ELF - NYSE

Thank you for joining us today to discuss e.l.f. Beauty's Fourth Quarter and Fiscal 2025 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. 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 Tarang.

Thank you, KC, and good afternoon, everyone. Today we will discuss our fourth quarter and fiscal 2025 results, our approach to fiscal 2026 and today's exciting announcement that we've entered into a definitive agreement to acquire Rhode, a break-through high growth beauty brand founded by Hailey Rhode Bieber along with Michael and Lauren Ratner. Before providing more detail on the newest addition to our growing portfolio of distinct yet complimentary fast-growing brands, I would like to discuss our recent results. I am proud of our incredible e.l.f. Beauty team and partners for delivering another year of industry-leading results. In fiscal 2025, we grew net sales 28% and adjusted EBITDA by 26%. We gained share globally across our largest geographies, including 190 basis points of share in the U.S., a 170 basis points of share in Canada and 270 basis points of share in the UK. Q4 marked our 25th consecutive quarter of both net sales growth and market share gains, putting e.l.f. Beauty in a rarified group of high growth companies. We are one of only six public consumer companies out of 546 that has grown for 25 straight quarters and averaged at least 20% sales growth per quarter. e.l.f. is the only brand of the nearly 1,000 cosmetics brands tracked by Nielsen to gain share for 25 consecutive quarters. The combination of our value proposition, powerhouse innovation and disruptive marketing engine continue to fuel our market share gains and deepen the connection we have with our community. In Piper Sandler's latest Taking Stock with Teens survey, e.l.f. Cosmetics is ranked the number one Teen Favorite brand for the seventh consecutive season. Our 35% mind share is now 3.5x the number two brand. e.l.f. SKIN increased its ranking to the number six Favorite Teen brand, up two spots relative to last year. And we continue to grow our audience beyond Gen

Thank you, Tarang. Q4 net sales grew 4% year-over-year on top of 71% growth in Q4 of last year. We experienced growth across both digital and retail channels. Looking to our geographical regions. Our net sales in the U.S. grew 1% year-over-year in Q4, while international sales grew 19%. Higher unit volume contributed approximately 8 points to growth in Q4, which was partially offset by a 4-point decline from price and product mix. Q4 gross margin of 71% was up approximately 50 basis points compared to prior year. Gross margin benefits were primarily driven by favorable foreign exchange impacts on goods purchased from China and lower transportation costs. On an adjusted basis, SG&A as a percentage of sales was 52% in Q4 as compared to 61% in Q4 last year. The primary driver of that year-over-year decline was our plan for a more normalized rate of marketing and digital investment throughout the year. Marketing and digital investment for the quarter was 23% of net sales, in line with our expectations and as compared to 34% last year. Q4 adjusted EBITDA was $81 million, up 99% versus last year. Adjusted net income was $45 million or $0.78 per diluted share compared to $31 million or $0.53 per diluted share a year ago. The increase across profitability metrics was driven by our net sales growth, gross margin expansion and leverage in our marketing and digital spend. Now let's turn to our full-year results. In fiscal 2025, we grew net sales 28%, adjusted EBITDA by 26% and increased our U.S. market share by 190 basis points. We achieved new market share highs in U.S. mass cosmetics and skincare, while thoughtfully continuing our international expansion strategy. Moving to the balance sheet and cash flow. Our balance sheet remains strong, and we believe positions us well to execute our long-term growth plans. We ended the year with $149 million in cash on hand compared to a cash balance of $108 million a year ago. I'm also pleased with the approximately $115 million in free cash flow we generated in fiscal 2025, up from $62 million a year ago. Our liquidity position remains strong. In March, we refinanced our credit facility into a $500 million revolver to give us greater flexibility and improved terms. We ended the year with less than 1x leverage in terms of net debt to adjusted EBITDA and availability on our revolver of approximately $243 million. Now let's turn to fiscal 2026. As Tarang discussed, there are a broad range of potential tariff outcomes. Balancing all factors, we don't believe it's prudent to provide an outlook and then have to adjust it if tariffs were to move from where they are today. As a result, we are not providing an initial full-year fiscal 2026 outlook. With that said, I'd like to provide some color on how we are approaching the year. Starting with the topline. As we look ahead, we remain focused on share gains in the U.S. and expanding our business internationally. And we continue to make progress in each. Looking at Q1 to date, we are seeing our consumption trends better than what we saw in Q4 and continuing to trend well ahead of the category. In the month of April, we were the only top five cosmetics brand to post growth, with e.l.f. gaining an additional 130 basis points of market share in the U.S. Turning to gross margin. We expect gross margin benefits from price increases, cost savings and supplier concessions to be offset by the incremental tariff costs Tarang spoke about. Given the timing of our inventory turns, some of that tariff headwind will start to impact our gross margin in Q1. Turning to SG&A. We continue to invest in our high ROI marketing initiatives, team and infrastructure to support the significant white space we see ahead. We plan to maintain marketing and digital spend at approximately 24% to 26% of net sales in fiscal 2026, in line with the range we targeted in fiscal 2025. Looking to non-marketing SG&A, we expect to see dollar growth on a year-over-year basis, primarily as we annualize the investments we made in our team and infrastructure last year, SAP rollout and continue our international expansion. I'll now turn it back to Tarang to talk about today's exciting announcement.

