief in the potential of the brand.

Road is launching in all sorts stores, the US and Canada in September, and the UK, by the end of the year.

We're excited to accelerate elf Beauties, Global presence with Sephora building, upon the successful partnership. We've had since launching elf into Sephora, Mexico. Last year.

We've been disrupting and driving industry-leading growth for 21 years in service to our growing communities around the world.

As we look ahead and now further fueled by road, we see an opportunity more than double our business. Over the coming years with significant white space. We see in color Cosmetics skin care and international across our portfolio of brands.

I'll now turn the call over to Mandy to talk more about our first quarter results and our approach to fiscal 2026.

Thank you, Terrain.

Q1, net sales.

A percent growth in q1 of last year.

Primarily driven by continued growth in unit volume.

Our net sales in the US grew 5% year-over-year in q1 while International, net, sales, grew 30%, we are pleased to see continued momentum and consumption with our growth outpacing category. Trends leading to 210 basis points of market share gains in the quarter.

Q1 gross margin of 69% was down approximately 215 basis points compared to Prior year.

The year-over-year decline was driven by incremental tariff costs.

Partially offset by favorable foreign exchange impacts on Goods purchased from China and mix.

On an adjusted basis, SG&A as a percentage of sales was 50% in Q1, compared to 51% in Q1 last year.

Marketing and digital investment for the quarter was 22% of net sales as compared to 23% in q1 last year.

Marketing spin for the quarter was lower than planned as campaign spin shifted into Q2.

We continue to expect marketing and digital spend at approximately 24 to 26% of net sales in fiscal 26.

In line with the range we targeted in fiscal 25.

Q1 adjusted debit DE was $87 million, up 12% versus last year.

At net income was 51 million or 89 cents per diluted, share compared to 64 million or 110 cents per diluted share a year ago.

The decrease in adjusted net income and EPS metrics was primarily driven by a more normalized tax rate as compared to q1 last year, which included discrete tax benefits related to stock-based compensation.

Moving to the balance sheet and cash flow.

Our balance sheet remains strong and we believe Physicians as well to execute our long-term growth plans.

We ended the quarter with 170 million in cash on hand compared to a cash balance of 109 million a year ago. I'm also pleased with the 2000 in free cash flow. We generated in q1 up from half a million dollars a year ago.

Subsequent to quarter end. We closed on our acquisition of road as a reminder. We financed the $800 million upfront transaction with an incremental Term Loan of approximately dollars, as well as $200 million or approximately 2.6 million shares of Elf Beauty, common stock issued directly to the equity holders of Road.

Our liquidity position remains strong with relatively low leverage, post the transaction. We expect our cash priorities for the year to remain on investing behind our growth initiatives and supporting strategic extensions. The specific initiatives we're focused on this year, include investing in our people and infrastructure. Our Erp transition to sap, and our International expansion,

In July, we officially went live on SAP. While it's still early days, I'm pleased to report that our go-live was successful and our business is transacting. As you all know, these are significant undertakings; our smooth go-live is a testament to the exceptional talent and dedication of our e.l.f. Beauty team members and partners.

Now, let's turn to fiscal 26. As we spoke about last quarter, we are planning to provide a full year of fiscal. 26 Outlook. Once we have greater certainty on tariffs,

unfortunately there continues to be a broad range of potential outcomes to set the foundation about 75% of our Global Production today comes from China between April 9th and May 13th. We were subject to tariffs at the 170% level. As of May 14th product Imports to the US are subject to tariffs at the 55% level. 25% of that was put into place in 2019. Plus an incremental 30% that is now in place through mid August.

Beyond this date, the Tariff rate remains subject to ongoing negotiations.

For these reasons, we are waiting for greater clarity to issue a full-year fiscal 2026 outlook.

For context.

If tariffs were to remain at this incremental, 30% level, we estimate. The gross impact to our cost of goods, sold to be approximately 50 million dollars on an annualized basis.

And as we spoke about last quarter, our tariff, mitigation plans are already underway through 3. Key vectors pricing supply chain optimization and business diversification. With that said, we do have better visibility into how we expect the first half of the year to shape up and I'd like to provide some color on our approach.

From a top line perspective, we expect to deliver net sales growth. In the first half of the Year above the 9% growth that we delivered in q1.

