e.l.f. Beauty, Inc.

Note 1—Nature of operations

e.l.f. Beauty, Inc., a Delaware corporation (“e.l.f. Beauty” and together with its subsidiaries, the “Company”), is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and cruelty free cosmetics and skin care products. The Company's mission is to make the best of beauty accessible to every eye, lip and face.

We believe our ability to deliver cruelty free, clean, vegan and premium-quality products at accessible prices with broad appeal differentiates us in the beauty industry. Further, we believe the combination of our passionate team of owners, value proposition, powerhouse innovation, disruptive marketing engine and productivity model have positioned us well to navigate the competitive beauty market.

Our family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People and Keys Soulcare. Our brands are available online and across leading beauty, mass-market and specialty retailers. We have a strong relationships with our retail customers such as Target, Walmart, Ulta Beauty, Amazon and other leading retailers that have enabled the Company to expand distribution both domestically and internationally.

Note 2—Summary of significant accounting policies

Basis of presentation

The consolidated financial statements and related notes have been prepared in accordance with US generally accepted accounting principles (“US GAAP”) and all intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain prior period amounts in the consolidated statements of cash flows have been reclassified to conform with the current period presentation.

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and highly liquid investments purchased with maturities of three months or less.

Accounts receivable

Trade receivables consist of uncollateralized, non-interest bearing customer obligations from transactions with the Company's customers, reduced by an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make payments. The allowance is based on the evaluation and aging of past due balances, specific exposures, historical trends and economic conditions.

The Company maintains allowances for doubtful accounts for uncollectible accounts receivable. Management estimates anticipated losses from doubtful accounts based on days past due, collection history and the financial health of customers. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. Recoveries of receivables previously written off are recorded when received. The Company recorded an allowance for doubtful accounts of $1.3 million and $1.2 million as of March 31, 2025 and March 31, 2024, respectively. The Company recorded a reserve for sales adjustments of $45.0 million and $38.7 million as of March 31, 2025 and March 31, 2024, respectively, which is also presented as a reduction to accounts receivable. The Company grants credit terms in the normal course of business to its customers. Trade credit is extended based upon an evaluation of each customer’s ability to perform its payment obligations.

Concentrations of credit risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents including money market funds. Although the Company deposits its cash with creditworthy financial institutions, its deposits, at times, may exceed federally insured limits. To date, the Company has not experienced any losses on its cash deposits. The Company performs credit evaluations of its customers and the risk with respect to trade receivables is further mitigated by the short duration of customer payment terms and the pedigree of the customer base.

During the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, the following customers individually accounted for greater than 10% of the Company’s net sales as disclosed below:

• Customer comprised less than 10% of net sales at the period ended.

Customers that individually accounted for greater than 10% of the Company’s accounts receivable at the end of the periods as of March 31, 2025 and March 31, 2024, respectively, are as presented:

• Customer comprised less than 10% of accounts receivable at the period ended.

Inventory

Inventory, consisting principally of finished goods, is stated at the lower of cost and net realizable value. Cost is principally determined by the first-in, first-out method. The Company also records a reserve for excess and obsolete inventory, which represents the excess of the cost of the inventory over its estimated market value. This reserve is based upon an assessment of historical trends, current market conditions and forecasted product demand. The Company recorded an adjustment for excess and obsolete inventory, which is presented as a reduction to inventory of $14.4 million and $10.6 million as of March 31, 2025 and March 31, 2024, respectively.

Property and equipment and other assets

Property and equipment is stated at cost and is depreciated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the useful lives of the assets. Repairs and maintenance expenditures are expensed as incurred.

Useful lives by major asset class are as follows:

As of March 31, 2025 and March 31, 2024, included in other assets are retail product displays, net, of $69.3 million and $41.1 million, respectively, that are generally amortized over a period ofthree years. Amortization expense for retail product displays was $22.3 million, $11.4 million and $5.2 million for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

The Company evaluates events and changes in circumstances that could indicate carrying amounts of long-lived assets, including property and equipment, may not be recoverable. When such events or changes in circumstances occur, the Company assesses the recoverability of long-lived assets by determining whether or not the carrying value of such assets will be recovered through undiscounted future cash flows derived from their use and eventual disposition. For purposes of this assessment, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. The Company’s long-lived assets are grouped on an entity-wide basis. This is due, in part, to the integrated nature of the Company’s various distribution channels and the extent of shared costs across those channels. If the sum of the undiscounted future cash flows is less than the carrying amount of an asset, the Company records an impairment loss for the amount by which the carrying amount of the assets exceeds its fair value. There wereno impairment charges recorded on long-lived assets during the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

As of March 31, 2025 and March 31, 2024, included in prepaid expenses and other current assets are internal-use software costs related to cloud applications, net, of $50.9 million and $29.4 million, respectively, that are generally amortized over a period ofthree years. Amortization expense for internal-use software costs related to cloud applications was $6.6 million, $5.0 million and $3.4 million for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

Goodwill and intangible assets

Goodwill represents the excess of the purchase price for an acquisition over the fair value of the net assets acquired. In addition, the Company has acquired finite-lived intangible assets and an indefinite-lived intangible asset.