Thank you, Mandy. At e.l.f. Beauty, our vision is to be a different kind of company by building brands that disrupt norms, shape culture and connect communities through positivity, inclusivity and accessibility. We disrupted the beauty industry from our inception in 2004, selling premium cosmetics for $1 over the Internet and democratizing access to the best of beauty for millions of consumers. We have been disrupting and driving industry-leading growth for 21 years, in service to our growing communities around the world. We have a very high bar for M&A given the strong organic growth we've been able to deliver, and only act when we find a win-win force multiplier. Our acquisition of Naturium in 2023 doubled down on the white space we see in skincare and brought us the vision of founder, Susan Yara, bringing the science of consistent skincare to everyone, everywhere, every day. We kept Naturium's entire team and leverage each company's strengths to further accelerate the combined business. Naturium leveraged e.l.f. Beauty's capabilities to expand into Ulta Beauty in the U.S., Shoppers Drug Mart in Canada and Boots in the UK. And in turn, we benefited from the expanded expertise in skincare to further accelerate e.l.f. SKIN. Fiscal 2025 was one of the strongest growth years ever for both Naturium and e.l.f. SKIN. We believe the acquisition of Rhode is a unique opportunity to bring together two like-minded disruptors who are best-in-class at delivering high-quality innovation to highly engaged communities. The unique partnership accelerates our collective potential to transform the beauty industry. Founder Hailey Rhode-Bieber, a fellow bold disruptor, saw a clear white space opportunity to bring a lifestyle approach to beauty. I've been in the consumer space 34 years and have been blown away by what Hailey and her team are building. In just under three years since its founding, Rhode has seen exceptional growth, achieving $212 million of net sales in the last 12 months, DTC only, with just 10 products. Rhode's unique fashion for aesthetic and lifestyle approach to beauty has driven success and scale across multiple product categories, cosmetics, skincare and accessories. Rhode has a powerful engagement model that has cultivated an incredibly enthusiastic and vocal community of brand champions, the type of fervent community engagement that people will camp out overnight and stand in line for 14 hours at a pop-up event in L.A. not just to buy a product, but to buy into the brand lifestyle. The brand ranks number one in earned media value amongst its skincare peers, with less than 1% of Rhode social media content being sponsored. The strength of this brand caught our attention and the attention of the world's leading global beauty retailer, Sephora. They see almost every beauty brand and are a destination of choice for many top brands. Sephora's standard approach is to test a brand in a subset of stores before scaling. Given Rhode's breakthrough DTC success and Sephora's belief in the potential of the brand, Rhode is planned to launch in all Sephora stores across the U.S. and Canada this fall and in the UK by the end of the year. Sephora sees Hailey well beyond our celebrity status. They view her as a thoughtful founder with a unique vision, incredible instinct and desirable aesthetic. Our time getting to know Hailey affirms this. As we look ahead, we see massive runway for growth and are excited to partner together with Rhode to bring the brand to more faces, places, and spaces. We see potential to leverage our mutual strength. Both e.l.f. and Rhode are known for their strong digital community engagement. We look forward to enhancing this strength by helping to accelerate Rhode's brand awareness. For context, Rhode's aided awareness is 20% today in the U.S., which is impressive for a brand this young and is half the level of other premium skincare brands which average 40% or more awareness. Looking outside the U.S., international drives nearly 20% of Rhode's DTC sales, while 74% of the brand's social followers are from international markets. There is significant pent-up global appetite for this brand. We plan to invest in marketing and fuel their disruptive marketing engine to further Rhode's brand awareness and further build its community of loyalists. We also plan to leverage our expertise and help Rhode further move into retail distribution. We have deep relationships with Sephora's top management and are excited to accelerate e.l.f. Beauty's global presence with Sephora, building upon the successful partnership we've had since launching e.l.f. in Sephora Mexico last year. Lastly, we see potential to provide Rhode with opportunities to broaden its product assortment and innovation in the skincare and hybrid makeup categories and expand into new adjacent categories in the future. Hailey's instincts have proven to break through the most crowded categories, and we look forward to supporting her and the team at each lifestyle stage. I want to close by extending a special thank you to the e.l.f. Beauty and Rhode teams. We each owe our success to the power of our teams. On the Rhode side, Hailey is a visionary and her unique perspective tenacity and passion to reinvent beauty come through in every aspect of the business. She surrounded herself with an exceptional team to bring the vision of Rhode to life for millions of consumers, further fueling fandom. In addition to Hailey, we intend to retain Co-Founders Michael and Lauren Ratner, experienced CEO Nick Vlahos and their passionate team. We plan to continue to operate Rhode from its headquarters in Los Angeles and build that team further to realize the global opportunity we both see. This approach will also allow the e.l.f. Beauty team to remain focused on the significant white space we see ahead for our existing brands. We are confident our combined companies have a bright future ahead of us. We look forward to partnering with Rhode to continue to disrupt the industry and further our vision to create a different kind of company. I'll now turn the call over to Mandy to talk about the financial details of the transaction.