Primarily given the incremental contribution from road for about 2 months of Q2.

Note, we are not benefiting from the road selling to Sephora as that occurred prior to closing.

From a profitability standpoint. We expect adjusted evida margins to be a proximately 20% in the first half of the year, which we believe is quite strong in this macroeconomic environment.

On a quarterly basis versus q1. This accounts for flowing through more of our higher. Pair of cogs the timing shift in marketing campaign spend and the inclusion of Road in our Consolidated financials.

In summary, we're pleased to have delivered another quarter of industry-leading sales and market share growth.

We believe we have a winning strategy and are in the early innings of unlocking the full potential we see as we welcome the road to our growing portfolio of disruptive brands.

With that operator, you may open the call to questions.

We will now begin the question and answer session.

to ask a question, you may press star then 1 on your touchtone phone,

If you are using a speaker-phone, please pick up your handset before pressing the keys.

Has been addressed and you would like to withdraw your question. Please. Press star then 2

At this time, we will pause momentarily to assemble our roster.

The first question today comes from Susan Anderson with canaccord. Please go ahead.

Hi, good afternoon, Alec Leon for Susan, a question on the tariffs. Can you talk about how much inventory uh might be trapped in um at the 170% rate versus the 50% rate? And if there's any way to talk about the potential timing of it flowing through the p&l, thank you.

Hi, this is Mandy. So on the tariffs we talked a little bit about this last quarter. There was a period of time that we were purchasing at that 170% level. Um, and so right now, what we have in inventory is a that 170 and the 555 plus some that is even at the 25% level that we were previously subject to uh, what we expect for Q2 is more of that, um, 170% to flow through. And so, that's why we, we called that out on the clock, this expecting more of that flow through in Q2. So would expect to see kind of a a a lower growth margin quarter of a quarter as we go through.

Thanks and then just a follow-up. So the first half ibida margin guide, it kind of implies a you know, 5 to 600 uh basis points. Be leveraged for ibida. Margins in second quarter, how much of that should we think about is coming from um, gross margin versus sgna. When you include there's a lot of moving pieces of the tariffs, the road acquisition uh maybe some incremental investment. Thank you.

Yeah, so that first half ibida margin that we called out the implications on Q2, really driven by 3 factors. 1 is the gross margin as we just talked to flowing through more of those tariffs in Q2

Secondly, is the shift in marketing spin. So we did have some campaign spin shift from q1 into Q2 and then lastly, is the addition of Road into our sgna again, without that benefit of the selling to Sephora from a Topline standpoint.

Overall, still quite strong. I would say from an EBITDA margin standpoint at approximately 20%, just given the kind of macro that we're operating in.

The next question comes from zero. Mena'em with Morgan Stanley. Please go ahead.

Hi. Um, I was just hoping uh Mandy or Trang. You could expand a bit on the greater than the 9% sales growth. That was posted in fiscal, q1 comment for the first half.

A does that come and hold without Road. I think Mandy you mentioned that road was in there, so just clarification there and maybe just

Through some of the key puts and takes. As you think about fiscal, Q2 versus fiscal q1 just conceptually how you're thinking about the business. I know we won't get quantification but a lot of moving pieces with pricing the consumer, demand reaction to pricing the retailer ordering patterns that the base business volatility. So just any conceptual thoughts around those areas would be helpful. Just as you think about the underlying business uh sequentially fiscal, Q2 relative to fiscal q1. Thanks,

Thanks for the question du Sol on the your first question, we have not broken out. What else versus road? We just want it to acknowledge that for Q2 we will have the addition of Road into our financials and so that will help to drive uh, Q2 higher than what we saw in q1 on on the elf business in particular, we're really pleased with what we're seeing on the elf business 1. I would say um our fall Innovation continues to perform well, we talked about pulling our melting lip balms up to launch earlier. Our community was asking for that. And so when you think

About that, um, that performance. And now we're cycling fall in the base, you know, fall last year in the base. We're still seeing a positive result overall for fall 25 Innovation. So feeling very pleased with that. And I would say that our our objective is just continue to build share, just like we did in q1. We built 210 basis, points of share in q1 across all 3 segments, I've lived and face and so feeling very good about the elf business. Um, the underlying elf business as we go through and to your point, pricing will be something that that kicks in. We'll see where the consumer Nets out on that. But as, you know, um, when we talked about issuing pricing or having to take that dollar price increase back in May, uh, consumer sentiment was positive for us. And so we're, we're really going to be watching for the elasticity and the response there itself.

