ELF - Earnings call transcript Q1 2022

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KC Katten

Thank you for joining us today to discuss e.l.f. Beauty's First Quarter Fiscal 2022 Results. I'm KC 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. could remarks release forward-looking the forward-looking and you'll factors our to please SEC statements. of to find earnings results our reports that many today from statements, contain refer where differ Since materially actual these cause filed with

In basis. presentation a company's the includes information addition, on presented today non-GAAP

Tarang. most turn reconciliation measure. With GAAP contains release between the earnings comparable over the differences the let directly me non-GAAP Our of presentation webcast to and the that,

Tarang Amin

Today, year we our We Thank discuss net and our XXth fiscal you, afternoon, ago. expectations Beauty QX everyone. sales ahead well results, consecutive by quarter up as KC, with in quarter fueled delivered of EBITDA drivers demand, sales inflecting adjusted well COVID time positively money, ever. by delivered XXXX. year net restrictions. of of category outperforming start model. year. QX are cosmetics raised grew sales will our of our and ease to and The good million, QX the versus $XX competitors net for largest Color our XXXX the our stimulus, this XX% underscoring e.l.f. recognizing this our in trends versus We million, pent-up $XX of QX team. of I backdrop as We're growth want marked results the for XX% outlook the e.l.f. June pre-pandemic strength above levels category business first ago. in up

cosmetics up year-over-year. gain levels. the brand e.l.f. a to with Top brand retail QX above basis e.l.f. to to our In levels share color Our led only the by core speed adapt only products strategy, continued wide ability proposition, at value e.l.f. resonating points e.l.f. above X XX sales fuel share to pre-pandemic are and continue Top digitally cosmetics and of market X margin. the XXXX performance. grow post color growth was to X.X% was our category

multi-brand Keys Soulcare portfolio. expanded packaging making for seeing brands. Keys early awareness a PEOPLE we for PEOPLE and about to progressing hit We and the across In the the behind we're recharged particularly Soulcare. great WXLL are and WXLL We with offerings we as wins we're shelves build feel product these portfolio QX, our progress

With we're the momentum across shortly. our our discuss guidance Mandy will raising full-year portfolio, which

Our relentless focus strategic is imperatives on our results. driving five

Let me quarter. provide the few a from highlights

double-digits confidence that decided is to our strengths marketing expected Cosmetics imperative are strategic Nielsen of our and has across behind time brand further followers our annual completed strong to ROI strategically recently and first e.l.f. for saw mix investments, million lean our marketing Our invest we've our driving sales. growing of to marketing giving XX% see nearly XX% profitable again at demand. net year-over-year. drive our results digital us We XX a We as to ecosystem, rate more into digital brand momentum initiatives sales. an this and analysis

Social further on strongly platforms find We far Survey, gamers engage resonates YouTube. young, continue games over a community. diverse traditional moving and ways to and that innovative gaming, they beauty and of watch community which responded to our entertain pushing played boundaries. We're with our XX% fans like In XX% e.l.f. like play video to Twitch into beyond

makeup. or around gaming company Twitch beauty centered the to of and [You], branded concept e.l.f. between We’re the the first major intersection a channel up on named launch game

we minutes. the created Cosmetics continue billion frontiers. launched terms set Gaming video Gamers as launch contest. were We call hour or in and Or to marks Grail that Camo creations the and the tokens of Lip watch of Got with we we far and Enthusiast concealer, digital in and exceeded brand partner out Wattpad, challenge products social went average rates, engagement Balm TikTok space bench Primer, the and Putty Talent! XX and We XXX% NFTs. X Ride non-fungible sold crypto. also as We TikTok hashtag first XX was In Die Crypto time digital true beloved Got dipped per views. e.l.f. person. largest e.l.f. on new them learn Talent! disrupting Three speed are edition the limited world's The our test beauty a of storytelling Gamers e.l.f.’s gold just nearly in nine to on Poreless platform. NFT's Holy series generate We're TikTok

their original fierce. stories Our and who #EyesLipsFierce strong, challenge asked to users Write-a-thon in them inspired lives, of share smart, to women be

We to ways. on Our challenge experiences lenses. platform. to seeing engage lenses generated of the of date new unique for Snapchat teamed SKUs. These largest in new the number on with with try new campaign reality XXX AR platform's already nearly our provide Snapchatters We're of with test and our any the makeup meaningful targeted up consumers female entries augmented products

globe and an Congratulations featured product is offerings committed. beauty lifestyle efforts as is Keys with a continue building benchmark proud, Sephora recognized our Business from brand timeless. coveted X with Lions, Report, insider XXXX, State Soulcare Kenny, in Kory billion and Marchisotto, Chipotle, press named in appeal publications She around for timely of Chipotle in LEGO. our features. brand favorite and e.l.f. to e.l.f. win the growing recent as number most Z. in innovative our to CMOs recognition the Mitchell TikTok, entire admirable leaders e.l.f., Gen putting creative Cosmetics groundbreaking world, in #EyesLipsFace and our e.l.f. impressions global promoting with already member ranked nine being brand and up two collaboration. Keys in-depth team. five alone. two Alicia Our the cover marketing the number quarter global excellence Keys went XXXX, as the board Kyra’s highly We multi-page last We Cannes Kenny campaign and was and our of Gen under Beauty the of garnered company both from with awards. reflecting Alicia beauty In Soulcare, passionate, Kory, our Z

Her Soulcare care Keys body channels. supports views. social posts Alicia her new our generate about addition, offerings XX million over across In

turned and performance high products. its to and beauty improved celebrate a The and clean formulas, June Turning new known plant-powered, our we WXLL brand new XX PEOPLE, and to products. brand pioneering thrilled look, were new with in dermatologist-developed, for

