e.l.f. Beauty, Inc. (ELF)

Results of operations

The following table sets forth our consolidated statements of operations data in dollars and as a percentage of net sales for the periods presented:

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Comparison of the three months ended June 30, 2026 to the three months ended June 30, 2025

Net sales

Net sales increased $125.6 million, or 36%, to $479.4 million for the three months ended June 30, 2026, compared to $353.7 million for the three months ended June 30, 2025. Net sales growth was driven by strong performance in both our retailer and e-commerce channels. Net sales increased $80.0 million, or 129%, in our e-commerce channels and $45.6 million, or 16%, in our retailer channels. From a price and mix perspective, higher average item price and mix drove $137.4 million increase in net sales as compared to the three months ended June 30, 2025. This was partially offset by lower volume reducing net sales by $11.7 million.

Gross profit

Gross profit increased $154.3 million, or 63%, to $398.8 million for the three months ended June 30, 2026, compared to $244.5 million for the three months ended June 30, 2025. This growth was inclusive of the benefit from a $50.1 million IEEPA tariff refund recognized as a reduction in cost of sales during the three months ended June 30, 2026. The remaining growth was primarily driven by a higher average item price and mix which drove an increase of $112.3 million, offset by lower volume impacting gross profit by $8.1 million. Gross margin increased approximately 1,400 basis points to 83% when compared to the three months ended June 30, 2025, including approximately 1,050 basis points benefit from the IEEPA tariff refunds, with the remaining increase primarily driven by pricing and lower year-over-year tariff rates.

Selling, general and administrative expenses

SG&A expenses were $280.3 million for the three months ended June 30, 2026, an increase of $84.5 million, or 43%, from $195.8 million for the three months ended June 30, 2025. The $84.5 million increase was primarily related to increases in marketing, merchandising and distribution costs of $49.9 million, increased compensation and benefits expense of $18.6 million, and increased depreciation and amortization of $12.9 million.

Change in fair value of contingent consideration

In connection with the rhode Acquisition, the Company recorded a fair value adjustment of $16.1 million for the three months ended June 30, 2026, driven by the outperformance of rhode's revenue results relative to the earnout thresholds set forth in the merger agreement entered into in connection with the rhode Acquisition.

Other (expense) income, net

Other expense, net totaled $0.3 million for the three months ended June 30, 2026, as compared to other income, net of $5.0 million for the three months ended June 30, 2025. The year-over-year variance was primarily due to a decrease in foreign currency exchange gain in the period primarily attributable to foreign currency rate fluctuation between the British pound and US dollar.

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Interest expense, net

Interest expense, net was $7.8 million for the three months ended June 30, 2026, as compared to $2.6 million for the three months ended June 30, 2025. The year-over-year variance was primarily due to the Fifth Amendment which established the Term Facility and increased our outstanding debt. See Note 6, “Debt,” in the Notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details on our debt. The increase was partially offset by $2.1 million of interest income associated with the IEEPA refunds received during the three months ended June 30, 2026.

Income tax provision

The income tax provision was $27.7 million, or an effective rate of 29.4%, for the three months ended June 30, 2026, as compared to a provision of $17.8 million, or an effective rate of 34.8%, for the three months ended June 30, 2025. The change in the income tax provision was primarily driven by the tax effects of an increase in income before taxes of $43.2 million, and a decrease in discrete tax benefits of $17.3 million, primarily related to stock-based compensation and the tax effects of IEEPA tariff refunds and associated interest.

Financial condition, liquidity and capital resources

Overview

As of June 30, 2026, we had $344.2 million of cash and cash equivalents. In addition, as of June 30, 2026, we had borrowing capacity of $243.3 million under our Amended Revolving Credit Facility.

Our primary cash needs are for working capital, fixturing, retail product displays and digital investment. We have also used cash for acquisitions. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities and expansion within or to additional retailer store locations. We expect to fund ongoing cash needs from existing cash and cash equivalents, cash generated from operations and, if necessary, draws on our Amended Revolving Credit Facility.

Our primary working capital requirements are for product and product-related costs, payroll, rent, distribution costs and marketing. Fluctuations in working capital are primarily driven by the timing of when a retailer rearranges or restocks its products, expansion of space within our existing retailer base, expansion to new retailers and the general seasonality of our business. As of June 30, 2026, we had working capital, excluding cash and cash equivalents, of $177.9 million, compared to $163.5 million as of March 31, 2026. Working capital, excluding cash and cash equivalents and debt, was $207.9 million and $193.5 million as of June 30, 2026 and March 31, 2026, respectively.

