e.l.f. Beauty, Inc.

e.l.f. Beauty, Inc. is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and cruelty free cosmetics and skin care products. The beauty industry is highly competitive, with competition based on the introduction of new products, pricing, quality, brand awareness, innovation, and in-store presence. The industry is relatively concentrated, with a significant portion of retail sales in the United States generated by brands owned by a few large multinational companies such as L'Oréal, Estee Lauder, Coty, Unilever, LVMH, Shiseido, Beiersdorf and Procter & Gamble. In addition to traditional brands, small independent companies continue to enter the market with new brands and customized product offerings.

The company's primary competitors include large multinational consumer products companies that have many beauty brands under ownership and independent beauty and skincare brands. The company's competitive advantages include its ability to deliver cruelty free, clean, vegan and premium-quality products at accessible prices with broad appeal. The company's strategy is underpinned by five unique areas of advantage: a passionate team of owners, a value proposition, powerhouse innovation, a disruptive marketing engine, and a productivity model. The flagship e.l.f. Cosmetics brand held four of the top 10 new products in all of mass cosmetics in 2025, on top of holding six of the top 10 new products in 2024, according to Nielsen. The company's largest customers, Target, Walmart, Amazon and Sephora, accounted for 18%, 13%, 11% and 10%, respectively, of net sales in the fiscal year ended March 31, 2026.

The company generates revenue through an omni-channel distribution strategy, selling products through domestic retailers, e-commerce channels, and international retailers. In the fiscal year ended March 31, 2026, national and international retailers comprised 76% of net sales, and e-commerce channels comprised the remaining 24%. The company's primary customer segments include mass, drug store, food, dollar, and specialty retail channels, as well as direct-to-consumer through its own e-commerce sites and mobile applications. The company's business is not described as having a recurring versus transactional income mix, but it operates as a single operating and reportable segment.

The company's family of brands consists of e.l.f. Cosmetics, e.l.f. SKIN, rhode, Naturium and Well People. e.l.f. Cosmetics is the global flagship brand that delivers universally appealing, premium quality products at accessible prices. e.l.f. SKIN champions clean and kind skin care with innovative, efficacious formulas at accessible prices. rhode is a line of curated skincare essentials founded by Hailey Rhode Bieber, based in science with high performance ingredients. Naturium brings biocompatible and dermatologist-tested formulas with natural botanicals and potent actives at an accessible price point. Well People is a clean beauty pioneer with high-performing, plant-powered formulas. The company transferred the Keys Soulcare brand to Alicia Keys in May 2026 and it is no longer part of the brand portfolio.

The company's products span color cosmetics and skin care categories including eye, lip and face makeup, beauty tools and accessories. The company's value proposition is exemplified by e.l.f. Cosmetics' average product price point in the US of approximately $7, compared to other leading mass cosmetics brands at $10 and prestige cosmetics brands at $30, according to Nielsen. Examples of the company's 'holy grails' include the e.l.f. Glow Reviver Lip Oil at $9 versus a prestige item at $42, the e.l.f. Cosmetics Power Grip Primer at $11 versus a prestige item at $38, and the e.l.f. SKIN Thirst Burst Drops at $13 versus a prestige item at $36. Total expenses for marketing and digital in the fiscal year ended March 31, 2026 were $399.8 million, approximately 24% of net sales.

On August 5, 2025, the company consummated the acquisition of rhode for a purchase price of $897.5 million in a combination of cash, shares of common stock, and a potential earnout initially valued at $7.1 million. The company paid total cash consideration of approximately $590.1 million and issued approximately $300.3 million of stock. On August 5, 2025, the company entered into the Fifth Amendment to the Amended Credit Agreement, establishing a term loan facility in an aggregate original principal amount of $600.0 million. During the fiscal year, the company repurchased 626,049 shares for $50.0 million at an average price of $79.84 per share under the 2024 Share Repurchase Program. As of March 31, 2026, $400.0 million remains available for future share repurchases under the 2024 Share Repurchase Program.

Net sales increased $323.0 million, or 25%, to $1,636.5 million in the fiscal year ended March 31, 2026, from $1,313.5 million in the prior year. The rhode Acquisition contributed $293.5 million to growth, with the remaining $29.5 million from the existing business. Gross profit increased $221.7 million, or 24%, to $1,157.3 million. Gross margin was 70.7%, a decrease of approximately 50 basis points as compared to 71.2% in the prior year. Net income was $26.3 million, compared to $112.1 million in the prior year. Diluted EPS was $0.44, compared to $1.92 in the prior year.

