e.l.f. Beauty (ELF) 26 Feb 192018 Q4 Earnings call transcript

Greetings and welcome to e.l.f. Beauty's Fourth Quarter Fiscal 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 conference like host, to now McManmon. Willa would turn over the your I ahead. go Please

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

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

information non-GAAP and the measures. non-GAAP Bailey, company's from the release of are President us between presentation differences In to Chairman today refer directly Financial Chief Amin, comparable the and most for Chief Tarang a on management press basis. presented today presentation Officer addition, today's Officer. you With We reconciliation the includes Executive GAAP a and and John

call our the call today's turn and performance financial guidance. discuss to action, Tarang pleasure It then to For will now will discuss in the Tarang. context John is my business over

slightly closed ago. track line adjusted EBITDA net Thanks, year delivered cash a and our EPS second down profile, of that year $XX share slightly per Willa significant we with year-end of reflected challenging million, channels. half The $XX strong margin $XXX delivered versus a of was a year across $X.XX our balance cash for and deceleration improved with operating million. flow adjusted and afternoon sales weakness, above us Despite with XXXX good everyone. year Fiscal ago top the of million,

our at in Beauty that changing demand will influencer already optimal in we consumers also face to our way This from to headwinds are our expect the leveraging in January to with disappointed our followers and Wal-Mart. care extraordinary January plan mass key Instagram XX% brings versus track changing digital up the X.X on placement for million. help ability doubling on earned interacting year-over-year. million core curation we X to on social of keenly are in in and social new who quality total March Marketing, fewer in products, of Squad topline, programs, brand, We of reasserting skin the and of these social We added and us an XX,XXX months delight our are XXXX In We market, prestige in particularly quarter on behind to are investments. Though addition focusing cost channels to brought of comps, improving focused advantage; online year-over-year difficult undergone our value. down on beauty will our savings In an transformation of do last success new market. competitive our media that. We're we Beauty in almost the how mass from e.l.f's generating has XX the we Squad content, members, our influencers brands. beauty market over our through enthusiasts [indiscernible] Clearly do to increase at Today the response XXXX of item entrants are the to our the a membership drive months, loyalty demand position the with bigger discuss XXXX. efforts. driving media mega the joined team. almost our intend and I brand, awareness. early X.X we weekly cosmetics initiatives with first focusing getting this To within digital a assortment putting in shelves seeing compared million we had from Three we value XX% up was January, We're pay meaningful head beefing Integrated over impact a indications product strong and ago stories new in and push is launches. making to

what's share these me Let numbers. driving

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XX Beauty most as on key spent first Our held plan lead to will We of Shiseido innovative exploring charge USA's e.l.f. Shiseido's Senior in year consumer has part the CMO President of to and mid consumers I and increased previously, the the position, where into building spend we further marketing at To XX as Prior innovation of and marketing around to range Group, we around while ended new our the with sales Kory Vice beauty these bareMinerals oversee the and focus years differentiate she this will said in products of high e.l.f that, be division, e.l.f.'s quarter. Kory will is Marchisotto marketing spend support digital unique franchise net the also years as bring and who the brand, helping recently sales single-digit new and brand. team these X% marketing to more creative, She build led of mass ways increase relevancy experience, Kory increase and our efforts Leading expect digital. brand. efforts than its to Prestige be transformation. LVMH. roles in to gradually. engagement

team. on have to excited our her extremely are We

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we is partners, and placement calendar the we underway, we will stores. assortment, retail in their national pickup space, expect a including longer result, seeing slightly in retail XXXX, as due At our of of to shelf Beauty, Project than resets major improvements. packaging, and typical, terms Ulta product a a space magnitude subset take overall are of Unicorn partners, gain our In where at additional

of lot a As on national we are partners. our getting these retailer we changes, from execute support

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around Another and our e-commerce automation and running the up area of cost country. while warehouse initiatives across savings day cost providing enabling already centers. to time our manufacturing three centers is distribution Columbus both delivery in our is savings and one

currently for complete be to XXXX our in automating our line fill respectively. on time calendar are We liquid and Wal-Mart we budget QX California fulfillment US of expect which and manufacturing Ontario, and in line, QX

We are also executive compensation. changes making to

program. As background, pay-for-performance we've always had a

X receive Personally, to as purchased for who will approximately executives XXXX, our has highly are long-term in performance bonus the of poor second-largest value. shareholder interests meaningful our my Given XX% aligned the stockholders company's year. my holdings, drive with