Okay, great. And then just as a follow-up, um, Road EPS, secretion as we think about this fiscal year separate from the base business, um, it looks like the acquisition will be significantly creative. Just give us a sense for how you're managing that is there. A lot of spend back behind the business near-term there? Um, you know, given the expansion in Sephora and maybe just touch on the underlying level of Revenue, growth for the business, um, versus how it exists at last year. Just just with the Sephora launch coming up and obviously the strong base business growth Trends on top of that, thanks.

Yeah. So we we're quite excited about the road launch into Sephora. Um, and, and as we talked last quarter, even with the Investments that we want to make back into the business. We still expect this to be a creative overall, so very pleased with that. Um, and, and we're pleased with what we're seeing out of Road. Um, you know, they had their lemon Tini, launch of their lip peptide and that went really well for them. Uh, we're just so excited about all the signals that we're seeing on road, um, and, and from a financial standpoint, we'll be back to you. Um, next quarter, hopefully in a position to give guidance once we have more clarity on tariffs, to really give you a a more wholesome picture on what we're seeing.

Okay, thank you guys.

The next question comes from Olivia Tom with Raymond James.

Go ahead.

Great, thanks. Good afternoon. Um, I wanted to dig a little bit deeper into the U.S. core business and whether you could talk about your topline growth expectations there, particularly in comparison to scanner, which has decelerated a little bit of late. And then your view on the 9% target, uh, 9% plus target, excuse me, for the first half. Um, clearly above 9 has no upper limit, but if we take the 9 end of that, it would suggest that x-road results could be down year over year. And, um, I guess could you tell us, in your view, is that on the table for Q2? Thanks.

Yeah. So, as I said, Olivia, I we still feel great about the elf business that includes our us Core Business. Um, the deceleration from a from a Neilson standpoint again, is really driven by us starting to, you know, cycle a full fall in the base. So we had the benefit earlier on of launching that uh, our melting lip balms earlier and so now we're still seeing fall overall positive. So that is that's fantastic for us. I would say, for on a x Road basis, there is not a scenario that we're contemplating as as we talk about the better than 9%, that would have elf business down on a year-over-year.

Basis, uh we just talked about uh in q1 seeing our us business at 5%. Um, our international business was up 30% in q1 and picked up 210 basis points of share in the quarter. Um, so we really see a lot of strength behind the health business.

Great. That's super helpful, and then...

Further expansion.

This is for which sounds great, you know, Mexico now Middle East. Um, uh, so um, you know, a natorium in as well. Um could you talk about your conversations with Sephora as you build more and more in international markets? Um, if you could give us a sense in terms of you know the lineup that's going into the into those um um those markets. Is it more? The hero products is it across the board? Just to give us a sense of what the opportunity is there for us.

For you. Thank you.

Hi Olivia. This is Trang. We're extremely excited about our expanding partnership with Sephora. Let me just back us up a little bit. It was last year that we entered our first with the elf brand. Our first Sephora Market was Sephora Mexico. It was 1 of the best launches they've seen. I think we've continued to maintain a top 3 position across all of Sephora and Mexico and 1 of the things that they really liked about. The elf launch is we brought in a whole new consumer set our younger more diverse uh uh engage consumer and so they really liked that Dynamic. So

Last but not least natorium entering Sephora in Australia. We feel really great about too. So we can see potentially additional Sephora markets over time and as we confirm plans, we'll, we'll talk about it. But overall, if we really good about the expansion with Sephora,

Thank you.

The next question comes from Andrea Dara with JP Morgan. Please go ahead.

Thank you and good afternoon. Um I wanted to follow up on the answer regarding the US this business. Um me you mentioned um that you know, it's been growing about 5% for the US. Um I was curious to see if what is the exit rate uh in the quarter and then also with the price increase uh the $1 over your average. Price of 650 is roughly. It's admitting price increase and understandably your banking some you know you have so many subtle elasticity there.

Uh, but you still going to have July and August, um, I'm sorry, August and September the benefit of that. So I was curious to see, uh, really, you know, scenario where you see this, uh, 5% accelerating, uh, given the price increases and, and also the Innovation that you spoke about or, is that too? Uh, too optimistic given how the consumer has been behaving?

