Cosmetics company e.l.f. Beauty (NYSE:ELF) announced better-than-expected revenue in Q3 CY2024, with sales up 39.7% year on year to $301.1 million. The company expects the full year’s revenue to be around $1.33 billion, close to analysts’ estimates. Its non-GAAP profit of $0.77 per share was also 79.3% above analysts’ consensus estimates.

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e.l.f. (ELF) Q3 CY2024 Highlights:

• Revenue: $301.1 million vs analyst estimates of $289.5 million (4% beat)

• Adjusted EPS: $0.77 vs analyst estimates of $0.43 (79.3% beat)

• EBITDA: $69.33 million vs analyst estimates of $45.03 million (54% beat)

• The company lifted its revenue guidance for the full year to $1.33 billion at the midpoint from $1.29 billion, a 2.7% increase

• Management raised its full-year Adjusted EPS guidance to $3.47 at the midpoint, a 2.5% increase

• EBITDA guidance for the full year is $306 million at the midpoint, above analyst estimates of $302.5 million

• Gross Margin (GAAP): 71.1%, in line with the same quarter last year

• Operating Margin: 9.3%, down from 18.6% in the same quarter last year

• EBITDA Margin: 23%, down from 28% in the same quarter last year

• Free Cash Flow Margin: 3.1%, down from 12.6% in the same quarter last year

• Market Capitalization: $6.04 billion

“Q2 marked another quarter of consistent, category-leading growth. In Q2, we delivered 40% net sales growth, fueled by 195 basis points of market share gains in the U.S. and 91% net sales growth internationally,” said Tarang Amin, CEO of e.l.f.

Company Overview

e.l.f. Beauty (NYSE:ELF), which stands for ‘eyes, lips, face’, offers high-quality beauty products at accessible price points.

Personal Care

While personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering. Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.

Sales Growth

Examining a company’s long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

e.l.f. is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale. On the other hand, it can grow faster because it’s working from a smaller revenue base and has a longer runway of untapped store chains to sell into.