• Net Sales Growth: 31% year-over-year in Q3.
• Adjusted EBITDA: $69 million in Q3.
• U.S. Market Share Increase: 220 basis points in Q3.
• Gross Margin: 71%, up 40 basis points from the previous year.
• Adjusted Net Income: $43 million or $0.74 per diluted share in Q3.
• Cash on Hand: $74 million at the end of Q3.
• Inventory Balance: $215 million at the end of Q3.
• International Sales Growth: 66% in Q3.
• Digital Consumption Growth: Nearly 30% year-over-year in Q3.
• Beauty Squad Loyalty Program: Over 5.6 million members.
• Adjusted EBITDA Guidance for Fiscal '25: $289 million to $293 million.
• Net Sales Growth Guidance for Fiscal '25: 27% to 28%.

• Warning! GuruFocus has detected 3 Warning Signs with ELF.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• e.l.f. Beauty Inc (NYSE:ELF) delivered a 31% increase in net sales for Q3, marking the 24th consecutive quarter of net sales growth and market share gains.
• The company achieved a 220 basis point increase in U.S. market share, outperforming the category with a 16% growth in tracked channels compared to a category decline of 5%.
• e.l.f. Beauty Inc (NYSE:ELF) reported strong digital performance, with digital consumption trends up nearly 30% year-over-year, and their Beauty Squad loyalty program surpassing 5.6 million members.
• International sales grew by 66% in Q3, driven by expansion into new markets and strong performance in existing ones, with international sales now accounting for 20% of net sales.
• The acquisition of Naturium has doubled e.l.f. Beauty Inc (NYSE:ELF)'s skin care penetration to 18% of retail sales, with promising expansion opportunities in Ulta Beauty and other international markets.

Negative Points

• The company experienced softer consumption trends at the start of calendar 2025, attributed to a decline in the beauty category, lower social media engagement, and external factors like wildfires and TikTok uncertainties.
• e.l.f. Beauty Inc (NYSE:ELF) is facing challenges with new product launches for Spring 2025, which have started slower than expected, impacting their sales outlook.
• The company has lowered its net sales outlook for the final quarter of the fiscal year to a range of -1% to +2%, reflecting a cautious stance due to current market conditions.
• An unanticipated foreign currency loss of approximately $7 million impacted adjusted EBITDA and net income for the quarter.
• The company is facing potential challenges from recently announced tariffs on goods imported from China, which could impact future financial results.

Q & A Highlights

Q: Can you provide more details on the January slowdown and how long you expect it to last? A: Tarang Amin, CEO, explained that January's slowdown was due to a 5% decline in the category, the impact of lapping the lip oil launch, and slower starts for new products. He noted that consumer behavior was affected by a promotional December and reduced social media activity due to external events. The company is cautiously optimistic that trends will improve with upcoming marketing activations and retail resets.

Q: How is e.l.f. Beauty's international business performing, and are there any new market expansions? A: Tarang Amin, CEO, reported a 66% growth in international sales for Q3, with strong performance in new markets like Germany, the Netherlands, and Italy. The company is in discussions with more retailers globally and plans further international expansion, driven by strong consumer demand and successful market entries.

Q: What is the current state of U.S. consumption, and how does it impact your guidance? A: Tarang Amin, CEO, stated that Q3 U.S. consumption was strong, but January saw a slowdown with some weeks of negative scanner data. The company is embedding a cautious outlook for Q4, assuming the trends may not improve immediately. Despite this, e.l.f. Beauty continues to gain market share, even in a challenging environment.

Q: How is e.l.f. Beauty adjusting its strategies in response to the current market environment? A: Tarang Amin, CEO, emphasized the importance of marketing activations for new products and expects social conversations to normalize. The company is balancing support between new items and core franchises, with a focus on leveraging existing successful product lines. They are maintaining current marketing spend levels, believing in the effectiveness of their current ROI.

Q: Can you discuss the competitive landscape and how e.l.f. Beauty maintains its edge? A: Tarang Amin, CEO, highlighted e.l.f. Beauty's unique competitive advantages, including its ability to deliver Prestige quality at accessible prices. While acknowledging the competitive nature of the market, he noted that few brands can scale like e.l.f. Beauty. The company continues to innovate and engage consumers effectively, which is reflected in its market share growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.