e.l.f. Beauty (ELF) 10 May 182018 Q1 Earnings call transcript

Greetings and welcome to the e.l.f. Beauty Inc.

First Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions] As a reminder, this conference is being recorded. to with conference ICR. like host, to now Malkin Allison would turn over the your I Please proceed.

earnings of everyone. XX available us in recording e.l.f. XXXX of today afternoon, the days to A Good Thank of will discuss on Beauty's you Investor Relations the first elfcosmetics.com. elfcosmetics.com. is call press for release today's for section joining results. available copy A quarter be also

by expectations, this call company's Management's and press contains forward-looking and may are including uncertainties results that those company's to statements, and on assumptions, outlook fiscal may are differ therefore the reminder, statements beliefs implied are subject results and based from those and the cause to forward-looking a in detailed estimates, materially. such Important XXXX release SEC statements today's to These projections. actual actual factors known filings. As relating risks differ unknown year that or and expressed

a information non-GAAP presentation In addition, a the the between the most on release differences press to reconciliation company's We includes of for and presentation presented you today's refer comparable non-GAAP GAAP directly today the basis. are Chief settings. President measures. measures based Amin, third-party this Management Financial cited Officer. With Chief and Executive and Tarang today us presentation Certain on Chairman Officer; and from Bailey, are in equity brand John

Q&A be the alternate, now related turn a results to Tarang followed For will to then an progress typical the performance as and session. and our providing to my us, It made pleasure begin additional for over strategy today's guidance. and against of our and details will will sharing call, overview our is by we call Tarang. John Tarang with This financial growth

first adjusted tracked QX earnings market everyone. our We're and and progress our growth quarter share pleased took and Ulta our net share channels results the including of with strategy. of good in report Allison, sales first well in of from demonstrate both per XXXX. the diluted importantly, with XXXX of in Thanks, We increasing X% We're XXXX direct $X.XX. quarter X.X% to pleased execution results afternoon, business, Most non-track successful to as also as channels Beauty. X.X% our

increase the I've brand is young, consumer is beauty unit past a brand. never enthusiast e.l.f. to first the our love. XXXX, brands. diverse, valuatings ratings. power of seen we've of while been achieve for over brand. our New of In great strategy include to million. that speaks the reached to the brand's of how that grow of highlights the Beautyscape any measures the a and each to This retail category, event value of brand brand winning also years Perhaps four prices a Orleans quarter has build by lips to able We've $XXX one priced been highest pricing Our strength number over at Across eyes, is privilege able introducing our to from face valuating brand. our XX% this and and highest years $X.XX in of have the e.l.f. strength retails I've and first been category. our over XX $X.XX. sector increasing average in higher the iconic the the had grow a points, averaging amongst best

beauty XXX,XXX Beauty and members most that of collaborations. Squad program Our over influencer successful several loyalty our grew to

Beauty. out than five stores [indiscernible] and Defense highlighters in Ulta a two lash Heart in sold weeks is kit Our [indiscernible] top less

of for sponge Best a received magnetic Cosmopolitan a mask also We Beauty Glamour duo. Award silicon for and Award our

penetration. that in John consumers the over now to progress brand innovation effectiveness our brand of with building efforts We to on both discuss turn and are and pleased I'll the love. efficiency engagement it

Thanks, Tarang.

in quality brands. breadth depth Our second innovation value us believe from an extraordinary and strategy is of to sets other We high our lead apart innovation.

which gross quarter, were approach of we innovation new over the products. items the including continues launched products care have XX of points be past A first been oil launch refining our XX driver of expansion primary of Additionally, has X,XXX control first-to-mass. major increased that years. the skin pore the area basis with four the to margins In in focus and

at points launching & a innovate launch to Eye continue $X. Tape, Define our We less, or across top-selling of $X price five Line items first-to-mass including

the the direct which to the XX with of consumer feedback speed channels We speed-to-market average the amongst our with was to from quickly being all through the provides XX weeks. respond in We brands. to believe QX continues also us The significant idea selling fastest beauty online fastest launch improved trends ability advantage. our weeks initial be to our and

