Executive Summary
Elf Beauty reported a resilient start to fiscal 2026 with net sales of approximately $353.7 million, up 9% year over year, marking the 26th consecutive quarter of net sales growth and market-share gains. EBITDA rose 12% to roughly $66.9 million, yielding an EBITDA margin of about 18.9%, while the company expanded its leadership in color cosmetics and continued to gain share across major channels. Management highlighted a strategic path to more than double the business over the coming years driven by white space in color cosmetics, skincare, and international markets, reinforced by the Rhode acquisition which closed just after quarter-end and is positioned to accelerate growth through expanded distribution (notably Sephora) and heightened brand awareness. Near-term headwinds include tariff-driven gross-margin pressure, a shift in marketing expense timing, and the absence of Rhode-related top-line benefits from Sephora sell-in in Q2. Elf expects first-half adjusted EBITDA margins to remain around 20% in an environment with higher tariff costs and the Rhode consolidation. The mix impact of tariffs and the SAP ERP transition are key non-operating variables to monitor, alongside Rhode’s accretion trajectory and international rollout.
Key Performance Indicators
QoQ: 38.83% | YoY:186.02%
QoQ: -5.63% | YoY:129.30%
QoQ: -6.35% | YoY:126.92%
Key Insights
Revenue: $353.7m (+10.2% YoY, -0.4% QoQ); Gross Profit: $244.54m; Gross Margin: 69.13% (down ~215 bps YoY); Operating Income: $48.71m (13.77% margin); EBITDA: $66.94m (EBITDA margin 18.93%); Net Income: $33.31m (net margin 9.42%); EPS: $0.59; Diluted EPS: $0.58; Net Cash from Operating Activities: $27.23m; Free Cash Flow: $20.14m; Cash at End of Period: $170.03m; Total Debt: $314.79m; Net Debt: $144.76m; Share count (diluted): 57.675m; Rhode acquisition financing: $800m upfront, funded via ~$600...
Financial Highlights
Revenue: $353.7m (+10.2% YoY, -0.4% QoQ); Gross Profit: $244.54m; Gross Margin: 69.13% (down ~215 bps YoY); Operating Income: $48.71m (13.77% margin); EBITDA: $66.94m (EBITDA margin 18.93%); Net Income: $33.31m (net margin 9.42%); EPS: $0.59; Diluted EPS: $0.58; Net Cash from Operating Activities: $27.23m; Free Cash Flow: $20.14m; Cash at End of Period: $170.03m; Total Debt: $314.79m; Net Debt: $144.76m; Share count (diluted): 57.675m; Rhode acquisition financing: $800m upfront, funded via ~$600m term loan and ~$200m equity issued (2.6m shares).
Additional context from the earnings call highlights a 30% international net sales growth in Q1, a 5% US core growth, and a 210 bps market-share gain in the quarter. Management reaffirmed marketing/digital spend guidance of ~24-26% of net sales for FY26.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
353.74M |
10.15% |
-0.44% |
| Gross Profit |
244.54M |
7.63% |
-3.46% |
| Operating Income |
48.71M |
186.02% |
38.83% |
| Net Income |
33.31M |
129.30% |
-5.63% |
| EPS |
0.59 |
126.92% |
-6.35% |
Management Commentary
Key takeaways from management calls: 1) Strategy and growth trajectory: Management emphasized the potential to more than double the business over the coming years due to white space in color cosmetics, skincare, and international markets, aided by the Rhode acquisition. 2) Rhode integration and Sephora plan: Rhode’s launch into Sephora in the U.S. and Canada in September, and the U.K. by year-end, is central to accelerating international penetration and expanding distribution. 3) Innovation and marketing: Halo Glow Skin Tint top-selling product in Q1; strong performance of e.l.f. SKIN Bright Icon Vitamin C + E + Ferulic Serum; falling into a more diversified portfolio with 75% of products under $10 post-price increase; marketing/digital spend targeted at 24-26% of net sales for FY26. 4) Tariffs and near-term profitability: Tariffs remain a material risk; with incremental tariff exposure, management guided to a first-half adjusted EBITDA margin near 20%, with gross margins pressured in Q2 as tariff costs flow through. 5) International momentum: International net sales up 30% YoY; UK performance outpaced category growth by 3x; 1,200+ stores launched with Kruidvat (Netherlands/Belgium) in Q1; Rhode’s international potential remains a key growth lever. 6) SAP ERP go-live: July go-live deemed successful, signaling progress on infrastructure to support faster growth and efficiency. 7) Guidance posture: No full-year fiscal 2026 outlook yet due to tariff uncertainty; plan to provide it when tariffs clarity improves.
As we look ahead, we see an opportunity to more than double our business over the coming years with significant white space we see in color cosmetics, skin care and international across our portfolio of brands.
— Tarang P. Amin
We're quite excited about the Rhode launch into Sephora. And as we talked last quarter, even with the investments that we want to make back into the business, we still expect this to be accretive overall.
— Mandy J. Fields
Forward Guidance
Near-term outlook remains cautiously constructive. Management projects: - Q2 net sales to be above Q1’s 9% growth, aided by roughly two months of Rhode contribution, though top-line benefits from Rhode sell-in to Sephora occurred prior to closing and are not included in Q2. - Adjusted EBITDA margins in the first half of FY26 expected to be about 20% despite tariff-driven COGS pressures, reflecting ongoing tariff mitigation through pricing, supply-chain diversification, and international expansion. - Tariff scenarios remain variable; if incremental tariffs persist around the 30% level, gross COGS could rise by approximately $50 million on an annualized basis. - Rhode is expected to be accretive over the full year, with continued investment to boost Rhode awareness (Rhode aided awareness only ~20% in the U.S.) and expand distribution, particularly Sephora. - The company plans to maintain marketing/digital spend in the 24-26% range and to accelerate international expansion (GCC Sephora launches, Boots/Naturium in the U.K., etc.) and the SAP ERP transition completed in July 2025. Investors should monitor tariff developments (especially any shifts in U.S./China tariff levels), Rhode integration milestones (Sephora launch cadence, awareness build), and the trajectory of international expansion (UK and GCC markets) to gauge potential uplift to profitability and equity value.