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. Additionally, 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.

The Company’s family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People, Keys Soulcare, and rhode. The Company’s brands are available online and across leading beauty, mass-market and specialty retailers. The Company has strong relationships with its 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 accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with US generally accepted accounting principles (“US GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, these interim financial statements contain all adjustments, including normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2025, March 31, 2025 and September 30, 2024, and its results of operations and stockholders' equity for the three and six months ended September 30, 2025 and September 30, 2024 and its cash flows for the six months ended September 30, 2025 and September 30, 2024. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025 (the “Annual Report”). Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Reclassifications

Certain prior period amounts in the unaudited condensed 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 to 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.

Fair Value Measurements

ASC 820, Fair Value Measurement ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs, which rely on the reporting entity’s assumptions when there is little or no market data.

The Company performs valuations of assets acquired and liabilities assumed in acquisitions accounted for as a business combination and recognizes the assets acquired and liabilities assumed at their acquisition-date fair value. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. For additional information on fair value measurement as part of the rhode acquisition, see Note 4, “Acquisitions,” in these Notes to our unaudited condensed consolidated financial statements.

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 up tofive years. Repairs and maintenance expenditures are expensed as incurred.

Useful lives by major asset class are as follows:

As of September 30, 2025 and September 30, 2024, included in other assets are retail product displays, net, of $74.9 million and $63.8 million, respectively, that are generally amortized over a period ofthree years. Amortization expense for retail product displays was $7.8 million and $4.8 million for the three months ended September 30, 2025 and September 30, 2024, respectively, and $15.4 million and $8.5 million for the six months ended September 30, 2025 and September 30, 2024, respectively.

As of September 30, 2025 and September 30, 2024, included in prepaid expenses and other current assets are internal-use software costs related to cloud applications, net, of $59.9 million and $41.1 million, respectively, that are generally amortized over a period ofthree years. Amortization expenses for internal-use software costs related to cloud applications was $3.4 million and $1.5 million for the three months ended September 30, 2025 and September 30, 2024, respectively, and $5.0 million and $2.8 million for the six months ended September 30, 2025 and September 30, 2024, respectively.

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 14, “Segment information,” in these Notes to our unaudited condensed 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.

The following table provides 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 (in thousands).

Significant accounting policies

The Company made no material changes in the application of its significant accounting policies that were disclosed in Note 2, “Summary of significant accounting policies,” to the audited consolidated financial statements as of and for the fiscal year ended March 31, 2025 included in the Annual Report.

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

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 the 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.

As of September 30, 2025, other than accounts receivable, the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheet.

Recent accounting pronouncements

New accounting pronouncements issued but not yet adopted

In December 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standards Update (“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 are 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 Disclosure (subtopic 220-40). The standard requires additional disclosures, in the notes to the 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 beginning April 1, 2027, and the 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.

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to modernize the outdated guidance for accounting for software costs by aligning the accounting with how software is developed today. The effective date for the standard is for fiscal years beginning after December 15, 2027 and interim periods within those fiscal years. Early adoption is permitted. The amendments in this ASU should be applied either prospectively, retrospectively, or utilizing a modified transition approach. The Company is in the process of analyzing the impact of the ASU on its consolidated financial statements and related disclosures.

Note 3—Restricted cash

Restricted cash amounting to $5.0 million as of September 30, 2025, included in prepaid expenses and other current assets on the accompanying unaudited condensed consolidated balance sheets, represents part of the purchase consideration held in escrow for the settlement of general representation and warranty provisions in connection with the Company’s acquisition of HRBeauty LLC (“rhode”). The Company determines current or non-current classification of restricted cash based on the expected duration of the restriction.

