e.l.f. Beauty, Inc.

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Thank you for joining us today to discuss Elf Beauty's third quarter fiscal 24 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 24. I want to start by recognizing the Elf Beauty team for delivering another phenomenal quarter. In Q3, we grew net sales by 85%, increased gross margin by nearly 350 basis points, and and delivered $59 million in adjusted EBITDA, up 61% versus prior year. Our vision is to create a different kind of beauty company by building brands that disrupt norms, shape culture, and connect communities through positivity, inclusivity, and accessibility. We have executed against this vision and delivered exceptional, consistent, category-leading growth Q3 marked our 20th consecutive quarter of net sales growth, putting Elf Beauty in a rarefied group of consistent, high-growth consumer companies. We're one of only five public consumer companies out of 274 that has grown for 20 straight quarters and averaged at least 20% sales growth per quarter. Across our business, we've continued to prioritize three areas with significant runway for growth. Color cosmetics, skin care, and international. Let me update you on our progress in Q3. In color cosmetics, we continue to significantly outperform the category. In Q3, e.l.f. Cosmetics grew 46% in tracked channels, 23 times category growth of 2%. We increased our share by 305 basis points. Out of nearly 800 cosmetics brands tracked by Nielsen, e.l.f. is the only brand to gain share for 20 consecutive quarters. We've more than doubled our market share from about 4.5% in 2019 to 10% in 2023, placing us as the number three brand nationally. Given our momentum, we see an opportunity to double our share again over the next few years. In Target, our longest standing national retail customer, we're the number one brand with about a 19% share, nearly double the share we had in Target just a few years ago. We're focused on replicating our success at Target across other key retailers and are making great progress towards that ambition. In skincare, we also continue to outperform the category. In Q3, Elfskin grew 89% in track channels, 10 times category growth of 9%. We grew our share by 60 basis points and gained six ranked positions, increasing our rank to the number 14 brand as compared to the number 20 brand a year ago. Elfskin today holds a 1.4% share and a significant runway with the number one brand holding 14% share. We're also making progress with Notorium, the clinically effective, biocompatible skincare brand we acquired in October. Notorium has doubled our skincare penetration to 18% of retail sales and gives us a fast-growing, complementary brand to further our aspirations in the category. Notorium has seen exceptional growth, with net sales growing at an 80% CAGR over the last two years. We're pleased by the strong growth that Notorium continued to deliver in Q3. Turning to international, our net sales grew 119% in Q3 and drove approximately 15% of our business as compared to 13% a year ago. We saw terrific growth in the UK and Canada, our largest global markets, and we're enjoying success in our expansion to other countries as well. As compared to our number three position in the US, e.l.f. is the number four cosmetics brand in Canada and the number six brand in the UK. In Italy, where we just launched this fall, ELF is already the number one brand in Douglas across both mass and prestige. We see significant runway to expand our brands globally. Across categories and geographies, the three fundamental drivers of our business remain the same. Our value proposition, powerhouse innovation, and disruptive marketing engine. Let me walk you through how each underpinned our strength in Q3 and how they collectively fuel our vision to be a different kind of company. First, we're known for our value proposition. Our mission is to make the best of beauty accessible to every eye, lip, face, and skin concern. We have a unique ability to deliver high-quality holy grails at an extraordinary value. created with inspiration from our community, the best products in prestige, and our distinctive e.l.f. twist. The average price point for e.l.f. is a little over $6 today, as compared to over $9 for legacy mass cosmetics brands, and over $20 for prestige brands. We believe our core value proposition expands the category, allowing more consumers to access the best of beauty. The second driver of our performance is our powerhouse innovation, Our innovation engine has built category leadership over time. e.l.f. has the number one or two position across 16 segments of the color cosmetics category, which collectively make up over 75% of e.l.f. cosmetics sales. We continue to deliver strong sales growth and share gains in each. We have a track record of building growing product franchises in both cosmetics and skincare that endure instead of typical one and done launches. Our five largest franchises, Halo Glow, Camo, Power Grip, Holy Hydration, and Putty, have grown year after year. As we launch new innovation within each, the entire franchise grows. In Q3, we extended our Camo franchise into the blush category for the first time with the launch of our Camo Liquid Blush, priced at an incredible value of $7 compared to a prestige item at $23.