Goodwill is not amortized but rather is reviewed annually for impairment, at the reporting unit level, or when there is evidence that events or changes in circumstances indicate that the Company’s carrying amount may not be recovered. When testing goodwill for impairment, the Company first performs an assessment of qualitative factors. If qualitative factors indicate that it is more likely than not that the fair value of the relevant reporting unit is less than its carrying amount, the Company tests goodwill for impairment at the reporting unit level using a two-step approach. In step one, the Company determines if the fair value of the reporting unit exceeds the unit’s carrying value. If step one indicates that the fair value of the reporting unit is less than its carrying value, the Company performs step two, determining the fair value of goodwill and, if the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded. The Company has identified a single reporting unit for purposes of impairment testing due, in part, to the integrated nature of the Company’s various distribution channels and the extent of shared costs across those channels.

Indefinite-lived intangible assets are not amortized but rather are tested for impairment annually and impairment is recognized if the carrying amount exceeds the fair value of the intangible asset. The Company evaluates its indefinite-lived intangible asset to determine whether current events and circumstances continue to support an indefinite useful life. Amortization of intangible assets with finite useful lives is computed on a straight-line basis over periods of 3 years to 15 years. The determination of the estimated period of benefit is dependent upon the use and underlying characteristics of the intangible asset. The Company evaluates the recoverability of its intangible assets subject to amortization when facts and circumstances indicate that the carrying value of the asset may not be recoverable. If the carrying value of an intangible asset is not recoverable, impairment loss is measured as the amount by which the carrying value exceeds its estimated fair value.

There wereno impairment charges recorded on goodwill or indefinite-lived intangible assets during the fiscal years ended March 31, 2025, March 31, 2024 or March 31, 2023.

Debt issuance costs

Debt issuance costs and lender fees were incurred for arranging the credit facilities from various financial institutions. For credit facilities consisting of both term and revolving debt, such costs are allocated to each sub-facility based upon the total borrowing capacity. For term debt, issuance costs are presented within the related long-term debt liability on the consolidated balance sheet and lender fees are presented as a direct deduction from the carrying amount. Both debt issuance costs and lender fees are amortized over the term of the related debt using the effective interest rate method. For revolving debt, issuance costs and lender fees are presented as a noncurrent asset and amortized over the term of the related debt on a straight-line basis.

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate their fair values due to the short-term nature of these items. The carrying amounts of bank debt approximate their fair values as the stated interest rates approximate market rates currently available to the Company for loans with similar terms. See Note 7 Fair value of financial instruments to consolidated financial statements in Part IV, Item 15.“Exhibits, financial statement schedules.”

Segment reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. Utilizing these criteria, the Company manages its business on the basis ofone operating segment andone reportable segment. It is impracticable for the Company to provide revenue by product line.

The Company’s CODM, who is the Chief Executive Officer, assesses performance of the segment and decides how to allocate resources based on consolidated net income as reported on the statements of operations. The CODM reviews measures of segment profits or loss by comparing budgeted verses actual and forecasted results, for purposes of assessing performance, allocating resources, and making decisions. See Note 17, Segment information to the Notes to consolidated financial statements for additional information about the Company’s reported segment revenue, significant segment expenses and segment net income.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

During the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, net sales in the United States and International were as follows (in thousands):

As of March 31, 2025 and March 31, 2024, the Company had property and equipment in the United States and International as follows (in thousands):

Business combinations

The purchase price of a business acquisition is allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the business combination date. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires the Company to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. Unanticipated events or circumstances may occur that could affect the accuracy of the Company’s fair value estimates, and under different assumptions, the resulting valuations could be materially different.

Costs that are incurred to complete the business combination, such as legal and other professional fees, are not considered as a part of consideration transferred and are charged to selling, general and administrative expense as they are incurred.

Revenue recognition

Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

For the Company’s retail customer transactions, a contract exists when a written purchase order is received. For the Company’s direct-to-consumer transactions, a contract exists when an order is placed online. Control transfers at the time of shipment or the time of delivery, depending upon the specific terms of the customer arrangement. Nearly all of the Company’s transactions with its customers and consumers include a single performance obligation delivered at a point in time.

The transaction price can include both fixed and variable consideration. In most cases, it is entirely comprised of variable consideration with the variability driven by expected sales discounts, markdown support and other incentives and allowances offered to customers. These incentives may be explicit or implied by the Company's historical business practices. Generally, these commitments represent cash consideration paid to a customer and do not constitute a promised good or service.

The amount of variable consideration is estimated at the time of sale based on either the expected amount or the most likely amount, depending on the nature of the variability. The Company regularly reviews and revises, when deemed necessary, its estimates of variable consideration, based on both customer-specific expectations as well as historical rates of realization. A provision for customer incentives and allowances is included on the consolidated balance sheet, net against accounts receivable.

Disaggregated revenue

The Company distributes products both through national and international retailers, as well as direct-to-consumers through its e-commerce channel. The marketing and consumer engagement benefits that the direct-to-consumer channel provides are integral to the Company’s brand and product development strategy and drive sales across channels. As such, the Company views itstwo primary distribution channels as components of one integrated business, as opposed to discrete revenue streams.

