e.l.f. Beauty (ELF) 4 Feb 212021 Q3 Earnings call transcript

Thank you for joining us today to discuss e.l.f. Beauty's Third Quarter Fiscal 2021 Results. I'm KC Katten, Vice President of Investor Relations. With me today are Tarang Amin, Chairman and Chief Executive Officer; and Mandy Fields, Senior Vice President and Chief Financial Officer. We encourage you to tune into our webcast presentation for the best viewing experience which you can access on our website at investor.elfcosmetics.com. could remarks release forward-looking the forward-looking and you'll factors our to please SEC statements. of to find earnings results our reports that many today from statements, contain refer where differ Since materially actual these cause filed with

In basis. presentation a company's the includes information addition on presented today non-GAAP

Tarang. most turn reconciliations measure. With GAAP contains release between the earnings comparable over the differences the let directly me non-GAAP Our of presentation webcast to and the that,

I hope to We category the Thank you and QX you, of am afternoon everyone. XX% our adjusted a of our for result QX Today, our navigate delivered versus as discuss KC and safe proud staying will results, EBITDA eight $XX and million. team well. I quarter delivering drivers we that $XX and strategic major opportunities good a are net consecutive our headwinds framework. million, COVID-XX. overall of of sales sales our net of I growth growth ago up year continue behind as

continue while transformation portfolio. a multi-brand advancing gain share We to our market to

We from year and to a guidance business are continued QX momentum. QX in some raising also our shift full orders reflecting

the results, key Mandy to Before our performance. details I want pillars our share underpinning

We working. a position is came of is strategy volatile Our strength. the into period from

with at that’s on products with powers price accessible XXX% to consumers. beauty our center quality points resonate super appeal cruelty-free Our ability to premium deliver universal continue

the relentless imperatives. to the relative business a strategic focus out-performance Our five and of category our reflects strength our on model

the provide a me highlights from quarter. Let few

demand. drive strategic imperative first Our to brand is

expand drive our engine our leverage marketing consumer to to continue greater brand We first relevance and reach. digital

points the X our with we working are continue up to over e.l.f. our significantly digital XXX year-over-year. the market the X.X% million quarter e.l.f.’s efforts social basis followers continues in with ecosystem. grow competition. share audience to building double-digits brand most outperform of as Our grew across

and we’re prior the XX% set. up in our to competitive only value media earned growing compared Our brand year the is

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continue efforts brand Our win building to awards.

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loyalty of e.l.f. cosmetics.com. members almost Our on drive collectively our XX% sales

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almost the Camo concealer engine flow which innovation launched Camo resonate three consumers. we to offerings and is our cream CC of our broaden than success new times segments, Building our to continues concealer core larger the category. our beyond last month and of products franchise, Looking on foundation, with

cream at $XX for $XX. grail be at as CC believe holy equivalent consumers, to CC especially our value We prestige next a Camo product. will offers incredible Camo an Our compared

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on-going partners. at with to Unicorn and productivity strategic drive Our navigation driving Project retail national presentation imperative continues our our is impress. shelf to improving productivity initiative fourth assortment, by

XXX,XXX of milestone reduce sustainability the estimated about excited sustainability We're also pounds SKUs. reduced an journey packaging XXX started across we achieved. are Unicorn to packaging just on footprint. Project and our we'll to excess getting continue We our over push

XXXX, and we consumer in productivity, elf our We lot launched innovation a the Walmart have expansion at Spring Ulta Canada engagement, of XXXX, subset leading beauty shelf Shoppers where leading Drug retailer Given expanded doors. beauty In we're and whitespace. strength retailer space Nykaa, India. the expanding for earned at fall space In internationally, recently a in of of we've of and even further beauty Ulta a in we a Mart, brand.

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savings is help imperative strategic cost investments. to fifth Our fuel brand delivering

we've six impact spoke navigating gross of pricing, expanded fund about the XX% investments to FX, quarter the behind our the expect incremental through margin pulling our last brand of a Mandy We're XX% products. we majority margins that from years, last FX while gross tariffs This including XX% QX. our us starting infrastructure. concessions. to headwinds of portion to approximately and mitigate on supplier and help to levers the Over enabled has in

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of let why future Before about turn to more is of our and our consumer Mandy, optimistic framework I points. beauty are I'm over and to the perspective the to provide face. different call making their brands eye, diverse me competitive lip our mission price of brands brand touch the accessible and our relative fulfill strategic to positioned All three cohorts best every on set, Each accessible portfolio. at a bit of

complementary to the platform. brands highly three and are all incremental beauty Importantly, e.l.f.

cosmetics to ahead, color we believe Looking growth. category return the will

on more proposition I'll our over continued speed role positioned in entering brighter strength, to we were Mandy. turn for performance. major core cosmetics Given digital at with portfolio, of ability now growing to and adapt a the to category an brand the even e.l.f. in future. regardless have consumer We Today focused value we're believe the fuel diversified We self-expression. call our share remain play trends. pandemic strong

fiscal Tarang. retailers. and ago. a by growth national Thank outlook. sales fuelled XXXX QX our of raised from delivered cover XX% up e-commerce, and financial was million net We QX Today across strength you, mainly year $XX This on-going I'll results international