Thank you, Tarang. I'll start with valuation. The $1 billion headline price breaks out into two components. The upfront purchase price of $800 million at closing represents approximately 3.8x Rhode's latest 12 months net sales, which compares favorably to precedent transactions in beauty. The transaction also includes additional potential earnout consideration of $200 million based on the future growth of the brand over a three-year time frame. We expect to finance the transaction using fully committed debt financing of approximately $600 million, as well as $200 million, or approximately 2.6 million shares of newly issued shares of e.l.f. Beauty common stock issued directly to the equity holders of Rhode. We expect our liquidity position to remain strong with relatively low leverage post the transaction. The transaction, which is subject to customary closing conditions, is expected to close in our second quarter of fiscal 2026. Turning to Rhode's financials. In the last 12 months, Rhode generated $212 million in net sales and very strong profitability levels. We expect the addition of Rhode to be accretive to our topline growth, adjusted EBITDA margins and earnings. Given the expected timing of the transaction close, we expect Rhode to contribute to our results starting in our fiscal Q2. When we have more certainty on the tariff front, we plan to issue guidance inclusive of Rhode's contribution. In summary, we are excited to welcome Rhode to the e.l.f. Beauty family. We have remained highly disciplined in assessing M&A and looking for opportunities that can leverage our strengths and bring complementary capabilities to e.l.f. Finding a brand that has achieved this unique combination of disruption, curation, scale and profitability is rare, and we are equally excited about the global opportunity we still see ahead. With this acquisition, we are further diversifying e.l.f. Beauty with a distinct yet complementary brand that we expect to be accretive to both our growth profile and earnings. With that, operator, you may open the call to questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question today will come from Olivia Tong with Raymond James. Please go ahead.

Great. Thanks. Good afternoon. A couple of questions here. First, just on the quarter, realizing that you're not giving a fiscal 2026 outlook, but sounds like for June quarter, at least, you're still working off of pre-tariff inventory. So is there anything you can tell us about performance? I mean, we've got two quarters in the books at this point. So that would be helpful. You also talked about performance across a number of channels, but didn't mention Dollar General. So I just wanted to see how that was going? And then in terms of Rhode, if you could just talk about your thought process in terms of further expansion and whether it will be run independently or integrating into the e.l.f. business? Thanks so much.

Hi, Olivia. I'll take the question on kind of Q1 and any additional color there. As you said, we are not giving guidance at this time. And really, that's rooted in until we get more certainty from a tariff perspective, just given such a wide range of outcomes on that front. I can tell you we feel great about our business as we are in Q1. As we noted on the call, we continue to build share even into this quarter. We will be cycling some – our space expansion in Walmart, the launch of the Naturium in Ulta Beauty and some outsized growth from an international perspective in Q1. But overall, we're feeling great about where we are.

