e.l.f. Beauty, Inc.

Good day and welcome to the ELF Cosmetics fourth quarter and full year fiscal 2020 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note this event is being recorded. I would now like to turn the conference over to Willa McManman, Vice President of Investor Relations with ELF Cosmetics. Please go ahead.

Thank you for joining us today to discuss Elf Beauty's fourth quarter and fiscal 2020 results. As a reminder, this call contains forward-looking statements that are based on management's expectations, including those relating to the company's efforts to navigate the COVID-19 pandemic, category trends, and longer-term outlook, and are subject to known and unknown risks and uncertainties, and therefore, actual results may differ materially. Important factors that may cause actual results to differ are detailed in today's press release and the company's SEC filings. In addition, the company's presentation today includes information presented on a non-GAAP basis. We refer you to today's press release for a reconciliation of the differences between the non-GAAP presentation and the most directly comparable GAAP measures. All comparative net sales figures exclude ELF stores. Please note after the presentation, there's a separate dial-in for the QA session, also noted in the press release. With me for management today are Tarang Amin, Chairman and Chief Executive Officer, and Mandy Fields, Senior Vice President and Chief Financial Officer. Let me turn the webcast over to Tarang.

Thank you, Willa, and good afternoon, everyone. I hope that you're safe and healthy during these challenging times. Today, we will talk about our fiscal 2020 results, our response to COVID-19 challenges, and our long-term investment thesis. Fiscal 2020 was a terrific year for Health Beauty. We saw four quarters of net sales expansion, culminating in a 16% increase in year-over-year sales in the fourth quarter. For the full year, net sales of $283 million were up 11%. We expanded gross margin to 64%, up 300 basis points over last year, and up 1,700 basis points since 2014. We also delivered adjusted EBITDA of $63 million, while almost doubling our investment in marketing and digital. Our consumption was strong all year and outpaced the category. Of the top five color cosmetics brands in the U.S., we grew the most market share in FY20, with 4.8% of the market, up 50 basis points. We also increased our rank in Piper Sandler's teen survey from sixth favorite brand amongst teens last year to fourth this year, reflecting our growing relevance with Gen Z. As I reflect on these results, I believe FY20 was an important year to reassert our multiple areas of competitive advantage. We did so by investing in our brand recharge and executing on our five strategic imperatives. We exceeded our key performance indicators and entered COVID-19 headwinds with strength relative to the category. Our mission to make the best of beauty accessible to every eye, lip, and face is more important than ever. We believe that our fundamental value equation in digital engagement, as well as our world-class team's ability to adopt at elf speed, positions us well to weather the COVID-19 storm and continue to gain market share. Let me provide a few highlights of the year. Our first strategic imperative is to drive brand demand. e.l.f.' 's core advantage centers around the emotional charge generated by our combination of affordability, excellence, and accessibility. In 2020, we kicked off a bold campaign to bring e.l.f.' 's superpowers to the forefront of the beauty conversation. Our pride in being 100% vegan and cruelty free, our unique ability to deliver first to mass holy grail products that have premium quality at unbelievable prices and, of course, our universal appeal. We rolled out our Elfing Amazing campaign across key social platforms, highlighting Elf's accessible, optimistic, and inclusive brand values in a fresh, energetic, and modern way. The results of the campaign far exceeded our benchmarks, bringing new consumers to Elf and accelerating brand advocacy within our existing community. Riding this momentum, in October, we launched our groundbreaking Eyes, Lips, Face TikTok Hashtag Challenge, which started out with an original music track and quickly became the most viral campaign in TikTok U.S. history with over 5.3 billion views. in over 3.5 million user-generated videos. ELF became a global music sensation as a song generated over 16 million streams outside of TikTok and a number four spot on Spotify's Global Viral 50 list. Fans desired more, so we partnered with Republic Records to produce a full-length, eyes-lips-face music video, which garnered over 2.3 million views on YouTube. In March, to further amplify our presence on TikTok, We launched the Elphia channel, a destination for Gen Z. Elphia delivers customized daily content featuring personalities, products, and premium entertainment designed to engage TikTok's rapidly growing audience. Elphia has already amassed over 80,000 followers and 1.5 million likes. Our efforts to drive brand demand delivered impressive results. And just this week, our Eyes Up Face TikTok campaign won two prestigious Webby Awards, including the People's Voice Award, that honor the best content on the internet. Year over year, Google's search trends were up 6%. Our Instagram follower growth was up 22%, and our earned media value was up over 60% for the year.