e.l.f. Beauty Inc (ELF) Q2 2025 Earnings Call Highlights: Strong International Growth and ...

GuruFocus News
4 min read

In This Article:

  • Net Sales Growth: 40% year-over-year in Q2.

  • Adjusted EBITDA: $69 million, up 15% versus last year.

  • Gross Margin: 71%, up approximately 40 basis points compared to prior year.

  • International Net Sales Growth: 91% in Q2.

  • Digital Consumption Growth: Nearly 40% year-over-year.

  • Market Share Gain: Increased by 195 basis points in the US.

  • SG&A as a Percentage of Sales: 53% in Q2 compared to 45% last year.

  • Cash on Hand: $97 million at the end of the quarter.

  • Inventory Balance: $239 million, up from $147 million a year ago.

  • Raised FY25 Net Sales Growth Guidance: 28% to 30%.

  • Adjusted EBITDA Guidance for FY25: $304 million to $308 million.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • e.l.f. Beauty Inc (NYSE:ELF) reported a 40% increase in net sales for Q2, surpassing their expectations.

  • The company achieved its 23rd consecutive quarter of net sales growth and market share gains.

  • International sales grew by 91%, contributing to 21% of total net sales, up from 16% a year ago.

  • The Beauty Squad loyalty program saw a 30% year-over-year increase in membership, reaching 5.3 million members.

  • e.l.f. Beauty Inc (NYSE:ELF) raised its FY25 guidance, expecting 28% to 30% net sales growth, reflecting confidence in continued market share gains.

Negative Points

  • U.S. consumption trends in Q2 were softer than expected, with growth at 16% versus the anticipated 20%.

  • The overall color cosmetics category saw a decline of 5% in Q2, indicating a more cautious consumer spending environment.

  • The company faced challenges in cycling significant strength from previous product launches, impacting current growth.

  • Adjusted SG&A expenses increased to 53% of sales, up from 45% last year, driven by higher marketing and digital investments.

  • Inventory levels rose to $239 million, up from $147 million a year ago, due to timing of inventory ownership and increased demand.

Q & A Highlights

Q: As makeup or mass cosmetics has slowed, have you reconsidered marketing spend as a percentage of sales, and can you comment on challenges in the drug channel? A: Tarang Amin, CEO, stated that despite a pullback in Q2, they remain bullish on the category and plan to maintain consistent marketing spend at 24% to 26% of sales. Their marketing is effective, with ROI above industry benchmarks. In the drug channel, e.l.f. Beauty is expanding, with increased space in CVS and Walgreens, offsetting any channel dynamics.

Q: Can you discuss the growth of mass beauty and your ability to stay ahead of a slowing category? A: Tarang Amin, CEO, highlighted their consistent value proposition, innovation, and disruptive marketing as key drivers. They have significant market share opportunities, especially in color cosmetics, skincare, and international markets. Their strategy includes expanding space in Target and Walgreens and entering new international markets.

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