And then, Olivia, you had a question on Dollar General as well. That continues to go extremely well. We're well above their expectations. We're building a ton of share, and we're really pleased with how it's doing, particularly serving the underserved, rural areas that didn't have access to e.l.f. before. So we're feeling great about that. And then switching gears to Rhode. I can't tell you how excited we are with the acquisition of Rhode. If you take a look at e.l.f. Beauty, we just finished our 25th consecutive quarter of net sales and market share growth. e.l.f. Beauty is on fire, and we're further fueling that fire with the acquisition of Rhode. Rhode is going to continue to be run out of Los Angeles. They have an incredible team with Hailey, her co-founders, Michael D. Ratner, Lauren Ratner and experienced CEO Nick Vlahos, and so we'll continue to run that team out of Los Angeles, both supplement the team and particularly increase the level of hiring to go after the global expansion opportunities that we see. The near-term priority will be really to execute with excellence, the Sephora rollout. It's a massive rollout. It's Sephora in all U.S. stores, and Canadian doors follow later this year by rollout into Sephora in the UK as well. And so we'll be looking to help the team, really make sure that that's an awesome launch. I can tell you, Sephora couldn't be happier or more excited of being able to get Rhode. It's an incredible brand. I mean, being able to go from zero to $212 million of net sales direct-to-consumer-only with only 10 products, I don't think any of us have seen anything like it. So extremely excited and you'll continue to hear news in terms of particularly once it closes in terms of our future expansion plans.

And your next question today will come from Dara Mohsenian with Morgan Stanley. Please go ahead.

Hey, guys. So Mandy, just wanted to follow-up. Obviously, you're not giving guidance for fiscal 2026. But just given we're two months into fiscal Q1, any additional perspective? Your answers Olivia, were helpful. But Q1 revenue is probably not as impacted by tariffs at this point. So I was just hoping for any more detail there. And perhaps also given the comp issue you mentioned in the U.S., could you talk about your U.S. topline growth potential relative to the scanner data? And then on the Rhode acquisition, Tarang, obviously, you're very excited by the growth opportunities here. Can you also just discuss organizationally, the key incremental capabilities that e.l.f. can bring to the brand? And just vice versa, what you think Rhode can bring to your organization and how you think about the biggest potential opportunities on that front? Thanks.

Right. So I did provide some color there, Dara, on Q1 topline. Like I said, we feel great about what we're seeing from a consumption standpoint, and we will be cycling those items already noted as we go through. So feeling great about Q1 overall. Now one thing that we did note on the call is that the impact of tariffs will start to hit us in Q1. And so that's something to be mindful of as you all think about how you're modeling profitability for the quarter.

Hi, Dara. In terms of your question on Rhode from an organizational capability standpoint, we've obviously built up a set of capabilities across marketing, innovation, our retail approach that we can apply to Rhode. More specifically, we've made this switch, and both brands are digitally native brands. We've made the switch successfully a number of years ago in expanding into retail. And so we'll be able to help Rhode, particularly as they expand into Sephora and then beyond that as they look to increase the global footprint of the brand. Second, from a marketing standpoint, it's amazing what they've been able to do, the engagement model they have. Again, I've never seen anything like it. Consumers are willing to camp out overnight, stay in line 14 hours in a pop-up event not just to buy product, but to buy into the entire lifestyle. And so it's very much reminiscent of type of community engagement we have and leveraging that strength. But in addition, we see an opportunity to increase the awareness of Rhode. As I mentioned, the aided awareness is only 20%. So our ability to invest more into the brand increased awareness. And then third, I would say, from a people standpoint, it's an incredible team, but it's a small team. So our ability really across every function to be able to enhance that team and bring the capabilities we so successfully apply to e.l.f. to Rhode will be there. So everything from retail to marketing to the overall team and expansion globally are things that we hope to help them with and help realize Hailey's vision. In terms of what we get in return, we get one of the most beautiful brands I've ever seen that is on rocket ship growth. We get to enhance our relationship and presence with Sephora globally over time and to learn from each other. I think every acquisition we've done, if I take a look at what we got out of Naturium, which is a home run acquisition we did just in 2023, it brought us Susan Yara's vision in terms of the science behind consistent skincare everywhere for everyone. And we've been able to help that business too, both in terms of expanding distribution, in terms of building out the team and being able to really leverage each other's strength such that not only is Naturium growing really fast, but e.l.f. SKIN just had its strongest growth year as well.

And your next question today will come from Oliver Chen with TD Cowen. Please go ahead.

Hi. This is Jonna on for Oliver. Thanks for taking our questions. First question just on the domestic shelf-space gains. Obviously, you have a bigger space now to work off of what's sort of the right pace of growth in the U.S. in terms of distribution. And then the second question around Rhode. Is there a potential for cross-selling between Rhode and e.l.f., given the younger consumers gravitate towards both brands? Is there any sort of customer overlap sort of exercise you've done that could [Indiscernible] both brands? Thank you very much.