Hi Andrea, it's great to hear from you. So on on the US business and taking it into account, the price increases, um, as you know, our approach is to always take a balanced approach. And in this instance, we're being a bit conservative on how we're modeling that internally um, in our past price increases, we have done better than we've modeled from an elasticity standpoint.

But with these increases just going in on August 1st, we're still reading how the consumer will respond to that. It will take a couple weeks for that to fully roll out within retail. And so, that is something that we're watching for. I, and I also acknowledge, you know, the consumer, um, overall sentiment right now, as you've heard from another of consumer companies, there's continuing to be choice for with how they're spending. I think, from our perspective, the great thing is even with this price, increase 75% of our portfolio will be at $10 or below. So still very much a value for our community and and we're feeling great about that.

Thank you.

The next question comes from Mark alts. Twanger with beard, please go ahead.

Good afternoon. Thanks for taking my question. Um, another question, regarding the price increases, I'm curious, um, how your Retail Partners um, have reacted to that? What's the feedback you've received? Um, and is there placing their orders? Are you you seeing them? Temper units orders in anticipation for some consumer, elasticity.

Hi Mark. This is trying uh, overall retailer acceptance has been good for our price increase. I think part of the reason why is we're very Choice. When we take price increases we've only Taken 3 increases in our 21 year, history, and have had a really good track record in terms of how that's executed. We take quite seriously, our responsibility to deliver an extraordinary value to our community. And so, even the way we've taken pricing of first letting our community know, um, uh, being transparent has been well received by our community, while received by our customers. The other thing I will tell you is, um, we are here in of a number of brands that are going to be taking pricing. So I think we just send that environment right now with the uncertainty of tariffs, and the Tariff impact that you will probably see more more. More companies take pricing, we tend to lead. Um, and then we will see how many more kind of followers.

Thank you. And then I understand Mandy there's a lot of noise in Q2 on gross margin given there's some good slowing through at the the much higher rates, but as we think kind of moving forward, if the 30%, um, were to stay in place is the dollar.

Took enough, um, to neutralize the margin impact.

See how things play out there.

Got it. Thank you.

The next question comes from Oliver Chen with Ken. Please go ahead.

Hi tangan, Mandy um, within the US elf brand what channels or Partners have been stronger or weaker in terms of what you're seeing in in the US market and the choice consumer. And that as we think about road, which is very exciting. Um, how what is your, what are your thoughts on on International Global development and also, um, potential exclusive product for Sephora and initial thoughts on, um, what might be most exciting for categories. There's a lot of tons of opportunity for you to pursue many things with Road. Thank you.

So Oliver, great to hear from you on the US, elf brand. Um, from a channel standpoint, we had growth in our brick and mortar channels our core retailers as well as in e-commerce. And so, um, very pleased with what we're seeing there. Like I said earlier, from a net sales, standpoint in the US, had 5% growth in q1 overall

um, were there channels that were

Yes, sorry, go ahead. Okay, go ahead. Oh, well, there are channels that were um

Which ones were weaker or which ones were were were less positive to those if you if you could share with that that with us as well.

That level of detail.

Progress in q1 in the US again, picking up, share, 210 basis points in the quarter across all segments and so really pleased with our performance.

Thanks and then all over to second question Road, our near-term. Uh, focus is really to execute with Excellence, the launch into Sephora and all us and Canadian doors followed by the UK. Uh there certainly will be other opportunities for further International expansion. I think we mentioned last time on the call that the vast majority of her of Haley's followers are outside the US, but that is still only has about 20% outside the US. So we have massive runway for growth for Road, similar to the pent-up demand that we see for Elf, every time we go into a new country,

Great. Thanks. Best regards.

Yeah. So hi Peter. We haven't disclosed the specific growth rate on Road, other than to say it went from $0 to $212 million in 3 years DTC only with just 10 products. So it has massive potential ahead of it, particularly with the launch into Sephora. Um, and I would say in terms of, um, you know, we're going to continue to accelerate it, similar to how we've accelerated the growth on Naturium, getting Naturium into Beauty, into Boots, into Shoppers, and continue to expand. The other thing we're going to do on Road is we're going to take, since it is quite creative, we are going to invest back into more marketing to drive that awareness. The aided awareness...