The reconciliation of cash, cash equivalents and restricted cash recorded in the condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of cash flows are as follows (in thousands):

Note 4—Acquisitions

rhode Acquisition

On August 5, 2025, the Company consummated the acquisition of rhode, the fast-growing, multi-category lifestyle beauty brand founded by Hailey Bieber known for its collection of high-performance, skin-focused products (the “rhode Acquisition”). The rhode Acquisition is built upon both brands' shared focus on disruption, community connection and product innovation, and furthers the Company’s penetration within skin care. The rhode Acquisition was completed pursuant to the Agreement and Plan of Merger, by and among the Company, e.l.f. Cosmetics, Inc., Glaze Merger Sub, LLC (“Merger Sub”), HRBeauty LLC, the sellers identified therein, and David Levin (as the sellers’ representative), dated May 28, 2025 (the “Merger Agreement”). Pursuant to the terms of, and subject to the conditions specified in, the Merger Agreement, Merger Sub merged with and into rhode (the “Merger”), and upon consummation of the Merger, Merger Sub ceased to exist and rhode became a wholly owned subsidiary of e.l.f. Cosmetics, Inc. Upon the consummation of the Merger and the other transactions contemplated by the Merger Agreement, all outstanding limited liability company interests of rhode were cancelled and converted into the right to receive the consideration. The rhode Acquisition was accounted for as a business combination using the acquisition method of accounting, which requires certain assets acquired and liabilities assumed to be recognized at the estimated fair values as of the date of the rhode Acquisition. The total purchase price of $896.5 million consisted of cash, equity consideration, and a potential earnout. The following table summarizes the preliminary allocation of purchase price to the assets acquired and liabilities assumed (in thousands):

(1)The fair market value of the $300.3 million common stock issued (equivalent to 2,582,371 shares of common stock) was determined on the basis of the opening market price of the Company’s stock of $116.28 per share on the rhode Acquisition date.

(2)In connection with the rhode Acquisition, the Company paid rhode’s acquisition-related expenses of $47.1 million recognized as an assumed liability at the acquisition date. The Company determined these amounts represented assumed liabilities of the sellers at the acquisition date, as the Company bore no legal obligation to the related vendors prior to closing.

The Company incurred and expensed acquisition transaction costs of $3.6 million and $7.2 million during the three and six months ended September 30, 2025, respectively, which are included as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

The purchase price allocation, deferred tax calculations and residual goodwill are preliminary and pending finalization. rhode’s results of operations have been included in the Company's condensed consolidated financial statements from the date of acquisition.

The following table presents the preliminary purchase price allocation recorded in the Company's condensed consolidated balance sheet on the rhode Acquisition date (in thousands):

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

Intangible assets

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

Valuation of potential earn out

In connection with the rhode Acquisition, the Company recorded a liability at fair value for the contingent consideration payable upon achievement of certain performance milestones by 2028, with a maximum cash payment of $200 million. This amount is reflected as "Other long-term liabilities" on the condensed consolidated balance sheets. If these performance milestones are not met, no payment will be made. The fair value of the liability is calculated using Monte Carlo simulation based on corresponding projected revenue. In accordance, the volatility and discount rate was adjusted to reflect the risk profile of recurring revenue.

The measurement includes significant inputs not observable in the market and thus represents a level 3 measurement as defined in ASC 820.

Certain financial information

Since the rhode Acquisition date, the results of operations for rhode of $52.4 million of net sales and $15.1 million of net income for the three months ended September 30, 2025, have been included within the accompanying consolidated statements of operations.

The net sales and net income of the combined companies on an unaudited pro forma basis, had the rhode Acquisition date been April 1, 2024. The unaudited pro forma financial information includes, where applicable, adjustments for (i) amortization expense related to acquired intangible assets, (ii) additional interest expense for borrowings related to funding the rhode Acquisition, and (iii) associated tax-related impacts of adjustments. These pro forma adjustments are based on the available information as of the date hereof and upon assumptions that the Company believes are reasonable to reflect the impact of the rhode Acquisition with the Company's historical financial information on a pro forma basis. Adjustments do not include costs related to integration activities, cost savings, or synergies that have been or may be achieved by the combined business. The net sales and net income of the combined companies on an unaudited pro forma basis, are as follows (in thousands):

The unaudited pro forma financial information shown in the table above is presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the rhode Acquisition had taken place at April 1, 2024 (the beginning of comparable period presented).