Our to expand is third brand penetration. strategy

we optimize execute last into expansion retailers space discussed As our our call, during the focus Ulta is current existing at to Beauty. our into

We are progress both making fronts. good on

international in Canada priority Superdrug at including at to Walmart UK. markets We continue the also growth and out our build

bringing compelling We have productivity a some in proposition, the best innovation consumers, category. of the and retailer

our remind me back everyone take step a approach. Let about and

of revenue $X.XX a over or to Across variables, we last our primarily product AUR two units. both increase growth, Our these driven Even we have extraordinary have to the products in which price prioritized four entails surmount of years, optimizing and productivity combination with AUR through remain higher the points. through model our AUR retails an average value. expansion unit

cosmetics is less of top mass brands. than AUR currently Our half three the

expect. unit [indiscernible] especially runway lead the productivity continue believe a category unit we three This times units such, top in productivity with with still we brands. trade comfortable three average the have as and are that of revenue to is to one in so continue retails nearly that is long through off the we driving As that would

our our One of productivity enablers channels. the of great direct is model

and Our innovation on introduced in our e.l.f. Elfcosmetics.com own is first stores.

see good completing improving in to re-platform the Elfcosmetics.com and capabilities. our continue QX, of We progress mobile

both to opened our awareness an and to progress. elements engagement. in also operational store back Austin discuss it drive turn experiential We I'll Texas exciting now to Tarang new with

Thanks, John.

brings diverse companies with the inclusivity of shows women. listed the and NYSE XX X,XXX enthusiast, roughly drive Out world-class experience appointment, to that our to the base appointed is starts members. which board we with including are and digital strategy as Richelle Along Directors. now of an one commitment is Board rich our Parham Board of of only public business to on of as their this CMO force In industry. in majority of operations be eBay. Richelle's world-class Nasdaq, to our have we former of With women first people. of composed our the employee quarter, lead young, a Our board, our to Richelle beauty proud majority

to operations, our the in continue business our in competitive also turn build advantage We enables model. which rest of

In to delivers Our partner, prototyping. I'll now financial John turn QX, quality, brought the to first of U.S. speed manufacturing progress. and we and cost, supply us back chain beauty. on and bringing it additional capabilities discuss our best and innovation combination speed our

Tarang. Thanks,

diluted million, and are retailer across compared was direct sales an prior $X.XX with in-line partially customer The percentage of SG&A in our foreign freight, was QX by first XXXX We million, and XXXX. to quarter On headwinds, to businesses. a net basis, was $XX.X by exchange results. innovation. share. variance national $XX.X to was $X.X adjusted margin driven Gross expectations. pleased million XX%. per reflecting our year X% margin million unchanged growth Net increased both mix Adjusted of or was $XX sales income offset XX%, adjusted EBITDA with accretive from as

We levels quarter. continue to inventory made the our optimize progress happy with are and throughout the

will year turn and now of back the outlook we to pleased with are some our given thoughts. our for XXXX, early, starts is the to Tarang Turning guidance. reaffirming provide we final I to are XXXX it it

remains There approach year the pleased progress making all. Thanks, with off pursue us positions multi-channel The I'd and whitespace luxurious John. In U.S. now a open in consumer ask deal of speed, innovation good to to and of especially for advantage are beauty for the both to output to accessible our operations operator internationally. call summary, to combination a our great questions. us our and we're the and engagement, start like well. fiscal for

we Please At with Instructions] question. first Herzog this conducting Bonnie will session. be you. question-and-answer comes question a proceed line time, of your with Securities. Thank Fargo from the Our [Operator Wells

mass you how any to seem Hi, in growth ago brand what pricing a the There you you. love to promotions? and rest of characterize this seen and re-launches so I far get year. versus seen category year wanted for three change Thank the little many changes would so the And category any if the you about outlook you've your and guys bit really environment? then in to competitive Thanks. current ask the be just you months have everyone. or guys just saw for

This Bonnie. Tarang. is Hi, Sure.