We order into December shift in also January. from timing experienced a

While in lower we the in happen expected net sales timing QX. lower shifts resulted this course, thus instance in originally EBITDA adjusted ordinary than and

down guidance, of to XX gross note mix cost points increased recapture product savings our expect was quarters, strength we approximately prior last the will Gross and basis enjoy QX. compared further from in to benefits Margin year. XX% e.l.f. orders margin we accretive you to to a margin and several cosmetics.com. by As mix, Similar saw those shift

costs was and to was last related was adjusted so QX increased adjusted EBITDA year, to by or innovation XX% XX% retailer investment and income an to XX% higher behind XX% activity We compared the EBITDA although space a margin investment operational $XX approximately benefits diluted approximately driven sales feel prior to the benefited of as related $XX was were Offsetting down FX, net per share, compared XX% of Marketing e-commerce sales. adjusted quarter ago. and basis, of increased $X.XX costs related digital On million a rates. net less expansion. net sales changing digital $X.XX impact year, Adjusted SG&A as out XX% to $XX quarters of was to last the to relative million these year a build and from or volume. our FX we ago. percentage million share costs year diluted versus of marketing also started and marketing, for to digital and primarily certain per headcount

to remains of revolving ended cash of $XX at combination credit million balance Our approximately in access ago. on facility cash $XX balance liquidity our quarter $XX and to a with We sitting cash the million year compared a with our million. hand, strong the

as of added I expansion our and quarter also addition is a the to inventory due end. new WXLL levels costs mix The balance Our orders mentioned distribution at ending timing changing Soulcare of product space largely basis remain year-over-year in higher levels on inventory planned, for at and through rates. This a and March. Key was to PEOPLE, expected plan is higher and higher as health earlier, shift and result to FX

our and have comfortable levels, with inventory we support are our on-going we business We what need believe momentum. to

to WXLL and Key expect brand cash remain We year our for of launch our supporting investing the focused strategic behind our of priorities five the on recharge. PEOPLE Soulcare the imperatives balance

Now let's XXXX. fiscal for turn our to outlook

versus previously. fiscal for X% now expect from growth We guidance fiscal raising fiscal approximately are XXXX. sales X% to We X% net of up year XXXX X% to

million $XX to $XX between million to of expect million diluted compared $XX $XX previously. as share, as previously. compared adjusted compared share million, to $X.XX to and EBITDA EPS We between adjusted to $XX per per and diluted $XX $XX as Adjusted million $X.XX to million to and $XX net million million income previously, $X.XX $X.XX

you the of planning Let our year, a me for fiscal top on color with remainder our line. little provide assumptions the more starting with

top orders from of continued from The sales momentum. our Soulcare. raised a reflects from in fiscal QX. timing still launch net outlook Key potential stimulus contribution Our anticipate in shift spending the modest and related business line benefits XXXX the We

on-going We continue to of around environment. and mindful general COVID-XX uncertainty the be the economic

in reminder on a also year-over-year XX% well a and As target. sales anniversary merchandising QX, tougher last as basis year, as year-over-year we face growth comparisons we less as incremental

Turning now EBITDA. adjusted to

cosmetics.com. accretive a as Soulcare margin an the margin to XX% factors mix, well outlook. implies XX% to our Within the to guidance adjusted product year, of favorable e.l.f. offsetting we largely underlying FX drivers in in million combination several is is gross Our rate shift incremental prior trends, range that that, to as intact, spend expect X a for remain Key approximately with EBITDA concentrated related including those unfavorable line marketing margin Partially QX. mix and in million in X of our

and to As FX of mitigate increases pulling impact help the cost are into fiscal select including we Tarang mentioned, XXXX savings. levers partially price

We fiscal into SG&A also focus move XXXX. as increased leverage have an we on

compounded, in economic top step to talk growth adjusted we long sales single about EBITDA term the me now line three a growth, targeting annual to out with model in long fiscal model. the continue growth take XXXX base term the we back over as economic net Let that outpacing next mid-to-high With look as believe digits years, over our our horizon.

the With may and questions. the you eight our category to demonstrates over call the absolute strategic open performance operator, are imperatives on and for to confidence future. relative results, how basis me last gives Our quarters both driving that an the five

JPMorgan. question-and-answer now come from will Andrea session ahead. We with begin today Instructions] will And our Teixeira [Operator the first question go Please

actually it's guys, [Indiscernible] for Andrea. Hey,

Hi.

deeper. guys. hey, a Dig little Hey,

So we on bit deeper just little wanted to a dig distribution.

have group? guys if update they're recently, little could came or So sort us bit if what guys could on we're your you game wondering expectation and expected. describe would in distribution seen And if you if the your you. a of as coming they then just possible, those games you that in, Thank of have about sales if distribution