The Company sells a variety of beauty products but does not consider them to be meaningfully different revenue streams given similarities in the nature of the products, the target consumer and the innovation and distribution processes. See Segment Reporting section above for the table providing disaggregated revenue from contracts with customers by geographical market, as the nature, amount, timing and uncertainty of revenue and cash flows can differ between domestic and international customers.

Contract assets and liabilities

The Company extends credit to its retail customers based upon an evaluation of their credit quality. The majority of retail customers obtain payment terms of approximately 30 days and a contract asset is recognized for the related accounts receivable. Additionally, shipping terms can vary, giving rise to contract liabilities for contracts where payment has been received in advance of delivery. The contract liability balance can vary significantly depending on the timing of when an order is placed and when shipment or delivery occurs.

As of March 31, 2025, other than accounts receivable, the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its consolidated balance sheet.

Practical expedients

The Company elected to record revenue net of taxes collected from customers and exclude the amounts from the transaction price. The Company includes in revenue any taxes assessed on the Company's total gross receipts for which it has the primary responsibility to pay the tax.

The Company elected not to disclose revenues related to remaining performance obligations for partially completed or unfulfilled contracts that are expected to be fulfilled within one year as such amounts were insignificant.

A reconciliation of the beginning and ending amounts of the reserve for sales adjustments for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023 is as follows (in thousands):

In the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, the Company recorded $3.9 million, $3.4 million and $1.6 million, respectively, of reimbursed shipping expenses from customers within revenues. The shipping and handling costs associated with product distribution were $74.1 million, $57.1 million and $36.9 million, in the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Future income tax benefits are recognized to the extent that realization of such benefits is more likely than not. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in its income tax provision.

Leases

The Company has entered into operating lease agreements for office space, warehouse and equipment and software. Lease assets and liabilities are recognized at the present value of the minimum rental payments (excluding executory costs) and expected payment under any residual value guarantee at the lease commencement date. The Company uses its incremental borrowing rate to determine the present value of lease payments.

Non-lease components primarily include payments for maintenance and utilities. The Company accounts for the non-lease components in a contract (e.g., common area maintenance) as part of the lease component by electing practical expedient for all leases of commercial office and warehouse space, as the non-lease components are not a significant portion of the total consideration in those agreements. The Company's lease terms include periods under options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Operating lease assets and liabilities are included on the Company's consolidated balance sheet. The current portion of the Company's operating lease liabilities is included in accrued expenses and other current liabilities and the long-term portion is included in long-term operating lease liabilities. Finance lease assets are included in other assets. Finance lease liabilities are included in long-term debt and finance lease obligations. Operating lease expense is recognized on a straight-line basis over the lease term.

Foreign currency

The functional currency of most of the Company’s foreign subsidiaries as of March 31, 2025 is the US dollar. During the fiscal year ended March 31, 2024, the Company reassessed its functional currency and determined that the functional currency for one of its foreign subsidiaries changed from the US dollar to GBP. The change in functional currency is accounted for prospectively from October 1, 2023. Prior to the change, the functional currency of all of the Company’s foreign subsidiaries was the US dollar. Transactions denominated in currencies other than the functional currency are recorded at exchange rates in effect on the date of the transaction. At the end of each reporting period, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Unrealized foreign exchange gains and losses due to re-measurement of monetary assets and liabilities denominated in non-functional currencies as well as transaction gains or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other income (expense), net in the consolidated statements of operations.

The financial statements of the non-US dollar functional currency subsidiary are translated into US dollars using period-end rates of exchange for assets and liabilities, historical rates of exchange for equity and average rates of exchange for revenue and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income (loss) as a component of stockholders’ equity.

Stock based compensation

The Company has several stock award plans, which are described in detail in Note 12. The Company accounts for stock based compensation under ASC 718, “Compensation-Stock Compensation.” The Company recognizes expense over the requisite service period of the award, net of an estimate for the impact of award forfeitures.

Advertising costs

Advertising costs are expensed as incurred or distributed. Advertising costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations and amounted to approximately $281.5 million, $209.2 million and $96.7 million in the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

Net income per share

Basic net income per share is computed using net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the dilutive effects of stock options and restricted stock outstanding during the period, to the extent such securities would not be anti-dilutive and is determined using the treasury stock method.

Recent accounting pronouncements

New accounting pronouncement adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280). The standard expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, ASU 2023-07 enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements. The Company adopted ASU 2023-07 effective for its annual period beginning April 1, 2024 and adopted the changes to the segment reporting guidance on a retrospective basis. The Company’s adoption of ASU 2023-07 only impacts its disclosures with no impacts to the Company’s results of operations, cash flows, and financial condition. See Segment Reporting section above for details on segment reporting and Note 17, Segment information to the Notes to consolidated financial statements for additional information about the Company’s reported segment revenue, significant segment expenses and segment net income.

New accounting pronouncements issued but not yet adopted

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740). The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The new requirements apply to all entities subject to income taxes and will be effective for the Company’s annual periods beginning April 1, 2025. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively and early adoption is permitted. The Company expects ASU 2023-09 to only impact its disclosures with no impacts to the Company’s results of operations, cash flows, and financial condition.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). The standard requires additional disclosures, in the notes to financial statements, of specified information about certain costs and expenses included in the captions presented on the face of the income statement. The new guidance is effective for the Company’s annual reporting period beginning April 1, 2027, and interim reporting periods beginning April 1, 2028. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively and early adoption is permitted. The Company expects ASU 2024-03 to only impact its disclosures with no impacts to the Company’s results of operations, cash flows, and financial condition.

