e.l.f. Beauty (ELF) Q2 2027 Earnings Call Transcript

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DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations - Ashley Helgans
• Chairman and Chief Executive Officer - Tarang Amin
• Senior Vice President and Chief Financial Officer - Mandy J. Fields

TAKEAWAYS

• Net Sales -- $520.8 million, representing a 51% increase driven by strong performance across retailer and e-commerce channels both in the U.S. and internationally.
• Adjusted EBITDA -- $123.4 million, a 86% increase compared to $66.2 million last year, reflecting high-performance productivity and top-line growth.
• Non-GAAP EPS -- $1.21 per diluted share, compared to $0.68 in the prior year period.
• Gross Margin -- 71%, an increase of 160 basis points primarily due to lower year-over-year tariffs and favorable product mix.
• Fiscal 2027 Net Sales Guidance -- $2.003 billion to $2.029 billion, raised from the previous range of $1.938 billion to $1.968 billion, reflecting sustained momentum across all brands.
• Fiscal 2027 Adjusted EBITDA Guidance -- $421 million to $427 million, representing projected 26% to 27% growth.
• Fiscal 2027 Non-GAAP EPS Guidance -- $3.82 to $3.86, raised from the previous outlook of $3.50 to $3.55.
• Organic Net Sales Growth -- 35% year over year, excluding the 16 percentage point contribution from the rhode acquisition.
• International Net Sales Growth -- 165% year over year, driven by the expansion of rhode into 19 European countries and the launch of e.l.f. in Brazil.
• U.S. Net Sales Growth -- 25% year over year, showing continued strength despite lapping a period of significant expansion.
• Pricing and Mix Impact -- 20 percentage points of net sales growth, reflecting price investments and a shift toward higher-value product offerings.
• Unit Volumes -- 31 percentage points of net sales growth, demonstrating strong consumer demand across the portfolio.
• Connected Commerce -- 31% of total consumption, with notable performance on Amazon and TikTok Shop.
• Marketing and Digital Investment -- 21% of net sales in the second quarter, though management expects this to rise to 23% to 25% for the full year.
• e.l.f. Skin Retail Sales -- Over $200 million, expanding from a localized test in 2019 to a major revenue contributor.
• Cash on Hand -- $350.8 million as of Sept. 30, 2026, compared to $194.4 million a year ago.
• Tariff Refunds -- $52 million received in the first half of the fiscal year, which management intends to reinvest in lower pricing and marketing.
• Non-e.l.f. Brand Sales -- 30% of total net sales, up from a negligible amount three years ago, highlighting the successful diversification into a house of brands.
• Manufacturing Diversification -- Nearly 70% of production now occurs outside of China, compared to 1% three years ago.
• e.l.f. Hair Performance -- The brand broke into the top 20 hair care brands and top seven in styling at Target within its first three months.
• rhode Segment Ranking -- The brand ranks number one or two in 12 of the 13 segments in which it competes.
• International Sales Mix -- 25% of net sales, compared to approximately 70% for legacy peers, indicating significant remaining white space.

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RISKS

• Fields stated, "Looking to the second half, we continue to expect gross margin to be lower year over year as Road expands its retail presence," noting the impact of shifting channel distribution on profitability.
• Fields warned that second half adjusted EBITDA margin is expected in the "low-teens" due to the timing of marketing reinvestments and the implementation of price reductions on 10% of the company's items.

SUMMARY

e.l.f. Beauty, Inc. (NYSE:ELF) reported a 51% increase in net sales for the second quarter, marking its 31st consecutive quarter of growth. Management reported that the expansion was fueled by triple-digit international growth and the sustained integration of rhode, which delivered the largest launch in Sephora Europe history. The company raised its full-year top-line and bottom-line guidance to reflect momentum across its five strategic pillars, specifically highlighting market share gains in the U.S. mass cosmetics category and the successful entrance into new adjacencies like hair care and fragrance. Management stated that the company is reinvesting $52 million in tariff refunds into strategic marketing and lower prices for consumers, which is expected to impact second-half margins while driving long-term unit growth.

• Management identified international expansion as a primary growth driver, noting that about 65% of e.l.f. Cosmetics and 75% of rhode's social following is currently outside the United States.
• CEO Amin stated, "I believe that our people are our greatest competitive advantage," citing that the company's sales and profit per employee significantly outperform consumer industry averages.
• The company reported that e.l.f. Cosmetics was named the number one favorite teen cosmetics brand for a record ninth consecutive survey by Piper Sandler.
• Management highlighted the elasticity of the e.l.f. brand through its expansion into hair care, where half of the consumers are new to the company's franchise.
• The company reported strong digital momentum, with e.l.f. ranking as the number one cosmetics brand on Amazon and the number two brand on TikTok Shop in the United States.
• The launch of e.l.f. in Brazil during September resulted in the brand achieving the number one rank in both dollars and units at Sephora Brazil within its first few weeks.

INDUSTRY GLOSSARY

• Connected Commerce: Digital shopping experiences and sales generated through social media platforms and online marketplaces rather than traditional retail sites.
• Mass Beauty: A category of cosmetic and personal care products priced for broad consumer accessibility and typically sold in large retail chains or drugstores.
• Prestige Beauty: Premium cosmetic products characterized by higher price points and traditionally sold in specialty beauty stores or department stores.
• COGS: Cost of Goods Sold, representing the direct costs of producing the goods sold by a company.
• Adjusted EBITDA: A non-GAAP financial metric representing earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring or non-cash items.

