EPS of $0.81 decreased by 13.3% from previous year
Gross margin of 71.3%
Net income of 47.56M
"“Q1 results ahead of our expectations. In Q1 we grew net sales 50% increased gross margin by approximately 80 basis points and delivered $77 million in adjusted EBITDA. Q1 marked our 22nd consecutive quarter of both net sales growth and market share gains.”" - Tarang Amin
elf Beauty Inc (ELF) Q1 2025 Results Analysis: 50% Net Sales Growth Fueled by Naturium, International Expansion, and a Best-in-Class Marketing Engine
Executive Summary
In the first quarter of fiscal 2025, elf Beauty Inc (ELF) delivered a standout start to the year with net sales up 50% YoY to $324.5 million, supported by a broad-based lift across all channels and regions. Management attributed the acceleration to a combination of higher unit volume, favorable mix, and ongoing scale advantages from the Naturium acquisition, which contributed approximately 16 percentage points to net sales growth in Q1. International revenue surged 91% in the quarter, underscoring ELF’s successful geographic expansion and retailer partnerships (e.g., Rossmann in Germany, Atos in the Netherlands, Douglas in Italy). Gross margin expanded roughly 80 basis points to about 71.0%, aided by foreign exchange, lower transport costs, optimal pricing in international markets, and mix, though offset by elevated container costs from earlier disruptions. Adjusted EBITDA reached $77 million, up 4% YoY, reflecting ongoing investments in marketing, digital capabilities, and integration of Naturium, with adjusted EBITDA margin at 24% of net sales. The company reiterated its strategy pillars—color cosmetics, skincare, international growth, a defensible value proposition, disciplined marketing, and an asset-light supply chain—that collectively form a durable moat. ELF raised its full-year guidance for fiscal 2025: net sales growth of 25–27% (up from 20–22%), adjusted EBITDA of $297–$301 million, adjusted net income of $198–$201 million, and adjusted EPS of $3.36–$3.41. The management emphasized a cadence of marketing investment (roughly 24–26% of net sales) and noted that Naturium will be annualized in the back half of the year, with gross margins expected to improve modestly (roughly +20 bps YoY) as benefits from FX, mix, and cost savings offset higher freight and retailer-space expansion costs. In sum, ELF’s QQ1 2025 performance underscores a compelling narrative: a digitally native, high-velocity beauty platform driving share gains in mass cosmetics and skincare, backed by a scalable global footprint and a track record of profitable growth.
Key Performance Indicators
Revenue
324.48M
QoQ: 1.04% | YoY:49.99%
Gross Profit
231.28M
71.28% margin
QoQ: 1.80% | YoY:51.59%
Operating Income
50.71M
QoQ: 197.76% | YoY:-16.37%
Net Income
47.56M
QoQ: 227.36% | YoY:-10.23%
EPS
0.85
QoQ: 226.92% | YoY:-13.27%
Revenue Trend
Margin Analysis
Key Insights
Net revenue: $324.477 million, up 50% YoY; QoQ up 1.0% in the period.
EBITDA: $61.842 million; EBITDARatio ~19.06%; adjusted EBITDA margin: 24.0% of net sales.
Net income: $47.556 million; net margin ~14.66%; basic EPS $0.85; diluted EPS $0.81; weighted shares ~55.97 million.
Financial Highlights
Key QQ1 2025 Metrics and Trends:
- Net revenue: $324.477 million, up 50% YoY; QoQ up 1.0% in the period.
- Gross profit: $231.283 million; gross margin approx. 71.28% (vs 71.0% prior year).
- Operating income: $50.708 million; operating margin ~15.63%.
- EBITDA: $61.842 million; EBITDARatio ~19.06%; adjusted EBITDA margin: 24.0% of net sales.
- Net income: $47.556 million; net margin ~14.66%; basic EPS $0.85; diluted EPS $0.81; weighted shares ~55.97 million.
- Balance sheet: cash $109.0 million; inventory $199.6 million; total assets $1.2048 billion; total liabilities $501.24 million; equity $703.59 million; net debt ~$153.14 million (cash flow position <1.0x Net Debt/Adjusted EBITDA).
