e.l.f. Beauty, Inc.

back in stock this season the halo glow liquid filter and now a special radiance report it's an elfin glow storm hi and yes you heard that right we are officially on storm swatch look at the gust of this liquid glow could we have a glow day in our sights you know i'm all about that glow My colleague is on location in Los Angeles. Our radiance radar is suggesting gale force glitter. We are priming for a glow storm. I'm talking unspeakably glowing dewy skin, Megan. I mean, you are starting to look smoother by the minute. Be sure to exercise extreme iridescence. It's cold. OMG, this storm swatch has been glowed up to an elf in glow storm. Curious. This glow up is real. Okay, folks. No matter the weather, wherever you are in your neck of the woods, we're looking at 100% chance of glow. Are we in for a glow day? Elf around and find out.

Thank you for joining us today to discuss Elf Beauty's third quarter fiscal 23 results. I'm Casey Katton, Vice President of Corporate Development and 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.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'll find factors that 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 the differences between the non-GAAP presentation and the most directly comparable GAAP measure. With that, let me turn the webcast over to Terang.

Thank you, Casey, and good afternoon, everyone. Today, we will discuss the drivers of our Q3 results and our raised outlook for fiscal 23. We delivered Q3 results well ahead of our expectations. We grew net sales by 49%, increased gross margin by 180 basis points, and delivered $37 million in adjusted EBITDA, up 69%. Q3 marked our 16th consecutive quarter of net sales growth. Given our momentum, we're raising our full year guidance. We're encouraged by the continued strength we're seeing across the color cosmetics category. In Q3, category trends grew 8% versus a year ago. e.l.f. Cosmetics continued to significantly outperform the category, growing 36% in tracked channels We grew our market share by 150 basis points and increased our rank to the number four brand as compared to number five a year ago. We continue to be the fastest growing top five brand by a wide margin. In skincare, Q3 category trends grew 6% versus a year ago. e.l.f. Skin also significantly outperformed the category, growing 34% in tracked channels. Before diving into our key growth drivers, I want to share a few highlights. In the last year, Elf has been celebrated for the power of our company, brands, and disruptive marketing engine. We're humbled by the recognition we continue to receive. In Q3, we were named Beauty Brand of the Year in the mass category by Women's Wear Daily and recognized on Forbes' annual list of America's Best Midsize Companies. We continue to be recognized for our purpose and values as we strive to create a different kind of beauty company, one that is both purpose-led and results-driven. With the appointment of Gail Tate to our board of directors, we are proud to be one of only four public companies out of nearly 4,200 with a board that's at least two-thirds women and one-third diverse, underscoring our commitment to diversity and inclusion. Three fundamental drivers of our business continue to fuel our results. Our value proposition, powerhouse innovation, and a disruptive marketing engine. Let me explain how each of these drivers underpinned our strength in Q3. First, we're known for our value proposition. We make the best of beauty accessible to every eye, lip, face, and skin concern. We take inspiration from our community and the best products in Prestige to deliver high quality Holy Grails at extraordinary prices. We often get questions whether our growth can be attributed to trade down from Prestige or trade within from Mass. While we see benefits of each, we believe the more fundamental point is that our value proposition creates accessibility, driving category expansion. We have many examples where the accessibility of our holy grail innovation significantly expanded the number of consumers who participate in a particular category. I'll start with primers. A few years ago, a Prestige brand introduced a new primer format at a $52 price point that quickly became a top primer in Prestige. We took inspiration from this item, added our own unique elf twist, and launched Poreless Putty Primer, Our price point of $8 invited a much wider range of consumers into the space, significantly expanding the entire Putty Primer category. In fact, looking at data over the last year, we've sold over nine times the units of the Prestige Primer, and both ELF and the Prestige item have continued to grow units at a double-digit pace. It's not just in primers where we see the benefits of e.l.f.' 's ability to make the best of beauty accessible. We also expanded the concealer category with the launch of our Camo Concealer at $7 compared to the Prestige Comparison at $31. Over the last year, we've sold nearly double the units of the Prestige Comparison with both our Camo Concealers and the Prestige product growing units at a double-digit pace. In both cases, e.l.f. expanded the category by attracting new consumers who are looking for high quality products at a great value. By making the best of beauty accessible, we're both expanding our share of the category and making the whole category bigger. The second driver of our performance is that we're an innovation powerhouse. Our innovation engine has built category leadership over time. Our largest segments, brushes, primers, setting sprays, brows, eyeshadow, concealers, and sponges, collectively make up over half of e.l.f. Cosmetics sales. We continue to gain share in all seven segments while maintaining the number one or two position within each. We know how to build winning franchises across categories. Our growing putty primer and camo franchises