Sure.

our e.l.f. distribution more last e.l.f. with space primary mentioned So and Those Ulta our picked sets, we're in we've beneficiaries We pleased distribution Ulta as Shoppers Canada, the spring as progress. additional We've at Walmart India fall, online. picked Nykaa for picking up on In Beauty. Drug Mart up Beauty. are up at in space well the brand at also

a month, are you brand ulta.com and picked we initiatives. digital PEOPLE and to In this serve that soulcare.com while started up both Soulcare, allows beauty Earlier on us to Key addition, to well. XX part conscious expand with their us online Ulta we Key shift, of has starting Soulcare. global and Beauty countries the WXLL distribution space Key as And see been launch as related on first, which

We Ulta, also in the countries this in announced Beauty call that at on well. that U.K. for at as sorry, we'll talked also market entering And distribution. being different be I'm about Dugas Cult European and eight Europe in we

our things confidence continued about guidance the we pleased we feel we in that one that terms have of our and also raised of It's the distribution have. that progress. So the momentum

next go will with Stanley. ahead. come our from Mohsenian And question Morgan Dara Please

guys. Hey

Hey Dara.

place. share levels sort the a seeing perspective think in we've should given discuss robust COVID. you post to share to any easier differences very of of come are forward expansion couple as key COVID key drivers had still category strong been unique XXXX. comparisons your calendar post going might for the from that the Thanks. at out COVID the market years markets a in just And we share Can in and you And if performance compromise U.S., continue cycle see just recently? this you for continued ability gain of now COVID, You've your nature

through were of those gaining feel I through. strategic out a to of the We've our execute even going We So from be five and we're the stronger. shine we pandemic. continued share five already strength. the imperatives think strategic to through overall value proposition We position pandemic, a pandemic; entered clearly executing coming imperatives even

have We that brand more also e.l.f. momentum we PEOPLE beauty, robust a portfolio, Key only not Soulcare. have the and an but WXLL

thing our even coming the this positioned quarter feel construct really category the better all even we're And will XX%. feel this sales one of pandemic. we the aid growth been in XX% of is we So of down a us we've net that doing that's out

as believe category tailwind. and now people's restrictions that comes back, express believe it a category get That of we've themselves. standpoint from out being right will, and had able absolutely we the kind I and So headwind which a to becomes given

our regardless brand imperatives So not to we gain is continue intent our of that where to only the and this market portfolio executing by have. for share, strategic is continue

so still the post picked maybe in total Great. December sequentially December, of particularly results we And a prior that versus pickup the untracked data track far saw U.S. the performance, were channel bit scanner just was more solid, so just to a and with sort a out that a the in phenomenon couple slowdown of understand then of channels trying in the in January. months,

on So overall that were and commentary perhaps during trends on track you if any shift some seeing period?

Dara. Hi, Sure.

little has seen up as track weeks. that say been a So overall and I down we've, channel the data Nielsen over would quite bit volatile,

us physical in continue bit a you which what see we a e-commerce, retail, kind pullback, normal, December, why of to in in is just seeing and see I you're QX would strength what looked think delivering impact that saw I a month was so you December. And of as a definitely that lift those an XX% inclusive a of we included say the of out. was into rolled bit for the from that stimulus little of positive January, we little saw,

And see eight weeks, I last so weeks a out, if would it to rolled did stimulus when upside you few we of six summer, call recall there.

a I gotten you're momentum also, But as that think January. business you think core seeing momentum, January. our bit little reflected we've of into just business I in saw

you. thank Great,

Please our Steph Wissink with Jefferies. And question next come ahead. will from go

prepared you comment to Thank afternoon, to in want come fiscal everyone. you. leverage your Good XXXX. I Tarang, about a in made SG&A back remarks

Mark in a year think I number first of was years. of the leverage maybe that

a maybe giving it the comment? So the what's ability share or coming line are to something that with behind us your Is is completion item? you and conviction investments lever little Thank business that mix you. bit to multi-year that seeing that within you're fact that

Sure.

So think I our to a long economic it term model. lot speaks

vision of had in time. So we've team investments, long series of be a infrastructure, leverage with the to of terms over in a investments we'll those well as as both our marketing, able

three fixed period model that CAGR. And mid-to-high we pick is that leverage to a faster continued definitely to our as a approach a sales the the at marketing definitely to marketing digit of SG&A three share through FY-XXXX see particularly that, we're making that look years investments drive able our has growth, stay EBITDA our we that, if sales. are But going ability in So to gains single costs be intent, to of we market bearing laid very the On that. in out really standpoint, our more where the of terms those structure, economic the cost we as be much of you up leverage from next fruit is business as take year than those outside marketing believe rest grow And been momentum. strong. I continued see

ask the really know FX I And Mandy, on I higher I of up. the help Keys us quickly inventory launch. and mentioned Tarang. space But you the Thanks, costing. could just step through think component expansion

higher but been the we model? So think cost overall should through see goods mentioned how I of fourth quarter, through had of about forward that think you feed kind the you'll year? the some

we and in prepared impact been benefit. is, U.S. our for a FX a so to a we talked in now as starts of That's headwind help with the are it's past with I've mitigate is out, pricing. into how FX talked planning the headwind, remarks, about weaker laid turned we really as that And a Yes, us. dollar.