Naturium 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 “Naturium 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 Naturium 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 Naturium Acquisition date.

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

The Company incurred and expensed acquisition transaction costs ofzero and $0.4 million during the three and six months ended September 30, 2024, respectively, which are included as a component of selling, general and administrative expenses in the condensed consolidated statements of operations. No acquisition transaction costs related to the Naturium Acquisition were incurred during the three and six months ended September 30, 2025.

The Naturium 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 Naturium 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 condensed 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 Naturium 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 Naturium 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 the 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.

Intangible assets

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

Note 5—Goodwill and intangible assets

Information regarding the Company’s goodwill and intangible assets as of September 30, 2025 is as follows (in thousands):

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 September 30, 2024 is as follows (in thousands):

Amortization expenses on finite-lived intangible assets were $8.9 million and $4.3 million in the three months ended September 30, 2025 and September 30, 2024, respectively, and $13.2 million and $8.7 million in the six months ended September 30, 2025 and September 30, 2024, respectively. Certain trademark assets have been classified as indefinite-lived intangible assets and accordingly, are not subject to amortization. There wereno impairments of goodwill or intangible assets recorded in the three and six months ended September 30, 2025 and September 30, 2024.

The estimated future amortization expense related to finite-lived intangible assets, assumingno impairment as of September 30, 2025 is as follows (in thousands):

Note 6—Accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of September 30, 2025, March 31, 2025 and September 30, 2024 consisted of the following (in thousands):

Note 7—Debt

The Company’s outstanding debt as of September 30, 2025, March 31, 2025 and September 30, 2024 consisted of the following (in thousands):

(1) See further discussion below. As of September 30, 2025, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement (as defined below).

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 a $100.0 million revolving credit facility (the “Amended Revolving Credit Facility”) and a $100.0 million term loan facility.

The Amended Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our 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 us to, among other things, comply with certain consolidated total net leverage ratios and consolidated fixed charge coverage ratios.

Second Amendment to Amended Credit Agreement

On August 28, 2023, we entered into the Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Pursuant to the Second Amendment, we borrowed incremental term loans in an aggregate original principal amount of $115.0 million under the Amended Credit Agreement (the “Incremental Term Loan”). We used the Incremental Term Loan, together with cash from our balance sheet and additional borrowings under our Amended Revolving Credit Facility, to consummate the Acquisition of Naturium (as defined in Note 4, “Acquisitions,” in the Notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) and to pay related fees and expenses in connection with the Acquisition of Naturium and Second Amendment.

Third Amendment to Amended Credit Agreement

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

Fourth Amendment to Amended Credit Agreement

On March 3, 2025, we 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 $500.0 million (the “Revolving Credit Facility”), refinanced the existing indebtedness under the Amended Credit Agreement and reduced the interest rate margin for loans. Additionally, certain baskets under the Amended Credit Agreement were increased as part of the Fourth Amendment. The proceeds of the Revolving Credit Facility are available to e.l.f. Cosmetics and certain of our other subsidiaries 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 our and our subsidiaries’ equity interests. In addition, up to $35.0 million of the Revolving Credit Facility is available for issuing letters of credit. The maturity date of the Revolving Credit Facility is March 3, 2030.

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

On August 5, 2025, we entered into the Fifth Amendment to Amended and Restated Credit Agreement (the “Fifth Amendment”). The Fifth Amendment, among other things, established a term loan facility in an aggregate original principal amount of $600.0 million (the “Term Facility”), made customary changes in connection with adding a term loan facility, increased the maximum permitted consolidated total net leverage ratio financial covenant, increased the interest rate margin for loans under our existing Revolving Credit Facility and increased the unused line fee under our existing Revolving Credit Facility. The proceeds of the Term Facility were made available to e.l.f. Cosmetics and certain of our other subsidiaries to pay a portion of the consideration for the acquisition of rhode. The maturity date of the Term Facility is March 3, 2030.