to six to a four cosmetics a shorter of faced the up, doing quarter, little in bit the I better, tell the at category focus not are pick terms look category bit early it's seen we but last the back of too a outlook bounced As we've I'd periods. tend think not. still if fundamental little say to or we as but of with on weeks,

don't that re-launches lot There's launches, in always the environment. of of very terms In of a well-positioned competitive say all competitive we're really competitive amongst within environment, them. would space. entries, see I the I of much difference a

consumer. great seen L'Oréal in job pretty some think behind we've quarter, have they the good against from a Maybelline I last and that innovation

the up price our We we're uptake anything ability side, to against it, share. our seen continue different then again, promotion compete that. but and don't again, the data, I well-positioned ability. to our I've on in at necessarily value just I'd given our we extraordinary seen than in say in we've and past see think don't pick a big least And very

I'm gross you. if ask you Do expect guidance, to for you in Then more, I flat labor context should as any margins reaffirmed but I guys the as that. know and exchange still Thank costs of your year-over-year one impact Chinese of may the the be from well about Okay. freight possibly and remainder just curious we then cost rates? how year think

some Bonnie. specific we we I'd XXXX. the standpoint in gross last consistent gave we don't margin obviously be call, John. fiscal margin on tell the you, Hey, from expect the commentary levels What a gross but XXXX would guidance, consistent provide It's margins with with generally of to

the plan expected. have Couple And second change USD the the first talked tell couple from about there. to you components was were FX quarter exchange anniversarying first quarter as of mentioned wouldn't certainly some and we discussed of in built you well. in first really called FX some in margins significant of XXXX. repeated into that which quarters to I of and departure the as rate impact freight, freight and was would last RMB between we've beneficiary year the that saw a consistent the what you, no significant benefits be quarter out what the one-time would No freight with and quarter are we also major So first

you. thank Okay,

proceed Our of next comes with Please question Wissink from line Stephanie question. your with the Jefferies.

Good afternoon, everyone. Thanks.

We have two questions.

roll the Ulta just and across under then and diligence, curious disclosure is progress next feedback expanding out. Thank thinking how release you're a of print Curious breadth secondly, with first your few I'm terms M&A about fine you the brand? help in portfolio category getting the if or the your either on or account; The in by retail little by base years over your if Ulta of could you. about bit any you're that of from preliminary

over is and turn Hey, question first it the I'll Steph. Tarang. take second. to the John for This

ours that's out, roll how and a off us. of has start, year. to well. like to of initial in Ulta really good The look gone our Elsa many very our roll key a we We're the strategic priority stores numbers out strong Regarding this sat

encouraged that. pretty we're So by

John. it's Steph, Hey,

M&A diligence on things in of on call. acquisitions, On unchanged for last I say, would we our point, the talked the generally some perspective that fairly position the about

only a extend levers growth of not creation see the to broader core continue to brands. also drive and significant continue acquisitions platform value made we've investments that the but in to e.l.f. We other to the opportunity other brand, capabilities to leverage including the to in

market. the we continue be to So in will active

strategic it's with we've consistent but complement us solid assets us, the would that for finding about really about. be For right a talked what

Thank you.

your next line the Our live. of Andrea, JPMorgan. is Please line question. question now from Teixeira Andrea with proceed comes your with

the being question, way this last the client you that's back see elasticity, that will, something worried you afternoon in for out of consumer able that that comment half the and but trade? I I to think would terms has of margin. if levels you. obviously, new as the can we levels at? price appreciate. muted. volume can you year half those was last you obviously some comment about you year. Or It's Right? commentary innovating you or said go that progressed said core of you're felt your aspirations that. market terms or because you're And second the you has have of on bigger that a But have on I point, about how loyalty, say Bonnie's you Can beginning at the just you most or being Thank you're If to price impacts would have gross the to two used a year, impacting to moved brand of to started enter been on Sorry Good kind wanted of your the guidance. -- a margins. share. you happening? aspects, you through pass in that Do less price John, to you're how do slack bigger the of with obviously were the there. increases impact on this

Sure.