select to the work over leverage, our And on as to and will then to cost focus point offset next EBITDA on term impact, suppliers continuing that three price help to of increases so your driving that SG&A we our some be deliver taking with long savings, earlier model help economic years. having a leverage on that really

Thank you.

question next our D.A. from Bolton-Weiser will go ahead. And come with Linda Please Davidson.

progression me third understand yes, maybe cadence of in EBITDA of kind you quarter. and Hi, the help could the fourth

margin more quite was in you because there modeled way third Alicia originally costs. now of lower and of fourth the And quarter, your think Keys fourth I frankly the it's be kind had EBITDA said, quarter higher it's EBITDA would quarter. out, the the pressure in than the expected in expected than

you on space understand that? the like, margin retailer mentioned there kind expenses color incremental the And the that in some could color some gross were can us Thank third You quarter? to unexpected? Maybe and you expansion impact you. help give maybe give gross margin the So on little costs could related activity a impact? of did in was you quarter you have

Sure.

with question. progression start let's EBITDA So the

So talked order shift QX. about I've a QX timing into from in

than so margins EBITDA if QX. that you QX, better into imply moving think And previous about really, would those sales, for over

And happen so there. seeing what that's you're

So in those that's sales reflected and recaptured total, we in QX.

little shift bit timing there from an of a order a standpoint. just So

shelf on retailers and the talked that gross retailer margin margin. there do On that with we are the certain impact about, space or are cost to gross costs related expanding that impact getting

we get associated as shelf, costs there space, that. and onto pick with as are so we up we as brands do And our

that by comment. what was implied was what that's so And that

you. Thank Okay.

Oliver from And our come will question with next ahead. Cowen. Chen Please go

how marketing undergo of as experimentation, your innovation these that of would platforms different you and context sales, longer what in that's and you how happening planning that sales? lot as business as imply do new on updated term marketing as And you. outlook, Ulta really partner, great think Hi, a you and well a a and percentage as marketing, as -- success, percentage Thank you what's as of terms about a may love then of see happening? trending any also with do in I target your basis.

Sure, of we feel so marketing digital first and investments. all, our about great

reminder, a comfortable taking unchanged. big marketing We talked guidance. As this we Key this from step which XX% when up about including That's year. up XX% to is levels our We're investments, FY year. to for year, pretty digital range right the Soulcare, last still with assume that we for XXXX those a provide now,

our our number look Loserfruit innovation now. products the be our quarter, right a from Next as of particular, grail our new and quite are balm, all with update our also melt unlike platforms, set franchise, collection things. which of a I going what how resets trailer, have whether Concealer slated like terms in it product new with resonance our think extremely And new doing I'm getting upcoming marketing real continuing And what launches pleased those of all other like take Things as remain hydration, other be our off is work year, have levels. with as of this activities. we're that building believe do to The seeing Twitch, cleansing really our a spring well makeup for our those it we're early in other our online partnership And CC big whether on some throughout to part as a our strong the we on I at us different then cream, mint on of strong. product entire investments well number. I consumers to mean, of we the seeing is program, outlook big sales our able be those innovations. brands, with we from our Walmart, Camo investments territory, with blaze indication are we're is we'll have we holy particularly we are next two pandemic. supporting those One, we holy

getting that about good some our and and really only really customer. new products opportunity, both that then of feel deliver. with each in see investment, of And huge can Ulta So with digital behind terms combination these the Target, ELF marketing, key then of we partnership

we quarter, at this a L'Oreal footprint two So less actually at surpassed than Target, the And that's for Maybelline Target. still position that's number L'Oreal. last with significantly and

a the we Ulta to award retail to only mentioned even our they grow spring but in that So space, with have the more within brand resets us their fall, established is the I not as remarks most long continuing prepared in way customer. space gave well. last

at brand, between And see and the Ulta. real depending exclusively an partnership to going on there's as I So Soulcare But start down well. which Key we within a look of take boutiques that we at opportunity, to Target those then, opportunity how momentum there. Ulta is also progresses, also line see Target particularly our some with

which final is our question, And you. Thank awareness growth.

blocks growth kinds as for thoughts awareness in Key different you joining on are Soulcare. awareness different Thanks. would those of there ways, building As you PEOPLE about at think And the the highlight brands what but that roadmap would at love special newer and WXLL brands?

Sure.