- Cash flow: net cash from operating activities $1.281 million; capex $0.786 million; free cash flow approximately $0.495 million; cash balance exit period $109.0 million.
- Liquidity/leverage: less than 1x net debt to adjusted EBITDA; ongoing investments in ERP (SAP) and distribution capacity.
- Channel/product mix: track channels ~50% of net sales; Q1 digital consumption growth >40% YoY; Beauty Squad loyalty surpasses 5 million members (up 30% YoY); Naturium contributed 16 percentage points to net sales growth in Q1. International sales contributed 16% of total net sales in Q1, up from 13% YoY.
- Guidance cadence: full-year gross margin expected to be +20 bps YoY (vs +10 bps prior); marketing/digital spend ~24–26% of net sales; Q2 net sales growth expected slightly above the full-year range; Naturium annualization expected in Oct; marketing ramp in Q2 to support near-term momentum.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
324.48M
49.99%
1.04%
Gross Profit
231.28M
51.59%
1.80%
Operating Income
50.71M
-16.37%
197.76%
Net Income
47.56M
-10.23%
227.36%
EPS
0.85
-13.27%
226.92%
Key Financial Ratios
currentRatio
1.77
grossProfitMargin
71.3%
operatingProfitMargin
15.6%
netProfitMargin
14.7%
returnOnAssets
3.95%
returnOnEquity
6.76%
debtEquityRatio
0.37
operatingCashFlowPerShare
$0.02
freeCashFlowPerShare
$0.01
priceToBookRatio
16.24
priceEarningsRatio
60.08
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights from the QQ1 2025 earnings call:
- Tarang Amin (CEO) highlighted five areas of competitive advantage and framed the sustained growth momentum: passionate team with equity ownership, compelling value proposition via asset-light supply chain, powerhouse innovation with Holy Grails (e.g., Soft Glam Satin Foundation at $8 vs prestige $39), disruptive marketing engine with broad reach (e.g., So Many Dicks campaign, Roblox engagement), and a productivity model delivering high output per retail shelf space. He cited Q1 as a strong start with 50% net sales growth and a 22nd straight quarter of growth with market-share gains, and noted international expansion as a meaningful runway (UK’s brand rank improving, Germany launch with Rossmann).
- Mandy Fields (CFO) emphasized Q1 gross margin of 71% (+80 bps) driven by FX, lower freight costs, price realization in international markets, and mix, offset by continued higher transportation costs and inventory dynamics from Naturium integration. She confirmed Q1 adjusted EBITDA of $77 million (margin 24%), and that SG&A was elevated to ~51% of net sales due to marketing/digital investments and Naturium’s consolidation. She reiterated the raised 2025 guidance and described a cadence where Q2 gross margin would be flat YoY and marketing intensity would step higher in Q2, with stronger EBITDA expansion anticipated in the second half as Naturium annualizes and marketing normalizes.
- Quotes illustrating strategy: Tarang emphasized the success of the five-area advantage framework and the rapid commercialization of innovations like Soft Glam Satin Foundation and the Glow Get A Body Oil from Naturium. Mandy highlighted that track channels contributed meaningfully to growth and that Naturium’s full-year impact is being “annualized,” with cost and organizational investments already baked into the plan. An emphasis on international expansion (Germany, Mexico, UK, Netherlands, Italy) and the ongoing ERP migration (SAP) were flagged as key catalysts and risk mitigants for scale.
- Management commentary on consumer demand and pricing: Tarang stressed that ELF is not experiencing consumer slowdowns; instead, they are seeing continued category acceleration via value-driven, prestige-quality products at affordable price points (e.g., bronzing drops at $12 vs prestige $38, foundation at $8 vs $39). He noted robust ROIs on marketing and a deliberate push on unaided brand awareness (from 13% to 33% over several years). He also discussed the potential impact of tariffs as a longer-duration, 2026 issue, with mitigation options including selective pricing, FX leverage, supplier concessions, and supply-chain diversification (reducing China exposure from ~80% to a lower share).