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be less to will this, above targets of Board our equity part the half price. performance-based I'll long-term is As current creation. level. initiatives awards with with like on my trading in Net price and stockholders team also highly update receive you substantially at our value aligned I'd well

one committee We her that company Board Director with members announced aligns or best expertize. In eight holding Independent new seat, have with a independent January, each assignments experienced public strong plus with his we myself. committee

member highly Beth I'm in to alongside appointed Board experience, expanded have Prichard experienced her Director. we is a this Lead public strong and company role. excited Additionally, Independent Beth work new with as governance

Before investment to tell with I e.l.f. feelings return he earlier to it's will you, leave over the John, world. we today, announced I call the mixed turn to as be

trusted TPG and As than of me on CFO let will I with of Russell by for very recall, company e.l.f. the and President in business. reignite friend. his our to be next him on role. team. entire strategic asked growth to wish and John's help to a acquisition e.l.f. across was the partner and he's We're in the John you we're is closing, absorbed He's thank I focused come and as In executive responsibilities may a colleague. search. public, the to other partner Reynolds team. a working his to the John him me the the service him been members XXXX. take aggressively consumer initiatives executive Growth valued and of more best terrific

play turn to and these our of confident take many execute are ability While initiatives time to in will to for the success. over John. out, long-term I'll we call strategy now

Thanks, Tarang.

partnership and Tarang echo results also want for grateful to Before we've relationship years. I and over the jump guidance, into the sentiments. I our our I'm built

transitions, sales strong XXXX. channel decision holiday new bittersweet in a Net to am it's Tarang were forward primarily due as to These now an at and closely that orderly continues to retailers, discount While full by in to e.l.f. program year with a sales. customers, Alta, I X% decreased added by select company. as $XXX the decline Rite be I'll in look our a impacts to brand transition. the comforted for at and ensure Walgreens, leaving talent declining national to team to our sales and to new distribution and exists decrease to Aid. partially mitigated working trends financial such additional accounts, the I million the turn be results the

per broader We focused SG&A net million On Adjusted a the the effective million $XX.X X% business million $X.XX in to net up or $XX.X $XX remain versus As $XXX Adjusted was down or $XX was expected, per margins or expense XX% $X.XX our year sales basis, XX% adjusted million compared share million were amidst for compared of with million from benefit that net a XXXX. $XXX gross or or million year trends. was year ago. to XX%. XXXX. line rate year EBITDA million share, tax to was Note an XX% in income tax of of at $X.X management on highly in sales a $XX prior ago.

to and than to of balance million the and December approximately in million With of generated XXXX, of Our with bringing cash driven XXXX equity we million, to effective last throughout disciplined working during guided rate as exercise of $X compared instruments year vesting due the by balance down operations an period of benefit over the period. lower from which management, year. capital last Part from $XX $XX inventories management was the $XX ending million $XX from primarily was million a million of continued our inventory in cash $XX our of year. balance was XX, a this flow

January guidance our enable be April budget primary puts business In addition the our This resets, and March as for of Therefore, each been down for we or value will by guidance to pay our better to X, allocate capital after December, many The turn are for March drive our on from period. will shareholders. expect fiscal and opportunities Adjusting changing are today our and under with our plan some us provide guidance we currently year our the are transition year. evaluating a to end begin XX, financial and shelf beginning e.l.f.'s to informed as to ending drivers cash drive in Company we quarterly to XXXX reporting calling bulk the these next our X, which in move that annual fiscal XX. fiscal align typical announced the March we February XXXX position XXXX, to to This needs, has debt use other fiscal business to cadence periods May. X year begin XXXX the with months to only national year giving that consideration will fiscal balance period operational for annual we community. of In much time, on should call discussed XXXX. on occur April year. you, the our resets retailer in partners XX in better March XX, XXXX

the I our share for context sentiment transition Stores. close provide e.l.f. on to decision I our Tarang's period, Before

pressure the exceeded the expenses resources their gratitude. That must and we to employees brand, passion Our e.l.f. action $X.X initiatives. margins over Store our traffic growth trends, expense brought worked We store allocate key hard take with by in our to and million our to said gross deserve have XXXX. properly believe

in costs remaining million, the include be be a $X recorded period and asset other million non-cash million. write-offs closures, the new will $XX to are The lease expected $X $XX liabilities cash the onetime and employee approximately XXXX. will $XX $X.X Approximately expect to be to to the of March of taken upon of we to which eventual in the substantially in transition transition standard. Turning million million to of to $X.X ended of incur non-cash adoption currently associated that lower. expect approximately severance approximately the payments Most accounting impact million approximately charges XX, $X.X the we a of shutdowns of relates period, million costs assets these to are figures million and accounting with outlay total,

pro be exclude forma other all stores. will the on forward metrics to of impact provided words, going basis our our will a business. In guidance provided Our exclude stores

period outlook XX, Now our transition the ending for for March XXXX.