Full Conference Call Transcript

Operator: Thank you for joining us today to discuss e.l.f. Beauty's second quarter fiscal 27 results. I am Ashley Helgans, newly appointed vice president of investor relations and I look forward to working with many of you on this call. With me today are Tarang Amin, Chairman and Chief Executive Officer and Mandy J. 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.elfbeauty.com.

Since many of our remarks today contain forward looking statements, please refer to our earnings release and reports filed with the SEC where you will find that factors could cause actual results to differ materially from these forward looking statements. In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliations of these differences in the non-GAAP presentation and the most directly comparable GAAP measures. With that, let me turn the webcast over to Tarang.

Tarang Amin: Welcome, Ashley, and good afternoon, everyone. I am proud of the e.l.f. Beauty team for achieving another quarter of industry leading results. In Q2, we grew net sales 51% and adjusted EBITDA 86%. This marks our 30-first consecutive quarter of net sales growth, that is almost 8 continuous years of growth We are 1 of only 6 public consumer companies out of 516 that has grown for 310.2520% net sales growth per quarter. With the momentum we are seeing, we are raising our fiscal 27 outlook to 22% to 24% net sales growth as compared to 18-20% previously. Our consistent category leading growth is a testament to the strength of our team, strategy, and portfolio of brands. e.l.f.

Cosmetics reignited unit momentum this quarter and gained 30 basis points of market share. Road continues to break records with every launch. Including most recently in Sephora Europe, marking the biggest launch in Sephora's history. And Naturium remains 1 of the fastest growing skincare brands more than doubling since our acquisition just 3 years ago. The strength of our portfolio is powered by leading engagement with our community. Especially the next generation of consumers. In Piper Sandler's annual Taking Stock With Teens survey, we made history with 2 unprecedented achievements. e.l.f. Cosmetics was named the number 1 favorite teen cosmetics brand for a record 9th consecutive survey.

With Mindshare nearly 5x the next closest brand and Road and e.l.f. were the only 2 brands in the top 10 for both skin care and cosmetics. No other portfolio in beauty can claim this level of strength amongst teens. Our mission is to make the best of beauty accessible to every eye, lip, and face. We recently refreshed our business strategy to unlock the full potential of our portfolio of brands. This new strategy is powered by 5 integrated pillars: Cultivate a passionate team of owners, co create with our community, win with winners, expand our portfolio, and accelerate global expansion.

Together, we believe these strengthen our competitive moat and give us confidence addressing the tremendous white space we see ahead. Let me walk through how each pillar powered our results in Q2. First, cultivating a passionate team of owners in a high performance culture I believe that our people are our greatest competitive advantage. And our results are a direct reflection of their tremendous talent and teamwork. We are the only public beauty company that grants equity annually to every employee strongly aligning our interests with the long term interests of our shareholders. We nurture a high performance team culture that delivers employee engagement.

In our latest engagement survey, 93% of our employees stated they are proud to work at e.l.f. Beauty. This engagement helps fuel our productivity. On a sales and profit per employee basis, we outperformed the average of 516 public consumer companies by 3 and 8 times, respectively. Second, co creating with our community through value, innovation, and marketing. We listen closely to our community and quickly translate their requests into premium quality products at extraordinary prices. In Q2, we had an incredible fall innovation class across e.l.f. Beauty. Exceeding our expectations with e.l.f. Cosmetics, our continuous stream of innovation has led us to holding the number 1 or 2 position in 22 segments, up from 11 5 years ago.

This fall was no exception. e.l.f. Cosmetics holds the number 1 position in mass for fall innovation launches. With 5 of the top 10 products in both dollars and units. We are building on this strength by tracking additional innovation our community has been asking for ahead of the holidays. With Road, each launch continues to exceed our expectations. Our recent limited edition collection with influencer Alexandra Leclerc had over a 200 thousand-person waitlist sold out of most items within the first hour, and marked our largest limited edition launch to date. And it is not just launch success. Road has amongst the highest repeat rates in beauty. A testament to the quality and durability of our products.

Our third strategic pillar is to win with the winners across channels and platforms. We have a long track record of winning with the retailers at prior beauty. This quarter, we strengthened our position in Connected Commerce and elevated our partnership with Sephora. As a digitally native company, we continue to lean in to connected commerce to launch newness, fuel discovery, and scale across geographies. In Q2, Connected Commerce drove 31% of our consumption. We are seeing particular strength on Amazon and TikTok Shop in The US, e.l.f. Was both the number 1 cosmetics brand on Amazon and the most searched cosmetics brand on the platform. On TikTok shop, the momentum is equally strong. In Q2, e.l.f.

Cosmetics climbed to the number 2 rank in cosmetics. Consumers continue to choose e. L. F. Wherever they shop for beauty. We are seeing this same momentum with our physical retail partners. This quarter, we strengthened our relationship with Sephora, the leading global specialty beauty retailer with our launch of Road in Europe e.l.f. In Brazil and Naturium in Canada and Mexico. Starting with road. In the last year, we executed record breaking launches with Sephora in North America and The UK. Achieving the number 1 beauty ranking in both geographies.