This in about competitive quarter PEOPLE through its resulting in on improved by our media new stronger is brand We which outlets out we encouraged are trends and packaging, paid click rolled we the impressions across feel seeing. X The press rates we're Tier Top shiny of ranking great is WXLL Number against share set. voice media. sales

step-up strategic major second imperative a is in digital. Our

our doors up our X% in stack basis two-year strategy returning to certain channels on XX% two between our consumers of to in trends we digital led We continues a stores, closed. and drove XX% serve over year XXXX expectations triple with to last shoppers digitally digits and On XX% a well Our us in-line retailer pre-pandemic were our gain brick e.l.f.cosmetics.com, see business levels. mortar QX, relative consumers. QX QX as as Digital shift ago, to or as were comfort lap digital and channel with years compared consumption in ago. did of total periods and year a renew

now signups for Our to members, over million and skincare year-over-year. Squad up has Beauty our nearly program. continue Beauty new XX% consumers index X.X and loyalty Squad over

XX% digital They stronger have loyalty purchase our almost values, ecosystem. have more retention higher Our frequently, and order are sales members of part drive on a rates, our of highly valuable elfcosmetics.com.

announce to loyalty in Soulcare called launched our that program global excited Soulcare we We’re May, Keys Rewards.

an making site rewards up keyssoulcare.com. our reward on page is already mobile top of and members the Our our of one increasing are sales on clicked pages percentage

Our third strategic imperative innovation. is to lead

our ability this at continue quarter ongoing on concealers, premium appeal half primers, e.l.f. and brushes, in deliver accessible points our superpowers beauty quality to Cosmetics center which to free cruelty our with core success Our approximately up sponges, brows, that consumers. XXX% make with price broad saw resonate segments, products sales.

continue position two share or drive all market one in each. to and number the have five in gains segments We

we're The of to for consumer Bronzer our been QX, upon launched and Importantly, Putty success consumers. phenomenal. newness Primer has on core we Fighting the build our our our and Putty building response Acne In Putty Primer franchise. innovating franchises deliver

Acne Our few weeks. reviews best in Bronzer its TikTok getting in is and on our selling since Putty our Fighting SKU first launch, Primer Putty is elfcosmetics.com rave

which Mood We Inspired developed nominated competition artists, also limited including by edition Lo. with we winners, three Grammy our collection, Annual Beautyscape musical launched global Electric superstar Tove

at in we holy QX, SPF we to with Skincare Our and SPF across is target. we're available exclusively and for cream elfcosmetics.com with skincare of Keys our skin. our hydration this keyssoulcare.com. SKU out and Soulcare X protection consumers quality by clearly selling a adding major This innovation best is of e.l.f. momentum focus Electric our collection with overall the product Consumers marketing our with encouraged and Mood brand's ratings In have face range its planned product launched admirable collection initial and highlighting XX, remains is since X.X brand are of portfolio cream. fuels face strategy pipeline product the further launch. the our category. on best-selling skincare resonating

also starter trial for new Soulcare encourage sets consumers. new to We launched recently Keys

partner we're lightworkers Internationally, we a for major featured three first we're driving our Looking for potential we've to with as in-line cap for doors that rituals. the interests open pleased also make remain the we includes our This end space and offering edition in space beauty fourth the with category, and with high body, The for be XXXX. secured for stores Soulcare retail retailers. in shapes, earned fourth about our our care our June to CVS and UK. to innovation continues have Keys in spring beyond to expansion to a of and featuring brand's retail plant announce key excited the We our skincare, labels, while at the strategic we countries continues expansion expanded space represents Ulta Soulcare global part commitment of boots varied UK that in in reinforcing Beauty, partners. fall while for will of body countries the the XX brand. with Walmart and shelf of In brand beauty XXXX Dugas. pipeline with e.l.f. their brand date XXXX. and individuals Western WXLL stores Our views, in-line We've performance We're for QX, the a brand. of to announce [subset new asked pleased with our to Beauty, Ulta with body multi-category and powered doors. eight the into they is space brand's retail how to see Europe on with program, accelerating in our opportunity marks in imperative via clean a this shelf retail standard which announce offerings partners. new share people With celebrate productivity space self is also [H continue July. major with and expansion let Ulta with we their Cult by campaign Harrods with restorative each in Harrods.com XXXX a launched for launched in internationally, limited U.S. we this new Cosmetics, new Keys [Commercial] retail remained we're Beauty raise time conscious product PEOPLE and end, pleased portfolio spring expanding Keys about that of for online elevating Soulcare UK body the at strength and across excited to sizes, celebrations. after recently To placement multi-year major positivity. view the Beauty planned the three space subset launched whitespace, with in partners. we've being starting Beauty] align The see brand points spring offerings and in relationships care that strategy. Ulta’s door] of In leveraging we retail of strong beauty. global our go

brand Our fifth help savings is investments. cost delivering strategic to imperative fuel

proud slowing we've issues navigated with these to levels we've of global and we our of seeing, transportation spoke we're e.l.f. incredibly with team which about approximately costs. XX% our retail some key is for shipments As imbalance Beauty logistics. our last seeing a we're able stock many containers, the capacity quarter, increasing of maintain companies, like in the and container partners. how Even I'm been

competitive believe and that best supply collection demand, we're quality, and a We to core advantage further forego core reflects is that forward, our and of our and and and ensure deliver strength. remain navigate in meeting edition XXXX we in our of our our raised impact speed. look ability consumer embedded the chain to business holiday sets. prioritizing The enables confident a our the challenges strength supply As these chain business to combination is ongoing we've decided program, guidance cost, global gift limited to us

