On February 6, 2025, e.l.f. Beauty Inc (ELF, Financial) released its 8-K filing for the third quarter of fiscal 2025, showcasing a robust 31% increase in net sales to $355.3 million, surpassing the analyst estimate of $329.67 million. However, the company's GAAP diluted earnings per share (EPS) of $0.30 fell short of the estimated $0.61. The adjusted EPS of $0.74 exceeded expectations.
Company Overview
e.l.f. Beauty Inc is a multi-brand beauty company known for its inclusive, accessible, clean, vegan, and cruelty-free cosmetics and skincare products. The company markets its products under brands such as e.l.f. Cosmetics, W3LL PEOPLE, and Keys Soulcare, primarily generating revenue from the U.S. market through retail and e-commerce channels.
Performance Highlights and Challenges
The third quarter results marked the 24th consecutive quarter of net sales growth for e.l.f. Beauty Inc, driven by strong performance in both retail and e-commerce channels. The company gained 220 basis points of market share in the U.S., reflecting its competitive positioning in the beauty industry. However, the increase in selling, general, and administrative (SG&A) expenses, which rose to 61% of net sales, posed a challenge. This increase was attributed to higher marketing and digital spend, compensation, and operational costs.
Financial Achievements
e.l.f. Beauty Inc's gross margin improved by 40 basis points to 71%, benefiting from favorable foreign exchange impacts and cost savings. The company's adjusted EBITDA rose by 16% year-over-year to $68.7 million, representing 19% of net sales. These achievements underscore the company's ability to manage costs effectively while expanding its market presence.
Key Financial Metrics
For the nine months ended December 31, 2024, e.l.f. Beauty Inc reported a 40% increase in net sales to $980.9 million. The company's adjusted net income for this period was $152.3 million, with an adjusted diluted EPS of $2.61, surpassing the annual estimate of $2.52. The balance sheet showed $73.8 million in cash and cash equivalents, with long-term debt reduced to $154.1 million.
| Metric | Q3 2025 | Q3 2024 |
|---|---|---|
| Net Sales | $355.3 million | $270.9 million |
| Gross Margin | 71% | 70.6% |
| Net Income (GAAP) | $17.3 million | $26.9 million |
| Adjusted Net Income | $43.0 million | Not Provided |
| Adjusted EBITDA | $68.7 million | Not Provided |
Analysis and Outlook
Despite the impressive sales growth, e.l.f. Beauty Inc faces challenges with rising SG&A expenses and foreign currency exchange losses. The company's decision to lower its fiscal 2025 outlook reflects a cautious approach amidst softer trends in January. The updated outlook anticipates a 27-28% year-over-year increase in net sales, slightly below the previous expectation of 28-30%.
“Given softer than expected trends in January, we are taking a prudent approach and lowering our outlook for the final quarter of our fiscal year,” said Mandy Fields, e.l.f. Beauty’s Chief Financial Officer.
Overall, e.l.f. Beauty Inc's strong market share gains and sales growth highlight its resilience in a competitive industry, while the focus on managing costs and navigating market challenges will be crucial for sustaining its growth trajectory.
Explore the complete 8-K earnings release (here) from e.l.f. Beauty Inc for further details.