Building on that success, this quarter we broke our own records with the expansion into Europe across 19 countries, exceeding what we achieved in North America and marking Sephora's largest launch ever. But it is not just the excitement from our launches that is unprecedented. Road ranks number 1 or 2 in 12 of the 13 segments we compete in. With exceptionally high repeat rates. This speaks to both the momentum and durability of this exceptional brand. With e.l.f. Cosmetics, our number 1 ranking in Sephora Mexico built the foundation for us to launch in Sephora Brazil this September. Brazil is our most requested country, and the 3rd largest beauty market in the world.

To amplify the launch, we leveraged our disruptive marketing engine with our e.l.f.o.f.o.f.o. Inspired by the Portuguese word fofoca, the art of sharing news and spilling the tea. In the first few weeks of launch, we achieved the number 1 rank in both dollars and units. Notarium is also expanding our footprint with Sephora. Adding to the success we have seen from our expansion into Sephora Australia and New Zealand last year, We launched in Sephora Mexico and Canada in September. Where we quickly broke into the top 10 brands in body. Turning to our fourth strategic pillar Expanding our portfolio of discipline across complementary yet distinct brands and categories, The e.l.f. brand is incredibly elastic.

And our consumers continue to ask for us in multiple categories. We listen, we learn, and we lean in. We took this approach with e.l.f. Skin expanding from a test in Target back in 2019 to a business that is now over $200 million in retail sales. We are taking this same thoughtful approach with hair care. Bringing prestige inspired products to our consumers at an extraordinary value. Our community wants e.l.f. in hair care. We launched e.l.f. Hair in July with a curated 6-product assortment each with a clear prestige frame of reference all priced at $10 or less. Within the first 3 months of our exclusive launch with Target, e.l.f.

Has already broken into their top 20 hair care brands and top 7 in styling. We are taking this test and learn approach to fragrance. Fragrance is an $11 billion category in The US. And the fastest growing in beauty. In October we launched e.l.f. Pop exclusively on Amazon and TikTok shop. e.l.f. Pop is a new fragrance and body collection. That transports our community to sensorial destinations around the world. The Full Pop lineup featuring additional scents, will be released later this fiscal year. Finally, our fifth strategic pillar of accelerating global expansion by activating our full in market growth engine. We are still in the early days of international expansion.

On a trailing 12-month basis, international accounted for approximately 25% of our net sales compared to approximately 70% for our legacy peers. We believe this gap represents 1 of our biggest opportunities. And the demand is already there. About 65% of e.l.f. Cosmetics and 75% of Rhode's social following is outside The US. Even after Rhode's launch in Europe, the brand is still only in 40% of Sephora's global doors. Our 5 integrated strategic pillars drive competitive advantage and industry leading growth. I am also proud of the work the team has done to further diversify our business. What started as a single brand in a single category in a single country, is now a house of brands.

Each growing across categories and geographies. Over the past 3 years, non e.l.f. brand sales have grown from a few million dollars to 30% of our net sales. Skin care has increased from 9% to 23%. And manufacturing outside of China has grown from 1% to nearly 70%. In summary, I am proud of our results and excited by the momentum across our portfolio. We continue to demonstrate exceptional consistent, category leading growth driven by a passionate team of owners in a high performance culture. Every 1 of our brands is growing. We are co creating with the most desirable consumers in beauty. We are winning with the winners to expand our brands globally. And we are just getting started.

I will now turn the call over to Mandy to discuss our second quarter results and raised outlook for fiscal 2027.

Mandy J. Fields: Thank you, Tarang. I will now cover the highlights of our second quarter results and our raised outlook for fiscal 27. Q2 net sales grew 51% year over year. Row contributed approximately 16 percentage points to net sales growth in the 1-month period prior to annualizing the acquisition on August 5. Organic net sales grew approximately 35% year over year. This better than expected performance was supported by growth across all of our brands, along with pipeline shipments for Roads launch in Sephora Europe. U.S. net sales grew 25% in Q2, while net sales grew 165%. In addition to Rode's record breaking launch in Europe, we saw a meaningful improvement in trends for e.l.f. in our largest International Markets.

Canada, The UK, and Germany. Pricing and product mix added approximately 20 percentage points to net sales in Q2 while unit volumes added 31 percentage points. Q2 gross margin of 71% increased approximately 160 basis points compared to the prior year. 30 basis points were driven by incremental refunds flowing through COGS in the quarter. The remaining increase was driven by lower year over year tariffs and a more favorable than planned mix benefit, partially offset by price investments. On an adjusted basis SG&A as a percentage of sales was 53% in Q2, as compared to 56% in Q2 last year.

Marketing and digital investment for the quarter was 21% of net sales below our expectations due to timing shifts in spending and compared to 23% last year. Q2 adjusted EBITDA was $123 million, up 86% as compared to $66 million in Q2 last year. Q2 adjusted net income was $73 million or $1.21 per diluted share compared to $41 million or $0.68 per diluted share a year ago. Moving to the balance sheet. We believe our balance sheet continues to position us well to execute our long term strategic plans and invest in the growth of our business. Our liquidity position remains strong with net leverage at approximately 1x adjusted EBITDA.