- The transcript underlines a disciplined approach to growth: cross-channel strength (digital and national retailers), balanced capex (ERP and distribution capacity), and a strategic emphasis on Naturium as a high-growth, complementary skincare platform within the Elf ecosystem.
“Q1 results ahead of our expectations. In Q1 we grew net sales 50% increased gross margin by approximately 80 basis points and delivered $77 million in adjusted EBITDA. Q1 marked our 22nd consecutive quarter of both net sales growth and market share gains.”
— Tarang Amin
“We still expect marketing and digital investment at approximately 24% to 26% of net sales in fiscal 2025… Naturium annualizing and continued investments in our team will drive EBITDA expansion into the second half of fiscal 2025.”
— Mandy Fields
Forward Guidance
Outlook and key assumptions for fiscal 2025:
- Net sales growth: now expected ~25%–27% for the full year, up from 20%–22% previously, reflecting better-than-expected Q1 performance and improving momentum into the backend of the year.
- Adjusted EBITDA: projected to be ~$297–$301 million, representing ~26%–28% YoY growth and margin leverage of approximately 20 basis points year-over-year.
- Adjusted net income and EPS: ~$198–$201 million and $3.36–$3.41 per diluted share, respectively.
- Gross margin: expected to be up about 20 bps YoY, aided by FX benefits, margin-accretive mix, and cost savings; partially offset by higher transportation costs and retailer-space expansion costs. Q2 gross margin expected to be flat YoY due to timing of retailer activity.
- Marketing/digital investment: targeted at ~24%–26% of net sales for 2025, with a more balanced cadence across the year; Q2 marketing as a percentage of net sales expected to step up vs. Q2 last year.
- Naturium: annualization of the acquisition starts in October; benefits to the EBITDA line are anticipated to accelerate in the second half as base marketing normalizes.
- Key risks and monitoring: potential tariff scenarios (up to 60% rumors) could necessitate price actions, FX optimization, supplier concessions, and further supply-chain diversification. ELF notes that actions could include selective pricing and geographic diversification (reducing China exposure from ~80% to a smaller share) to mitigate any tariff impact. Investors should monitor: tempo of Naturium integration, international expansion progress (Germany, Mexico, UK, Canada, and others), raw-material cost trends, and any shifts in consumer discretionary spending that could impact mass cosmetics versus prestige substitutes.
- Conclusion: The company contends that its five-area moat (people, value proposition, innovation, marketing engine, productivity) positions ELF for sustained market-share leadership and above-system growth, with a path to margin expansion as scale and normalization of marketing investments take hold in H2 2025.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ELF Focus
71.28%
15.60%
6.76%
60.08%
PG
52.10%
26.70%
7.64%
25.77%
CL
59.90%
22.80%
2.97%
26.82%
COTY
65.50%
14.20%
1.98%
24.58%
KVUE
57.60%
18.90%
2.79%
34.34%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case scenario supports a positive long-term thesis: ELF remains a category-leading, high-velocity mass cosmetics and skincare platform with durable margin potential and expanding international scale. The company’s growth is anchored by five pillars (teams with equity ownership, compelling value proposition, continuous Holy Grail-driven innovation, a disruptive marketing engine, and a productive SKU strategy) that collectively fuel sustained market-share gains and operating leverage. Key quantitative catalysts include: (i) continued high single-digit to mid-20s top-line growth aided by Naturium’s annualization and ongoing international expansion, (ii) margin expansion opportunities as marketing normalizes and scale efficiencies accrue in both ELF SKIN and Naturium, and (iii) capacity investments (ERP and distribution) that enable higher service levels and expanded retailer acceptance, particularly in drug and grocery channels. The upside hinges on successful integration of Naturium, execution of international expansion (Germany, Mexico, UK, Canada, Australia as applicable), and the ability to sustain elevated marketing ROIs. Risks to the thesis include tariff dynamics, transport-cost volatility, and potential shifts in consumer demand. Relative to peers in the consumer staples and beauty spaces, ELF’s growth-rate profile and profitability trajectory remain competitive, with a relatively high price-to-sales multiple reflecting the market’s confidence in sustainable share gains and the company’s scalable platform. Investors should monitor: Naturium’s full-year contribution and profitability, international margins as ELF scales in Europe and APAC, ERP deployment progress, and any changes in retailer promotional dynamics that could influence margin mix and growth pace.