Is 20%, which is great for a brand that's just 3 years old, but still, but less than half, what some of the prestige skincare brands are. And then certainly, I mentioned executing Sephora. Well, uh, and then they have a very strong Innovation program. So, really bullish on road, and what we can achieve there and then in the commentary of doubling the business, we're talking about the overall elf company, uh, that with the white space we have in,

Color Cosmetics, skin care and international. We see in the coming years, the ability to more than doubled up our overall business.

Just seems like it would be a pretty big step up from minty and to kind of get back to to 20% plus, on the surface sequentially. So just if you could help us understand that, that would be great.

Yeah, so, but what we're looking at for the first half of the year, remember, for the majority.

The first half of the year, that's pretty much an unmitigated tariff that that we haven't put the pricing into place until August 1st. Um, We are continuing to work on the other 2 aspects of tariff. Mitigation, our supply chain diversification and as well as our business diversification, continuing to expand internationally. So all of those things are at play. But I would say for q1 and Q2 your flowing through those higher rate of tariffs without um, a real offset from a mitigation standpoint. And so as I think about the second half, you'll have to wait until we get, give full year guidance to get a, a full answer there. But um, you can just tell you what we're seeing for. The first half is, you know, that that margin gross margin pressure in Q2 mainly, because we're flowing through those tariffs. Um without a lot of the offsets yet firing

Got it. Thanks so much. I'll pass it on.

Yeah.

Next question comes from Ashley Helgen with Jeffrey. Please go ahead.

Hi. This is Sydney on for Ashley, thanks for taking your question. Just wondering we've seen a bit of a gap uh with unit. Sales outperforming dollar sales in the scanner data wondering, if you can speak to kind of what's driving the Gap in that Trend, um, possibly connected, what are you seeing in terms of promotion in the channel? And then if you can share, expectations for Innovation and Q2 and how that will compare to what we saw last year. Thank you.

Yeah, so we're really pleased with the volume growth that we've seen, um, both in our total business. So on our, on the call, we talked about volume really helping to drive our, net sales growth in q1. Um, and we've seen that as well from a scanner standpoint, continuing to be volume driven, which is, which is great to see from a category standpoint. I wouldn't say that we've seen an acceleration of promotion in the category. Um, you do see from from here and there, you know, certain certain, um, retailers or or categories going on promotion, but I wouldn't say that that is exponentially higher than what we've seen normally in this category, um, and I would say from an innovation standpoint, we're very pleased with the innovation.

Our call Innovation that we launched, we've talked a lot about the melting lip balms, but we also have our skin tint with SPF 50, uh, that you heard on the call Michaela saying, it pretty much the best product we've ever launched, which is fantastic. And then also, continuing to speak to value for our consumers with the sheer for blush, which is priced at $6, um, that that's really resonating in the market as well. Um, and so really pleased with what we're seeing from an innovation.

The next question comes from, Bill Chappell with true security, please go ahead.

Thanks, good afternoon.

Good afternoon. Hey just just uh kind of as we look at at 1 Q versus 4 q and we were back uh several months ago, the thought was in January February. There was a

A a little bit slow down of the overall category in the US. Your your, uh, holy Grails or weren't I guess performing, as well as the, the prior year ones were. And, you know, and there was just a, obviously tougher comps. As you look at the acceleration these past 3 months in the US, you know maybe give it a little color on what changed the the the new batch of holy Grails start to pick up the the existing ones, start to gain traction. We did the comps just get easier, you know, how how did the category get?

Better any thoughts on? Kind of why we felt the the progression of these past 3 4 months.

Elf is in, in a better place. As you saw, we picked up continue to pick up market share which we've done now for 26 consecutive quarters. Um, and so really still focused on on the main things, which are making sure that we are a value to our community. And like I said, even with the dollar price increase still 75% of our portfolio, $10 or less, making sure that we're continuing to launch Powerhouse Innovation. And we we have shown that and getting a lot of positive feedback from the community on our fall Innovation, and then just making sure that we're continuing to invest in high Roi marketing, making sure that we're being the first to do things that we talked about, um, being funny and bringing humor into the category is is a big thing and helps consumers. Remember who we are. And so really continuing to do to do the things that have worked well for us and keeping our eye, on how we continue to grow share, uh, here in the US and also in our International markets.