and on units, we're that time on improvement the terms have proposition the proposition but think the just very have at strong minute. majority trade-off how a just time provide how I guidance revenue, in as quarterly as margin this standpoint, of for in are making overall through value same sort One, well sure just of around not AUR focused we a you've company as how will expanded we any I given tell positioned try from there there. not take We in that taken not value still there and that are speak to mentioned, to is off, our good our addition we in feel market commentary the does in historically that gross go franchise for of does opening guidance get standpoint, as obviously feedback a the provide has that rating margin innovation-led relatively want there. evolved with back what value the be we either. you can focused to price we've an But certainly I fiscal, about business to hit XXXX resonate, our fiscal the that how clear period Certainly as over higher rating been over comments and points increase that what the what in and the XXXX actions to of From versus To have really we're to AUR to to that continues have pertains the our you we a And and our increases, where on all with margin, be just direct gross and through those aspect would that quite it the couple any of price happened continue gross and XXXX. you to your similar. to points. pricing time seen things business will continued point. channels prices mentioned as continue year is core extend the to about some of we we I be Tarang of consumers, question margins mentioned talk the we're price in we optimization of

we freight would of which margin evolving. first pretty anniversarying, Of see you course was throughout year, a couple process terms as things the on quarter we in will and the year which in called of see year did the you last out of in -- back given our being of one go overall gross business, nature dynamic variability we we're have you but that focus significant the just the I of how

the you far announced how in on you helpful. then quarter, fourth the And is process? that are positioning that This

What we Sorry, repositioning? Andrea, follow didn't that.

I that Target called you clients. and on remember Walmart core your

you for you me I You're the If Correct most alluded process, what trying you not keep. that? are you the to XX% but in in sense just question that far make that portfolio. that that you're to or is just and a reposition got that think you beginning? It's evolution activity. that -- pricing discussed. you the perception of to if reanalyzing you're still My your are the your mix It's I'm SKUs mix of how are Right? effect that say wrong, selecting that I

that space that a optimize call We this quite and We that it up picked Spring is of we resets gains we'll do. bit got works optimization our our space retailers Sure. then year. the space Target at way The and these in land last of Walmart. model we'll

Walmart we at So of product the us year set our how those as is And did had We in this on terms a merchandizing and about innovations. later we more The higher new product a first that levels they very ran merchandizing shelved. we our earlier last shelves. quite too, this [indiscernible] of and last as Walmart the our good was really bit. out one than going innovation. Target some focused in quarter before see productivity in addition, the to stocks so focused set had on very for did highlighting our in year, little program of QX sets optimization were feel innovation, year, Not collaborations really year, big in some but the

the see feeling of we'll process we're really at out how pretty but set pretty pans Walmart few So is months we're next the optimization. in productivity Target, overall, Target, say good. I'd I further and over much Certainly, think

Okay, that's helpful. Thank you.

from proceed Bill line with your the Chappell of question Please question. SunTrust. next comes with Our

Thanks. Good afternoon.

Bill. Hey,

afternoon. Good

getting When Nielsen's with going decelerating. shelf shelf Target you And XX% is and paradox so more eventually at you a time Walmart. more And I the this how XX% space talk don't were talk Nielsen's? Nielsen, the kept the in talk little you then then Can about know space that, bit why say I what's about year, last loved optimization? to more about on we

in I'm Now talk trying set when the new are that so or optimization, for you're those and should that sell-through year so code better? where you the not Nielsen's accelerate? reworking the stocks? any continue to you getting as like what this we that Nielsen maximizing is not, numbers products this feel both accelerating. about it the like planned And are retailers understand, out the looks big cracked wins Is just Do if it much you've stage? is

on will key all depending our cover doesn't you it, a disconnect only part first, channels off of But terms our stores. bit performance period and of products discussed see that our the Nielsen time in those able little given, how all it's John of our had as data and to well is model we to both that on versus direct the approach We've reset. terms innovation get in particularly it elfcosmetics.com put we our retail terms own between a big then of in the business. optimization, what of get a of a as we We're of really of