me the more Before I lip, company brands. turn let our Mandy, overall paw face, We call a sustainable and communities and bit a purpose. our framework every and the corporate with of eye, strategic with over lead we're provide to we a of perspective manner responsible By on committed in the in which our for citizen benefit investors, our and live environment, consumers, the and operating to being the work. team, standing

best our look directors. enthusiastic In Beauty on section business share QX, to in throughout with e.l.f. website leaders as Beauty we from new XXXX. ESG to our of fact, launched our one support journey. We Fortune In policies e.l.f. of as company, a named the progress our continue and well social board our to forward workplaces ESG disclosures recently of the as impact enhance

portfolio founded of to the a portfolio price positioned make eye, Underpinned the values. expand we consumer and Our cohorts ago of with lip, brands, purpose our the complimentary, of to five strategic but that our strength Cosmetics Today, and distinct foundational the accessible different mission by at has us e.l.f. extensions with our face. each diverse allowed brand beauty years have company a XX strategic was with touch imperatives, to work every behind points. best to support

I fiscal our we're believe well and we our I'll both bottom the and see beyond. of to stages realizing turn Mandy. in top in opportunity we're full and to ahead, the in guidance. potential in line drive believe XXXX positioned call growth of still significant Looking over reflected as the business now early raise the

Mandy Fields

driven net and rates than pleased stimulus you, fiscal Thank versus share raised I of QX ongoing XXXX the related spending. XX% of prior highlights sales fulfillment We outstanding delivered momentum we outlook. from to growth and brand expected am across by year, our results portfolio, our first Tarang. our quarter better benefits

saw margin particularly from in innovation saw store of basis also benefits Gross of left cost Ulta internationally, a to XX% improvement We an down approximately periods gross We year. points, accretive performance from was and prior XXX our and compared at we as year savings. ago. margin closures margin

basis, were We as we navigate this FX also more imbalance. on was The sales also transportation subset gross impacted SKUs e-commerce of container offset mainly mix a as year-over-year change and by shifted changing of a mortar. margin implemented as global than to and price in increases from rates quarter, margin to XX%, brick our the consumers channel Gross year. XX% to elevated costs internationally. SG&A On an compared last percentage adjusted benefits worked

QX sales line at of better our investment digital taking in investment top quarter behind digital of increased and adjusted per last the sales. than by sharper ago. XX% EBITDA and to was $X.XX compared was million adjusted than expected was non-marketing more marketing XX net spend or for expenses. margin diluted diluted ago. related XX% approximately leverage year, Marketing and per net XX% was was a million Our combination versus EBITDA up year of income offset versus net approximately trends share, year or the share from $X.XX look and XX% a Adjusted a XX million, our X

credit to over $XX strong facility compared with million. hand, remained cash with liquidity $XX a ended in balance $XXX the We quarter the of to sitting million balance ago. cash revolving and our a access combination on our of year cash Our at million

build with balance last inventory was and approach ending will as we in-line September. year Our relatively

the by $XX addition $XX continued and and increase driven times, million PEOPLE, to lead Keys transportation levels of WXLL to inventory Soulcare higher to business We longer approximately million expect momentum. costs, our

our for five cash our We extensions. the and strategic remain to expect on supporting imperatives coming priorities year focused investing strategic behind our

to turn XXXX. let's for Now, fiscal outlook our

in growth discussed, QX. category we Tarang working sales is our As our XX% delivered by investments and demonstrated and net momentum the as are outperformance strong,

more Our profitable an analysis, digital strong initiatives indicating recently confidence us further our that sales driving giving our to marketing marketing again completed invest mix Nielsen behind showed brands. and opportunity and ROI, are annual

made fiscal coupled XX% This spend to previously. take well fiscal expectation gains, result, with net a approximately a from decision our strength as to from business to XX% for is up net X% As XXXX, We space modest we growth top for momentum sales XXXX, up XX% compared increased as to XX% to as versus to behind and significantly marketing line for our pipeline approximately expectations our outlook. of expect sales previously. increased continued to our XX% invest supporting our XX% of proactive XX% investment now

EBITDA up million, million million $X.XX adjusted per approximately share, count fully previously, tax between shares, up million, $X.XX million between We EPS XX% a XX XX million and to to to million XX.X XX our $.XX to We still previously, $X.XX of up to adjusted adjusted XX.X expect of from million be XX to net XXXX XX.X XX%. previously. to to diluted income from from and XX approximately expect rate fiscal diluted million XX.X share

me Let you a more assumptions little XXXX. fiscal our for color planning with on provide

First, forego XXXX our program. on decision to holiday our

to This largely for during reduction to strength ability prioritizing net holiday to $X our quantities this in plan As keep program, guidance. in to good consumer through chain core Kits, marketing we that impact the meet to themed expected an engagement. is raised made our New creative we in supply holiday program business. have confident will these We holiday of consumer global still is than to our timeframe. our smaller mentioned, we're challenges around navigate in Nielsen remain ongoing as result Tarang sales, have demand our plan to and up The Thanksgiving holiday container although in QX. Year's we million reflected decision space The our Luxe in approximately news ensure and some our results elimination our traditional

guidance of well to the our implies from incremental in to pressure our assumptions as XX% largely as year-over-year X% space we growth underlying EBITDA, margin of Second, now previous combination expect about. on adjusted with these EBITDA. some Outside expansion associated Relative spend, our are unchanged. factors, marketing guidance, we increased adjusted spoke costs do the