which this in noted, resets Project between shelf $X transition $X.X per net million of period net the adjusted million EBITDA a count million expect we yet million, million. adjusted sales e.l.f. to share on million impact million Again, fully and excludes in diluted stores, based prior fully $X.XX We as or year Unicorn. have $X.X to $X our outlook share of quarter Also to XX.X $XX million, net $XX as and is between assess to this a of the sales. $X.XX $X income and generated

the current trends our are As universe within take until such, resets expected shape. Nielsen largely to firmly persist

last to of and Finally, is in update we that pipeline upcoming the the May. our plan resets approximately shelf on in call comparison. year for the you million during impacting the had overall retailer impact XXXX fiscal comparable $X outlook of quarter We national the

a is leverage operating that for the initiatives skin time, I these not bottom benefit it forecast, for in the care though, are On as the you to in quality will with questions. May. we at a in the that take number extraordinary plan of operator, has open implicit quarter, providing the see and on may cost high in leader to you in believe line, Tarang begun you year. company call earlier update referenced savings summary, place declines XXXX from will commentary. was position note that cosmetics reassert initiatives declines, And right deleveraging now yet negative our topline while value. his the the initiatives to In challenging expected result our would in the an We With

conducting Our proceed be your Please SunTrust. a this Instructions] the of Thank line time, from with Chappell you. we'll question-and-answer question with Bill [Operator session. comes At question. first

Good afternoon. Thanks.

afternoon. Good

Bill. Hi,

Hey, of the 'XX? I and the understand you give with expect space? things any I as when to mix, us Do lead mean, next and the kind - resets months? are saying XX losing the looking change give still as in shelf us I'm year color apples-to-apples in Are calendar you you can you're space, mean, that do shelf I would to look to that, for expect you believe Anything kind over versus EBITDA should 'XX worse there fiscal that meaningfully anything sales there, but resets to get is at more of can and grow? we you you any then grow? the

particular This shelf Bill. XXXX. Hi, talk of As as with subset start - on the and where you space we'll Sure. the Ulta We mentioned called - in space? I your second get terms up of in overall kind of script, their is a question doors. don't of we specifically momentum shelf will Beauty e.l.f. in space increased Tarang. out in I our Why expectation in pick is half shelf that particularly we

productivity, broadly profile, in retailer our these stead. innovation, mass retail from partner consumer of I'd with can you and you they've will these disclose e.l.f.'s happy really see partnership reasons, in our what us of tell we're terms what to But standpoint, For proposition the I doors both those us particularly many ability on and is competitive how to put good be. what the we first retailers to and tell asked a of items overall not

on with strong. working of in Wal-Mart we in-stocks us incremental with improving top So Target with centers, shelf expect particularly very I rewarding partnerships, up quite Target those. And Wal-Mart's and overall is think merchandising are our and to then our us pick innovation that, space. now right Ulta, floorway space. kind closely of

overall and feel position standpoint from of our partnership terms retailer an in So space. good overall

around how moment to the we're and apples-to-apples And trend on broader recognize clarity on year the difficult the then, question an of big Bill, forward a relative business that change. we that was line in basis, of ahead the the obviously your resets, plays and fiscal driver on

a that Important that will of you of to I guidance. in look May. or impact better note transition the trend Company implicit sort negative we benefit Unicorn does in marketing the from you think at Project our position that in not a be that play. period, But obviously in our if have see the initiatives take to our resets, shelf will a quantify fully

So a you little bit we'll in right we're try help bit that now. offline, a and recognize but a moment of

you just and expected next outlook Okay. or how the anything you're And certainly have tariffs of even I I cost front, the few quarter roll of kind in better how tariffs - Can over then in stuff. changes your would the on excluding that well us that mean, one-time months? of terms was than in back, outlook the offsetting if kind understand if the help

ways, bit a be seems moving target tariffs of like say many relative news new a no in Yeah. And coming I would continue messages it Washington. to there. out of to

have, through. transition you've items include calls, heard period tariff prior we that few a plan impact prevailing As happened that has concessions from talked we of we as XX% what does given our factors the in a the which with delayed. already vendor our you partners of between as dollar well actions know, that in got to would been now, the mitigating went tariff, different and have exchange on and XX% our to those the couple guidance plans the was RMB. Right subject our as rate US obviously the that a not and about been mitigating if But we when

what what point, that where would did go And are we we analyzing kind by already if we SKUs, our and items of ends we'd and pending terms specifically selective well feel XX% held of up with XX%. obviously off through, of worked we've with happening did to of on do, already in positioned prepared that one that competitive our manufactured trade XX% are have if pricing take kind there but and the on customers. Bill, is and have communicated We've what negotiations, every a

it. you. Thank Got

Our proceed next question the Coyne Capital with your Please BMO with Shannon of Markets. comes from line question.