are great examples of how our multi-year innovation is driving our share leadership in key segments. Our PowerGrip franchise is a more recent example. We launched our original PowerGrip primer in late 2021 at an incredible value of $10 compared to the prestige item at $36. In 2022, Power Group was our top selling SKU and the number two SKU across the entire US mass cosmetics market, according to Nielsen. e.l.f. Cosmetics Power Group was also the number one face primer SKU across the entire US prestige beauty market, according to the NPD Group. Coupled with our multi-year innovation in primers, e.l.f. now holds the number one position in the face primer category in both the mass and prestige markets. We're building upon the success with our recent launch of our PowerGrip Primer with 4% Niacinamide. At the same $10 price point, this hybrid product delivers on our community's desire for makeup with skincare benefits. The sticky texture grips makeup for a long-lasting wear, while the 4% Niacinamide helps even out and brighten skin. This item has proven to be highly incremental, further expanding our PowerGrip franchise. We are also innovating in areas where we currently under-index on share. Our spring 2023 launches include a few great examples. In mascara, we launched Lash and Roll Mascara, a mega curling mascara with a unique double-sided and curved silicone brush to lift and separate lashes for an eye-opening effect. In lip, we launch our O-Face Satin Lipstick that delivers a bold, satiny color with a creamy, long-lasting finish and is infused with hydrating squalene and jojoba esters for a super comfortable, next-to-nothing feel. In skincare, we launch our Youth Boosting Advanced Night Retinoid Serum, a powerful retinoid that reduces the appearance of fine lines and wrinkles over time to reveal rejuvenated, smooth, and radiant skin. In skincare, we also launched our sun-touchable Woe Glow SPF 30, a lightweight face sunscreen that doubles as a makeup primer and leaves skin with a glowing finish. As compared to the approximately 7% share we have across the cosmetics category, we have a 1% share in mascara, lip, and skincare. For context, mascara is a $900 million category and the largest segment within cosmetics. Lip color is nearly a half a billion dollar category. And skincare is over a $5 billion category within masks. We have significant white space in these large segments of beauty and the innovation engine to conquest them. The third driver of our performance is our ability to attract and engage consumers with our disruptive marketing. We kicked off the holidays with a first-of-its-kind digital campaign informed by the insights from the Weather Channel and brought to life with Grammy Award-winning Meghan Trainor. Meghan delivered a special radiance report across social channels to break the news of an elfin glow storm, celebrating the restock of our viral sensation, Halo Glow Liquid Filter. The trifecta of Elf, The Weather Channel, and Meghan Trainor helped us reach new audiences and entertain our community. The campaign generated over 5 billion press impressions, exceeding last year's holiday campaign by a wide margin. Over the past three years, We've increased our marketing investment from 7% of net sales to 16% and continue to expect marketing near the high end of our 17% to 19% range for fiscal 23. We recently completed our annual Nielsen marketing mix analysis and again saw exceptional ROI results, giving us further confidence that our marketing and digital initiatives are driving brand demand and delivering profitable growth. We expect these three drivers of our performance, our value proposition, powerhouse innovation, and disruptive marketing engine to continue to fuel our results. Looking beyond fiscal 23, we believe we are still in the early innings of unlocking the full potential we see for the ELF brand. Taking category share as one KPI, we see a lot of runway for growth. Nationally, we're the number four cosmetics brand with a 7% share. In Target, our longest standing national retail partner, we're the number two brand with a 13% share. The significance of our position and share at Target is that we entered Target in 2008, a number of years ahead of our other national retailers. We believe that our position at other major retailers could mirror that at Target over time. And even at Target, we believe we still have opportunities to continue to take share and become the number one brand. On our Q2 call, we discussed the space expansion we've earned with Target for spring 2023. As we continue to drive productivity and expand our footprint across customers, we see a significant opportunity for growth. We also see considerable white space internationally. We've recently expanded space at Shoppers Drug Mart in Canada and Superdrug in the UK, and there still is more room to grow. International represented approximately 13% of our e.l.f. Beauty sales in Q3, with the business growing nearly 80% year over year. We're seeing strong results behind our disciplined expansion strategy in Canada and the UK. As compared to our number four position in the US, we're the number seven brand in Canada and the number eight brand in the UK. We recently hired a new GM of international and plan to build out that team to further penetrate international markets. Before I turn the call over to Mandy, I want to discuss our brand superpowers, which set the foundation for overall competitive advantage. With ELF, Consumers can have premium quality beauty products at accessible price points with broad appeal that are cruelty-free, vegan, clean, and fair trade certified. While other beauty brands can try to replicate any one of these, we believe the unique combination of our expanding superpowers forms our competitive moat and fuels our ability to win in fiscal 23 and beyond. I'll now turn the call over to Mandy.