Spring that output You what the big our give to We'll of available more of of our and can some would The able products of want product some whatever call we're the for we'll ends resets year. an both there's to take We hallmarks our to bit to in get will that to us one where broadly being We partners. and then of on an Fall replace. big entire launches launched of and speed Little decide times see XXX those launches space and the work space. them get last and take. innovation. is retail terms I be of then we have retailer then data year for new able the uptake the is the the it assortment in in new weight of

on replace year the them. Walmart why the that's as saying, are set as assortment XXXX, retailers, with We're the year XX% or And is right items So for and full as we that's the assortment we in out what data can optimization. by to that XX% SKUs can of always see what looking we sometimes figure Target. the and put Shelf you'll we have on mean new we detail at a year. through that It with didn't much that that up also we continual think pick it's process we're We products saw includes a for able are more doing. but that bit continual Target. how than strong the up us. end communication, a and process wanted, of SKUs to we growth result to A so flow going was any space it's very signage, optimization, those monitor on shelf I and how little more working

That the comment the then manufacturer. domestic also helps. And on

of Just trying understand what have very time-to-market brings? already You to products. quick that

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it's supply the XX in have we said, quality the last cost, advantage over the we've we've of industry speed years. As best honed combination chain and our and

this our is advantage innovation prototyping. augmenting with that U.S. about So that and speed improve can a supplier really help

have So and it's those that which innovation. think in of just really honed strengthening continue our current further we've China model, we in strengthens advantage on the be it we to particularly majority just

time-to-market that down go even lower? Does mean could

always That's goal. our

the direct We XX. when our fastest few. and our average look quarter was in an all and XX launched weeks about speed looking stressed I the being new last of in average launch to quarter I to be speed, over XX Last and at items we time we're launched over items was about across that the the we weeks not at think we think talked and our strive on We as channels. four-year the as first just our XXX progress year weeks we in talked product call, to XX idea to for settling from I average. a average used mentioned, us launches, first this always the our select we've the we where numbers improve

the have the advantage. as innovation, to to that we improve I speed real will comes think it continue output and as we both advantage well when

Got it. Thanks much so for the color.

your of line with question. Mr. Blair. Please Jon next from proceed question comes with the Andersen Our William

Couple you're XX%, in new of guidance composition then was questions. and you same-shelf extent Could for unpack velocity the generally-speaking growth the the quarter? growth in How think from contribution full-year and distribution expansion the everybody. the much hello, to as that to X% the a I locations willing or mister. that the velocity was, Oh, got well from Thanks what standpoint? of about the you versus

The would picture, the going merely I and predicated back XX%, some that had Ulta last the the is as we just on call on Tarang just efforts big say John. existing process It's talked continued on of full that to optimization of which commentary of was made Jon. Hey, as distribution our the expansion completing. well the through in that at chain roll Beauty, out just the

that's how about So think we broader year. the

it I would pertains that tell you quarter, aren't different. things As the that to

those of some headline throughout last about were that as to think fact well, break the that out of impact, we underpinning year rate. and the as some the drivers Certainly beneficiaries we level. setting Ulta growth that the quarter anniversary that the despite from space some of don't granular benefit the stores Beauty got X%, we were As the well

Okay. and was Is contained the within complete Ulta the quarter? that wholly roll first out

No.

was We quarter. go is first the 'XX, now. at past But complete of that half going be to have it did it so largely right first it said

a then And quick Okay. follow-up.

future Can You how clearly little lot remains bit and international the the is about those? opportunities should a domestically, or internationally chain performing from think timing retailers of for just existing talk an And about you. the case. talked the brand Thank with big about other then portion the we U.S. either how expand a and to timing of the space retailers? that's and white opportunities overall around business you any perspective and in

Sure.

the On great on reminder. a It's progress the international the about feel we just business, international.

with and then UK. our in the and Mexico Walmart last footprint, really main Canada components Our of Superdrug are international entry the it in year in

in these We we continue of markets. in with the to progress Superdrug see resonates and these quality really really Walmart feel is about find What of markets. engagement model international our brand and high business. combination really does our value that The extraordinary great good each internationally resonate

feel we bullish going So international about quite forth.

the whitespace. the it your distribution, I'd back Jon, perspective currently in of on conversations you we that comment partners. tell to We point earlier number think And to can constantly brand a new where go around is We're isn't carried. with certainly mentioned places what e.l.f.

on where us that it's see executing Certainly the the committed the right a who would to particular well retailer partner For is e.l.f. over and of wants really continue and enthusiasts it's potential have category to about sure beauty number terms. making folks that candidates time. to be that

you. Thank Great.