We ended Q2 with $351 million in cash on hand. Compared to a cash balance of $194 million a year ago. We expect our cash priorities to support the growth of all of our brands, technology investment, including AI and automation as well as investment in infrastructure to ensure our brands show up their very best in our retailers across the globe. Following the end of the quarter, we used a portion of our cash to satisfy the first payment of the road earn out given the brand's exceptional performance. Now let's turn to our raised outlook for fiscal 27. We are raising our outlook on both the top and bottom line.

For the full year, we expect net sales growth of approximately 22-24%, up from 18-20% previously. Adjusted EBITDA of $421 million to $427 million up from $401 million to $407 million adjusted net income of $231 million to $233 million up from $212 million to $215 million and adjusted EPS of $3.82 to $3.86 per diluted share $3.50 to $3.55 We continue to expect an adjusted tax rate of approximately 25-26% and approximately 60.5 million fully diluted shares. Starting with the top line. For the full year, we expect to deliver 22-24% net sales growth, reflecting the strong results from Q2 and an improved second half outlook.

Our raised outlook translates to organic net sales growth on the full year of 9% to 11%, up from 6-7% previously. Looking to the second half, we expect net sales growth of approximately 7-10% up from the implied 6-9% previously. With each of our brands expected to contribute to growth for the balance of the year. From a cadence perspective, we expect Q3 net sales growth above that range. And Q4 below that range. Primarily due to the timing of launch activity in the year ago period. Recall, in Q4 of last year, e.l.f. Expanded space with Ulta Beauty, and launched with Diem in Germany.

Rhode launched in Mecca in Australia and New Zealand, and Naturium expanded into Walmart for the first time. Turning to gross margin. We now expect an increase of approximately 250 basis points year over year as compared to 200 basis points previously driven by the upside we saw in Q2. Excluding tariff refunds, our fiscal 27 outlook remains unchanged at approximately flat gross margin versus prior year. Looking to the second half, we continue to expect gross margin to be lower year over year as Road expands its retail presence. From a spin perspective, we continue to expect marketing and digital investment at the higher end of our 23-25% of net sales range for the full year.

From a profitability perspective, our outlook implies adjusted EBITDA growth of approximately 26-27% up from 20-21% previously. With adjusted EBITDA margin expanding approximately 50 basis points year over year versus 20 basis points previously. As a reminder, our outlook assumes we fully reinvest the $52 million of tariff refunds received in the first half through lower prices on a subset of our portfolio and increased marketing investments across our brands. For a neutral impact on full year adjusted EBITDA. With marketing spend shifting from Q2 into the back half, we now expect second half adjusted EBITDA margin in the low-teens reflecting both the reinvestments and the timing shift in spend.

In summary, Q2 marked our 30-first consecutive quarter of net sales growth. A testament to the durability of our model and the power of our brand portfolio. We believe we have a winning strategy and are in the early innings of unlocking our full portfolio potential. With that operator, you may open the call to questions.

Operator: Thank you. We will now begin the question and answer session. If your question has already been addressed and you would like to remove yourself from queue, please press * then 2. We do ask that you please limit yourself to 1 question. And today's first question comes from Sydney Wagner at Jefferies. Please go ahead.

Sydney Wagner: Hi, thanks for taking our question. So as you have expanded the e.l.f. brand into hair, body, and fragrance how are you thinking about the opportunity for each adjacency to create incremental shelf space at retailers over time? And then maybe just talk through kind of proof points that you would need to see for a broader expansion of body and fragrance. And then just on the portfolio of brands overall, e.l.f., Road, and Naturium are all expanding across categories and geographies. So how are you prioritizing marketing, innovation, and investments across the portfolio? And are there any constraints that could affect that pace of expansion? Thank you.

Tarang Amin: Hi. This is Tarang. I will take your first question. Question. On hair, we are extremely excited about the momentum we are seeing on e.l.f. Hair. This is a category consumers have been asking for us for some time. And we are using the same approach we used when we expanded from e.l.f. Cosmetics to e.l.f. Skin. Tarang inspiration from the best products in prestige, putting our e. L. F. Twist on it, and introducing a great value. Our elf hairline is curated line of 6 products each with a clear frame of reference to prestige, all at $10 or less. And we have seen great success initially in the first 3 months at our exclusive launch with Target.

ELFair is already in the top 20 brands in hair care, top 7 in styling. And in terms of our expansion plans, we are currently in exclusivity with Target. We will eventually expand distribution of Elfhera similar to what we have done with Elf skin, and that will come with incremental space. Hair right now is in the hair care aisle. We continue to expand space with e.l.f. Hair would be our strategy just like we are expanding space with e. L. Skin. And then in terms of body and fragrance, the proof points are really the consumer response that we see. it is off. e.l.f. Pop is off to a great start.

We are starting with Amazon and TikTok shop. For instance, transporting consumers to different sensorial destinations around the world. And we are really pleased with what we are initially seeing there. And so I would say in summary, e.l.f. Is a really elastic brand. there is a number of categories consumers wanna see us in. And we have a good disciplined approach in terms of how we expand. And then in terms of your question on portfolio, 1 of the great things about e.l.f. Beauty is every single 1 of our brands is growing.

We see strength across the portfolio, all of our brands, contributed growth in Q2, and we for foresee that growth continuing through the balance of the year. The way we manage our brands though is individually. We have a CEO of e.l.f., for Road, president for Naturium, president for e. L. F. Brands. Each have their own P&L. Each have kind of their own levels of investment to their ability to invest in the brands. We use a rate based approach in terms of our investments And so we feel good about the focus we have against each brand with their ability to be able to pursue the white space that they see for themselves.