We year-over-year FX gross rising margin and down transportation continue face to headwinds, growing be expect as material and to costs. we

both a margin we mitigate to SG&A, Within gross previously, to As are these increases our a look at including of PEOPLE we leverage savings continue on to we've and we scale to price through spend our brands. discussed cost non-marketing SG&A initiatives. help levers pulling spend portion expect select as impacts, and take we Keys as and areas sharper WXLL key Soulcare start of the

to We're As within global focused with remain Against years. mid-to-high reminder, fiscal in pleased QX will of outstanding economic with still line well we growth that anticipate in first annual sales marketing, EBITDA year fiscal results next horizon. above excited the three long-term summary, to adjusted XXXX single-digits are invest three-year in growth we're the our our and be EBITDA our over the growth targets about and healthy backdrop this in and a XXXX on adjusted opportunities XXXX. cost top ahead adjusted expanding top growth line growth more net fiscal that In which desire pressures over margins our pleased be range the compounded targeting the model, outpacing EBITDA year.

how on five last our confidence and imperatives the Our the results may operator, XX basis and absolute to strategic future. open questions. an performance driving the that, call you are gives category both me over to quarters for the With demonstrates relative

Operator

go Sandler. The with Erinn question Piper Instructions] Murphy first comes [Operator from Please ahead.

Erinn Murphy

has have Tarang some like domestically a the of category markets as again, of the to variant of solid cosmetics you recovery about my thinking the Good concerns bit starting guess on move afternoon And in for the the had thanks. of that first broadly, just you're this it certain category anything and the Great, of sustainability very how as question forward? quarter. late, wear you, seems category? you it’s traction we impacted relates it's Delta to masks little any seen I it congratulations can share a color on and

Tarang Amin

we Hi, cosmetics Erinn. color Well, bullish remain on the quite category.

June talk, category track in month we above As the levels. that was first XXXX saw data the we

easing seen inflection. we've demand a good think for stimulus, I category, And of that's pretty So, pent-up of restrictions. this consumers reflective

And so, on forward. bullish we're category I'd quite say the overall, going

variant any and restrictions, In us terms additional that tease out. to hard of the it's for Delta

as of in backdrop core think higher categories liking each cosmetics. the of we're but only as demand, that our well innovation, not consumer within stepped competitors, us, the color across the trends from we're some I seeing up from of also

Operator

Andrea is with Teixeira Please question next JPMorgan. go The from ahead.

Andrea Teixeira

well think higher and year-over-year, XXX had squeezed I highlight Erinn’s deceleration, anything your you're else you this building terms mentioned XXX afternoon. I you just Good I'm that know, that you. think for momentum you to want you And question the earnings to you're before. but want to that that you And know, I had is no, is, you surprised, chain obviously going but informing I growth to of know, understood still TPG we Mandy, thank of, her through than any as and quarter, XX% also you’re is back course, that think, just – but points impressed seeing understand that, to facing think us that this in you marketing and not can And you’re was you all Yes, means awards. I'm for, that seeing answer basis what lot with, a is you accelerating, the the not supply into points the your in real. through Kory after go very congratulations sales the know, percentage increasing. echo I checking, quarter season, a Of think walk in guide. investment I the I'm built you're I deceleration? to I you issues. basis the first of still you into in that you

line? have the taking more [indiscernible] little the bit defend metric, profitability flow So, on same not to added what bottom is into why pricing and a more then

Mandy Fields

a questions Okay. right. quite hear and to few was nice from there there. Andrea, in you, All

where QX. let So, are just me start with in we

fantastic us, of up So, QX. QX quarter drivers momentum core we the sales in was and e.l.f. the for a One, growth, lot a XX% saw brand. that net behind

trends to brand. You continue strong see the know, on we

So that was fantastic.

helped had to that net quarter fulfillment better We sales to rates also growth. get we XX% us which than this expected, originally

We also the impact had of stimulus.

So, about recall, if into transit an saw that you and third as that was internationally, store This by And the closures of we QX. we've know, Ulta of over we trickle you especially far seen impact QX, then year. in talked improved those round largest stimulus standpoint. from and we we had, left periods also at last

So, that's really QX overall.

to of terms expect Top those business. really continue to on e.l.f. and the In the outlook, top line see. continue line we we momentum, trends

are ROI have we associated our investment strong your And seen that. increasing marketing to point. with We

and also space that as with as well that's So, implied we pipeline guidance, called in the associated games that out.

it's we seeing, of all the we standpoint, are bit an investing you there. marketing are digital. From because little of those of the and impacting know, things margins are And EBITDA line. our top So, compression behind

cost to we well, with embedded associated as well games in our the those and costs is up that range, pressures XX% chain within ocean as that that we XX% from as previously, you of XX% to mentioned. digital the took with we some as see supply space guidance So, XX% to marketing and our mentioned, cost also and

Tarang Amin

brand is a this pricing does on have pricing, power. then Andrea, And that question on your

XXXX. recently round up So, ever the price U.S., of largest another followed we in price with really pretty internationally. increase more May in timeframe. that our price That We a but increases was big increase successfully more implemented executed in the modest

saw containers, imbalance would in balance And over progressed. we those the feel right about we of containers feel time, moderate. to we as time, And that increase The we we're further we headwinds we reason over of want some cost in any expect will price. availability to quarter why nature. to see don't price the temporal The good also is, costs is ability the a good so, our now out of seeing

some costs pricing So, then ahead of use nature, would saw lever. more we a don't on necessarily in certainly want get but if these could that we permanent pricing, us we be to of as

Andrea Teixeira

on. I’ll pass it Thank you.

Operator

next Steph question comes from The Please ahead. go with Wissink Jefferies.