Hi, why know thanks year for taking lot my question. a the a talk haven't going guess expect you of think you Can just it in where state to you I it kind Can surprises and keep half you about wrong, biggest competitive reasons talk forward? your being different that about landscape? than about pace and able are, talked just maybe then went been I you was you you ago. what

this Shannon, is Sure, Tarang.

for message up many is the a were XXXX it So the year, the influencer lost out new happening shifts of standpoint these of impact all us landscape there. a entrants up I there particularly I'd driven that pretty terms macro, was mega what ended at from noise And of say that take ended big brands. in get a having on look of if as competitive e.l.f.'s number in the and

about of ability up when I it at into and our only quality we really of of great we value. and a in was Wal-Mart, our give off innovation and was as that elfcosmetics.com. first into high we're channels, behind had behind direct to the time went asserting while Target, distribution the those bit, care in of to Our particular, little we just mass Ulta items. talked there terms particularly usually reset that would need extraordinary innovation, Beauty, doing, really a historically kind we're happened that couple products. very back sure position make this is And biggest brought integration pipeline a skin own always a our unique resets market initiatives biggest to that our By of examples the coming cosmetics player learning to

terms a So one say one I the particularly couple we've a on have to call, actually item, preliminary so And that to of our and prestige made, results first in sure the fully on integrating of that that. the what far. and with again, both of let's and influencers, make we you've those you seeing biggest how we changes gave in beats efforts inspiration, of the when digital, stepped we're behind is mass we we're seen up believe we like examples social

pay I'd so hand that with savings more to behind goes importantly, it mass the in terms to the some funding behind in talked brand, products. themes but cost And our hand we first say investing of the of for investment, help most integrating

Can you to expect about if in Just Okay, with international to if thanks. grow the And wondering you continue follow-up. then business? changing anything just another or internationally? is there talk US your change focus on

you in pleased what really guidance international tell what seeing international particularly we're I can May. direct is full give in overall We'll relationships. But with our we're Sure. in

now, concealer amount That of So being by this in And has of incredible we've point price with closely I been the UK. Camo called the UK in Concealer the the Superdrug mentioned awareness, right partnered of example concealer very the ever incredible. on best sales our and GBPX. the that at that LUK driven amount has

And to pull kind see the the - it and in back continued distributors some strong of At that kind really growth continue we Superdrug we as other last of brand did directly. direct the growth year, whether have expanding booths relationships on we be the UK, of retailers so to potential, in and these we start use.

ahead. our combination We are space really direct of kind white have of a a relationships number of and distributor relationships, prioritizing deal great but see good

Thanks. Okay.

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

is this Hi, for [ph] on Mark. Taurel

there. Hi,

Hi.

had development question spending product and a then how your balancing cost incremental how will of versus sort going and to just you're be about marketing with that like forward promotions allocated versus initiatives. We your that saving

So the business? are much of reinvested into actually the how being like savings

Sure.

little kind first Many QX to QX give fiscal of as intention those go the there, investment you hand high next vast We'll year, we behind those but I and and, marketing of the to R&D we're broadly XXXX loudly of So seeking picture the mass for reinvested how consumers of savings and cost aware and very throughout of mid as The spend new to and for is in bit of May single full the have of good about. guidance into majority able marketing together, in our I'll going in that them have, marketing as help spend we the cost really not what again, these finding picture put this a clearly. have make The cost There's again to year innovations talked a much pay of quarter about. we those sequence how that quarter, more activate investment that transition period, will call. better of most We say initiatives of the be hand are the that in of savings the very we numbers digits. got back our first savings is program but be you products. we'll investment. but we do kind sure the we've feel you in or engine in give to behind actual go specific we on some really I'd would we mentioned, investments. is kind on speaking, incremental kind give the products tell

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

good afternoon. Hi, everybody,

a of couple Just follow-ups.