A key growth vector is the acquisition of rhode, which contributed $293.5 million to net sales in the fiscal year ended March 31, 2026. The company expects rhode to continue to expand distribution and deliver new skin care products, as the goodwill recognized in the transaction is primarily attributable to this expectation. The rhode brand was named to Fast Company's list of 'The World's Most Innovative Companies of 2026.' The company also continues to focus on its flagship e.l.f. Cosmetics brand, which held four of the top 10 new products in all of mass cosmetics in 2025.

Another growth vector is international expansion. The United States accounted for 79% of net sales in the fiscal year ended March 31, 2026, with the remaining 21% attributable to international markets, primarily the UK, Canada and Germany. The company recently opened offices in the UK and India and hired new teams of employees to support international expansion. The company also continues to invest in digital capabilities and its e-commerce channels, which grew 63% in the fiscal year ended March 31, 2026.

Gross margin was 70.7% in the fiscal year ended March 31, 2026, a decrease of approximately 50 basis points as compared to 71.2% in the prior year, primarily driven by tariffs, partially offset by pricing. SG&A expenses as a percentage of net sales increased to 63% for the fiscal year ended March 31, 2026 from 59% in the prior year, primarily due to increased marketing, merchandising and distribution costs of $129.1 million, compensation and benefits expense of $55.1 million, and increased depreciation and amortization of $35.0 million.

The company has an asset-light supply chain centered on speed to market, high-quality and low costs. Products are sourced and manufactured through a network of third-party manufacturers, primarily in China, with products also sourced in the United States, Italy, South Korea and other countries. The company has ample manufacturing capacity as well as redundant capabilities. Distribution centers are operated by leading third-party logistics providers. The company is currently undertaking various technology upgrades, including an implementation of SAP software to upgrade platforms and systems worldwide.

Capital expenditures were $22.4 million in the fiscal year ended March 31, 2026, primarily related to leasehold improvements and equipment. The company has a 2024 Share Repurchase Program authorizing up to $500.0 million of common stock repurchases, of which $400.0 million remains available as of March 31, 2026. The company has no current plans to pay cash dividends on its common stock. R&D spending levels are not explicitly disclosed in the filing.

A significant headwind is the impact of US tariffs on products sourced from China. The majority of products are sourced and manufactured in China and have been subject to a US 25% tariff since May 2019. Throughout 2025, the company was subject to a range of tariff rates on imports from China ranging from 25% to as high as 170%. During the fiscal year 2026, the company paid approximately $58.5 million of IEEPA Tariffs. On August 1, 2025, the company raised prices globally for all products sold in response to tariffs and inflation.

Another constraint is the company's dependence on a limited number of retailers. Target, Walmart, Amazon and Sephora accounted for 18%, 13%, 11% and 10%, respectively, of net sales in the fiscal year ended March 31, 2026. The loss of one or more of these retailers could adversely affect results. Additionally, the company faces risks related to its significant operations in China, including political, legal and economic risks, and the potential for disruptions in the supply chain.

The beauty industry is highly competitive, and the company faces vigorous competition from large multinational companies and independent brands. The company's new product introductions may not be as successful as anticipated, as the beauty industry is driven by fashion and beauty trends that may shift quickly. Changes in US and international trade policies, including tariffs, pose a material risk, as the majority of products are sourced and manufactured in China and have been subject to a US 25% tariff since May 2019, with additional tariffs imposed in 2025 reaching as high as 170%. The company depends on a limited number of retailers for a large portion of net sales, with Target, Walmart, Amazon and Sephora accounting for 18%, 13%, 11% and 10%, respectively, of net sales in the fiscal year ended March 31, 2026. The company's indebtedness, totaling $841.7 million as of March 31, 2026, could require a substantial portion of cash flows to be dedicated to debt service payments and exposes the company to variable interest rate risk.

Management's message emphasizes the company's ability to deliver cruelty free, clean, vegan and premium-quality products at accessible prices with broad appeal, which differentiates it in the beauty industry. The strategic priorities emphasized for the period ahead include building demand in brands, investing in digital capabilities, leading innovation by providing prestige quality products at an extraordinary value, driving productivity and space expansion with retailers, delivering profitable growth, and pursuing strategic extensions. Management highlights the company's five unique areas of advantage: a passionate team of owners, value proposition, powerhouse innovation, disruptive marketing engine, and productivity model. The company's 88% employee engagement score, 18 percentage points above the consumer industry benchmark, with 93% of employees recommending e.l.f. as a great place to work, is cited as evidence of the team's strength.