Note 3 —Acquisition

On October 4, 2023, the Company, through its wholly owned subsidiary, e.l.f. Cosmetics, Inc., completed its acquisition of Naturium LLC (“Naturium”) (including the indirect acquisition of equity interests in Naturium through the purchase of TCB-N Prelude Blocker Corp., a holding company) (the “Acquisition”), which furthered the Company’s mission to make the best of beauty accessible to every eye, lip, face and skin concern. Naturium is a skin care company that provides clinically effective products at an affordable price. The Company directly and indirectly acquired all rights, title and interest in and to the outstanding equity securities of Naturium for a purchase price of $333.0 million in a combination of cash and Company stock.

The following table summarizes the fair market value of the consideration transferred and how the Company calculates the goodwill resulting from the Acquisition (in thousands):

(1)The fair market value of the $57.8 million common stock issued (equivalent to 577,659 shares of common stock) was determined on the basis of the opening market price of the Company’s stock of $100.01 per share on the acquisition date.

(2)In connection with the Acquisition, the Company paid Naturium’s acquisition-related expenses of $10.5 million recognized as an assumed liability at the acquisition date.

The Company incurred and expensed acquisition transaction costs of $0.4 million and $3.4 million during the fiscal years ended March 31, 2025 and March 31, 2024, respectively, which are included as a component of selling, general and administrative expenses in the consolidated statements of operations.

The Acquisition has been accounted for as a business combination under the acquisition method and, accordingly, the total purchase price is allocated to the tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. The purchase price allocation, deferred tax calculations and residual goodwill were finalized during the quarter ended September 30, 2024. Naturium’s results of operations have been included in the Company's consolidated financial statements from the date of acquisition.

The following table presents the purchase price allocation recorded in the Company's condensed consolidated balance sheet on the acquisition date and upon finalization during the quarter ended September 30, 2024. The adjustment reflects finalization of purchase accounting for facts and circumstances that existed upon the acquisition date as follows (in thousands):

(1)The goodwill represents the excess value over both tangible and intangible assets acquired and liabilities assumed. The goodwill recognized in this transaction is primarily attributable to the Company’s expectation that Naturium can continue to expand distribution and deliver new skin care products. A substantial amount of the goodwill is expected to be deductible for tax purposes.

The Company made certain measurement period adjustments in the fourth quarter of fiscal 2024 and second quarter of fiscal 2025 resulting in an aggregate increase to goodwill of $0.4 million. None of the adjustments were individually material. There was no income statement impact on comparable prior periods presented as a result of these adjustments.

Intangible assets

The estimated fair values (all considered level 3 measurements) of the identifiable intangible assets acquired as of the acquisition date, their estimated useful lives and fair value methodology are as follows:

Certain financial information (unaudited)

The amounts of Naturium’s net sales included in the Company's condensed consolidated financial statements from the date of acquisition and the net sales of the combined companies on an unaudited pro forma basis, had the acquisition date been April 1, 2022, are as follows (in thousands):

The unaudited pro forma financial information shown in the table above are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the Acquisition had taken place at April 1, 2022 (the beginning of the comparable prior annual reporting period presented in the period of acquisition).

The pro forma earnings of the combined companies are not presented as the effects of the Acquisition in earnings are not material in relation to the overall consolidated financial statements.

Note 4—Goodwill and other intangible assets

Information regarding the Company’s goodwill and intangible assets as of March 31, 2025 is as follows (in thousands):

Information regarding the Company’s goodwill and intangible assets as of March 31, 2024 is as follows (in thousands):

The Company has not recognized any impairment charges on its goodwill or intangible assets. Amortization expense on finite-lived intangible assets was $17.4 million, $15.0 million and $8.1 million for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

The estimated future amortization expense related to the finite-lived intangible assets, assumingno impairment as of March 31, 2025, is as follows (in thousands):

Note 5—Property and equipment

Property and equipment as of March 31, 2025 and March 31, 2024 consists of the following (in thousands):

Depreciation and amortization expense on property and equipment was $4.4 million, $3.5 million and $4.3 million during the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

Note 6—Accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of March 31, 2025 and March 31, 2024 consists of the following (in thousands):

Note 7—Fair value of financial instruments

The fair value of financial instruments are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is measured using inputs from the three levels of the fair value hierarchy, which are described as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities

Level 2—Quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3—Inputs that are unobservable (for example, cash flow modeling inputs based on management’s assumptions)

The assets’ or liabilities’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following table sets forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy as of March 31, 2025 (in thousands):

(1) The gross carrying amounts of the Company’s bank debt, before reduction of the debt issuance costs, approximate their fair values as the stated rates approximate market rates for loans with similar terms.

The following table sets forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy as of March 31, 2024 (in thousands):

(1) Of this amount, $100.3 million is classified as current. The gross carrying amounts of the Company’s bank debt, before reduction of the debt issuance costs, approximate their fair values as the stated rates approximate market rates for loans with similar terms.

