e.l.f. Beauty, Inc.

Thank you for joining us today to discuss Elf Beauty's third quarter fiscal 25 results. I'm Casey Katten, 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, KC, and good afternoon, everyone. Today, we will discuss the drivers of our third quarter results and our updated outlook for fiscal 25. In Q3, we delivered another quarter of consistent category-leading growth. We grew net sales 31%, delivered $69 million in adjusted EBITDA, and increased our U.S. market share by 220 basis points. Q3 marked our 24th consecutive quarter of both net sales growth and market share gains, putting Elf Beauty in a rarefied group of high-growth companies. We're one of only six public consumer companies out of 546 that has grown for 24 straight quarters and average at least 20% sales growth per quarter. Elf is the only brand of the nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 24 consecutive quarters. Our fiscal 2025 year-to-date results have been exceptional with our team delivering 40% net sales growth. We remain confident in our strategy, ability to take market share, and capitalize on the white space ahead of us. At the same time, our consumption trends to start calendar 2025 have been softer than we expected. We see three factors. First, the category continued to decline in January. We believe this decline is reflective of consumers stocking up in a highly promotional December and lower social conversation around beauty. Consumer mindshare was focused elsewhere, including wildfires in LA and uncertainty around the TikTok platform. Second, in Q4, we're lapping the global launch of our viral Glow Reviver Lip Oil, which was our biggest launch in calendar 2024. In addition, we had higher shipments in Q4 last year as retailers built inventory ahead of the big game. Third, initial reads for a couple of our new product launches for spring 2025 have started off slower than we expected. We're still in the early days of marketing activations for these launches and our spring resets. Over the next few weeks, our retailers will add spring innovation to shelf and refresh our shelf sets, including expanded space in Targets and Walgreens. These results are still in progress and will not be complete until the end of February. Balancing these factors, we're lowering our net sales outlook for the final quarter of the fiscal year to minus 1% to plus 2%. Given the dynamics between Q3 and Q4, we do not believe Q4 is indicative of the underlying run rate of our business, and we remain confident in our ability to deliver market-leading growth. As updated, our outlook contemplates 14-16% next sales growth in the second half of 2025, on top of the 77% growth we delivered in the second half of last year. As we look ahead, we remain focused on four areas with significant runway for growth – digital, color cosmetics, skin care, and international. Let me update you on our progress in each in Q3. Starting with digital, founded as a digitally native brand, e.l.f. remains the only top five mass cosmetics brand with our own direct-to-consumer site. Q3 digital consumption trends were up nearly 30% year-over-year, on top of triple-digit growth in Q3 of last year. Digital channels drove 24% of our consumption in Q3, in line with last year. We're pleased with these results as Q3 was highly promotional across MassBeauty. Instead, we held to our approach of delivering outstanding value every day, foregoing promotional activity on elfcosmetics.com during the holidays. We're seeing continued momentum across our digital and social platforms with strength on Amazon and supported by our ongoing enhancements to our loyalty program and mobile app. Our Beauty Squad loyalty program recently surpassed 5.6 million members with enrollment consistently growing over 20% year over year. Our mobile app now has over 3 million downloads, making the most downloaded single brand cosmetics and skincare app in the U.S. and holds a 4.9 rating out of 5. In color cosmetics, we continue to significantly outperform the category. In Q3, e.l.f. Cosmetics grew 16% in tracked channels as compared to a category that was down 5%, increasing our market share by 220 basis points. Nationally, Elf is the number one brand on a unit basis with approximately 14% share and the number two mass brand on a dollar basis with approximately 12% share, more than double the level we had three years ago. We remain focused on the opportunity to double our market share in the coming years. In Target, our longest standing national retail customer, we're the number one brand with over 20% share, delivering consistent growth over time. In Q3, we grew our cosmetics share at Target by 170 basis points and believe we can fuel further growth with space expansion this spring. We believe we're making great progress on replicating our success at Target with other key retailers. In Q3, we reached the number two brand rank at Walmart for the first time, up from number four a year ago. We're also finding success with newer retailers like Dollar General, where we launched ELF in a subset of doors. Our initial results have exceeded our expectations in this new channel, and we'll continue to expand into additional Dollar General doors this spring. We share Dollar General's mission to serve the underserved and democratize access to the best of beauty, particularly in rural areas, which have traditionally only been served by legacy brands. We are pleased with our continued retail expansion opportunities, unlocked by our focus on driving productivity. e.l.f. remains the most productive cosmetics brand on a dollar per linear foot basis with our largest retail customers globally. Our 24 consecutive quarters of share gains are a testament to the effectiveness of our productivity model, and we believe our continued focus on productivity will aid in further space expansion in the years to come. Look into skincare. In just five years, e.l.f. Skin has become a top 10 skincare brand in a category dominated by legacy brands built over decades. For context, the average age of the other top 10 skincare brands is 63 years old. In Q3, e.l.f. Skin continued to meaningfully outperform the category and grow market share. As we look ahead, we see significant runway for growth. Elfskin today holds about a 2% share as compared to the number one brand holding nearly 14% share. With the acquisition of Notorium, we've doubled our skincare penetration to 18% of our retail sales. We now have two of the fastest-growing mass skincare brands that are distinct yet complementary in their price points, positioning, and audiences. The launch of Notorium into Ulta Beauty continues to perform well, and we see further expansion opportunities ahead. Turning to international, our net sales grew 66% in Q3, fueled by growth in our existing markets as well as our expansion into new markets. International drove 20% of our net sales in Q3, up from 15% a year ago. We see significant white space ahead with our global peers having over 70% of their sales outside the U.S. We've seen success with our engagement model across social platforms, driving global consumer demand well before we enter a particular country. Today, Elf has retail presence in 15 countries, with launches over the last year including Rossmann Germany, Atos Netherlands, Douglas Italy, and Sephora Mexico. We've achieved a top three ranking in each of these new markets we've launched in, reflecting our strength in driving global brand demand. We're also excited to bring our disruptive marketing to new markets, fusing our universal brand superpowers with local cultural relevance. In Germany, Elf translates to the number 11. Elf von Zen, the title of our latest campaign, means 11 out of 10. A wink and a nod to the obsession in Germany with quality ratings.

Jamie writes, metal concert proof, holy wow, has kept all the sweat and chaos of the Mosh Pits. In fact, Jamie, the Elf Power Grip Primer provides a long-lasting performance at any volume. That's too much good makeup. A smooth 11 out of 10. Grace writes, I love the ELF lip oil so much. Soft like butter. In fact, Grace, lips are soft like butter thanks to the ELF Glow Reviver Lip Oil. That's too much good makeup. My conclusion, 11 out of 10.