e.l.f. Beauty, Inc.

Thank you for joining us today to discuss Elf Beauty's second quarter fiscal 26 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.oafbeauty.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 our second quarter results and our outlook for fiscal 2026. I'm proud of our incredible Elf Beauty team for another quarter of consistent, category-leading growth. In Q2, we grew net sales 14% and delivered $66 million in adjusted EBITDA. Q2 marked our 27th consecutive quarter of net sales growth, putting Elf Beauty in a rarefied group of high-growth companies. We are one of only six public companies out of 546 that has grown for 27 straight quarters and average at least 20% sales growth per quarter. Beauty continues to be a resilient category. In Q2, the U.S. mass cosmetics and skincare categories grew approximately 2% year-over-year, in line with the low single-digit growth we've seen in the category over the last 10 years. On a consumption basis, our namesake ELF brand grew 7% this quarter, three times the category, and grew our market share by 140 basis points. We delivered triple-digit share gains across eye, lip, and face. consumers continue to choose e.l.f. Q2 marked our 27th consecutive quarter of market share gains, making e.l.f. the only brand out of nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 27 consecutive quarters. In August, we closed on the acquisition of RODE, the high-growth beauty brand founded by Hailey Bieber, and executed a record-breaking launch in Sephora North America. The acquisition contributed $52 million, or approximately 17 percentage points, to our net sales in Q2. On an organic basis, excluding road, our net sales were down approximately 3% this quarter. Shipments were below consumption, primarily driven by our decision to temporarily stop shipments to retailers who were slower to execute our price increase that took effect on August 1st. We're pleased to report this is now resolved and normal shipments have resumed. Looking at Fiscal 26, we're pleased to provide full-year guidance, which calls for net sales growth of 18-20% year-over-year. This is on top of the 28% net sales growth we delivered in fiscal 25 and projects another year of best-in-class growth among consumer companies. Within that, we expect organic net sales, excluding road, to be up approximately 3% to 4%. We believe our consumption trends and market share gains are the best indicator of the underlying health of our business and are pleased by our ongoing strength we've seen in fiscal 26 to date. We expect our shipments to be below consumption in fiscal 26, particularly as we lap significant distribution gains in Dollar General and Target that occurred in the second half of fiscal 25. Over a longer period of time, shipments tend to even out with consumption. We remain confident in our strategy to grow market share and capitalize on the white space ahead of us. We believe the addition of ROAD enhances our long-term growth. In fiscal 26, we expect ROAD to contribute about $200 million in net sales to our results. When considering the $98 million of net sales ROAD achieved in the first half of the year prior to the acquisition close, our outlook assumes ROAD will generate approximately $300 million in net sales on an annualized basis for the 12 months ending March 31, 2026, growing approximately 40% year over year. The strength of our brands is evident when viewed in the context of the overall beauty market. While beauty has comparatively low barriers to entry, very few brands have been able to scale. Of the over 1,900 cosmetics and skincare brands tracked by Nielsen, only 26 have surpassed $100 million in annual retail sales. With our acquisition of Naturium two years ago and the acquisition of Rode in August, we now have four brands that surpass this threshold. Our brands are unified by our vision to be a different kind of company by building brands that disrupt norms, shape culture, and connect communities through positivity, inclusivity, and accessibility. Let me take a moment to discuss our brands and key milestones we achieved in Q2. First, turning to e.l.f. Cosmetics and e.l.f. Skin. The combination of our value proposition, powerhouse innovation, and disruptive marketing engine continue to fuel our market share gains deepen existing community connections, and expand our audience segments. In Piper Sandler's semiannual Taking Stock with Teens survey, e.l.f. Cosmetics ranked the number one favorite teen makeup brand for a record eight consecutive surveys. It's the first time in the 25-year history of this survey that any cosmetics brand has achieved this level of sustained leadership. Notably, our 36% mind share is now four and a half times the number two brand. e.l.f. Skin also reached a new high, increasing its ranking to the number seven favorite teen skincare brand, up from number eight last year. We continue to grow our audience beyond Gen Z. Our latest awareness and usage studies shows e.l.f. purchasers growing substantially amongst millennials and Gen X. We're also the most purchased brand among Gen Alpha, showing our multi-generational appeal. Today, e.l.f. Cosmetics is purchased by approximately one in three females in the U.S. Our marketing is working, delivering ROIs multiples above industry benchmarks and expanding our brand awareness. Over the last five years, we've grown e.l.f.' 's unaided awareness in the U.S. from 13% to 45%. in Canada from 8% to 26%, and in the UK from 6% to 19%. Look into innovation. We have a unique ability to deliver a steady stream of holy grails, taking inspiration from our community and the best products in prestige and bringing them to market in extraordinary value with our signature ELF twist. As one example, PowerGrip Primer is the number one SKU across the entire US cosmetics category. Our customers crave more, which is why we recently launched our limited edition Mega PowerGrip Primer, containing 50 times the amount of product as the original PowerGrip. Mega went viral, selling out in three minutes on TikTok shop where it launched exclusively. Our latest elf skin campaign highlights our bright icon, Vitamin C E-Furlix Serum, and its incredible value at $17 compared to a prestige item at $185. Proof of our ability to make the best of beauty accessible and expand the category.

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