So we're It's as on the same strategy. a digital first e.l.f. approach following macro level, a

digitally So and of spending that you our awareness. related, primarily building really see all

So we on did recharge a PEOPLE. WXLL brand

building have distribution that we results brand. million digital. we're Key with a our with also ability Alicia XXX expand far followers really we through to but similar of Soulcare, Keys that on the consumers, on and seeing strategy as terms in We’re that community engage And using in pleased that we're Soulcare. the so Key we're somewhat different

starting greater really ability done creating expand a really given the well. the amplify as on brand particularly Keys and opportunity content to that and a beauty real one is community lifestyle power accelerate brand will a true awareness I to be that that distribution have we brand, big that by we just what with of and Alicia and even on really as and conversation So global we've think brand

Best regards. you. Thank

come Please And go our Andersen ahead. from question Jon next Blair. William with will

be already apologize number or clear, that brick Key is Soulcare, of you asked. afternoon. the Good mortar brick terms But to available And that and you I where retailers which talk be at products initially been in brand I on totally to with merchandise? and are about retail? when have today you available could of this you Soulcare, plan market. plan mortar Thanks. And wasn't will retail, in when at

Jon. Sure,

range Soulcare to kind So in we Key January. really expanded earlier the different and nine of rituals, skincare products

pleased we're the those in the the We're Cult now ulta.com. with primarily you'll terms online, so, mortar, in start And Beauty Those of that brick of both in UK seeing and online. initial brand. are of expansion products. and And results keysoulcare.com been

customer is that have announced we first Ulta Beauty. The

enter Ulta that Europe. that's quarter see You'll And expansion and And all retail ship so. or then you'll over already Beauty following Western global the in that next and countries addition see the available live. to into across XX it gloss that's is

the to But a So in progression. you'll mortar and bit later see brick year. will come continue a

opportunity color And on there? there update National Could the us about the on couple little so PEOPLE, and Thanks. your then you're distribution, a on or far? recharge brand a to know you talked What's making, bit changed? Okay. expand progress the give maybe you've relationships I also program an progress more And WXll made the you've Retail of leverage times.

Sure.

stands PEOPLE was the amplifying focus the WXll for. on real So recharge really brand

One we a Beauty. products, space things us the is PEOPLE's that in is the Almost when really there. real Clean XX in heritage verified acquisition pioneer WXll real Beauty a of EWG clean, of highest standard the great pioneer the made to Clean appealed

come These making to on phenomenal of those work. life, really and recharge so And WXll is the superpowers Clean approach really products products really PEOPLE. that are the Beauty brand our focus

so visual And just PEOPLE.com, you take you on that including more if brand And as of go we see core WXll proposition. brand, merchandising. they're customers, to vibrant the presentation better

of PEOPLE, doors primary not So all the at Target. target and in WXll current they're the footprint customers distribution

more other And as leveraging consumer which part strength really as opportunity distribution increasingly we're that opportunity, as So we more that at see we see go a key a program, to retailers I Ulta's expand becoming and huge through. earlier clean, of you that consider segment, there. our retailers conscious well. beauty an mentioned Target

So progress we we've made the particularly good ahead, our the brand. journey on about feel and

If Thanks. one could squeeze in. helpful. really more That's I

changes optimization Just if the made kind with in the supply et of of you. own on manufacturing, some you status some of doing the of chain? chain, Thank supply comment the cetera, the could you're you've work

Sure.

chain our of one key is supply our advantages. So,

We control great likeminded model deal chain. a unique with have terms we of work supply suppliers of entire have a our where in and hybrid

first COG chain able great transfer We manufacturing, see the savings, our supply that through operating our better to able basis, chain progress continue to be the of cost We products through gives foremost manufactured advantage significant Soulcare supply six PEOPLE's to same realizing WXll chain which from speed. were results. also China's being generating China supply all that lean in months over is Key savings. even tech and really quality last us to and

not is have we The our it. manufacturing. enhance us see place U.S. to continue you one on much made progress as so And

and by recall to our helping engineering to The it very we've work I still of that the China one the that's able last us future. is be the getting That's much greater forward that talked about overcome in drive that strengths COVID the to chain in is If been do for on good that able we're our But true. overall look really supply in updates to some the seeing business. the providing restrictions news way strength of you for facility. quarter,

from question Erinn Please go next come our Murphy will Sandler. Piper ahead. And with

Great. Good Thanks. afternoon.

So bringing more you. next about pulse customer Beauty? as just seeing you're great and Could pretty it from unique really now, kind job, to are wrapping Or is QX? for see into year? kind that next And a in just higher on on Is on trying Twitch have some And keeping Thank what a right Triller? both in just finger you the platforms a that of margin new a you done then, a to we little of what's pressure? secondly, pricing. one bit on the that the coming on guys going here media share you're response from quarter taking really a the perspective. Is pricing first gross understand of a of then shelf follow-up you experiment then fourth net social

Yes.