Hi. Jonna, so I'll take the first question. On domestic shelf-space gains, we're very pleased with the shelf-space gains that we've gotten over this last year. And as we've talked – usually, we do have some expansion. And so as we talked on the call today, we have – we're launching in Kruidvat in Belgium and the Netherlands. We are also – we also talked about Rossmann Poland from an international standpoint. And here in the U.S., we just had the space expansion in Target this past spring that we're very pleased with. And so there's still a lot of potential out there for us as we think about domestic shelf-space expansion. We talked about Walmart last year, getting that 50% shelf-space increase still remains an opportunity for us on the road ahead to continue to increase space there as well, really across all of our top retailers. And so that's something you have to stay tuned for as we go through.

And then in terms of your second question, in terms of Rhode and any consumer crossover, I would say both e.l.f. and Rhode have exceptional engagement efforts with our communities. And we both care deeply about each of our communities. As you know, e.l.f. is the number one brand amongst teens. I think our share of Gen

And your next question today will come from Susan Anderson with Canaccord Genuity. Please go ahead.

Hi, good evening. Thanks for taking my questions. I guess just a follow-up really quick on the tariffs. I think you said, Mandy, that you'll start to feel the impact in the first quarter. I guess, is that just some inventory that you didn't kind of have built out? Because I think this whole year, you kind of built some inventory in the balance sheet. So just curious how long that's going to last? And then at what point in first quarter are you having to flow through new inventory with additional tariffs? And then I assume as the price increases go through in August, the second quarter won't be impacted. And then just one quick question on Naturium. I was curious if you had any new shelf-space gains there for Naturium or any international plans? Thanks.

All right. Hi, Susan. So on the tariff impact, why I'm saying that it's going to start in Q1, we were mindful on the shipments that we brought in from the April period when the tariffs were at that higher rate through May, when they went through the lower rate. But we will – because we're mindful about that, it's really the product that we needed to ship out most immediately. So we will feel some of that tariff impact in Q1. And to your point, pricing will not be in effect, so that will not be a mitigating factor in Q1. And then on Naturium, we didn't have anything new to share there. But outside that, it was a great year for Naturium that we're very proud of. And I'll let Tarang add a little bit.

Yes. And I would say on Naturium, we continue to make progress. We feel extremely great about our performance in Ulta Beauty, both in the facial skin care as well as body sections. We did take Naturium – expand Naturium distribution at Boots, and we're actually increasing the store count pretty significantly there as well. We'll continue to talk about other expansion with Naturium as well.

And your next question today will come from Korinne Wolfmeyer with Piper Sandler. Please go ahead.

Hey, good afternoon. Thanks so much for taking the question. I look at just a little bit on the pricing that you're planning here in August. How should we be thinking about the incremental sales lift that could come from that? And what kind of elasticity you think that could bring? And then any context on why timing of August for that pricing? And then also, can you confirm, I think the prepared remarks was across the entire portfolio in all geographies. So does that include all brands or just e.l.f.? Thanks so much.

Hi, Korinne, so yes, pricing, we just announced our pricing moves last Friday. And it's been – as usual, we're transparent with our communities, and we posted that on our social channels. And so the pricing that we're taking effective August 1st and why that's August 1st is because many of our retailers require a 90-day window on any pricing moves. And so that's why we've landed at August 1st. That's going to be across all of our SKUs globally. So every item within the e.l.f. portfolio going up $1. We also had social posts across Well People, Naturium as well and as well as Keys Soulcare. So we will be, across all of our brands, taking some form of pricing. We have – as we think about it from a sales lift standpoint, we have incorporated as we look at it from our internal models, some elasticity just given that this is a unique macro that we're operating in. But what we've seen so far from community response is like a 99% positive sentiment on our pricing. So I think more to come post August as we see how consumers react and the sales lifts from pricing.

And the only other thing I would add there is we think this is an opportunity for us to continue to build market share. By taking our prices up just $1, we still have a superior value proposition, especially as we expect a lot of other people to take pricing. So it's a great opportunity for us not only to preserve the value for our community, but also continue to drive market share.

And your next question today will come from Andrea Teixeira with JPMorgan. Please go ahead.

Thank, operator, and good afternoon, everyone. So can you comment a little bit more about the most recent topline trends? I understand, Mandy, you – and you, Tarang, too, you both founded positive about the most recent trends. But we have been seeing, I think, all of us on this call, the track channel consumption in April was now back to low to mid-teens for the e.l.f. Beauty side of the business. Is that would you say reflective of the performance across all channels? That's the first question. And then on Rhode, can you comment actually on how much was the growth pace most recently? And then also how diversified they are into some of the products? Some of them are obviously very popular and viral. Just a curiosity in terms of like the skincare side of the business against the color cosmetics side, how diversified they are and how obviously complementary they can be against the e.l.f. Beauty legacy portfolio? Thank you.