And then just 1 clarification. it is less about p and l's by brand. it is more about focus by brand. We have overall 1 P&L for the overall company. Thank you.

Operator: Our next question today comes from Andrea Teixeira with JPMorgan. Please go ahead.

Andrea Teixeira: Good afternoon, everyone. Thank you for taking the question. I was just, like, trying to run and Jennie to get the. To the fourth quarter. Of course, you have a lot of tough comps both for the base brand, for e.l.f., and then also for Road. Can you talk to how much you see from a sell off perspective? In terms of like the exit of the quarter for both brands and in particular, as you expand. So on a US basis, if that is possible to talk about road The US has been lapping the introduction last year. Into retail and how we should be thinking of it as a run rate for both e.l.f. Base business and growth?

Thank you.

Mandy J. Fields: Thanks for the question, Andrea. So in terms of our back half that we talked about on the call, we said that we are outlooking 7% to 10% growth. And, you know, that growth is well ahead of where the category is tracking. Right now. Category is kind of low single digits. We are planning to deliver multiples above that. You know, we have a track record of consistent category leading growth, and I think that is what is reflected in our second half into the fourth quarter. To your point, we do have some launches that we are cycling in the fourth quarter with Ulta Beauty expansion on e.l.f., and our dm launch on e. L.

F, Road going into Mecca, Naturium launching in Walmart. So that will you know, on the call, said, Q3 a little bit higher than that 7-10% range, Q4 a little bit lower than that range. But still, we see it as strength across the board just given again, where the category is. And then you also asked about road here in the US even. After cycling the launch. The US launch last year. They are delivering growth on a year over year basis here in The U.

Tarang Amin: And what I would add, Andrea, on that on road, the strength that we continue to see on ROAD and the momentum in the U.S. alone and Canada, where we did lap the launch, Rhode is by far Sephora's number 1 brand. And not only is it their number 1 brand, it has amongst the highest repeat rate they have seen that talks about the durability, and we are doing all of that mainly in 1 bay. So we still have further expansion opportunity here even in North America. As we continue to expand around the world.

Operator: Thank you. Next question today comes from Olivia Tong at Raymond James. Please go ahead.

Olivia Tong Cheang: Great. Thank you. Good evening. Happy anniversary. Can you talk about the sellout trends both in The U. S. And existing markets and then the uptake in Continental Europe And then second, what is the biggest unlock you have seen since acquisition for Road? And then third, do you think is the right pace for further geographic expansion there as you mentioned at the vast majority of the road social follow ship is still overseas? Thank you.

Mandy J. Fields: Thanks, Olivia. So on the sellout trends, as I just mentioned, U. S. Continues to be strong. Europe was a record launch for ROAD in the European markets. it is a largest launch Sephora has ever seen. Only second best to our US launch that we had last year. And so we feel great about the trends that we are continuing to see on road. it is just got a ton of momentum behind it.

Tarang Amin: Yeah. And then up to your second question on the biggest unlock on road, the great news on road is we have momentum across multiple dimensions. And so we have been able to, as you see very strong innovation cadence on roads still sticking to the overall vision of 1 of everything really good, but we have real strength across the portfolio, not only in skin where we started, but in hybrid color and in lip. In fact, in Sephora, number 1 or 2 in 12 of the 13 segments we compete in, so real strength across the board, really driven by innovation, our overall engagement efforts.

We are investing more in the brand, and still having the brand be accretive on an adjusted EBITDA margin basis. So we have got a great approach on road. That team's done an exceptional job and we see continued white space ahead as we continue to expand I would say the distribution expansion strategy will be the same discipline strategy we have used as we have launched now with Sephora in North America, Mecca, and Australia, New Zealand, 19 countries with Sephora in Europe, even after all of those expansions, Rhode is still in only about 40% of the stores globally. We still have a lot further to go.

There is not a market in the world that does not want road right now. Thank you.

Operator: Our next question today comes from Anna Lizzul with Bank of America. Please go ahead.

Anna Lizzul: Hi. Good afternoon. Thank you so much for the question. Was wondering if you could talk about the road business and the Sephora Europe expansion. How do you see this split of business evolving now between retail and DTC? And should we ultimately view this split as becoming similar to retail and DTC in the e.l.f. brand? And then as you are expanding into retail, how should we expect gross margin to evolve? Is there any opportunity to cushion this with the retail expansion kind of pressuring gross margin a little bit to cushion this with incremental pricing or mixed benefits for road? Thank you.

Tarang Amin: So hi, Anna. On road, we are seeing momentum across both retail and DTC. Of the things I have been really pleased with what teams been able to do is have a series of exclusive launches on DTC, which has continued to propel that business even as we have expanded our retail distribution. Already talked about the number 1 position we have within Sephora in every market they are in as well as with Mecca. In terms of where Rhode is. But DTC is also extremely strong. You know, we talked on our prepared remarks, our overall digital penetration for e.l.f. Beauties 31% of our consumption. So very strong digital presence. Continue to lean in on the leading digital platforms.

Same is true obviously, with our site on road. And so I would say you are gonna continue to see emphasis on both our DTC, business as well as our retail expansion.