Unicorn. Project So one is on

of on should retail your give many and as area many the stores you an year distribution the close Maybe How an those to think and in trying the give community would follow consumer insights just the widespread you're And to next accounts, should online, about test thinking it how doors? then products I how bring on you XXXX? over your course ecosystem that If know, to on then ultimately about was update innovation rollout wanted side the decision of I two us could just of how you. expect that to some insight Across we about to of products initiative new update the wholesale. we how relates is? Thank and how you're enthusiasts thinking us business. up, where of the years. across retail the an

Sure.

of allows So so as be one we'll fall, may or but of There kind right and but get us in in will on still kind where more product, in at Unicorn. to sleeker much our now more distribution. more all is the the place and two of design. Ulta packaging those well is Wal-Mart, the Target is impacts board of our efficiently better and items distinct They pretty more as in of across That's retail phase customers back in Unicorn to packaging, all allow that into come as sets. putting us as of brushes efficient other, brushes Beauty of and product which XXX% onto other the design. Unicorn to fit currently drawn on shelves the of start then in go new more kind placement Unicorn move In sets. Balance not customers a It two What's Unicorn Ulta. drawing taking Target customers Wal-Mart, Unicorn kits packaging of much Project we're we phase be just Project one. will will our way Unicorn. kind first each really of put more efficient phases product

hear the me phases throughout about you'll rollout. So Project multiple Unicorn pretty talk year in much of the

implemented required phase, associates. through your vehicles. the a role in that and store off resources on love currently expect March at we're by second of some the passion stores, we in when the we look As then And of the have these first of the of to resources insights, question, those insights we're our end stores, particularly our we planograms of sources from go terms we kind Yet, that took of main the of to the that better got relative deem against we we getting putting other doing. other

to now Squad, site we we're particularly creating e-commerce It's that in first our vehicle mass members and able a What are cosmetics. rich we creating core looked many getting area novel a innovation stores, relative of color we a our Squad some insights our is of of able there didn't to our program. of elfcosmetics.com at and loyalty most another products example, the started we we the our started Beauty after we Beauty to really once same Squad feed insights for So got started loyal Beauty to is newest prior a feedback team have our do, which with we've rich level store, insights, for.

some Target and our better get terms of being of innovation to innovations even able a has to kind on there's And desire different in kind Beauty we're of national doing their much our big with number some of by terms the retailers Wal-Mart. of front. particular insights. retailer expressed Lastly, innovation say faster of the go got in things I as would Ulta partnership of on in have we've

unique new ability of they online and us to at So of our each can get of at innovation learning. than have we constantly shelf will what on we typical than innovation, At including a in of we're longest they're before return more Beauty, Ulta products partner, the kind mentioned items their foot And give looking their Target, centers, would what four strategic to wanted some I put doors standing terms kind on exclusive that ever ways in fit items. partner faster into set. Wal-Mart, of our floorway insights

associates from terms the important particularly ways getting new more learning, So other stores hearing of in what our played they're a and getting from an back, insights, as efficient I we step have while items, of manner. insights certainly those consumers in role and

one about just understand could year. throw more. I bit I want little If scanner in Tarang. a to Thanks, just this

March quarter, us just of through any year need comparability mindful If that to at we progressing the help are December June, things you year, September, could occurring last be remind there we as look were affected that considering just for scanner we things. the make those sure the want there year comparables year? lot I I so of account is progress, as that this be scanner in a to noise know should in we

Yeah.

Unicorn. So the in we see in headwinds we of I I a are bigger think channels. through first If the with macro is think quarter do particular, conversion track that going still our normally than we

The Unicorn As a talking to biggest just the of of transition in number given magnitude the that little is over. of see that longer, taking SKUs that to is year-over-year about more mentioned, going scanner you're kind change relative I though we're are bit volatility. converting bit a

a Nielsen, of things after doing better like see getting it saw may while items and the things next us - on allowed of month's be one depends I read is put part to changeover, on or look last that you the Unicorn lot the clearance. better, worse So they're do less

typically deleting, what shelf, so as put that put those we markdown to And the come we're have that clearance for to items us in to of new kind much. not the allows happens is items are allow do to on for happen deleting. delete or the items will when items space we resets Because on more retailers Unicorn

that because has impact in while negative lot a drive the of So actually kind of a do scanner items the discounted sales. clearance

month. a read to is we current compare actually around say I'd month in to to a clearance how clean overall set, this between see you're ourselves. around have the period to versus start going bit to of kind But have really to where best you're of prior kind did frankly, is So we. the kind be you'll would period March base bouncing The this much of scanner - see I we're you period after trend to we've where get, going able bounce month, say that the that going have are and once

