ELF earnings call transcript, November 4, 2026

Welcome, Ashley, and good afternoon, everyone. I'm proud of the ELF Beauty team for achieving another quarter of industry-leading results. In Q2, we grew net sales 51%. And adjusted EBITDA 86%. This marks our 31st consecutive quarter of net sales growth. That's almost eight continuous years of growth. We're one of only six public consumer companies out of 516 that has grown for 31 straight quarters and averaged at least 20% net sales growth per quarter. With the momentum we're seeing, we're raising our fiscal 27 outlook to 22 to 20.

Our consistent, category-leading growth is a testament to the strength of our team, strategy, and portfolio of brands. ELF Cosmetics reignited unit momentum this quarter and gained 30 basis points of market share. Rode continues to break records with every launch, including most recently in Sephora Europe, marking the biggest launch in Sephora's history. And Notorium remains one of the fastest growing skincare brands, more than doubling since our acquisition just three years ago. The strength of our portfolio is powered by leading engagement with our community, especially the next generation of consumers. In Piper Sandler's annual Taking Stock with Teens survey, we made history with two unprecedented achievements. ELF Cosmetics was named the number one favorite teen cosmetics brand for a record ninth consecutive survey, with Mindshare nearly five times the next closest brand. And RODE and ELF were the only two brands in the top 10 for both skincare and cosmetics. No other portfolio in beauty can claim this level of strength amongst teens. Our mission is to make the best of beauty accessible to every eye, lip, and face. We recently refreshed our the best of beauty.

This new strategy is powered by five integrated pillars. Cultivate a passionate team of owners. Co-create with our community. Win with winners. Expand our portfolio. And accelerate global expansion. Together, we believe these strengthen our competitive moat and give us confidence addressing the tremendous white space we see ahead. Let me walk through how each pillar powered our results in Q2. First, cultivating a passionate team of owners in a high-performance culture. I believe that our people are our greatest competitive advantage and our results are a direct reflection of their tremendous talent and teamwork. We're the only public beauty company that grants equity annually to every employee. Strongly aligning our interests with the long-term interests of our shareholders. We nurture a high-performance team culture that delivers exceptional employee engagement. In our latest engagement survey, 93% of our employees stated they are proud to work at HealthBeauty. This engagement helps fuel our productivity. On a sales and profit per employee basis, we outperformed the average of 516 public. consumer companies by 3 and 8 times, respectively. Second, co-creating with our community through value, innovation, and marketing. We listen closely to our community and quickly translate their request into premium quality products at extraordinary prices. In Q2, we had an incredible fall innovation class across ELF Beauty, exceeding our expectations.

With ELF Cosmetics, our continuous stream of innovation has led us to holding the number one or two position in 22 segments, up from 11 five years ago. This fall was no exception. ELF Cosmetics holds the number one position en masse for fall innovation launches, with five of the top ten products in both dollars and units. We're building on this strength by fast-tracking additional innovation our community has been asking for. ahead of the holidays. With Rode, each launch continues to exceed our expectations. Our recent limited edition collection with influencer Alexandra Leclerc had over a 200,000-person waitlist, sold out of most items within the first hour, and marked our largest limited edition launch to date. And it's not just launch success. Rode has amongst the highest repeat rates in beauty. Rode was 10,000-to-s지만, as we go to this strategy, and we're taking over double-click points and we're starting to see how low-click points and we're going to be able to take a step at the moment. We'll be right back to the next one. Now, let's move on to the last one. A testament to the quality and durability of our products. Our third strategic pillar is to win with the winners across channels and platforms. We have a long track record of winning with the retailers that prioritize beauty. This quarter, we strengthened our position in connected commerce and elevated our partnership with Sephora.