Grace Menk

about Hi, could Steph. taking bit double this kind of Menk should kind strength about it period? of wanted we you how my then for we the I for Soulcare, And think Thanks the the question. on over talk Grace contribution in is to, a click seeing, fiscal look year? the that on as Keys you're little out

Tarang Amin

Sure.

the we're hi, our Keys of quite Soulcare’s. but not on individual we're pleased is, So, you bringing out not tell we're can what our any breaking brands, I We're with progress making Keys does Soulcare, in great brand. particularly the we she every We the Alicia's posts, in something own every consumer she engagement see areas time and engagement about of talked response. time really consumer

it's we out a in had had started amongst The partners. takeover as Beauty, somewhat that brand total at really in The of we're rolling brand out. H In Europe. across the But really really feeling of delayed up that restrictions some eight countries latest Beauty. addition, in execution [indiscernible] inherits showing well proud execution. Ulta and And our then our starting we're by COVID to really now with was pleased roll roll-up That store we've execution retail the with Europe. is the good it

would on for is, brand the Keys think the here. long-term building way it a I we're say the Soulcare, last about to So, thing

much love, multiple other great pipeline, categories. Ethos body So, into with category, in for the very our expansion three builds on across what self that line, we have this the started tie an in care much line, quarter brand our really the very body was Soulcare, next the positivity, on launch we few of items our a body rituals, first with care adjacent and Keys years first

to and by continue updating you So, right progress. on quite as forward what we're to seeing more we make encouraged look that now

Grace Menk

taking, to Thank later you. detail up then earmarked of you're was would And love of, in year? mentioned That's you that great. a follow way that the just alternative you measures or helpful. other to, for is – just I’d on you are you've want seeing that can more inventory there domestic some maybe kind suppliers approaches, levels, be know, kind there the like explore inventory And using you've, use been of

Mandy Fields

Sure.

overall, sales we ended had about, QX that So, chain that kind would I outlook supply quarter. overall. inventory great feel would lower a we we bit and than a net of XX% have expected, on the given inventory say little growth our

lead feel so, be talked where the the want that And we longer we number. are September the we're million. the And and reflective into support that WXLL And higher times build brands we our of what embedded the – the to business, of business million momentum I to inventory costs ending and at transportation about quarter our seeing XX really, some of XX continued said, of to we like then into addition seeing Keys is seeing. we the

are starting September question, the you know, and, yes, your to So, into we to inventory rebuild times some quarter. seeing get we our position longer as lead

Tarang Amin

quality, deliver. And then that the in this issue. we're your for a cost, combination We supply question about chain, speed of chain the second of feel transportation see part able and our as we of to great supply terms on primarily

the standpoint and We to flex a of business from manufacturing our ability meet have plenty really to capacity need.

better, think I we transportation in go gets as So, be forward. we'll shape great situation as

Grace Menk

guys. Thanks, sense. makes That

Operator

Next question Morgan ahead. comes from Dara Stanley. with go Mohsenian Please

Dara Mohsenian

XX% you range. were year-over-year to Two healthy and the XX% questions, you guess QX in Hey, much as rates the fiscal transportation fall impact all really mentioned, didn't the issues, that on I it up were guys. just, first seem given

constructive? the the worse to things potentially, the QX, So, issue is, in just didn't big saw we more tone year-over-year seem to want better, it just are understand June a things guys. post be you you quarter? I Do getting in But given for think growth general, are sounded

of of that just bit on little to update get So, wanted expect a in we going should terms what forward front?

Tarang Amin

Yeah, What team hi is, the navigated I'm the of Dara. really way say I'd proud container imbalance. the

we in able maintain So, stat this we're stock use levels. XX% customer to is,

strong able fulfillment item penetration sucks. be was right Our they to by customer inventory our to but the level our lower had make our were to able than chains, rates that team and through maintain and supply that, sure

seen have We container more availability.

there'll this of be And the work demand further. as confident customer through hit we that, even a ability up rates navigate filament terms pretty to temporary those get as but meet through our to hope we in overall, situation. to our in consumer we stocks So,

Dara Mohsenian

slowdown program, last what it'd be Okay. we about fiscal even revenue is, of full I just year it's year holiday pretty And to the midpoint, it's if guess to you QX, and X% well obviously, follow-up year's balance a like as from big question, only the X% more mid-single-digits, as then, Andrea's during in fiscal but know, your QX, guidance back you COVID. saw on fiscal add a

point. you And limiting prohibitive about So, at the business. positive this sound obviously in sounded but generally of dynamics underlying transportation doesn't most it's like pretty the it factor, is a

trying to a if And guidance know, that, would you better So, the than what year. understand know, more revenue recently? already you anything, that there's revenue I'm the significant growth seen besides the just in lot really of balance program you've limit holiday

Mandy Fields

No.

related forecast, million $X pulling as, back through. as We the that the in our we're stimulus we program in cycling are that. holiday the well out key we as factor earlier, mentioned well called base, is into get I you year, as that do, the to QX of know, we that, as of half out the So

of that outside business continue the and feel of confident you year. expect we to the So, balance of our core know, momentum growth that, see for

Dara Mohsenian

you. great. Okay, Thank

Operator

Linda comes next with go Davidson. from Please D.A. Bolton-Weiser question ahead. The

Linda Bolton-Weiser

Yes, thank you.

margin? actually sales gross So, Are would the program, the effect a on gross you not the [gift talked holiday about bit margin? doing impact on and set] of lower the be what little mix

Mandy Fields

a would impact. say, But you're versus, if Kits just asking, Kits in that’s Luxe traditional holiday So, holiday versus margin Luxe from that. standpoint, our program? I we haven't a and the mix would a the difference gross what say on program specifics I not the given major there's