Mandy J. Fields: And then on the gross margin piece, you know, we have outlooked that as ROAD goes further into retail, we will see some compression on the gross margin front. But as I mentioned earlier, from an adjusted EBITDA margin standpoint, even with that gross margin compression and the investments that we wanna make from a marketing standpoint, still, are seeing strong EBITDA margins on the road. Thank you.

Operator: Our next question today comes from Susan Anderson at Canaccord Genuity. Please go ahead.

Susan Anderson: Hi. Good evening. Thanks for taking my questions. I guess, I am curious just on the e.l.f. Hair. It sounds like it is really off to a strong start. I am curious if you have any information on what overlap there is with existing e.l.f. loyal customers that are bought. Now buying e.l.f. Hair. And then also, I am just curious on your thoughts on hair versus fragrance and which 1 you think could be bigger longer term? Thanks.

Tarang Amin: So e.l.f. Hair is indeed after an extremely strong start. I talked about our rankings within target. What we are seeing from a consumer standpoint. 1 of the great things about e.l.f. Hair is it is also brought significant new consumers to the franchise. I would say about half of the consumers we have on e.l.f. Hair are new to the e. L. F. Brand. So it is a combination of our current e.l.f. Consumers buying into the new category, but also being able to attract new consumers.

And a lot of that to do with the overall strategy of having clear frames of reference to prestige at $10 or less. it is a terrific value people who otherwise could not get access to those products. And then in terms of hair and fragrance, we are bullish on both. We see both as really big categories. You know, we mentioned the size of hair in The US alone, $17 billion. Fragrances, $11 billion. As you extend globally, they are quite sizable. But we will use the same discipline strategy we have used, on e.l.f. Skin. We will pursue that kinda 1 step at a time. I would say e.l.f. Hair is main right now. E. L. F.

Fragrance and getting great signals on. We will continue that expansion as well as we go forward. But we see big opportunity on both those categories. Thank you.

Operator: Our next question today comes from Peter Grom at UBS. Please go ahead.

Peter Grom: Great. Thanks. Good afternoon, everyone. I wanted to ask specifically on the top line performance in the quarter. And just maybe some clarifications on the path from here. So first, just on The U. S, I am curious how organic sales came in to your expectations. And I asked just because if I were to back out the road m and a benefit, and I understand we do not know the exact split of US versus international on that 16%, but it would imply high single digit organic sales growth despite having pretty easy shipping comparisons from a year ago. So we are just hoping to unpack that a bit more.

And then just on the second half, and I understand there was a pipeline fill benefit that helped drive this strong 2Q internationally, but the mix of international really steps up. So just curious how you would characterize growth in U. S. Versus international as we look ahead?

Mandy J. Fields: Hi, Peter. So from an organic sales standpoint in the quarter, it is like we said, 35% growth with Road being a part of that as a contributor. But all brands growing in that number. And so I would say that was consistent with what we had expected, maybe even a little bit better as we saw the quarter come in. When I think about how we have raised our guidance to 22-24%, a portion of that is driven by the Q2 also being incrementally more positive on the second half as well. So even as we look between US and international, we talked about ELF our top countries, UK, Germany, and Canada. All doing much better into Q2.

And so we have momentum not just on road from an international perspective, but also on the core e.l.f. brands. And so that is encouraging. Thank you.

Operator: Our next question today comes from Mark Altschwager with Baird. Please go ahead.

Analyst: Great. Thank you. Mandy, looking ahead to fiscal 2028, just with the reinvestment concentrated here in the second half, should we think about the fiscal 27 adjusted EBITDA as the base to grow from next year? And on the second half spend, how much is permanent pricing on the 10% of SKUs? Relative to the marketing investment that could roll off next year?

Mandy J. Fields: Yeah. So not providing insight into 2028. At this time, you have to stay tuned for our May call for that. But what I can tell you on the reinvestment, we are, taking the $52 million that we have gotten from tariff refunds, and we have invested a portion of that into pricing as we talked last quarter, and the majority of that being invested in marketing and digital with that coming in the second half. that is why you see those lower EBITDA margins in the second half. Largely, those are gonna be neutral in impact So we have got the refund in the first half of the year. Reinvesting in the second half of the year.

So when you think about our EBITDA margin overall, up 50 basis points on a year over year basis, we even raised that this time from a guidance standpoint. that is really gonna be the base for us to build off of as we go into fiscal 28. Thank you.

Operator: Our next question today comes from Joanna Kim at TD Cowen. Please go ahead. I am sorry. Jonna Kim. I apologize.

Analyst: No problem. Thank you for taking my question. Just a question on the Naturium As you see. Continue to see success, how should we just think about the retail expansion opportunity within The US as well as international? And what is the sort of the growth outlook that you have for the brand as you think about skincare? Thank you.

Tarang Amin: So we still see major white space from a retail expansion opportunity, both in The U. S and especially internationally. In The U. S, for perspective, national share on e.l.f. To start with is about a 13% share. Target, which is our longest standing national retailer, has over a 20% share. And if you look at the trajectory of each of our customers, we see them tracking towards, that ultimate kind of goal of being able to get to that 20% share and above. And a lot of that is gonna be driven by continued expansion.