Got it. Well then just kind of followed up on Innovation. I mean do you feel like the spring Innovation? This took a little bit longer and took and step now is taking off or we just moved to the summer Innovation and fall Innovation and those were bigger wins.

So for spring Innovation it was still at around the same performance as it had been. Remember the prior Year's Innovation was exceptional. It was the best class of innovation that we've ever launched as a company. And so the spring Innovation is still great. Second best year that we've had from a spring Innovation, but just not as much. And that, and that prior year Innovation, was really driven by the lip oils which, um, has been 1 of our most successful launches that we've had,

Great, thanks for the color.

The next question comes from rupesh Parikh with Oppenheimer, please go ahead.

Good afternoon. Thanks for taking my question. So I'm going to ask 2 questions. I'm not sure if you're going to answer, we're going to try since I've been getting emails on it. So just for Q2, uh, for road. Is there any way to help us understand like the revenue contribution for, for that business? And then also for Road, uh, you know, I know ebit. Margins are expected to be down in Q2, but is road expected to be diluted to your Q2 margins.

Hi ra petsch. Uh, the great question, but, uh, detail that we have not provided overall. Um, other than to say that we feel great about Road We Believe over the longer term, you know, as we talk about a full year and thinking about how road comes in and it will it be a creative? We have said that, we believe it will still be a creative overall, um, as we think about bringing in that sgna in Q2, um, I think we call that out specifically, because we don't have

The fell in to Sephora to match with those uh, expenses and so, um, I wanted to be clear on calling those out. That's why we included those in the prepared remarks

Okay, that's that's helpful call and then just on International, you know, strong strong momentum, this quarter. Um, is there any any way to help us frame something that puts and takes as we think about Q2 on in your international business in your ability to sustain, that momentum,

Yeah, so 1 thing that we talked about last quarter, was that in the first half of last year, we had a lot more International activity selling, then we do this year. And so um I think that still holds true as we look at Q2 and just thinking about a first half or second half Dynamic. Other than that, you know, we're continuing to be pleased with what we're seeing from International. We talked about the launches that we're going to have with Sephora coming up, both on the, um, on the elf and natorium sides of the house, as well as the expansion further expansion and boots on nutrium. Um and uh just continue to expand in Poland with Rossman and so very pleased with what we're seeing from an international standpoint.

Great, thank you. Best of luck.

The next question comes from Steve Powers with Boye Banks, please go ahead.

Great, thank you very much. Um, maybe I just wanted to Circle back on 2q, Gross, margins. If I could, you know, I understand the Tariff flow through. Um, but on the other hand, you mentioned not that many offsets. I just want to press on that a little bit because you will have effectively 2 2 months of of pricing benefits this quarter that you didn't have in the first quarter. And um, even without the the selling to Sephora, I would assume that, you know, 2 kind of 2 months of Road sales, also, gross margin of creative, so just maybe a little bit more context on the puts and takes in 2, Q gross margin. If I could

As well. And so those those are 2 Good Guys in this scenario. Um, but also want to be mindful that we do, have those higher tariffs yet to flow through and also considering, you know what happens next week with tariffs. Do we maintain at this 55% or does that move to a different number? And so again, just keeping in mind, the number of scenarios that can happen from a tariff standpoint.

Yes. Okay, very good. And then I, you know, um, maybe related to that. So I think early in the call you said you hadn't, um, talked about whether the the pricing would be enough to kind of offset the the dollar basis of, of tariff, Etc. You know, the I think, tarang, I think, tarang, you think you mentioned last quarter that at the 30% incremental tariff rate? It was about a $50 million annualized, hit to cogs. Um, that that to me, you know, strikes me as like, a, a mid- teens. You know, impact to, to base business cogs, uh, the pricing seems to also be a mid teens increase. So it seems to me that unless the last unless elasticity is, is such that, the volumes go negative, all a SQL at that 30% rate, you should be pricing to maintain if not, if not, um, you know, exceed a little bit of of coverage there and and maintain gross margin is that math or logic wrong.

Yes. Steve you got it right? We, we talked to 30% incremental is about 50 million dollars. Um, the uh, assumption, we're always more conservative on how we model elasticity. Now, the last 2 price increases, we've done way better than what we had modeled. And if that held true, then you would see some upside relative to what we talked about. But we also don't want to get ahead of ourselves. Just give in the number of brands that we hear are going to be taking pricing. Um, so we're just being more cautious on that till we see how the price is accepted.