So, Erinn, the then update. I'll take question. Tarang the on it And to first social I'll pass

QX. will not that impact standpoint, pricing a from So

You'll see early XXXX. fiscal that in

as XXXX, select SG&A FX on to that's on leverage In our pressure, savings, offset fiscal into an terms of program of the focusing the offsetting and as negotiating cost though, increased kind we headwinds. head price increases, focus then that

Okay.

there FX I in and level to fourth for given Is may to prepared mean, think you quarter? to down similar puts QX? I and takes And so, is it a the have fourth about remarks. in the so quarter, the the flip missed this if worse Or the that margin, starts gross

right. That's Yes.

quarter. to -- starts FX in fourth flip the the first So in the

QX was less So of benefit. just in a what we saw

it turns a fact, QX. into headwind in In

you so, to see should expect materialize. that And

yes, that. Okay. Tarang, love And your then, to thoughts on hear

Yes.

X activations of continue generated but our mean, over of new Lufu. particularly to And think on into doing do And that is I'm I were I going digital XX I'm platforms. views, million continue on over to marketing our They kind with billion we're one quite frontiers. that So, things on new and partnership really blaze The user you our videos, with proud the about team. well excited saw TikTok, Twitch. which what also

plays also the new core mean, e.l.f. could then we Anna some And Top had kind entirely continue and and everything much of doing, excited to our that up And artists. a going male So a holiday current our I the wonderful an Billboard territories. express and herself, as audience kind and and mentioned, confidence strengths about who's XX. I'm that's them her with coming I other to some but you as and play of connection Triller. gain in about of excited as on that educate some to our in the new hear of it her also frankly gamer on makeup whole have, there's definitely we're which very put did artists, and the she's set out the we've an amongst wait accesses you're on call you're upcoming till terms Four our definitely of activate And Bynum, values. and into have the see album music on about female brand now we next audience to XX we gamers. them. to quite that of Triller, to video consumers the saw right new in global surprised ability I work themselves, to work going well helping we ability our collaborations of us was, their both a to have avid about really blaze And globally, Top shows terms tracks it U.S. and partnerships brand think hit -- of Billboard's hit there.

you Thank great. Sounds both.

from Please And Bill Truist our with next Securities. question will Chappell go ahead. come

Thanks. Good afternoon.

Good afternoon.

the -- price take no, I Tarnag, you're meaningful able tariffs, just to real and mean, back FX. beyond years, go offset increase to on if to change pretty no on volumes. as thought to pricing. or terms no in company back really we the couple elasticity, the the question going I pricing any of issue past had to And mean,

it an is the improve with attractively next so, products over your year opportunity seems them? or there take I actually extraordinarily -- priced. But are to margins know further two even and And

be Well, our of the saw round we definitely in case last that pricing.

of approach pricing tariffs actually lineup. which worried lot well So gross on really this do goods really overcome were of able margin. if people about selective the and of And those we're tariffs on to XX% you recall, a to impacted our China most use

power And have a the we everything, did as biggest So execution we where peanut was know halo or important. pricing based the general prior across value pick opportunity didn't that items the the pricing. brand execution. really take has equally We we pricing on how just butter, to we our percentage

so be And and very won't time. broad It I'd was quite last design much construct is the as of U.S. pricing as that the upcoming. our say in it

I we did about not time. our of take pricing a last think last impacted time. SKUs we third internationally But

with particularly think the the have items to FX select I then with go and in opportunity further we So internationally U.S.

we definitely pricing so, at a see lever And our as disposal.

accretive margin is gross though, preferred margin Our driving through of innovation. method

Cream, So product. grail I believe our equivalent, to at It's going it's CC retailed to our an which relative $XX Prestige $XX. mentioned next the holy I value but is incredible be

relative So our a it's premium the lineup. to of rest significant

in terms did innovation extraordinary Bill a pricing to we as forward, So go and being accretive that will the unit but see things did It’s always Mandy of about we progression, gross time. tension through healthy last also, that's decline margin value be our other some which we it's brand ahead not margin of pricing. that going We getting combination, of a is primarily ourselves. look at when talked

there's balance And so a always there.

to we tells about Now, last we post which to I to pricing, feel how that want built get time. But have pricing good we the that that in way we've did similarly again, through. executed units, back pricing choiceful and power ability me and be

understand to time till continue Key to throughout year be Mandy, March? it's and if that to I will to you. Soulcare, kind Thank advertising marketing to XXXX I quarter? the I up that levels is giving the mean, know you're I of -- Great. trying kind Or that. you we realized -- is kind end don't get expecting the not to the normalized But guidance. a peak ramp fourth of we the fiscal appreciate spin of in spend expected by of get level? of you're

Yes.

is the net our think think I have sales. that, Bill, against dedicated will So to of do a marketing brands best way And each as that we about of them. percentage

behind marketing e.l.f., about for putting broadly to so, if about spin talked incorporates that XX% the think you the we're XX%, e.l.f. that Beauty Key we've Soulcare. And

plans earlier, brands will of about as forward. have brand mentioned those sales come where back as of with percentage move we we'll a see each marketing just But think as kind into we get each of As support we fiscal own we everything XXXX, Tarang forward. their net move as to