If you take a look at what we have been able to do with Walmart, with their highest vision sets where we are anchoring their new beauty concepts, We are really pleased with the numbers, and so is Walmart in terms of the. What we are seeing off of those sets. And so there is a major opportunity for continued expansion there. If you take a look at Ulta, know, they are brands that have much more space than we do there really across the board. No 1 is quite at the level that Target is at, and so it gives us a great opportunity.

And then if you look at Naturium, we have even a further opportunity on Naturium as we go in terms of our expansion. We mentioned last year, we got into Walmart. We see further opportunity to expand within Walmart with Naturium just given the strength and the momentum we have behind that brand. In addition to additional customers. We are not fully distributed yet on Naturium by a long shot, so we still have a long way to go. Thank you.

Operator: And our next question today comes from Anna Andreeva with Piper Sandler. Please go ahead.

Anna Andreeva: Great. Thank you so much, and congrats. Nice results. Just curious, did you guys quantify how much of that 51% growth you saw in the second quarter was the sell in into Sephora Europe Curious if you can share any learnings so far from the launch and maybe talk about what was your approach to choosing some of this specific European countries? And then secondly, to Mandy, with the second quarter, SG and A shifting later with marketing, just any color on how we should think about the catch up? Is it more in Q3 or equally split between the quarters? Thank you so much.

Tarang Amin: Yeah. So we have not quantified the pipeline for so we have not disclosed the pipeline for Sephora Europe pipeline. But what I would tell you is there was a lot of pipeline. Sephora learned from their experience in North America and wanted to make sure they had a stronger stance, and I am glad they did that. Because it was the biggest launch they have ever seen, far exceeded any of our expectations. We had a good inventory position to be able to support that launch And then in terms of what we are seeing, we have been extremely pleased with the performance it is by far the number 1 brand Sephora carries in Europe.

With the strongest repeat rates that they see. So we are seeing the same characteristics that we have seen in The US in terms of. And really across each of their markets in Europe as we are going through. Yeah.

Operator: And then on your question on marketing investment, you know, we talked about sales, you know, being kind of above that 7-10% range in Q3, a little bit below that in Q4.

Mandy J. Fields: I would say from an investment standpoint, you are gonna see more. You know, even if you went historically, probably leaned a little bit more to Q4 as we go through. But again, you know, I would focus you on the second half in total, and just looking at the EBITDA margin in the low-teens is reflective of the reinvestment plus the timing shift in spin. That we saw out of Q2. Thank you.

Operator: Our next question today comes from John Anderson at William Blair. Please go ahead.

Analyst: Hi, good afternoon and congratulations. I just had a quick question on e.l.f. Performance outside The U. S. And what you are seeing as more strength in some of your key markets. Is this the categories improving? Is it the competitive situation getting better? Is it specific actions that you are taking? Can you kind of give us a little bit more color on what you are seeing in The UK, what you are seeing in Germany? And you think about the growth there going forward for the core e.l.f. brand? Thank you.

Tarang Amin: Hi, John. This is Tarang. I would say we have had very strong consumption in those markets. So it is primarily based on our execution We talked about focus plan we had against both The UK and Germany and putting more support on from a marketing standpoint. Core fundamentals from a sales standpoint. So in The UK, we have seen strong consumption. And that is really even before we started our expansion further with boots. And our retail expansion there. So feeling really good about the momentum. In The UK. It continues to build.

And in Germany, you know, we saw an immediate change as we got into DM in Germany, that expansion, and we see that continue to build as well. So really pleased with the work the team has done, there, and we have continued to see good momentum with Canada across our key retailers as well as online in each of each of these areas. The last thing I will add is, you know, we continue to see real strength in connected commerce. We mentioned in prepared remarks, we are e.l.f. Is the number 1 brand on Amazon, most searched on their platform. We are now number 2 with TikTok shop in The US.

We see major international opportunities with both Amazon and TikTok shop as we go forward. So it is not just our retail penetration in those markets. Where we see both retail as well as connected commerce being able to continue to drive momentum. Thank you.

Operator: Our next question today comes from Rupesh Parikh with Oppenheimer. Please go ahead.

Rupesh Parikh: Good afternoon. Thanks for taking my questions. Also, congrats on a nice quarter. As I look at the e.l.f. brand, nice share gains this quarter. Just curious in your confidence in sustaining the share gains as you look at the balance of your fiscal year. Thank you.

Tarang Amin: Hi, Rupesh. We are really pleased with the share gains that we seen on the e.l.f. brand. As we talked about strong consumption, you are seeing that in scanner data, particularly pleased on reigniting unit momentum on the e. L. Brand. So we feel great about that. And then just stepping back if you take a look at the e.l.f. brand over the last few years, believe we have grown close to 900 basis points of market share. So we still feel we have further share to be built, as I gave that comparison between Target and our national shares. And so we are feeling really good with where e.l.f.

Is right now and what we are seeing for the rest of the year. Thank you.

Operator: And our next quest. Our next quest. Question today comes from Javier Escalante with Evercore ISI. Please go ahead.

Javier Escalante Manzo: Hey. Good afternoon, and congratulations on the very strong quarter. I have 2 questions. 1 on e.l.f., Tarang, you did a lot of changes on the cosmetic side, the pricing, innovation. If you were to kind of like at a very high level, right, what was the unlock to go from market share losses to market share gains in the quarter and on makeup specifically. Also, with E. F, The Launches In Mexico and Brazil through Sephora Is this can we see this as a seating to understand the market? Why not the broader distribution that is more consistent with what we had seen in The US? So this is on e.l.f.