The Company did not transfer any assets measured at fair value on a recurring basis to or from Level 1 or Level 2 for any of the periods presented.

Note 8—Debt

The Company’s outstanding debt as of March 31, 2025 and March 31, 2024 consists of the following (in thousands):

(1) See further discussion below. As of March 31, 2025, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

Amended Credit Agreement

On April 30, 2021, the Company amended and restated its prior credit agreement (such amended and restated credit agreement, as further amended, supplemented or modified from time to time, the “Amended Credit Agreement”) and refinanced all loans under the prior credit agreement. The Amended Credit Agreement has afive year term and consists of revolving credit facility (the “Amended Revolving Credit Facility”) and a term loan facility (the “Amended Term Loan Facility”).

All amounts under the Amended Revolving Credit Facility are available for draw until the maturity date on April 30, 2026. The Amended Revolving Credit Facility was collateralized by substantially all of the Company’s assets and requires payment of an unused fee ranging from 0.10% to 0.30% (based on the Company’s consolidated total net leverage ratio (as defined in the Amended Credit Agreement)) times the average daily amount of unutilized commitments under the Amended Revolving Credit Facility. The Amended Revolving Credit Facility also provides for sub-facilities in the form of a $7 million letter of credit and a $5 million swing line loan.

Prior to the Second Amendment (as defined below), both the Amended Revolving Credit Facility and the Amended Term Loan Facility bore interest, at the borrowers’ option, at either (i) a rate per annum equal to an adjusted LIBOR rate determined by reference to the cost of funds for the United States (“US”) dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from 1.25% to 2.125% based on our consolidated total net leverage ratio (the “Applicable Margin”) or (ii) a floating base rate plus an applicable margin ranging from 0.25% to 1.125% based on our consolidated total net leverage ratio. On March 29, 2023, the Company amended the Amended Credit Agreement to transition the benchmark from LIBOR to an adjusted Secured Overnight Financing Rate (“SOFR”) (which is equal to the applicable SOFR plus 0.10%) (such transaction, the “First Amendment”). In connection with the First Amendment, all outstanding LIBOR loans were converted to SOFR loans. The annual interest rate for SOFR borrowings will be equal to term SOFR plus 0.10%, subject to a floor of 0%, plus a margin ranging from 1.25% to 2.125%.

Second Amended Credit Agreement

On August 28, 2023, the Company entered into the Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”). Pursuant to the Second Amendment, the Company may borrow incremental term loans in a principal amount equal to $115.0 million under the Amended Credit Agreement (the “Incremental Term Loan”). The Incremental Term Loan will bear interest at a rate per annum equal to, at the Company’s election, adjusted term SOFR or an alternate base rate as set forth in the Second Amendment, plus an interest rate margin, to be based on consolidated total net leverage ratio levels, ranging from, (i) in the case of SOFR loans,1.50% to 2.375%; provided that if SOFR is less than 0.00%, such rate shall be deemed to be 0.00%, and (ii) in the case of alternate base rate loans,0.50% to 1.375%; provided that if the alternate base rate is less than 1.00%, such rate shall be deemed to be 1.00%. The Incremental Term Loan amortizes at 5.00% per annum payable in equal quarterly installments of 1.25% per annum, commencing with the fiscal quarter ended on December 31, 2023. The Company used the Incremental Term Loan together with cash from its balance sheet and additional borrowings under its Amended Revolving Credit Facility to consummate the Acquisition (as defined in Note 3 hereto) and to pay related fees and expenses in connection with the Acquisition and Second Amendment.

The Amended Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict the Company’s ability to pay dividends and distributions or repurchase capital stock, incur additional indebtedness, create liens on assets, engage in mergers or consolidations and sell or otherwise dispose of assets. The Amended Credit Agreement also includes reporting, financial and maintenance covenants that require the Company to, among other things, comply with certain consolidated total net leverage ratios and consolidated fixed charge coverage ratios.

Third Amendment to Amended Credit Agreement

On August 26, 2024, the Company entered into the Third Amendment to Amended and Restated Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Company increased its capacity to make restricted payments, provided that after giving effect to any such payment, the Company complies with a certain consolidated total net leverage ratio.

Fourth Amendment to Amended Credit Agreement

On March 3, 2025, the Company entered into the Fourth Amendment to Amended and Restated Credit Agreement and First Amendment to Pledge and Security Agreement (the “Fourth Amendment”).The Fourth Amendment, among other things, established a revolving credit facility in an aggregate principal amount of $500 million (the “New Revolving Facility”), refinanced the existing indebtedness under the Amended Credit Agreement and reduced the interest rate margin for loans. Additionally, certain baskets under the Existing Credit Agreement were increased as part of the Fourth Amendment. The proceeds of the New Revolving Facility are available to e.l.f. Cosmetics and certain other subsidiaries of the Company for working capital, capital expenditures and other general corporate purposes, including to finance acquisitions and investments permitted under the Amended Credit Agreement and other permitted distributions on account of the equity interests of the Company and its subsidiaries. In addition, up to $35 million of the New Revolving Facility is available for issuing letters of credit. The maturity date of the New Revolving Facility is March 3, 2030. The unused balance of the New Revolving Credit Facility as of March 31, 2025 was $243.3 million.