We believe that our operating cash flow, existing cash and cash equivalents and available financing under the Amended Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next twelve months. The unused balance of the Amended Revolving Credit Facility as of June 30, 2026 was $243.3 million. If necessary, we can borrow funds under our Amended Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control, including those described elsewhere in Part II, Item 1A. Risk factors. In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will rely on our ability to provide innovative products to our consumers, manage production and our supply chain.

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Cash flows

Cash provided by operating activities

For the three months ended June 30, 2026, net cash provided by operating activities was $111.7 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $133.9 million, which is inclusive of $52.1 million benefit from IEEPA tariff refunds, partially offset by an increase in working capital of $22.2 million. The increase in working capital was primarily driven by a $26.5 million increase in inventory, a $2.4 million decrease in accounts payable and accrued expenses, and a $1.7 million decrease related to other liabilities, partially offset by an $8.2 million decrease in prepaid expense and other assets, and a $0.2 million decrease in accounts receivable.

For the three months ended June 30, 2025, net cash provided by operating activities was $27.2 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $74.5 million, partially offset by an increase in working capital of $47.2 million. The increase in working capital was primarily driven by a $46.2 million increase in accounts receivable, a $16.3 million increase in prepaid expense and other assets, a $1.5 million decrease in accounts payable and accrued expenses, and a $1.9 million decrease related to other liabilities, partially offset by an $18.7 million decrease in inventory.

Cash used in investing activities

For the three months ended June 30, 2026, net cash used in investing activities was $1.7 million primarily consisting of capital expenditures related to fixturing, equipment and software.

For the three months ended June 30, 2025, net cash used in investing activities was $7.6 million primarily consisting of capital expenditures related to fixturing, equipment and software.

Cash (used in) provided by financing activities

For the three months ended June 30, 2026, net cash used in financing activities was $55.5 million primarily driven by repurchases of our common stock of $50.0 million and repayments on the Amended Term Loan Facility of $7.5 million, partially offset by cash received from the exercise of stock options.

For the three months ended June 30, 2025, net cash provided by financing activities was $0.1 million related to cash received from the exercise of stock options.

Description of indebtedness

Amended Credit Agreement

On April 30, 2021, we amended and restated our prior credit agreement (such amended and restated credit agreement, as further amended, supplemented or modified from time to time, the “Amend

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Results of operations

The following table sets forth our consolidated statements of operations data in dollars and as a percentage of net sales for the periods presented.

Comparison of the fiscal year ended March 31, 2026 to the fiscal year ended March 31, 2025

Net sales

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 fiscal year ended March 31, 2025. The rhode Acquisition contributed $293.5 million to our growth in the fiscal year ended March 31, 2026, with the remaining $29.5 million contributed from our existing business. The $323.0 million increase was driven by both our retailer and e-commerce channels. Net sales increased $178.3 million, or 16%, in our retailer channels and $144.7 million, or 63%, in our e-commerce channels. From a price and volume perspective, a higher average item price and mix drove $333.5 million increase in net sales as compared to the fiscal year ended March 31, 2025. This was partially offset by lower volume impacting sales by $10.5 million.

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Gross profit

Gross profit increased $221.7 million, or 24%, to $1,157.3 million in the fiscal year ended March 31, 2026, compared to $935.7 million in the fiscal year ended March 31, 2025. Higher average item price and mix drove an increase of $229.2 million, offset by lower volume impacting gross profit by $7.5 million. 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% gross margin in the fiscal year ended March 31, 2025. The decrease in gross margin rate was primarily driven by tariffs, partially offset by pricing.

Selling, general and administrative expenses

SG&A expenses were $1,026.1 million in the fiscal year ended March 31, 2026, an increase of $248.4 million, or 32%, from $777.7 million in the fiscal year ended March 31, 2025. SG&A expenses as a percentage of net sales was 63% for the fiscal year ended March 31, 2026 and 59% for the fiscal year ended March 31, 2025. The increase on a dollar basis was primarily related to increased marketing, merchandising and distribution costs of $129.1 million, compensation and benefits expense of $55.1 million, increased depreciation and amortization of $35.0 million, increased professional fees of $20.6 million, and increased regulatory fees of $8.6 million.

Change in fair value of contingent consideration

In connection with the rhode Acquisition, the Company recorded a fair value adjustment of $57.6 million for the fiscal year ended March 31, 2026, driven by the outperformance of rhode's revenue results relative to the earnout thresholds set forth in the merger agreement entered into in connection with the rhode Acquisition.