And on Road, some companies have commented on increased acquisition cost. Digital, to go to making the DTC online, very onerous. So if you can comment whether you have seen increases in customer acquisition cost yourself, and how does it change the DTC versus Sephora equation for Road? Thank you.

Tarang Amin: Sure. First of all, On e.l.f., I am really pleased with the work the team has done, and it really goes back to the core fundamentals that have been the consistent driver of our growth. If you look at almost 8 continuous years of growth, they have really been centered on 3 things. Our value proposition, powerhouse innovation and disruptive marketing engine. We talked last quarter about doing a broad pricing test we took everything down a dollar. What we found was that 90% of our items were appropriately priced. Delivered a great value every day even at a dollar higher.

But there were 10% of the items where we did see outsized unit growth by going down a dollar lower. In fact, the unit growth is so great that we see it as building gross profit. Over time. So really terrific actions, but it was only 10% of our SKUs. Let's say, a bigger contributor, than that is our innovation. And, again, innovation is something we have had a consistent track record over the years of being able to take inspiration from prestige or our community, put the e.l.f. twist, and bring it to great value. Mentioned our fall innovation is number 1. In mass with 5 of the top 10 items from our fall innovation.

A number of items have very clear references to prestige. That are really resonating. We also mentioned in the prepared remarks that we have additional innovation that we are bringing in based on what our community wants. You can see 1 of the items that already hit market, our a-peel-ing lip oil at $6. Just a phenomenal price given the prestige quality. If you want, you can go and take a look at, 1 of the reviews from Mikaela. She went off and bought those products on her own organically and posted a review and cannot get over just how great these products are.

And so we feel really good about And then last is we have always had a consistent track record of how we engage consumers By far, the number 1 brand amongst Gen z, Gen alpha, and millennials. You know, as you mentioned there on the Piper Sandler survey, that just came out, we had 2 unprecedented achievements, first, e.l.f. Cosmetics 9th consecutive survey. We are number 1 with a mind share nearly 5x the number 2 brand and both e.l.f. And Rhode being in the top 10 in both cosmetics as well as skincare. So real strength across all 3 dimensions. And like I said, that is more consistent with our history as we have gone forward.

And then from a Mexico and Brazil standpoint, I would say the lead partner that we have gone in with is Sephora, and we are extremely pleased with the execution we have in both countries. I mentioned our number 1 position And then we will look from there in terms of what the other distribution opportunities are in Mexico, we have already entered Ulta as they have expanded started their expansion into Mexico. We also just launched the brand with Amazon. In Mexico, which, has a very strong business in Mexico. So you are seeing some expansion in terms of our distribution. We see both Mexico and Sephora as having really great potential.

And then finally, on your question on road, you know, I would say we have not seen higher acquisition costs, and a lot of that has to do with the momentum we have behind the brand, the strength of, the innovation as well as our limited time exclusives. You know, we have upcoming here in November, Hailey's birthday month, which is always a very exciting time for the brand and terms of level of interest we get. So there is already such great consumer interest, and particularly given the strategy of limited time exclusives. Has been able to drive really strong traffic and sales on our DTC site. Thank you.

Operator: And our next question today comes from Anna Lizzul with B Riley Securities. Please go ahead.

Analyst: Hi. Good afternoon. Thanks for taking my questions. Actually, last answer leads into it well. I wanted to ask for some more perspective on your approach to product innovation on road. How do you balance keeping the assortment fresh in these limited time collabs with maintaining customer satisfaction considering a lot of these are selling out really quickly. And do you view these collabs as a test for launching more permanent offerings? Thanks.

Tarang Amin: Yep. So we love the product strategy on road. Haley's vision of 1 of everything really good. We continue to follow. A well curated line As I mentioned earlier, we love the balanced strength we have on road, with strength across skin, hybrid color, and lip. And then the strategy of these limited edition collaborations, really have to do with continuing to broaden the aperture and appeal of Rhode. The Alexander Leclerc collaboration we did not only had a 200 thousand-person waitlist when we launched that, but most of those items sold out within an hour. So it continues to drive interest in the brand, which is similar to a strategy that we have used with e.l.f.

In terms of the types of collaborations we do to bring even greater interest to the brand, more new users to the brand. So we feel really great, and we have a very good pipeline of innovation on road, but still following that curated strategy in terms of really making sure we have 1 of everything really great. Thank you.

Operator: And that concludes our question and session. I would like to turn the conference back over to Tarang Amin for closing remarks.

Tarang Amin: Well, thanks for joining us, everyone. I am so proud of our passionate team of owners operating in a high performance culture. Who are showing what it means to be a different kind of beauty company by building brands that disrupt norms shape culture, and connect communities through positivity, inclusivity, and accessibility. Our refresh strategy is powered by 5 integrated pillars: cultivating a passionate team of owners, cocreating with our community, winning with winners, expanding our portfolio, and accelerating global expansion. Together, they strengthen our competitive moat and give us great confidence that anything is e.l.f.ing possible.

We look forward to seeing some of you at our upcoming investor conferences and to speaking with you again when we discuss our third quarter fiscal 27 results in February. Thank you, and be well.

Operator: Thank you. That concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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