Loans under the New Revolving Facility will bear interest at a rate per annum equal to, at e.l.f. Cosmetics’ election: SOFR or an alternate base rate as set forth in the Fourth Amendment, plus an interest rate margin, to be based on consolidated total net leverage ratio levels, ranging from, (i) in the case of SOFR loans,1.125% to 1.875%; provided that if SOFR is less than 0.00%, such rate shall be deemed to be 0.00%, and (ii) in the case of alternate base rate loans,0.125% to 0.875%; provided that if the alternate base rate is less than 1.00%, such rate shall be deemed to be 1.00%.

The Fourth Amendment also replaced the fixed charge coverage ratio financial covenant with a minimum interest coverage ratio of at least 3.50 to 1.00, to be tested as of the last day of each fiscal quarter. The minimum interest coverage ratio is based on the ratio of trailing twelve month EBITDA for the four fiscal quarter period most recently ended to cash interest expense for such period.

The interest rate as of March 31, 2025 for the Amended Credit Agreement was approximately 5.4%.

The Fourth Amendment also amended the Pledge and Security Agreement, dated as of December 23, 2016, among the Company, certain subsidiaries of the Company, and the Agent pursuant to which certain covenants and thresholds set forth therein were amended, amongst other changes.

Aggregate future minimum principal payments are $256.7 million due March 31, 2030.

The components of interest expense, net are as follows (in thousands):

Note 9—Commitments and contingencies

Legal Contingencies

The Company is from time to time subject to, and is currently involved in, legal proceedings, claims, regulatory matters and litigation arising in the ordinary course of business, including the matters described below. While it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on the Company’s business, results of operations or financial condition or cash flows. The Company records a liability for legal proceedings when it determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company can provide no assurance as to the scope and outcome of these matters and cannot reasonably estimate any loss or range of loss, if any, that may arise from these matters. Due to the early stage of the Securities Class Action and Derivative Matters described below, the Company cannot reasonably estimate the potential range of loss, if any. The Company disputes the allegations and intends to vigorously defend against them.

Securities Class Action and Derivative Matters

On March 6, 2025 and April 8, 2025, the Company, our Chief Executive Officer, and our Chief Financial Officer (collectively, “Defendants”) were named as defendants in separate purported securities class action complaints filed in the United States District Court for the Northern District of California by plaintiffs Luke Rottman and Boston Retirement System. The complaints in both purported securities class actions allege that Defendants made false or misleading statements in violation of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, and violated Section 20(a) of the Exchange Act, and seek damages and other relief. On May 5, 2025, two putative shareholders filed motions for lead plaintiff, with one of those motions also seeking to consolidate the purported securities class actions into one action. Those motions remain pending.

On March 28, 2025 and April 22, 2025, derivative action complaints were filed purportedly on behalf of the Company by separate putative shareholders Joseph Falconio and Robbie Bosworth against certain of the Company’s current and former officers and directors in the United States District Court for the District of Northern California. The complaints allege that certain of the Company’s officers and directors breached their fiduciary duties in connection with the Company’s purported issuance of false and misleading statements concerning the financial condition of the Company. Premised upon the same allegations, the complaints also assert derivative causes of action under the Exchange Act, including Section 10(b) and Rule 10b-5 thereunder, under Sections 24400 and 25500 of California’s Corporations Code, and for waste and unjust enrichment. The latter filed complaint likewise asserts derivative claims under the Exchange Act, including Sections 14(a) and 20(a), and for abuse of control and gross mismanagement, and seeks contribution under Sections 10(b) and 12D of the Exchange Act. On May 19, 2025, the parties subsequently filed a stipulation to consolidate the two cases and to appoint lead counsel. That stipulation remains pending.

On May 19, 2025, putative shareholder Mikhail Venikov filed a derivative lawsuit purportedly on behalf of the Company against certain of the Company’s current and former officers and directors in the United States District Court for the District of Delaware. Plaintiff Venikov asserts derivative claims under the Exchange Act, including Sections 14(a), 10(b), and 20(a), in addition to asserting claims for breach of fiduciary duty and unjust enrichment.

Note 10—Income taxes

The components of income (loss) before the provision for income taxes are as follows (in thousands):

The components of the benefit (provision) for income taxes are as follows (in thousands):

The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate:

The components of net deferred taxes arising from temporary differences are as follows (in thousands):

The deferred tax assets and liabilities are reported in the accompanying balance sheets as follows (in thousands):

The valuation allowance was $0.7 million and $0.7 million as of March 31, 2025 and March 31, 2024, respectively, primarily relating to an investment impairment for which we do not believe a tax benefit is more likely than not to be realized.