Other income, net

Other income, net was $2.8 million in the fiscal year ended March 31, 2026, as compared to other income, net of $1.3 million in the fiscal year ended March 31, 2025. The year-over-year variance is primarily due to an increase in income from insurance recovery, and a decrease in foreign currency exchange loss for the period primarily attributable to foreign currency rate fluctuations between the US dollar and both the euro and British pound.

Interest expense, net

Interest expense increased $21.5 million, to $35.3 million in the fiscal year ended March 31, 2026, as compared to $13.8 million in the fiscal year ended March 31, 2025. The year-over-year variance was primarily due to the Fifth Amendment which established the Term Facility and increased debt. See Note 8, “Debt,” in the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details on our debt.

Income tax provision

The income tax provision was $14.1 million, or an effective rate of 35%, for the twelve months ended March 31, 2026, as compared to a provision of $33.4 million, or an effective rate of 23%, for the twelve months ended March 31, 2025. The change in the income tax provision was primarily driven by a decrease in income before the provision for income taxes of $105.0 million.

Financial condition, liquidity and capital resources

Overview

As of March 31, 2026, we had $289.7 million of cash and cash equivalents. In addition, as of March 31, 2026, we had borrowing capacity of $243.3 million under the Amended Revolving Credit Facility.

Our primary cash needs are for working capital, fixturing, retail product displays and digital investment. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities and expansion within or to additional retailer store locations. We expect to fund ongoing cash needs from existing cash and cash equivalents, cash generated from operations and, if necessary, draws on our Amended Revolving Credit Facility.

Our primary working capital requirements are for product and product-related costs, payroll, rent, distribution costs and marketing. Fluctuations in working capital are primarily driven by the timing of when a retailer rearranges or restocks its products, expansion of space within our existing retailer base, expansion to new retailers, and the general seasonality of our business. As of March 31, 2026, we had working capital, excluding cash, of $163.5 million, compared to $214.8 million as of

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March 31, 2025. Working capital, excluding cash and debt, was $193.5 million and $214.8 million as of March 31, 2026 and March 31, 2025, respectively.

We believe that our operating cash flow, cash on hand and available financing under the Amended Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next twelve months. The unused balance of the Amended Revolving Credit Facility as of March 31, 2026 was $243.3 million. If necessary, we can borrow funds under the Amended Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control, including those described elsewhere in Part I, Item 1A “Risk factors”. In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will rely on our ability to provide innovative products to our consumers, manage production and our supply chain.

Cash flows

Cash provided by operating activities

For the fiscal year ended March 31, 2026, net cash provided by operating activities was $212.5 million. This included net income, before deducting depreciation, amortization and other non-cash items of $262.0 million, partially offset by acquisition-related seller expenses of $47.1 million in connection with the rhode Acquisition, and an increase in working capital of $2.3 million. The increase in net working capital was primarily driven by a $67.4 million increase in prepaid and other assets and $17.5 million increase in accounts receivable, partially offset by a $75.3 million increase of accounts payable and accrued expenses and a $7.3 million decrease in inventory.

For the fiscal year ended March 31, 2025, net cash provided by operating activities was $133.8 million. This included net income, before deducting depreciation, amortization and other non-cash items of $238.9 million, partially offset by an increase in net working capital of $105.0 million. The increase in net working capital was primarily driven by a $2.7 million increase in accounts receivable, a $75.9 million increase in prepaid and other assets, a $7.9 million decrease in other liabilities, and a $23.4 million decrease of accounts payable and accrued expenses, partially offset by a $4.9 million decrease in inventory.

For the fiscal year ended March 31, 2024, net cash provided by operating activities was $71.2 million. This included net income, before deducting depreciation, amortization and other non-cash items of $205.5 million, partially offset by an increase in net working capital of $123.8 million and payment of acquisition-related seller expenses of $10.5 million in connection with the Naturium Acquisition. The increase in net working capital was primarily driven by a $93.9 million increase in inventory. The increase was reflective of building inventory to support net sales growth, as well as $10.0 million related to Naturium inventory, and $7.8 million related to a change in certain vendor arrangements where we now take ownership of inventory at shipment from China versus when it enters our US distribution center. Additional changes in working capital include a $49.6 million increase in accounts receivable, a $55.2 million increase in prepaid and other assets, and a $6.3 million decrease in other liabilities, partially offset by an $81.2 million increase of accounts payable and accrued expenses.

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Cash used in invest

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