Okay. Thank much. you very

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

afternoon. good thanks, Great,

kind out So first it business maybe seems XX% at retail time think quarter sales year, guide perspective. is like this this to down even Tarang, If a the still of guidance back on to that the thought. follow-on just just X% about last I if from I

mean, some reflection I later would of shifts is of quarter? QX what recognize a of have I this any changes major that's is other So because optically? for reset, but there that kind impacted Easter Are this year really retailer there's you're kind that seeing

that little that, than a than respects. Sure, in lot some Erinn. a or It's better better

the in of year So year. million last we we had did pipeline we call period that have out comparable don't $X that this

can of progression of trends. importantly, different retail only guidance tell the the the kind May around year, but in the so and a out be expect see of position overall million, really coming And stores pipeline. that in much set million it's to you resets then of kind really better we'll these you more where when I not would $X.X we the of $X

I'm anything I seen of the the that just you consumer, they were between from guess questions. Okay. fill that's of characteristics Marketing demographic new front? on you you've Integrated front, you And some other to And roles in CMO, Are Are a the terms that think in hires or Beauty you've to two Squad, pretty just I then on seeing looking Head any I similarities one there the I maybe the made with compelling guess and interesting pleased there was what think the stats consumers. now is you? with of of team mean, to then hired are Kory, that marketing how assembled? said saw related XX% curious I growth you you're still what are open, recently. on side

Sure.

our terms So hires. first in of

one of have have think we great strength the the I of board. we kind advantages across the of is the team

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initiatives this we including some So of scanning and us the to say sales. our the testing of able that quarter tie would we on to forward online continue that terms kind we frontier that some first as to next of see what is we for receipts allow further as kind being put of in of there of version out sales national I'd there. like our to personalization time, our together our data retailer first own go

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Our question. next Wells question Herzog comes with from the with your proceed Please line of Bonnie Fargo.

guys. I today. you changes, a thank transition All Good business discussed your guess, things to right I at of lot now. I a or about are to afternoon, which circle right, wanted as where you. and think back your a period, entering you're business turnaround making

than have take? do read more a this you some QX have want a for of need So or lot the you what I transition resets of happened. on do in instance? your guidance, Should this think year And the expect into retailers context the to how given about guess then we realistically long

some from you're get weakness that things reconcile this guess always few of there better So not to about will especially I'm a and lag just through is then changes business So advertising. a I'm trying trying the might in this trying through that to this forward for the really suggest pretty decent when think carry for deceleration just I expectations think especially and given making, doesn't this with think to I quarters, a year? the

long So turn? Thanks. to really thoughts to hear how things take could on just wanted your

Sure, Bonnie.

terms start with in the resets read part your of when happen. of We're and in middle of kind the of I'll second maybe actually the it. So right piece

March. I Wal-Mart. reset of no line middle time is and fully across none, yet. So, of that the of Ulta's of kind our of customers, in We're is each Maybe know complete end Target still

resets, be Some have not with yet. you, key completed of been honest our to

the to sense. say, take kind have of give I to able on accurate the yes, point initiatives where to I some as we take more much finished able what the would frame to resets. yet the why of kind of be visibility that's you point. it could goes. once these of I'll see get quarter changing year not much of and of that going But have of we time to at will inflection better long so these and to kind yet whole that it the out the do tell resets, specific timeline take is fiscal we're don't not be you some on ready I visibility was April get how sense time look So I'm therefore it setting that you a full with of we're

that. then just ask and Okay, to again on

do lay it, weaker and from the what So middle in terms your you a as of just now, of Tarang, to QX or you be things talk you to through out but lot trying are right guidance seem if you're resets, your the you as know in be that ultra-conservative expectations?

Yeah.

X% right take So earlier line of look, questions imply talked at about the in quarter. guidance stores, stores we've would then take it transition if put think out that - this if a about decline top pipeline, comparable that you of the and to I once one and X% on the a kind I look the range, our you you think put

of We things was X%. kind QX if there. that pipeline had just going So minus you on perspective, X%. for X% to do math, is X% minus QX

last what of quarters. couple range seen in kind the of in it's the we've So of

and calls, hey, the of given the a is you the with stores. I the been at - we've out and I including or as tell all not. that don't you the of But a isn't of off far of trend to of on kind look and take stores, that X% the going kind on. Unicorn pipeline that X% once the that puts So at X% kind mentioned we funny of want of the lot kind and project have giving - period, transition look just X% transition to I'm like, just to reset

just Okay, the enough. then spend. from that's And quick fair final question advertising on one me

that you're mid around expecting in think was to I digits said said as percentage You single be high X% and it in a to QX. XXXX, sales, of you

returns about some then business? do confirm drill the of And what maybe you just how down a on And that. on right advertising. going think then spending this bit expected your So this for of forward. level targeting maybe you little are Like guys

on You that the for lift this, you spending is touched but you required Thanks. seeing the think levels? are