All right. So Andrea, thanks for the question. On topline trends, as I've said, we're very pleased with the consumption trends that we're seeing as we think about that from a net sales standpoint for the quarter. Calling out those three items, again, we will be cycling the space expansion in Walmart, the launch of Naturium at Ulta Beauty and outsized growth from an international standpoint. And so I think with those pieces that you can kind of get to where we're thinking from a Q1 standpoint, but again, not providing guidance at this time.

And then on your question on Rhode, we're not disclosing the specific growth rate, other than they went from 0 to $212 million in net sales in three years. So it's a very fast-growing brand. And we have very high hopes as they expand into Sephora as well. In terms of the product assortment, one of the things we really like about Rhode is just how tight the product assortment is. It's only 10 products across skincare, color cosmetics and accessories, and you see power SKUs across their entire lineup, just given how tight that range is. One of the things that we plan to do on one of the earlier questions on capabilities is we have an incredible innovation capability and being able to really help Hailey and the team advance their vision in terms of their lifestyle approach to beauty and other product categories that they can get into, as well as broadening out some of the ranges here over time. We look forward to being able to help them with that as well.

And your next question today will come from Anna Lizzul with Bank of America. Please go ahead.

Hi. Good afternoon. Thank you so much for the question. I was wondering here with the acquisition of Rhode, do you see any potential for other brands or products you have to benefit from potentially added distribution in Sephora? And then as we take a step back and look at the e.l.f. parent company now, do you see the company becoming more of a portfolio of brands with maybe additional acquisitions over time? Thank you.

Hi, Anna. In terms of Rhode and Sephora, we already were making progress with Sephora. I mentioned we had one of the best launches ever last year with e.l.f. in Mexico. We've been in discussions with Sephora about other markets around the world that we could take the e.l.f. brand in. This just accelerates our presence with Sephora and even a bigger scale. And certainly, there are opportunities for other parts of our brand portfolio and Sephora, just as they are with every – there isn't a retailer in the world right now that doesn't want e.l.f. or our portfolio of brands. And so for us, it's really about making sure we're taking a disciplined sequential approach with each retailer as we go through. And then on your broader question, we are a portfolio of brands. One of the things that I'm really proud of is every one of our brands grew in fiscal 2025. And they're distinct, complementary to each other. And so we love what we have with our brand portfolio, especially with the addition of Rhode. We have a really powerful overall portfolio that meets different consumer needs, different segments. And we really like that. In terms of future acquisitions, I would say our primary focus is always going to be to realize the white space we see for our existing brand portfolio and the strong organic growth we see there. Our second priority is to make sure we close and successfully integrate in Rhode. So I would say those are our two main priorities right now is – we just couldn't be more excited with what Rhode is going to bring to e.l.f. Beauty and what we can do together.

And your next question today will come from Peter Grom with UBS. Please go ahead.

Thanks, operator. Good afternoon, everyone. So Mandy, you talked – and Tarang, you both talked about the consumption performance of [indiscernible] quarter-to-date. Maybe two questions. I guess as you look back to kind of the slowdown that you saw back in kind of the January-February timeframe, do you feel like you have a better understanding today in terms of what ultimately drove that weaker performance? And then just as you think about the improvement we've seen over the past few weeks here, totally understand that there's going to be a gap between net sales and what we're seeing from a consumption perspective. But just as we think about the improvement, what is driving that in terms of the consumption? And how sustainable is that as we look forward here? Thanks.

Yes. So on your first part, in terms of the slowdown that we saw in the January, kind of March quarter, we know exactly what happened there. We were lapping by far, our biggest product launch ever with our viral lip oils as well as some of the other innovation we have. We feel really good about the spring innovation, about twice the rate of most years, any other year. The year before that was almost 4x higher. So that really – you're lapping a big innovation cycle as you go through. In terms of the improved trends, again, you're seeing the impact of our overall marketing, as well as innovation. I talked about our melting lip balms. Those have been a huge hit. They were requested by our community, an incredible value relative to prestige. And feel really good about the innovation we have come in this fall, too. So really like what we're seeing on the business right now and like even more what we see coming.

And your next question today will come from Ashley Helgans with Jefferies. Please go ahead.

Hi. This is Sydney on for Ashley. Thank you for taking our question. Just wondering if you can share anything more on what adjacent categories do you see opportunities in for Rhode? And then the Circana data showed mass outperformed prestige in Q1. Just curious if you're seeing any trade down or if you can kind of speak to that trend? And then just on the innovation pace you just commented on, do you plan to keep that kind of 2x speed throughout the balance of the year? Thank you.