As of March 31, 2025, the Company had gross federal, state and foreign net operating loss carryforwards ofzero, $0.8 million and $1.5 million, respectively. The state net operating loss carryforwards can either be carried forward 20 years or indefinitely. The state net operating loss carryforwards will begin to expire in 2038. The foreign net operating loss carryforwards can either be carried forward 5 years or indefinitely and will begin to expire in 2027.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

If all of the Company’s unrecognized tax benefits as of March 31, 2025, March 31, 2024 and March 31, 2023 were recognized, $0.5 million, $0.4 million and $0.4 million, respectively, of unrecognized tax benefits, would impact the effective tax rate. The Company believes it is reasonably possible that $0.1 million of unrecognized tax benefits may reverse in the next twelve months.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. The Company's liability for unrecognized tax benefits is recorded within other long-term liabilities on the consolidated balance sheet. The Company had $0.2 million and $0.2 million of accrued gross interest and penalties as of March 31, 2025 and March 31, 2024, respectively. The Company recognized net interest and penalties (benefit)/expense of $56 thousand, $(21) thousand and $34 thousand for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

The Company files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. As of March 31, 2025, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax fiscal year ended March 31, 2021.

The Organization for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as "Pillar 2"), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which the Company operates have adopted the legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The Company crossed certain thresholds in the fiscal year ended March 31, 2025 and will be subject to Pillar 2 legislation in the fiscal year ended March 31, 2026. However, for the fiscal year ended March 31, 2025, the Company for Pillar 2 did not have a material impact on the effective tax rate or the consolidated financial statements.

Note 11—Preferred stock

The Company has authorized 30,000,000 shares of preferred stock for issuance with a par value of $0.01 per share. There wereno shares of preferred stock outstanding as of March 31, 2025 or March 31, 2024.

Note 12—Stock based compensation

Stock plans

The Company grants stock based awards under its 2016 Equity Incentive Award Plan (as amended) (the “2016 Plan”), which replaced its 2014 Equity Incentive Plan (the “2014 Plan”) and became effective immediately prior to the effectiveness of the Company’s registration statement on Form S-1 in September 2016. No grants have been made under the 2014 Plan since the Company’s initial public offering and no further awards will be granted thereunder. Any awards outstanding under the 2014 Plan that are forfeited or lapse unexercised will be added to the shares reserved and available for grant under the 2016 Plan. The 2016 Plan permits the grant of incentive stock options, non-statutory stock options, restricted stock and other stock- or cash-based awards to employees, officers, directors, advisors and consultants. The 2016 Plan allows for option grants of the Company’s common stock based on service, performance and market conditions.

During the fiscal year ended March 31, 2025, no stock options were issued. As of March 31, 2025, a total of 18,825,528 shares have been authorized for issuance under the 2016 Plan, and 9,171,859 remain available for grant. As of March 31, 2025, there were 40,569 options and awards outstanding under the 2014 Plan that, if forfeited, would increase the number of shares authorized for grant under the 2016 Plan.

Service-based vesting stock options

The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition as follows:

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company's closing stock price of $62.79, as reported on the New York Stock Exchange on March 31, 2025.

Additional information relating to service-based options is as follows (in thousands):

As of March 31, 2025, there was $37 thousand of total unrecognized compensation cost related to service-based stock options, which is expected to be recognized over the remaining weighted-average vesting period of 0.5 years.

No service-based stock options were granted during the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023.

The determination of the fair value of stock options on the date of grant using a Black-Scholes option-pricing model is affected by the fair value of the underlying common stock, as well as assumptions regarding a number of variables that are complex, subjective and generally require significant judgment. The assumptions used in the Black-Scholes option-pricing model to calculate the fair value of stock options were:

Fair value of common stock

The fair value of shares of common stock underlying stock options is based on the closing stock price as quoted on the New York Stock Exchange on the date of grant.

Expected term

The expected term of the options represents the period of time that the options are expected to be outstanding. Options granted have a maximum contractual life of 10 years. Prior to the Company’s initial public offering of its common stock in September 2016, the Company estimated the expected term of the option based on the estimated timing of potential liquidity events. For grants upon or after the initial public offering, the Company estimated the expected term based upon the simplified method described in Staff Accounting Bulletin No. 107, as the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares had been publicly traded.

Expected volatility

As the Company did not have sufficient trading history for its common stock, the expected stock price volatility for the common stock was estimated by taking the average historic price volatility for industry peers based on daily price observations over a period equivalent to the expected term of the stock option grants. Industry peers consist of several public companies within the same industry, which are of similar size, complexity and stage of development. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of its own share price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be used in the calculation.

Risk-free interest rate

The risk-free interest rate was based on the US Treasury rate, with maturities similar to the expected term of the options.

Expected dividend yield

The Company does not anticipate paying any dividends in the foreseeable future. As such, the Company uses an expected dividend yield ofzero.

Performance-based and market-based vesting stock options

The following table summarizes the activity for options that vest based upon the satisfaction of performance or market conditions as follows:

(1)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the Company's closing stock price of $62.79, as reported on the New York Stock Exchange on March 31, 2025.

As of March 31, 2025, there wasno further unrecognized compensation cost related to performance-based and market-based vesting stock options.

Additional information relating to options that vest based upon the satisfaction of performance or market conditions is as follows (in thousands):

Restricted stock awards and restricted stock units

The following table summarizes the activities for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), including performance-based RSUs, as follows:

The Company has historically granted both service based and performance-based RSUs to its executive officers. Service based RSUs vest over time based on continued employment of the participant. The performance-based RSUs vest based upon the achievement of certain performance goals and continued employment of the participant through the determination date of the achievement of the respective performance goals. Service based RSU awards are also granted annually to every Company employee, and vest over time based on continued employment of the participant.