Tarang Amin

bit of it's Yeah, you adding little our color have cube. holiday, annual kits more holiday program, consumers. way Linda, we that, decision forgoing high of know, like just engaging a the holiday a to But very great

throughout up will our to get same amount strong had stepped on Luxe given we've product The really that engagement help we up of and core strength really quarters. consumer containers four in container, Kits efforts us each part and about have but the of prioritizing skews. our the of takes one consumer get can as it for as So, and the demand, gap, addition, we pretty so make

and and So, to a decision good we will it navigate be prioritize we temporary business. about piece through feel can definitely base feel the our

Linda Bolton-Weiser

hear And then, great Thank it's to so you. international getting shelf additional space you talk some about in markets. the

as this you working your And bigger that So, affect, get as for how need kind that, grow does does you capital? internationally? time how affect margin does of internationally, how over your

Mandy Fields

things, we've standpoint. So, this look about a of our before. from agnostic margin think business margin on We really I at the side talked

volume outside whether it's that a that behind It's here and required very capital and fixturing flow also terms is just we you the cost of So, similar what not like course it's U.S. another. in line of of with our we and in much business expansion, And domestic our cash internationally, normal in perspective, inventories that's see that. shelf or U.S. have from to even one coming relatively there's space things that. of know, business. From

Tarang Amin

part is, Linda accounts, that approach can efficient each Superdrug years shifted at we of these the very ago, sales made is direct distributors foods. why is headquarter reason seen model selling from to And key the couple core team our where cover as our a you’ve progress to of

Beauty, service really we to at Ulta an able feel similar we Walmart, and others. Dugas, and about our to them Now, way be way the service in ability good efficient to quite Target,

Linda Bolton-Weiser

more space the maintain of great add some you at the just thanks. as of productivity more what it continue And U.S. the finally, and again, in high expanded like grows retailers in terms know, Okay, are the space your over of to challenges you of news time? [indiscernible] some do how as shelf about you space the Walmart, shelf

Tarang Amin

in inherent model. Yeah, our that's

Our model of also innovation those. our online engagement sales, is site. goes in We based level on reviews of not the only of data really get first. data great customer ecommerce but behind our get that we Most off

with really take back, as and going well to a we And at know, opportunity, customers, has all us say, work able would a really stemming we productivity proactively over back I business starting those that digital way deal with. have tremendous the with, we where really model, served to insights, good you and have decide So, to our were which XX years ago, model and them we we're retailer items space every years. replace single the delete

we better. stepping So, we optimize we're able space lot sequentially that And past know, grow of There go. space. well I’m one massive I with space the where to the us have, in gains it we the really pleased picked benefit customer have is, to into space given further year. think, amounts are of you a a you cycles a that found into took in to particular years up at And couple space a

increments you we're do in with Probably XX types extremely we of the being, manageable, to you space, our I well some of stores, in quite the given think and some pipeline product. of it's now into best their go the of have, sets you and foot those. if extent our will getting Target’s know, XX example you know, innovation, doors,

continue continue to ability to our of that gain. confident highly to space So, we the optimize

Linda Bolton-Weiser

Great, thank much. very you

Operator

from Olivia go The James. Raymond Please Tong with ahead. next question comes

Olivia Tong

Thanks.

help And we're challenges. guide, but wins great? the because know, retailers, seeing were sounded understand very talk sort just wanted in key you the bit I was little First, that later it just you're better expected? particularly top all particularly acceleration, I space the also through detail I nice more about drivers congrats understand about, than little subcategories a retail mortar a quarter. plans, brick be to it of year. bit Was it online, the chain holiday some should line and brands dramatic going then guess expansion you that of there I the on you would like supply the versus thinking

puts to – of year the do? net you. why just trying sort of Thank So, where there the for and you, out of are sort rest know, understand, the takes you you and

Mandy Fields

Sure. us. for joining Hi, Olivia, and thanks

we're say, the e.l.f. I momentum than QX expected. again by the rates sales Cosmetics had So, our would better really fulfillment are we driven that initially drivers core net brand. behind We growth seeing

in into cycle mortar and over e-commerce trickle also we QX. the stimulus we back especially closures internationally, We in results of those brick over have a saw expected, U.S. consumers And as as we shift we as to from into better have the that we seen have store seen also – also impact mention question e-commerce on the impact, performance shift at into digits your reopen, the going Ulta from base, two-year but we're and the triple or To associated of brick and our see we expansion, over mortar, then impact on there, that but have of with we up expansion stores, space do with will XXXX, our a your balance basis. did into are next some guidance, still really answer these get spring as we space so year. a the since very pipeline fiscal pleased you that

You'll year. just this really have pipeline the

Olivia Tong

right. the isn't too. Right, I'm that dramatic surprised pipeline

understanding obviously, guide to the suggest back rest the of know, of looks but EBITDA of you math, guide, kind more that? than understand my marketing mean, bit points the and incremental question do basis you like area the more as growth decision especially you XXX XX% there XXX I And the increase just by is push you then great, point your or, quick the decision of that of why after a margin but around want increase like that. to sort you specific add first, to just is a decided [indiscernible] it there, marketing had EPS is to maybe margin about other trying anticipated? your to pressure little quarter, or basis really genesis to spending then So, of So, originally the a for would do year.

than that. cost are obviously, higher So, pressures much

So, quite Thanks. are increasing cost there? versus higher, points, basis I'm not what's if your you're sure. you're prices by in XXX going marketing significantly the offset expectations,

Tarang Amin

Olivia. Hi,

first the take I'll So, have second. Mandy part, the answer I’ll

seeing feel great real And been we business, just the our investments. marketing and in momentum we're them. that's marketing, about on So, driven by

recently our got marketing In extremely strong we marketing. ROI behind results our Nielsen showed mix fact, annual

we into we're leaning drive the of We consumer to us and for continue opportunities So, our see feel strengths. momentum to have. plenty engagement

we frankly, opportunities invest that. than, just was core more between so And driver see in. can We real that a

make were we strong. levels we so, investments sales. And net and our And XX% first those about that of quarter, keep the to marketing want in sure digital

is for XX%. Our the guidance year XX% to

to that terms we're in very consumer our to So, strong drive continue ability engagement. range comfortable within of

Mandy Fields

go then we're headwinds the gross Yeah. of as we're margin taking Delta, the that's us helping that at through. to outside portion that of additional as on non-marketing momentum marketing well a driven is top putting marketing and line the by also SG&A a as sharper seeing, And in. we out QX, really, then look And driven Olivia, the of expenses offset really investment

helping that's the So, on also year.