As a digitally native company, we continue to lean into connected commerce to launch newness, fuel discovery, and scale across geographies. In Q2, connected commerce drove 31% of our consumption. We're seeing particular strength on Amazon and TikTok Shop. In the U.S., ELF was both the number one cosmetics brand on Amazon and the most searched cosmetics brand on the platform. On TikTok Shop, the momentum is equally strong. In Q2, ELF Cosmetics climbed to the number two rank in cosmetics. Consumers continue to choose ELF wherever they shop for beauty. We're seeing this same momentum with our physical retail partners. This quarter, we strengthen our relationship with Sephora, the leading global specialty beauty retailer, with our launch of RODE in Europe, ELF in Brazil, and Etorium in Canada and Mexico, starting with RODE. In the last year, we executed record-breaking launches with Sephora in North America and the UK, achieving the number one beauty ranking in both geographies. Building on that success, this quarter we broke our own records with the expansion into Europe across 19 countries, exceeding what we achieved in North America and marking Sephora's largest launch ever. But it's not just the excitement from our launches that's unprecedented. Code ranks number one or two in 12 of the 13 segments we compete in, with exceptionally high repeat rates. This speaks to both the momentum and durability of this exceptional brand. With ELF Cosmetics, our number one ranking in Sephora, Mexico built the foundation for us to launch in Sephora Brazil this September. Brazil is our most requested country and the third largest beauty market in the world. To amplify the launch, we look at the

to leverage our disruptive marketing engine with our Elf Ofoca campaign. Inspired by the Portuguese word fofoca, the art of sharing news and spilling the tea.

It's so grudent. I love it, everyone talking about it.

We launched in Sephora, Mexico, and Canada in September, where we quickly broke into the top 10 brands in body. Turning to our fourth strategic pillar, expanding our portfolio of discipline across complementary yet distinct brands and categories. The ELF brand is incredibly elastic, and our consumers continue to ask for us in multiple categories. We listen, we learn, and we lean in. We tune in. We took this approach with ELF Skin, expanding from a test in Target back in 2019 to a business that's now over $200 million in retail sales. We're taking this same thoughtful approach with haircare, bringing prestige-inspired products to our consumers at an extraordinary value. Our community wants ELF in haircare. We launched ELF Hair in July with a curated six-product assortment, each with a clear prestige frame of reference. All priced at $10 or less. Within the first three months of our exclusive launch with Target, ELF has already broken into their top 20 haircare brands and top 7 in styling. We're taking this test and learn approach to fragrance. Fragrance is an $11 billion category in the US and the fastest growing in beauty. In October, we launched ELF Pop exclusively on Amazon and TikTok Shop. ELF Pop is a new fragrance and body collection that transports our community to sensorial destinations around the world. The full pop lineup featuring additional scents will be released later this fiscal year.

Finally, our fifth strategic pillar of accelerating global expansion by activating our full in-market growth engine. We're still in the early days of international expansion. On a trailing 12-month basis, international accounted for approximately 25% of our net sales, compared to approximately 70% for our legacy peers. We believe this gap represents one of our biggest opportunities. And the demand is already there. About 65% of ELF cosmetics and 75% of Rhodes' social following is outside the U.S. Even after Rhodes' launch in Europe, the brand is still... ...only in 40% of Sephora's global doors. Our five integrated strategic pillars drive competitive advantage and industry-leading growth. I'm also proud of the work the team has done to further diversify our business. What started as a single brand in a single category in a single country is now a house of brands, each growing across categories and geographies. Over the past three years, not only in Sephora's global doors. Non-ELF brand sales have grown from a few million dollars to 30% of our net sales. Skincare has increased from 9% to 23%. And manufacturing outside of China has grown from 1% to nearly 70%. In summary, I'm proud of our results and excited by the momentum across our portfolio. We continue to demonstrate exceptional, consistent, category-leading growth. Driven by a passionate team of owners in a high-performance culture.

Every one of our brands is growing. We're co-creating with the most desirable consumers in beauty. We're winning with the winners to expand our brands globally. And we're just getting started. I'll now turn the call over to Mandy to discuss our second quarter results and raise Outlook for Fiscal 27.