As of March 31, 2025, there were no unvested shares subject to RSAs outstanding. Additional information relating to RSAs and RSUs (including performance-based RSUs), is as follows (in thousands):

As of March 31, 2025, there was $86.2 million of total unrecognized compensation cost related to unvested RSAs and RSUs (including performance-based RSUs), which is expected to be recognized over the remaining weighted-average vesting period of 1.8 years.

Note 13—Repurchase of common stock

On May 8, 2019, the Company announced that its board of directors authorized a share repurchase program to acquire up to $25.0 million of the Company’s common stock. This share repurchase program was exhausted following the Company’s repurchase of a total of 108,753 shares for $17.1 million at an average price of $157.04 per share during the three months ended September 30, 2024. The shares were retired after repurchase.

On August 27, 2024, the Company announced that its board of directors authorized a new share repurchase program to acquire up to $500.0 million of the Company’s common stock (the “2024 Share Repurchase Program”). The Company repurchased a total of 701,346 shares for $50.0 million at an average price of $71.29 per share during the three months ended March 31, 2025 under the 2024 Share Repurchase Program. The shares were retired after repurchase.

Purchases under the 2024 Share Repurchase Program may be made from time to time, in such amounts as management deems appropriate, through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, or by any combination of such methods. The timing and amount of any repurchases pursuant to the 2024 Share Repurchase Program will be determined based on market conditions, share price and other factors. The 2024 Share Repurchase Program does not have an expiration date, does not require the Company to repurchase any specific number of shares of its common stock, and may be modified, suspended or terminated at any time without notice. There is no guarantee that any additional shares will be purchased under the 2024 Share Repurchase Program. Any shares that will be repurchased are intended to be retired after purchase.

The covenants in the Amended Credit Agreement require the Company to be in compliance with certain leverage ratios to make repurchases under the 2024 Share Repurchase Program.

A total of $450.0 million remains available for future share repurchases under the 2024 Share Repurchase Program as of March 31, 2025.

Note 14—Employee benefit plan

The Company maintains a defined contribution 401(k) profit-sharing plan (the “401(k) Plan”) for eligible employees. Participants may make voluntary contributions up to the maximum amount allowable by law. The Company may make contributions to the 401(k) Plan on a discretionary basis which vest to the participants 100%. The Company made matching contributions of $1.0 million, $0.7 million and $0.5 million to the 401(k) Plan during the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, respectively.

Note 15—Net income per share

The following is a reconciliation of the numerator and denominator in the basic and diluted net income per common share computations (in thousands, except share and per share data):

Note 16—Leases

The Company leases warehouses, distribution centers, office space and equipment. The majority of the Company's leases includeone or more options to renew, with renewal terms that can extend the lease term for up tofive years. The exercise of lease renewal options is at the Company's sole discretion and such renewal options are included in the lease term if they are reasonably certain to be exercised. Certain leases also include options to purchase the leased asset. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Most of the Company’s equipment leases are finance leases of assets used to operate its distribution center in Ontario, California.

Significant judgment is required to determine whether commercial contracts contain a lease for purposes of ASC 842. The Company uses its incremental borrowing rate to determine the present value of lease payments.

Supplemental balance sheet information related to leases as of March 31, 2025 and March 31, 2024 is as follows (in thousands):

For the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023, the components of operating and finance lease costs were as follows (in thousands):

As of March 31, 2025, the aggregate future minimum lease payments under non-cancellable operating leases presented in accordance with ASC 842 are as follows (in thousands):

As of March 31, 2025 and March 31, 2024, the weighted-average remaining lease term (in years) and discount rate were as follows:

Operating cash outflows from operating leases for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023 were $10.7 million, $6.0 million and $4.9 million, respectively. Right-of-use assets obtained in exchange for lease obligations for the fiscal years ended March 31, 2025 and March 31, 2024 were $36.3 million and $18.9 million, respectively. Right-of-use assets obtained in exchange for lease obligations for the fiscal year ended and March 31, 2023 is not significant.

Note 17—Segment information

The following provides additional information about the Company’s reported segment revenue, significant segment expenses and segment net income for the fiscal years ended March 31, 2025, March 31, 2024 and March 31, 2023 (in thousands):

(1)Other operating costs include general and administrative expenses, depreciation and amortization.

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Note 18—Quarterly financial summary (unaudited)

Unaudited quarterly results for the last three years were as follows (in thousands, except per share data):

Note 19 –Subsequent Event

Entered Definitive Agreement to Acquire rhode

On May 28, 2025, the Company entered into a definitive agreement to acquire rhode, a fast-growing, multi-category lifestyle beauty brand founded by Hailey Bieber and known for its collection of high-performance, skin-focused products. The deal is comprised of $800.0 million at closing, subject to customary adjustments, in a combination of $600.0 million of cash and $200.0 million of stock, and potential earnout consideration of up to $200.0 million based on the future growth of the brand over athree-year timeframe. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of Fiscal 2026. The transaction will be accounted for as a business combination using the acquisition method of accounting, which requires certain assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. As of the date of this filing, the Company is currently evaluating the preliminary allocation of the purchase price to the net assets acquired and liabilities that will be assumed in the transaction.