Sure.

up, advertising, backing XXXX X%, from you spend influencers is of single A part at ROI on is would activation our kind like that high almost digital it what first that this of of is is back and We had very of the our right. where little finish of none is. it kind we're the I traditional question. So it level channels. core But seeing we're I in lot and numbers the of digits. with like I say doing social quarter mid to did quarter to in

to great Some return have these of the profiles. mass we've against really activations done particularly products first

on kits, influencer integrated doing marketing sending So I the from mouth. there, where pretty out incredible Putty influencers word big out to able by described we're Primer some social, pretty of get pickup example big

wave-in, Putty cetera. stock. of else in of fact consumers terms are now In you talk we Primer of see surge this online et big another kind time the of every I about, in-stock out consumers get that is more buying, getting kind new We're what

with the again, sense current put the cost high levels to full like I'd profile. want the and of But marketing will so of mid with better of give And comfortable that we yeah, kind kind of of digits. have of the kind where range say, overall a here's single I you you is I'm will together - to picture savings that business with specifically much

All right. Thank you.

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

wanted cash the I and to sure a question. - some make I'll afternoon. just ask good Hi, I just last understood clarification more a then just of flow

you still pretty the X% that to question, shelf the Bonnie's in on So to making. single are and high like the space the much mid digits resets imply

on decline not So an the adjusted all resets. basis incorporating in are shelf the are fully still the revenues XX% range for of the what seeing, we middle

So in Tarang middle be a instead XX%. something impact between of some X% potentially seeing the of in had range, I X%. potentially - should think said the more to the But I of mean, we more the - lot

shelf So not the I'm reconcile more if if to then the flow. a that's that that's net And numbers we're number of question two just see the pipeline is from trying seeing, second space. necessarily cash to a on

I to want will... Sorry first first then I if don't and just - I know you the answer question

first the question. Sure. Why don't I take

to look So, $XX on transition Andrea, the if you we take at top said line, a guidance million period the million. $XX

If in you the had stores $X.X $X the the you do we and line. for gets retailers, range the for year have pipeline this add you that add to X% that's we million on not minus what last X% minus million of to year top national

to provide that kind standpoint, able from the a it's transitions have including - a up to just savings. why you of future do going the as is do now. reason a and come both we'll X% shelf and marry cost clearer on able taking clean to place before. We'll my informed able the much we pipeline be. you view what - at read X% shelf be period, messy the exactly kind to be On view the of the shelves we had versus picture be XX% will resets. take that's not lot a kind kind of I of There's and you get kind ROI, the a the the where is be well tell line top given the as a once not see like with marketing that I off all that, to, spend, May to So coming will kind of frustrating of future know to But of right year related of look have the it

Thank - data. the And for Okay. helpful. you then unpacking that's

obviously, done facilities in tremendous of of invested other you've is couple The that US. you've your in work supply chain I together, terms question the in getting had like, a

the you of kind how support into us initiative - more to should stores? that of be the gets it can that on more online going e-commerce, some like you given other you're be thinking cash that the we like now should can guide side give like So we to investments flow, you need to which seeing the vis-à-vis is how focusing flow business, also more our be business of cash probably potentially

we balance, been generation those the overall with of into management Hi, Yeah, know good ago capital cash particular, in on A talked lot about and really position, We about a I - Andrea. place. a very working a year good or you've to proactive XXXX. so inventory it's theme side, rather, and that the in throughout feel obviously bring John. able our seen that year, into the as flow

been undrawn So revolver. the sheet, the with capital in finishing $XX of the as over that year will lot made balance feel of investments particularly investments million actually savings, mentioned and on To in of side, overall that XXXX. relates is initiatives strong core a the your a cost terms cash really that in e-commerce that question already and of around to both drive capital some we completely capital kind and

automation be speed terms exploring online right And very what in but warehouse Columbus and some calendar end time and overall feeling the doing operation not for process now in domestic delivery. in feeling about at the of from that's the there, of manufacturing, which Ontario about also of efficiency we should So have initiatives XXXX. good and good an we of experience near some obviously our only the customer perspective of the as us, also mentioned,

about a sheet think balance sitting our lot those feeling of good investments the condition here made I and today. have been of very So

it. Thank I you. appreciate

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

the change-ahead of brands accounts. Is rise just to how seeing what you. advantages the one get wholesale want buy? pivoting innovation way frequency sure the you of thank you credit also and And sure your and for are person, you're may thoughts present, second enhance on order customers Hi, influencer and by of question of that's terms of about in share may the drive inform how drops make innovating core there just that to doing. fair and your it make competitive you We're to buying your you're led relationships how not or product awareness the are is terms that newness this just with your Thank given what the your in that customers that a like is key you. future in to sure want the making can