It's it's of an the a kind next So, and few splash not big build? over steady months. of kind outside slow

going in along Well, for further again, of behind like about distribution percentage year especially brand, each QX million it's $X our on long to plan. to have the baked by as for for a we get as we focused we we $X for said, the be think this term, of launch the million sales it But brand. the really in

The all some inclusive the to expect to sales FY year Ongoing point, Mandy's fiscal what guidance million of launch part And that's adding in that perspective We $X modest that. of we'd this in out a in year, prudent standpoint we include contribution then just Beauty. Soulcare total. $X was to something definitely outsized thought million Key XXXX Yes. to And to marketing spend comfortable have. really of maybe when XX%, new guidance relative for XX% that to that put is completely for from spend to of least brands. at there, three this will we really we're a our

to don't it'll as part have to how overall the ongoing, be translate people does percentage we six have of So guess, five a the company.

Perfect. Thanks appreciate so much. I it.

Yes.

from Parikh will come question go Please next Rupesh ahead. Oppenheimer. Your with

taking questions. for my Thanks Good afternoon.

gotten launch. was launch? good that you far guys have like on going buzz. very if Soulcare just anything with the sounds Tarang, back I positive It just so So curious Keys to your commentary far surprised you the thus already there's

I if but price would I'm I impressions $XX picked billion we're Well, don't since know still we've of and even not say, in yet. it the up Yes. surprises, retail

that's brand of So depth in what remarks, expecting. the engagement engagement, were Instagram it about well resonating as we think And prepared community, look community, this of I something think we at the we there's that the definitely being that shows I talked then metrics broadly. beyond

like. days, looks we we to to provide are able able retail, so consumer the response early engagement and that to be And think still encouraging and it's in brand. in I see of I think We'll be it's terms quite more metrics, once what level out but that have of

Okay, great. Mandy. just follow-up And for question one then

operating flow. your cash on Just

good But guess including some I even the working the I cash working So, your get commentary during some other of on in there's quarter. inventory, way a other generation. headwinds inventories, are capital, the just that elevated capital inventories the

you just how in cash QX? are flow thinking about So curious

Yes.

So yes.

inventory a date was of use our year at you on cash a that basis. to If look portion

all through. just timing. Our And areas you is receivables other look that the would of I be just think

to In free flow flow positive have on into terms be year, from additional shouldn't would like enter our cash QX we that. expect things the a expectations an free pull for I the cash or standpoint us of as for inventory year,

should flow some cash in QX. there have So

Thank great. you. Okay,

And our come Please next will ahead. go Mark from with Stifel. question Astrachan

how of And online everybody. a afternoon, in that about to that at they're settle well I but mean, both think perhaps on we Beauty as surprised retailers Thanks. from there, ask the also online sales an Yes. Wanted of of thoughts percentage has sales. where some you heard settles done back standpoint, some time. from into

on that number you now. how And So of where you you forward, the are do you broader think in as of category? sales think about XX% touched the context the

Yes.

signing obviously I for we providing the continue mean, of B we up elfcosmetics.com, Loyalty to as guidance. Similar between retailer.com. XX% from triple consumers, is. I think I that XXXX everyone business you've on elfcosmetics.com are also a we were our we're have who growth I and commentary think more a Program. new Mark, else I some get on into have a when to see new particularly online good thoughts we mean, we'll seeing others, are FY of proportion Squad heard consumers purchases digit from think -- of pleased

seeing what That retain. down consumers those definitely But momentum. we it's going a percent right to underlying we're year, have think with migration to of a So XX% XX% we're and be versus last business. in will don't of really come percentage what but to many the a more some our total of I now able how pleased future, of show dictate definitely which the that metrics, in online. importantly, as we mind terms will see

Got it.

with about broad you're sales Okay. what investment next growth? and you those or thoughts and that to some marketing just just the correlation on like specific guidance in factoring between think extent? year. the decoupling do But how your will growing time about And then the you each think question, do in second other and increasing correlation, spend how to for And in look sales

Yes.

spend. seeing our spend One we're marketing to of things us off that marketing increase the ROIs caused that was

measure of of So can engagement of invested. that, combination mix, platform gross per have some dollar marketing in strong get sub-metrics as core by see on we Nielsen's levels. of a marketing well use of terms a We we as sales the the both we where very returns

we're able feel to share So be has business definitely know impact. comfortable it's And we that both levels we're the a and a currently of to our And generate key driver gains at term obviously, we that. at market longer momentum.

to we're a FY the XXXX of terms in give of when FY to some little bit guidance. of drivers We'll able XXXX talk that that able more guidance. be So

you. Thank

from our Citi. go And Nicholson ahead. will come next Please with question Wendy

questions. Two Hi. Thanks.