Okay, okay. Very good. Thank you very much.

The next question.

Comes from Anna lazul with Bank of America. Please go ahead.

Hi, good afternoon. Thank you so much for the question.

I was wondering how you're thinking about the longer term strategy here with Road. Um, there's a limited number of products across Cosmetics skincare accessories. Um, there is also a privately held Cosmetics competitor, which recently launched a fragrance line. So, I was wondering how you're thinking about the products here and the categories where you can be. Thank you.

1 of the things Santa, we love about road is just how curated the product assortment is, it's incredibly thoughtful and it has a beautiful aesthetic and certainly you're seeing that in terms of the response from consumers and just how much they can't get enough of Road. And so we will approach it is that same thoughtful approach to Haley's taken and the team have taken on in

Innovation will continue to do that. You saw a couple recent launches from Road, there'll be additional launches as we go forward. Uh, but continue to make sure that it matches

and focus of the brand. Um, so I think, you know, we have a lot of confidence in what we've seen in terms of the Innovation pipeline, as well as other ideas that we're talking. Uh, so I think similar to elf Beauty, you're going to continue to see game-changing Innovation on road and we feel really great about it.

Great, thank you so much.

From John Anderson with William Blair, please go ahead.

Thank you. Uh trying to Mandy uh, could you? I don't apologize if I didn't hear it but did you comment on the digital sales growth in in the quarter? I would like love to get an update on that and what digital representatives and percent of the total business at this point and then on International um you know you mentioned it's about 20%

Sales today. Um, but as you look to doubling the business over the next several years, the total business do you have kind of a Target in mind for uh International contribution? Uh, overall and then last 7 Innovation, you've pulled forward, some Innovation fall Innovation earlier in the year with the request of customers Etc. Does that create any kind of an air pocket on the pipeline for the second half of the year or um how how to think about that? Thank you.

Yeah, so I'll take I'll take the first.

Uh uh question on the digital sales growth overall um in our e-commerce channels. Um, we saw close to a 20% growth rate overall, um and it represented about 20% of our business. And so, um, fairly consistent with what we've seen, what we've seen over the last several quarters, digital continues to be very strong. Um, especially with the Amazon business which in our 10K you saw, uh, creep Crypt into 1 of our top customers. And so, very pleased with that performance.

International business. We have very high aspirations for international and part of where those aspirations come from Beyond just only 20% of our businesses outside. The US is a success. We're seeing retail after retail in country after country uh the launches we've had in the past year. I think we've debuted in the top 3 spot in every single retailer we've entered and so you do see plenty of pent-up consumer demand for elf. And so as we continue to roll out into more countries, we see that 20% being much higher or over time. I don't think we've disclosed an overall aspiration other than we expect. Our international business to more than double in the coming years, as well. As we talked about in terms of the opportunity we have in color and skin. Um, and then from any Innovation standpoint, uh, we have that ability and you've seen us do this in the past, whether it be our lip oils, whether it be our bronzing drops, where we'll take signals from the community and we will pull something up faster like our original timing for bronzing drops.

Uh, was not when it was going to launch, but we got so much so many requests from our community of wanting and wanting that incredible formulation and a great value. That we moved it up. We did the same with the melting lip balms where we're just getting so much consumer for for that item that we moved it up but it did not cost us a whole in our fault, uh, Innovation calendar. As Mandy said, our fall Innovation is stronger than our fall Innovation last year. Some of the other items that we talked about are off to a great start. And so we feel great

About the overall Innovation, Cadence, including that ability to be able to respond to what our community wants.

Thanks so much.

This concludes our question and answer session. I would like to turn the conference back over to Tang. Amen. For any closing remarks.

Well, thank you for joining us today. Um, so proud of our incredible team, that elf Beauty for delivering, another quarter of industry-leading results. And I'm thrilled to officially welcome road, to the elf Beauty family. We look forward to seeing some of you at our upcoming investor meetings. And speaking to you, in November, when we'll discuss our second quarter results. Thank you. And be well.

The conference is now included. Thank you for attending today's presentation. You may now disconnect

Me.

In your head.

I am.

From the bus now.