Our line comes Dara Stanley. next with your with question Morgan of Mohsenian the from Please question. proceed

guys. afternoon, Good Hi.

Good afternoon.

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at space; light and declines just increased retailers, on wins driving volume in of distribution your shelf garner sort larger how that over does what's impact clarity give time? B, to especially those you ability us A, new can of more So, the the

Dara. Sure,

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got it. I

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into leap. built XX haven't probably So, that

at think about what last in. was an people got confused as we looked I year,

we on 'Hey, explain XX would So difference. real based is That said, these things'. the

Okay. Thanks, guys.

Thank you.

next question Cowen with Chen Oliver & your the from Please of line proceed Our with question. Company. comes

you. Thank Hi.

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things comment brought that some John. on we're the Oliver. It's Why partnership your has directly some and of standards let at investment piece question, But the Tarang that us. that Target. then capabilities the thrilled we're to of with say seeing and Hey, take I'd don't I social

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take both Whether it a of as partner out blow of lot things be beauty seriously they merchandizing one extend with with Target, their extremely stores do know, the well of or on are working they and longest-standing they how opportunities you working we and and the then and love assortment, elevated for there. their always where them to them. to there's with continue they're to some beauty as in communication as leadership the we terms Oliver, us fixturing partner have they our And love you looking is of see retail Target reasons

we're elevate Target the and blow On continue there. out kind different of space to that beauty at presence stores, looking within configurations e.l.f.'s

national And their I getting Shield items merchandizing, of of for of success terms is channels that like hallmark one was to Glamour Target then we Target. holiday well really including our our critical what extremely were the Really we and as of partnership gifting. our real holiday lead In line we examples think period expanded really described was from into model. That's that we be in a one the the terms Beauty magnetic top Award, Target within assortment, business continues of and it beauty in customer best the our part did direct doing collaboration with where mass of our product Beauty retailers. a the Best in over

the on any Okay. term mix skin year. care the How about will understand as degree micro-trends? there and continue product think our and of we your units And modeling? versus about you if that mixes on evolve also should attractive the we executing cosmetics diversification evolution lastly and are should margin long to with in consideration know What color every

given that tremendous continue ago, business will only have nature see you'll about. evolving for speaking, to history care which of Yes, that emergent of increasing how a say see of the to business think We to time is I the care to Oliver. we time. of we excited you're fair skin see and But we some be is. expand care portfolio, skin just say and that of color All continue skin is I'd couple portfolio. aware preponderance penetration our the potential that very care in there that still of terms the years in skin The generally so quite we our launched still over

Thank you. Best regards.

Murphy of the proceed Piper Please comes question next with from Erinn Jaffray. line Our with your question.

or then in XXs. QX fourth expect quarter a Curious aware things Ulta I next first in in the flattish the should but on range, thinking QX, your as quarter, that if should cadence my Great. any guess help rolled above in Thanks. be in comparisons [indiscernible] couple sales the well? Good of how mid out a lapping on we and just be the of would Clearly question both to great. first the re-acceleration you're XX% timing quarters Any and is upper guidance. we of you're clarification or afternoon. the QX and about still if

John. the prior obviously it guidance, pieces a lot a question our we quarterly we've changes at and in It's come Obviously programs since that if of quarter-to-quarter few answer Erinn. could new what depending year history e.l.f. results difficult that you points. think to current distribution has Hey, look don't see but I demonstrated on on provide the you you can or from announced important in of touched In that the be think that or I period. new IPO, happening in the business,

headline very in of growth. obviously, those think we year, second terms the last were strong quarter about As and third

would the you all So account relative impact, throughout think into take to I cadence that anniversary the say year. about is certainly that if would the