Olivia Tong

Great. much. Thanks so

Operator

from Oliver go Please ahead. The Cowen. comes question with Chen next

Oliver Chen

you. thank Hi,

you. engage we marketing, preferences you're category, think skincare dollars what mediums focus terms in go KPIs see from do what in marketing about you marketing seeing and of the opportunity you regarding incremental the to spend, you rapidly? in the look will of where where of continue as innovation what additional forward the marketplace, in on the and you on as – Also terms shift On and do consumers in as spending? terms incremental Thank most consumer

Tarang Amin

Oliver. Hi,

across focus brand have and very skincare our portfolio. So, on say, really broad it on we I is a would skincare,

skin, launched with holy recently it's top XX our selling e.l.f. we SPF skincare quickly become just SKU. on our hydration So, cream

accessible. hit e.l.f., made beauty continue the So, the key within skincare same segments under to and the thesis of best

see go a long really extraordinary have these on Soulcare with Keys quality way and values to focus. continue pipeline. you'll on a e.l.f. we started that skincare with So, high products to

average clean nine products behind have the Soulcare, So, ratings skincare are X that. out and we of about we we in of initial rich keyssoulcare.com our Keys stars the on great pipeline a have product X.X feel products

longer-term WXLL opportunity PEOPLE skincare. We of on see terms also in

of little And nature, focus see a and brands. in take on skincare. brand one different distinct of a you'll see each our all we is bit opportunity each So, complimentary since three across

XX to obviously, done momentum now the well TikTok the on learn then great And highly there. we're that #challenge, I it's way And vehicles, and like lot so, our would of of a results, we where good we've and I on of the campaign feel our and platforms. driving years, see on seen in continue ROI as vehicles about of awareness of media dollars got combination second many the a terms on question where really incremental your talent, what gamers terms raised views. is go? marketing, We're say, our billion skin on proven will new over lead pleased, over as work with TikTok and incredibly test we've continuing think to doing

proven has gaming to be really the in foray great. Our

strong. Our we're think And said call, on there Twitch, is really, level the quite live there's we platforms, stream attribution of getting engagement heard then this about the we're actually there, us an on also getting as new opportunity. talk you

combination of on, So, as well we is, collaborations very continuing strong do proven consumer including the way category the I we a know, well the where have time do. think about and the vehicles engagement, you of partnerships marketing we dollars really ROI data get and the over to many as disrupt

Oliver Chen

industry And at are question. innovation, a and how ingredients, know, you. your been maintaining, a And platform apply you. will final well? lot that and Thank what on your you you thoughts at know, e.l.f. to there's the in R&D R&D Thank large, also innovation, as of

Tarang Amin

Yeah.

biggest say innovation would that long products great having I has strength journey beauty. key consumers ours. our is on on beyond innovation been focus clean So, new And a of love our continued

on so, And focused very it's that. strong ingredient

on so focus COGS and did gold clean high getting even the does team operating ingredient we have progress turn the WXLL of Keys Snyder, WXLL pioneering are And those the our tech through PEOPLE. us really of standard on our to WXLL in think We our of works. launch on brought brand then significant Dr. we're PEOPLE cofounders clean. Renee e.l.f., learning’s has with products every into at company even reformulated PEOPLE better lot That and Soulcare platform, and in journey. really one acquiring had with skincare very clean performance transfer making innovation product beauty as terms WXLL You working as one a savings, of a of plant in that great of realizing our helped that capability e.l.f. really beauty powered PEOPLE standard strong is and

formulate ingredients our and our at look a take X,XXX in with you do progress not we continued If there’s clean. over formulations

one really focus great consumers we've areas increasingly beyond And about great products made is the really that's ingredients the there. feel primary products. So, of their care progress the I about having and are what

Oliver Chen

Thank regards. best you,

Operator

Mark The next question from with go Stifel. comes Please Astrachan ahead.

Mark Astrachan

and afternoon, Two thanks everyone. questions. Yeah,

skincare? then then observed new Are space, from and far. you sourcing portfolio to to also you the what of legacy any would series if that helpful you other forward sales, in other just of you of of to know, it around share could, would frame about talk you're Are so skincare referenced? today, terms on expand sort as sort First, terms portfolio? small relative the to go it And just of two And And then today. of shelf [indiscernible] brands? incremental to bit in can secondly, so, you related as you they business just Is sort then, of Could you where remind from of pieces mix you've questions as Thank you space, presumably direction there. the you broader them have a skincare, the progress sort stimulus, consumers? impact also seasonality a how could a relatively the the margin number benefits to of the versus be you. that you for sourcing quantify, terms any this add just also, saw of can just of impact that more any percentage Anything skincare basis? go SKUs

Mandy Fields

All other saw as quantified not stimulus. that said, our net Well, as I we've in seen, the say far of stimulus I'll than to QX. Like here your this of as it impact largest by QX, sales block is an on quantifying specifically we've last have sales, first in we the question take our net impact what well to did Mark. that right, in on round impacts building a

Tarang Amin

Amazon ways less of sales. know, your and questions the relates the both we skincare, our you sales e.l.f. total big XX% on to is, if than of on of level our I the is And and primarily skincare. I there online have at one in like overall, of delta it XX% Yet cosmetics.com you think, skincare framing look assortment it's

So, I have skincare feel items. in we a pipeline great great

more said, different continue, continue it's the percentage cosmetics our up points a continue as a skincare, standpoint, a of to From we time. tremendous from our to margin overall from up to because strategy we as space, put you line, margin we see pick are our more so drive not price standpoint, to opportunity is that And as that over higher.