Sure. Thanks, Oliver.

learnings biggest last we had we credit for impact the kind and of probably of get was was to brands the the kind what that one first rise of on competitive ourselves in advantage the the allowed get is that innovation? and noise. do of how of year - our on lost all how say we we would of do I So kind influencer core

some is advantage so And prestige There our day pretty best what - good roots, the has competitive any inception like from That's at are have the that early of have proposition the no of other. propositions really some decent there value. differentiates and care that have of we are end points. almost skin from the there's and quality quality, extraordinary from this and question price core the cosmetics changed kind nothing company the

amazing. of saying believe kind to influencers $X - $XX consumers I a we defused the track is I'm innovations ended it our this on I the on lost, we great have stay Putty able even to prestige out is at example, and prices productivity, it of we up of able XX-hour or that our leading can't for able Concealer, really happening frankly and product is kind these doesn't do some focused take allowed launch shine compares items that would be and figure core $X, of even on these this say product Concealer this kind some light advantage all the Primer, what normally just effort some ability more $XX shelf, that ability a the ours different would of really quality year. put is think last items every that year of prestige out phenomenal We bring much to that be to competitive points to to - right. had being on unique to able be like is of of that Camo our and proud I at get at and that or versus that to maintain Camo finding there prestige and record key what we're these we to Our have that will price compare and would at

we I given any quite our good look not feel as structural really plenty the are very just going of the it's testing bring that but not to have not. things and thing, we product have as or only take some that in the of different that reach e.l.f. as biggest not the some have the innovation to been in I given of for because, was And competitive And that of better frankly well amongst good, $XX of a sustains same they and for that opportunity innovation, the things. terms discussions one but point. out end, addition get them of you brand, them and with they the only the national categories the us time trial a look we do ratings to engines take all they the initial tried partners, category, that price retailer or review overall - take a speed when when this partners in has it, number some very at love innovation biggest retention kind the advantage new right. as that our positioning, engines. at of in with I'm They of at of at areas scope have are looked then - one great reviews highest see of the able quality proposition future of our in time advantage the the gosh, about - And product are is in e.l.f. evaluating we one to is be the to both high we the one how of single their retail within So of honest, say, of marketplace, to long-term our limitations key that people competitive

items to the is lot news them with our thing at own really to new kind say they to be the - that both on speed. retail do is Frankly, same Beauty, taking the leading bring drive I'd tested willing on being and their that before ulta.com done move substitute ability on inventory now our there as that. next something fast risk we've we're can at in our to entirely for and barriers of able in the talk advantage There actually and exclusive take we'll our we and reach Wal-Mart, take. is we've to help trying our on their customers to partners one drive there ability and So of in have time and of in With And have take shelves that display Wal-Mart, them there. we're kind some a items never terms we third further. That's where each to elfcosmetics.com. bring ability can uniqueness space as to core on do kind terms to innovation is of kind are partners is we of I can to Ulta at doing so unique of able Ulta making some about the of kind products the - no online how talked approach able our be of different their market on fast they front, of an ability sure as while it there that admitting structural to they of

broadening of and In question seeing program last and getting or of it's wellness. partnerships we're and lot on on future What's powerful space, we're specialist program? health is different the the with seeing and some the what Squad just - Squad. the loyalty. Beauty of really a big One concern some that Beauty retailers And this is with apps perspective your across Okay. the of bigger a

like program that So longer-term basis. would on a love may thoughts Thanks. on your look what

Yeah.

on So great the broadening Squad. point, is in the Squad. comes we your think really approach from part Beauty I potential potential where of to see And Beauty

people, buys of for to each Wal-Mart, somebody have loyalty across to or though elfcosmetics.com. consumer component many So a an advantage is delightful it much Target program highly a vision we The something being that started key truly ultimate that. other there's doing of of say expanded just our Beauty, a core a and dataset. Squad our that platform personalized to a Ulta standpoint of of how frontier first our is together was greater when Beauty is users, the we lot to We a personalization Beauty enable do Squad, next to take and I'd we're to in when a store. similar that's able technology tie work from experience it

it experience we you'll making nature we our really hear as on So the delightful users. go for of core we're most a of we about the that as get more that - do is forward the investments because how lot

Best helpful. Thank you. regards. Very

Thanks.

you This today's have us disconnect questions. no time. for your this conference, does today. At lines [Operator you Instructions] conclude may at we joining Thank time, and this further