Just specific to you're not this thoughts? providing consensus at But the point? aligned get Okay. QX-ish

don't do since We policies IPO. No. just the

guidance. doing reflection on are quarterly prior that It disclosure. in and try really how you again, year. that. I just were understand in of And the a happening the the business of things and is to danger guys timing issued help haven't back think the many hold of some We not certainly there But it's elements

Got it. then. just couple for other then a And one me

I that growth clarification for big cut-through mix, bit how was and where that at overall as Any year? higher but a I headwind around XXX does for then for than it erosion point QX? was year, last normalize there? on assumption your the little What's know Any now? exit off-price still margin. it's this Just a know right overall we basis help we are at

Yes.

any this the we to last to was for core part our tell have QX, higher the are what don't been that, than roughly year. wall said Just second take months; year. pertaining see freight. just freight With discontinue quarter the to else. that rate we it's items were business off-pricing you the take of exchange being movers XXXX out called FX the to tell off-prices you, tell from largely part that the don't in off second there broader off-price and saw business. I'd the the and of actually anything some of I would variance X% plans items and this anniversary in XX Obviously the timing of to we due what We've relative USD and happened as but and overall the did long impact. I as see and We last I'd year difference of respect less you, the benefit FX margin biggest RMB impact course over QX, to that more first than the

versus the this balanced. volumes quarter, think most XX% in last year I to came driver was but of a other first half business of year of second less It you in the back mentioned. items more halfway being those of modestly off-price I where XXXX, over those relatively higher see If than in were that it recall we two

in the then much it presented understand perspective. give brand from that That's to M&A the that last How of I Board guess you, would be, of can EBITDA, right helpful. maybe an debt to potentially what comfortable just Thank guys debt the I you. in sheet, so a balance perspective could get And taking itself. at? we you be or us scope looking net just kind on

that acquisition. other to our using are actual right Erinn, leverage Yes. level, we than I'm an we comfortable commit for balance sheet not sure the

to do of we the all of platform. that is that that is actual details flow on that the dynamics depend as want cash terms for say the comfortable I operated balance really as using And making is would acquisition. levels But nuances on asset, also business something flexibility the back investing that we the be this in a to well of it in have sure what we right leverage. asset higher is and at much I'd itself the think continue just of that

to evidence we ones operated levels more but just that higher anything, So than to have the at see. than signal currently certainly we not

Thank you.

D.A. Please Our line of with comes proceed Davidson. with Linda question. your from question next the Bolton-Weiser

and curious with more changes. like just especially on was business evolved strategy your in adding those could has grown how and social care, channel along has I you skin evolved if as your Hi. comment how media

media, intended has on more mix So something think you towards over what social efforts that's your you had has you're occurring? traditional advertising? up to you're some of spending Because Thanks. maybe could time? in changed And if Is comment maybe spending. over also that time, putting on that that I

our is social Hi. strategy in What engages that Sure. our what best Tarang. is our really innovation. Often is consumers. say This I'd

opportunity look most second continues methods to for the now continue our us. with I help core that our collaborations importantly of care, back collaborations our you key efficient with collaborate and that we've the media respect on if do overarching great you more I social and term the skin able conversations of investments then bring part, spend, a our having in resonate only talking of our how build be how want an against success authentic our being skin to own we efficiency some long and overall in national a those take the we tends product pieces, authentic well not and brand consumers into do our care beauty some will to direct And channels, that think engagement described we've of model really that for to are manner, us in time innovated parts with we first what continue but see as design also team still have deploying quarter, and enthusiast. quite that. But types more see are said to be of advertising just engaging with that with in winning activation, retail the drives As highly New the new yes, and are about. partners. Orleans was one Beautyscape a it as we activation at products deal to But Those them

to put brand. So we will behind additional the continue spending

so afraid continue advertising. what be test company, depends traditional been test-and-learn But are but a vehicles you upwards on to sales we of relative to we're not different anything, their to XX% legacy efficient that's to We very that as it over brands mean to XX% the we might pursue time. traditional of by

you. Thank

Our next the Stifel. your with question from proceed Please of line Astrachan with comes question. Mark