$X. on average just about is and e.l.f. XX, Keys they're retails higher range. So, then alone, were significantly – about course, if think XX And that $XX Soulcare you than skincare cosmetics our $X, $XX around there unit on of to on

highest but think, of of we more not skincare generates because mainly the standpoint, do our I of is of that a having win, sure the gross margin ways see, a we're much one we really that So, strategy from dollars. making difference, quality definitely that profit accessible

Mark Astrachan

Great. Thank you.

Operator

Please Oppenheimer. with Rupesh from The go ahead. next Parikh question comes

Rupesh Parikh

questions. my taking for thanks and afternoon Good

So, about to totally and point, margins. a future know I going gross you then a year, is forward any the provide as get towards think out, two you was I QX of questions know, you of margin we maybe decline can curious low any to on in more it's look next And years? gross for sense expect margins full-year? first wanted would the of how you terms gross specificity in the if I recover

Mandy Fields

Rupesh. Hi,

will I answer your question So, gross margin. on

basis gross XXX points So, margin year-over-year. about we down for QX, saw

on not we in look year, of down saw margins So, as we to out as what balance qX. we the the be expect gross much as

we throughout seeing. and from So that get find we of stability improving as kind some the we're costs year, these transportation here

out imbalance, all you expect know, The a In that ocean time. recovery, to the of costs, do this terms we transitory issue. of we balance as see over container

And so, about do go yet. that, talking expect not we to through. as we're in get XXXX, gross just Timing of fiscal recovery margin obviously, some

So, have wait to see to that.

Tarang Amin

of ability And confident to I just to add time. over Yeah. strong Rupesh, think gross drive highly that margins say our we're

carrying years, of and us, EBITDA continue XX% cost amount year's this last deliver we to If that. transportation FX XX% growth. we're ability pretty against costs, the even in you the talked tariffs, of the a just high about of between really great our We turning level X% guidance, think costs to to it's couple the feel China about of

progress. to of So, cost we're deliver think the terms manage, and strong I ability of longer-term, environment around quite kind still our in us profit bullish

Rupesh Parikh

great. Thank you. Okay,

Operator

[Operator from Instructions] go question The again with Please Piper ahead. Sandler. next comes Erinn Murphy

Erinn Murphy

your and expect time? expect Keys just on you an Soulcare, believe we secondly, over list Keys brand that back job up approach opportunity When Great. me currently over Soulcare Target. partnership, one was with a One great last so should I Thanks couple at there? such the the aren't are should for slotting I team for is then follow on to just we the WXLL on guess be to e.l.f. you've there had product years. few with selling collaborations Ulta, the much. on brand in. both? Tarang, Thanks collaborations, the still. brand I is How and the a or PEOPLE you Keys done And viewing Target

Tarang Amin

Sure.

to team's pull ways. to of even collaboration, the continue partnering doing things done with did in Erinn, music most a So three you're electric one and recent our to to e.l.f. job collection, a mood go artists, collaborations more. the I going unexpected terms remarkable the see in with back global we these

which hear big we're and brow, it Lash launch tomorrow. a best that I collaboration strength mood, tomorrow, [big yet Mascara on about always great we launched. we've our mascara you're a the the success been in our of you'll on think feel going I before doing we've it's had category. in builds feel to having eye Loud, see We've that And mood],

and we in see fact, you'll and all on that as voices there's on of as built lots like-minded collaboration. from both that has we're of gem the in to continue possibilities good universe an there's a but Soulcare, brand way good out, the Soulcare. view content that people different you're strong been is similarly we're are the there so, And our If terms wellness. PEOPLE hearing a lightworkers, entire its putting this think stream think Keys WXLL PEOPLE, well not real with Soulcare PEOPLE, through partnerships We Keys clean is that bring there's there WXLL Keys And a out. absolutely to to as message broader pioneer heritage think in of real going that potential. And clean beauty WXLL only partner continue as beauty, to we then well. of We feel of

lot expand for I And would I tuned, that future. a and focus an you'll certainly think stay with in to Keys opportunity, more so, the Ulta, presents you exclusivity still So, then the that Ulta us period area another but presence at the the see We're there. globally, for on continue us say the with Soulcare, that Target of but of of Keys in continue them becomes to Ulta, I'm quite was making hopeful eventually you'll Keys but opportunity, in future, in Soulcare, really Soulcare not the see most only also us the U.S.

Erinn Murphy

Great, you. thank

Operator

back remarks. now conference closing our to over question-and-answer I turn the for concludes will session. management This

Tarang Amin

the I'm navigated proud have this us. across momentum consecutive sales of the of our knowing entire you brand XXth how growth thank delivering tremendous net e.l.f. we've portfolio. everyone joining we quarter Well, for incredibly with Beauty pandemic team, our

to quarter you and So, joining talking we next for you look progress, on meanwhile, us. forward updating to our you but thank

Operator

conference presentation. is Thank today's The now attending concluded. for you

disconnect. may now You

e.l.f. Beauty (ELF) 5 Aug 212022 Q1 Earnings call transcript