Key Investment Factors
Growth Potential
Significant growth runway from international expansion (Germany via Rossmann, Mexico, UK, Netherlands, Italy), continued momentum in color cosmetics and skincare, and the Naturium integration which contributed 16 percentage points to net sales in Q1 and is expected to annualize in Oct 2024. Management highlighted a path to doubling market share in key channels and markets, with an opportunity to expand ELF’s footprint in drug and grocery channels where shelf space remains relatively underutilized.
Profitability Risk
Key risks include higher freight/cargo costs and retailer-space expansion costs that may pressure gross margin in the near term; tariff risk in 2026 requiring price, FX, and supplier concessions; macro consumer softness or preference for promotions; execution risk in large-scale ERP implementation (SAP) and international distribution expansion; reliance on continued effectiveness of disruptive marketing to sustain unaided brand awareness growth.
Financial Position
Solid liquidity with cash of $109.0M and net debt of approximately $153.1M, leveraging less than 1x net debt to adjusted EBITDA. Total assets of $1.2048B and stockholders’ equity of $703.6M provide a strong balance sheet to fund growth initiatives, including SAP deployment and distribution capacity expansion. The company’s retention of a high gross margin (~71%) and robust EBITDA margin (adjusted 24% in Q1) supports an attractive cash generation profile and deleveraging potential over time.
SWOT Analysis
Strengths
Strong, consistent growth profile: 22 consecutive quarters with at least 20% YoY sales growth; Q1 net sales up 50% YoY.
Rapid share gains in color cosmetics (26 percentage points) and skincare (2% market share; top 10 brand in ELF SKIN), driven by Holy Grail innovations.
Robust international expansion: 91% YoY international growth; strategic retailer partnerships (Douglas in Italy, Atos in the Netherlands, Rossmann in Germany).
Complementary acquisition: Naturium contributes to growth trajectory with additional SKUs and faster-growing mass skincare, now integrated with ELF’s distribution network.
Asset-light, scalable supply chain and digital-first go-to-market (direct-to-consumer/site loyalty programs).
Strong marketing engine with high ROIs and elevated unaided brand awareness (from 13% to 33%).
Healthy liquidity and modest leverage with a plan to fund ERP and distribution capacity upgrades.
Weaknesses
Near-term gross margin headwinds from elevated freight costs and retailer space expansion costs.
SG&A increase driven by Naturium integration and higher marketing spend; potential incremental deleveraging risk if the mix shifts unfavorably.
Execution risk related to large ERP upgrade (SAP) and rapid international expansion (new markets and retail partners).
Valuation potentially sensitive to consumer spending softness and promo intensity in mass cosmetics.
Opportunities
Expansion into Mexico and Germany (new market entries with Sephora in Mexico; Rossmann in Germany) and continued UK/Canada growth.
Skincare franchise growth via ELF SKIN and Naturium with a focus on mass-market premium positioning at attractive price points (e.g., Soft Glam Satin Foundation at $8).
Expansion of Naturium into Ulta across 1,400 stores and broader international distribution; potential acceleration of Naturium’s retail footprint beyond Ulta and Target.
Digitally driven consumer engagement (Beauty Squad loyalty >5 million members) and Roblox-based real-world commerce pilot enhancing brand affinity and conversion.
Continued optimization of SKU productivity with proactive SKU changes (up to 20% annually) to maximize shelf-space efficiency and margin.
Threats
Tariff risk as trade policies evolve; potential 2026 impact requiring price, FX, and supplier concessions plus supplier diversification to reduce China exposure (from ~80% to lower).
Macro consumer sentiment weakness or higher inflation reducing discretionary spending in beauty categories.
Competitive intensity and promotions from mass and prestige brands potentially compressing price realization.
Supply-chain disruptions or increases in freight costs could pressure margins if not offset by pricing, FX, or mix benefits.