seems Clean that Beauty Beauty? more space, a I And place you do be in within you're you But revenues. gross overall you I And Do can for you a makes to to gross that is getting your you Just Or just you're be Soulcare very, gaining what lift having sort mean, us outlook But if know is -- such is about assume, well Mandy, that give within to guys better? you of the I then guidance? basis margin where Do is? long share talk faster if First, price Beauty, market for generally, And Is obviously think than be I'm to Tarang this I XX, XX what's space. some basis Clean so so skincare help better? a points your And share I do mean, crowded around margin? segment? gaining manage XXXX you just gross your I term higher accretive. right very skincare that points can you But obviously share? within Do competitive. much can positioned margin long sense? think -- directionally, grow wondering, a hot can. segment how think range XXX of your much target you're defend question, now had Beauty. directional you'll type about getting Clean Beauty you you worry it that's are of EBITDA term? your can -- how

it. Got

and term Wendy So model your margin. I'll on long questions gross economic the start around

So, yielding EBITDA in long growth, the to margin economic term thus model adjusted point, EBITDA expansion. we outpacing sales your adjusted talked about

into much been We has that have on will innovation, we will Tarang's depth not don't margin specific adjusted SG&A additionally I how really versus earlier and margin on margin. And guidance say margin. play give how product accretive, that gross point play products into gross that. forward gross into gone can that. our to around gross much path

more and we Key about what adjusted as so, start the not years EBITDA to margin it And move But into get may specifically. forward. to standpoint. the give as fiscal the an specifics EBITDA around expect of beyond, versus Soulcare from gross adjusted out we On XXXX talk we'll

that because does become gross Soulcare that accretive Keys, quarter our neutral last down talked the the we royalty certainly at we the get margins. relatively you to being So product product overall pay level. Key when about But Alicia margins gross to net do to total margin, of company

And XXX%, within it's on a second used a really on Obviously terms part Beauty, a Clean Beauty. the in Beauty back first your cruelty-free. Clean cruelty-free overall one of segment a niche mainstream. becoming But parallel, brands and of then, goes And being Beauty is overall a our of thesis our from is, Beauty. to push part standpoint question be growing we fast say math to within consumer. very as Clean were

as one the is really thing feel Beauty. have. relegated cruelty-free segment. That consumers seen no Clean to is with other to brands embrace You've going We sub same happen be now longer

to brands that Beauty? to what standards, clean live in than really so, just The can And and it up ones win that more are but also Clean offer stand for both going beauty. those

we extraordinary very we even about -- do mentioned PEOPLE out they WXll the We're not But certainly premium ability came formulate. are clean standard their now is that XX products. EWG before portfolio, to standard verified on to at quality the every And up that Clean I the our brand. to with Key Clean close we're these an on think cruelty-free superpowers I ingredients have the Soulcare as values, e.l.f. Beauty gates So of XXX% e.l.f.. XXXX increasingly clean. gold have e.l.f. Beauty

about And to values, becomes appeal you Prestige is game overall so, changer cruelty-free, universal like and I a consumer can think not like clean, quality, proposition. the when that offer and really that's great e.l.f. has what's

is we It’s looking we're opportunity, very that combination certainly So benefits by main it. much is term able not win together. long only put a but being to at are -- of going to

Soulcare, got a with It more go those Kohl's Ulta. fit makes price. to or with Sephora in Key I Got well more Kohl's feels given you historically, given in it. there going with And had relationship is on if Is of know sense you bit wanted a it the Or stores Sephora, Kohl's you being Sephora your are like to could stores, But would something Ulta. a price that great you've that And little particularly you? restricted stores haven't into initially, which premium whatever. into points. much Soulcare obviously relationship

Key Soulcare. with initially Not

for Ulta have period. with Our a do is they exclusivity time relationship

in together some we globally, there we're we're of you behind going us. Talking I stores. partnership, on period Ulta both is. investment quite PEOPLE. a exclusivity there's of even that that opportunity And there. The partnership. Kohl's there's pretty we're wait well. look as their acquisitions brand. brand look the to the we to they opportunity. And And bit there's for that great things as opportunity brands either itself online, also incubating that I go going potentially for Key good up future what at then be deal looking into putting to Sephora Sephora We can't think going disclosed though, to things tuck-in We an do, ramp dates. Soulcare the be or doing other really the But haven't is we We think is there's an at amplifying WXll there think mean, a to at of

initially on and we really So focus but the Ulta partnership there. is Beauty here, have our

much. Thanks so Terrific.

answer over remarks. question. question This like our will conference session. the Amin back Actually the Tarang for conclude closing I'd next and And apologies. to to any turn

Well, great we've time incredibly grateful how today. at market to talent us during I we that the the person pandemic have and continue well for for difficult team this and particularly brings want build Beauty executed the joining to to day I'm every each thank at e.l.f. share. everyone

able May XXXX fiscal about for today, look we'll prospects forward when to our from be tell can to you and in highly full you we're guidance talk comments as As confident business. our long to the FY speaking future well XXXX. this results as of And term provide

So thanks everyone and well. be

The you presentation. conference is now concluded. for today's attending Thank

your this disconnect now may lines time. You at