funding? on Thanks with question. there's in bit a and good programs to seem little last brand everyone. retailers I change afternoon, Could Particularly you of trade the talk wanted retailers follow-up ask a about the whether differentiate words, regarding drive out any retailers as incremental the to focusing within funding do itself there have In mass or the for brands? shelf ask e.l.f. increasingly does more other be competitive retailers specific in how on an introducing market stores space? to more to

level really retail full of same more brands types trade the high Often given to in tactics to customers business us will have that great and legacy be extraordinary many and the The customers. merchandized find we go our have much also may see will when that have higher only pricing makes things value do for of That you everyday e.l.f. much other will it spend brands don't is efficient don't to we and that market we every formula of do an to about day. are single at of extraordinary it do value. to of then trade deal often offer have you merchandized, that back and prices. aware One our the quality discounting much, the

retailer serious of an we their three category consumers is In that mass category them best to incredibly not in attract other writing brands, interested on diverse, entire young, have terms of The check. shelf we every about as mentioned, we they're -- is in that the the dependent trying they're that things one to is space proposition compelling beauty retailer have a have enthusiasts we beauty. these and if

every pipe-lining second our have retailer thing is innovation innovation our and that that The capability. we wants

collaborate ways that our lot active there. know earlier to that Shield difference. and of of sales first dependent a and and online the support interested importantly which what dibs is them, and to Similarly, well tension we us up take in Walmart and because on are on the line. as with they're carry we is they're our that segment. to of of pretty with the able our form examples. insights terms terms carry says months. for There's If that able there how you they direct in productivities, very in at check. majority we're with collaborating. we stepping have to a most our differentiate: our our allowing skin through way big in huge really get as Beauty e.l.f. proposition always best insights makes as first reviews on channels, gave then Beauty big, in. differentiate and give they XXX,XXX the have And of from want often I'd is our were innovation direct items line collaborating more data They a differentiation, we with of couple early our our up the with were as qualify about our this a of number one, but over Shield a us put retailers stores that perfectly the that in via data get unit over sellers they for six or them a think but I XX channel compelling healthy Target And terms third we retailers to with the then we launch years, risk interested collaborate you to engagement best as one such have the in both of our collaborated translated end We're the well best-sellers, care not don't getting happy to

So on focus. has that differentiating been depending ways our not are of price discounting

of We consumer weapon as in profile well have both as our our a capability. great terms innovation

to the AUR that, I'd on that part way. uniquely the guess too, product there you're been asking retailer going selling in the selling within wonder for? the retail? is up. other just a different the price-wise, Maybe of most positioned of in from Has I mark a where products what the up of prices Okay. it's I focus context say where shelves. change expensive the in in products the product of Meaning context are your less category than And

dollar than Dara's sell to So weaker. would the retailer and so volumes other or more little been profit presumably they makes bit earlier, have items, per a less sale have point you to turn some

from you do a a that or retailer? how So up make retailer if you're

We We any different make so just it a couple of other faster ways. turn much brand. about than

throughput nearly incredibly productivity [Indiscernible] on brands. attractive, being three that us the productivity. about talked I are because mainly As have of our retailers unit top unit three times

AUR willing have to retails to of able productivity trade in averaging drive off we and volume lead already able given there really to been those to. we have the be go-to we market higher this many between of of we're where different numbers to the that two brands have of So legacy high-priced that being the that within are to than continue out able things drive very luxury It's that.

within terms brands. in margins their Our retails, choice that's they where price of

the I structure pretty overall margin comparable. think is

set at think their of level. most them I between category

we quite chains, movement that in for our their retail is have strong. So given of model think and have profitability the we efficiency supply terms penetrating the overall I also

Thank Okay. you.

question-and-answer for the the closing back like to Ladies remarks. turn of would I reached the end call and session. gentlemen, we to have Management

seeing William Great. discussing QX and We and to everyone. joining our forward look This you is conferences Thanks, Jefferies' the June for Tarang. Thanks us. August. Blair at again in results in

conference. today's concludes This

You participation. time. Thank may this your at disconnect lines your for you