In terms of adjacent categories, we haven't disclosed that yet. We still don't own the business until it closes. We'll be – we've had plenty of conversations with Hailey and her team about some of the categories. You're going to have to stay tuned for that. But there's plenty of room with just 10 main products for them to continue to expand Hailey's vision, and we look forward to helping her. In terms of trade down, we don't have a great way of seeing trade down. It's two different data sets between prestige and mass. What I can tell you is the secret of our success has less to do with trade down or taking share. It's more our ability to bringing access to millions of consumers who previously couldn't afford a particular segment. And that's really what – I think if I look back over a long arc of time, that our biggest driver of really being able to bring more consumers into a particular segment or franchise they previously didn't have access to.

On the innovation – sorry, I was just going to answer the last question on the pace of innovation. To Tarang's point, we feel great about our pace of innovation. In fact, he talked about the melting lip balms. We launched our Sheer For It Blush as well. It's completely sold out on our elfcosmetics.com. So we do have some really nice indicators that our fall innovation is resonating with our community.

And your next question today will come from Mark Altschwager with Baird. Please go ahead.

Good afternoon. Thank you for taking my question. Just first, with respect to the price increase that you announced, what has been the feedback so far from retail partners and just anything you're hearing that would suggest you'll see pressure on volumes? And then on international, you talked about the factors affecting the first quarter. You noted cycling outsized growth in international. I guess the year-over-year growth rate on a percentage basis, last year was pretty consistent in Q1 and Q2. The year-over-year growth on a dollar basis was pretty consistent really in the first three quarters of last year. So I guess I'm trying to – I'm wondering if the comments you're giving for the first quarter, any reason to think why that wouldn't carry forward for the next few quarters as we think about just cycling international growth? Thank you.

Hey, Mark. In terms of your first question on pricing, we've heard from our retail partners that a number of different people are going to be taking pricing. I think they're bracing for it across a number of consumer categories. That's why we feel great about our approach in terms of just taking it up $1, being transparent with our community. As Mandy said, the response has been overwhelmingly positive, particularly our responsibility to make sure we're having superior value for our community. And so I'd say, so far, no real pushback from a retailer standpoint, they understand. And I think we're actually grateful that we're not going all the way to the level that I think they would expect one to take. And so overall, those conversations have gone well, and I think we're going to come through it we believe we're going to come through it well and just given the approach.

And then on your question on international, Mark, you're right. The outsized growth from an international perspective certainly will carry through the first half of the year as we think about what we launched and the number of markets that we opened and things like that. So I'm answering it in terms of Q1 because that's what folks have been asking about. But certainly, we may see that trend continue through the first half for sure.

And I'd say you're going to continue to hear us talk about additional new markets throughout the year. Kruidvat, we're very excited about. We already have the number one position with Etos in the Netherlands. This will further and improve our position both in the Netherlands and Belgium. Particularly excited about our launch coming up in Poland. Rossmann has a huge share of the Poland market. And so given our success with Rossmann in Germany, we're going to see that. Now you'll continue to hear about other expansion markets throughout the year as we go through. And so we'll take it one quarter at a time and update you on additional expansion.

And your next question today will come from Bonnie Herzog with Goldman Sachs. Please go ahead.

All right. Thank you. Hi, everyone. I actually wanted to go back to tariffs with a question. I understand the situation is fluid. There's a ton of uncertainty. But could you tell us in a worst-case scenario, if you believe you can still generate earnings growth this fiscal year? Could you talk about potential mitigation efforts and what you would consider doing in a worst-case scenario? I guess I assume you would need to take further pricing and then possibly shift production faster. Any other considerations? And then ultimately, Tarang, I guess, I'd like to understand your priority to drive margins and earnings growth versus balancing market share in a potential worst-case scenario? Thank you.

Hi, Bonnie. So on tariffs, there is a wide range of outcomes on the tariff front, which is why we did not provide guidance today. We have a mitigation playbook, a tariff playbook that we've talked about, really consists of three things: pricing, supply chain optimization and business diversification, of which we're making progress across all three of those. And because there are a wide range of outcomes, it's really prudent for us not to just talk about a number of different scenarios, but really to focus on the one that we talked about on the call, which is the $50 million impact if tariffs were to stay at the 55% level. Now we know that's only in place for the next 90 days. And so we're going to take it as it comes, but until we have more certainty on that front, really are not diving into more detail on the impact of mitigation and what a worst case should be. But rest assured, we run a number of scenarios behind the scenes.