I'll now cover the highlights. of our second quarter results and our raised Outlook for Fiscal 27. Q2 net sales grew 51% year over year. Road contributed approximately 16 percentage points to net sales growth in the one month period prior to annualizing the acquisition on August 5th. Organic net sales grew approximately 35% year over year. This better than expected performance was supported by growth across all of our brands, along with pipeline shipments for Rhodes' launch in Sephora Europe. U.S. net sales grew 25% in Q2, while international net sales grew 165%. In addition to Rhodes' record-breaking launch in Europe, we saw a meaningful improvement in trends for ELF in our largest international markets, Canada, the U.K., and Germany. Pricing and product mix added approximately 20 percentage points to net sales in Q2, while unit volumes added 31 percentage points. Q2 gross margin of 71% increased approximately 160 basis points compared to the prior year. 30 basis points were driven by incremental tariff refunds flowing through COGS in the quarter. The remaining increase was driven by lower year-over-year tariffs and a more favorable-than-planned mixed benefit, partially offset by price investments. On an adjusted basis, SG&A as a percentage of sales was 53% in Q2. as compared to 56% in Q2 last year. Marketing and digital investment for the quarter was 21% of net sales, below our expectations due to timing shifts in spending, and compared to 23% last year.

Q2 adjusted EBITDA was $123 million, up 86% as compared to $66 million in Q2 last year. Q2 adjusted net income was $73 million, or... $1.21 per diluted share, compared to $41 million, or $0.68 per diluted share, a year ago. Moving to the balance sheet. We believe our balance sheet continues to position us well to execute our long-term strategic plans and invest in the growth of our business. Our liquidity position remains strong, with net leverage at approximately one times adjusted EBITDA. We end at Q2 with $351 million. and cash on hand, compared to a cash balance of $194 million a year ago. We expect our cash priorities to support the growth of all of our brands, technology investment, including AI and automation, as well as investment in infrastructure to ensure our brands show up their very best in our retailers across the globe. Following the end of the quarter, we used a portion of our cash to satisfy the first payment of the road earnout, given the brand's exceptional performance. Now let's turn to our raised outlook for fiscal 27. We are raising our outlook on both the top and bottom line. For the full year, we expect net sales growth of approximately 22% to 24%, up from 18% to 20% previously. Adjusted EBITDA of $421 million to $427 million, up from $401 million to $407 million. Adjusted netting. Income of $231 to $233 million, up from $212 to $215 million. An adjusted EPS of $3.82 to $3.86 per diluted share, up from $3.50 to $3.55. We continue to expect an adjusted tax rate of approximately 25% to 26% and approximately 60.5 million fully diluted shares.

Starting with the top line. For the full year, we expect to deliver 22 to 24% net sales growth, reflecting the strong results from Q2 and an improved second-half outlook. Our raised outlook translates to organic net sales growth on the full year of 9 to 11%, up from 6 to 7% previously. Looking to the second half, we expect net sales growth of approximately $3.86. 7 to 10%, up from the implied 6 to 9% previously, with each of our brands expected to contribute to growth for the balance of the year. From a cadence perspective, we expect Q3 net sales growth above that range and Q4 below that range, primarily due to the timing of launch activity in the year-ago period. Recall, in Q4 of last year, ELF expanded space with Ulta Beauty and launched with DM and Jervis. Road launched in Mecca in Australia and New Zealand, and Naturium expanded into Walmart for the first time. Turning to gross margin, we now expect an increase of approximately 250 basis points year-over-year, as compared to 200 basis points previously, driven by the upside we saw in Q2. Excluding tariff refunds, our fiscal 27 outlook remains unchanged at approximately flat gross margin versus prior year. Looking to the second half, we continue to expect gross margin to be lower year-over-year as RODE expands its retail presence. From a spend perspective, we continue to expect marketing and digital investment at the higher end of our 23 to 25 percent of net sales range for the full year.

From a profitability perspective, our outlook implies adjusted EBITDA growth of approximately 26 to 27 percent, up from... ...20 to 21 percent previously, with adjusted EBITDA margin expanding approximately 50 basis points year-over-year versus 20 basis points previously. As a reminder, our outlook assumes we fully reinvest the $52 million of tariff-free funds received in the first half through lower prices on a subset of our portfolio and increased marketing investments across our brands for a neutral impact on full-year adjusted EBITDA. With marketing spend shifting from Q2 into the back half, we now expect second-half adjusted EBITDA margin in the low teens, reflecting both the reinvestments and the timing shift in spend. In summary, Q2 marked our 31st consecutive quarter of net sales growth, a testament to the durability of our model and the power of our brand portfolio. We believe we have a winning strategy and are in the early-

And today's first question comes from Sydney Wagner at Jefferies. Please go ahead.

Please go ahead.