And then in terms of your question on margins versus market share, I think the beauty of e.l.f. has been we've always had a very balanced plan. We've gained market share 25 consecutive quarters. We're confident of our ability to continue to gain market share. And over the years, we've made good margin progress. As Mandy said, the range of outcomes are too broad to really speculate on overall margins at this time. Once we have greater resolution on it, we'll be able to provide that in our guidance.

And your next question today will come from Rupesh Parikh with Oppenheimer. Please go ahead.

Good afternoon. Thanks for taking my question. So just going back to the acquisition. Just curious on sourcing. And then if you see any limitations or limiters to growth from a capacity perspective? And then just – I guess, just going back to tariffs as well. In your base case scenario, do you really beat the pricing and other mitigation efforts fully offset, at least, I think, the $50 million exposure you guys disclosed just based on the current environment?

Yes. So Rupesh, I'll take the first question. In terms of Rhode, they have an excellent supply base and have been able to meet the demand they see. We feel confident about continuing to meet that demand. They have suppliers, both in Italy and South Korea, as I mentioned, with a ton of capacity. So we feel good about the plans, particularly as we prepare for Sephora here. So don't see any concerns from an overall capacity standpoint or ability to source. We feel highly confident we have a very good, high-quality set of suppliers.

And then from a tariff standpoint, Rupesh, we have not gone into the details on how much we're mitigating of that $50 million annualized impact. Again, when we have more certainty on the tariff front, we'll be back to you with what those impacts are.

And your next question today will come from Jon Andersen with William Blair. Please go ahead.

Hey, good afternoon everybody. Thanks for the questions. I've got one for Mandy and one for Tarang. Maybe, Mandy, on the comments you made around gross margin when you were giving some color around fiscal 2026, I think you mentioned that price and productivity will help offset tariff impact. Were you talking on a rate basis so that we should expect kind of the legacy e.l.f. Beauty gross margins to be relatively flat year-over-year? And then if I could throw it in for Tarang. Tarang I'm really curious as you kind of vetted Rhode, how you got comfortable and the whole team got comfortable that this is a brand with – a lifestyle brand with a long sustainable growth trajectory, not a kind of a high flyer celebrity backed brand that that may be a little bit more flattish? I just love to kind of understand your viewpoint on that aspect? Thanks both.

Hi, Jon. So on gross margins, we actually are not giving any guidance on gross margin or growth profit for that matter and the impact and mitigation efforts. All we called out was the $50 million on an annualized basis of the impact of tariffs at a 55% level. We do have – we have pricing, as we talked about our mitigation efforts, pricing, cost savings, concessions with our suppliers. But when we get to a point where we are having more certainty from a tariff standpoint, we will be able to come back around with gross margin impact.

And then, Jon, in terms of the longevity of Rhode and what gives us confidence, I'd say there are a number of things. First and foremost, Hailey. Hailey is well beyond a celebrity. She's one of the most thoughtful founders I've ever met, has great instincts, a desirable aesthetic. She – and it's not just me. Sephora is thoroughly impressed with her, everyone who's met her. The more time we spent with her, just how thoughtful she is in terms of the vision of that brand and where it can go gives us a lot of confidence. Second, it's incredibly hard to scale a brand in our space. We've cited this stat before, there are 1,900 cosmetics and skincare brands tracked by Nielsen alone. Only 26 of them have more than $100 million in retail sales. To be able to do $212 million DTC only in net sales is simply incredible and talks to the strength of the consumer conviction behind the brand. The third thing is the quality of the products, the innovation are outstanding. They have amongst the highest repeat rates of any brand we've seen in the category across skincare, color cosmetics, et cetera. So there's real depth of consumer conviction in this brand. It's still young, so there's quite a few more consumers that we can attract to the brand. And – but the core metrics that we look at in terms of like what is the equity of the brand, how does it resonate, what level of community engagement, what is the quality of the products and how are they resonating, what's the repeat rates there. We feel great about all of those things and see the brand for the long-term and to help Hailey build that out.

This concludes our question-and-answer session. I would like to turn the conference back over to Tarang Amin, Chairman and CEO, for any closing remarks.

Well, thank you for joining us today. I'm so proud of the incredible team at e.l.f. Beauty and at Rhode for delivering another year of industry-leading results. Definitely thrilled to welcome Rhode to the e.l.f. Beauty family. We look forward to seeing some of you at some of our upcoming investor meetings and speaking to you in August when we'll discuss our first quarter results. Thank you, and be well.