Loans under the Amended Credit Agreement will bear interest at a rate per annum equal to, at e.l.f. Cosmetics’ election: SOFR (subject to a 0.00% floor) or an alternate base rate (subject to a 1.00% floor) as set forth in the Fifth Amendment, plus an interest rate margin, to be determined based on consolidated total net leverage ratio levels, ranging from, (i) in the case of SOFR loans,1.50% to 2.25%, and (ii) in the case of alternate base rate loans,0.50% to 1.25%.

Unused commitments under our existing Revolving Credit Facility are subject to a fee, to be determined based on consolidated total net leverage ratio levels, ranging from 0.15% to 0.25%.

The interest rate as of September 30, 2025 for the Term Facility was approximately 6.3%.

The interest rate as of September 30, 2025 for the Revolving Credit Facility was approximately 6.2%. The unused balance of the Revolving Credit Facility as of September 30, 2025 was $243.3 million.

The Company’s debt outstanding as of September 30, 2025, matures as follows (in thousands):

Note 8—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 Stockholder 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 28, 2025, the court consolidated thetwo putative securities class action suits, and appointed Boston Retirement System and Metropolitan Employee Benefit System as lead plaintiffs. Lead plaintiffs filed an amended consolidated complaint on July 23, 2025. Defendants filed a motion to dismiss the amended consolidated complaint on September 5, 2025. Lead plaintiffs’ opposition to that motion to dismiss was filed on October 22, 2025, and defendants’ reply is due November 19, 2025. A hearing is currently scheduled for February 11, 2026.

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 thetwo cases and to appoint lead counsel, which the court granted on July 3, 2025. The consolidated action is currently stayed pending the resolution of the securities class action.

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. The action is currently stayed pending the resolution of the securities class action.

The Company believes that it has substantial defenses to the allegations made in the lawsuits and intends to vigorously defend against them.

Note 9—Income taxes

The Company’s quarterly tax provision is based upon an estimated annual effective tax rate as adjusted for any discrete items. The Company’s income tax benefit was $7.0 million for the three months ended September 30, 2025 and the Company’s income tax provision was $8.9 million for the three months ended September 30, 2024. There was an income tax provision of $10.8 million and $8.6 million for the six months ended September 30, 2025 and September 30, 2024, respectively, with an effective tax rate of 175.1% and 31.9% for the three months ended September 30, 2025 and September 30, 2024, respectively, and an effective tax rate of 23.0% and 11.4% for the six months ended September 30, 2025 and September 30, 2024, respectively. The effective tax rate differs from the US statutory tax rate primarily due to state and local income taxes and the executive compensation limitation partially offset by a discrete tax benefit related to stock-based compensation.

The Company has completed its initial assessment of the One Big Beautiful Bill Act (“OBBBA”) corporate tax provisions which was enacted on July 4, 2025. OBBBA contained a number of U.S. corporate tax provisions, of which the Company expects to elect to expense U.S. incurred research or experimental expenditures immediately and full bonus depreciation for certain assets placed into service after January 19, 2025. As a result of the Company’s elections, it is expected that in fiscal year 2026, U.S. cash taxes will decrease with no material impact to the Company’s effective tax rate.

Note 10—Stock-based compensation

Stock-based compensation expense is recognized on a straight-line basis over the requisite service period. Total stock-based compensation is shown in the table below (in thousands):

As of September 30, 2025, there was $131.2 million of total unrecognized stock-based compensation cost related to unvested shares subject to RSAs and RSUs. The unrecognized stock-based compensation for shares subject to RSAs and RSUs is expected to be recognized over the remaining weighted-average period of 2.1 years. There is no unrecognized stock-based compensation cost related to unvested service-based stock options.

Note 11—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 immediately 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 immediately 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 shares will be purchased under the 2024 Share Repurchase Program. Any shares 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.

The Company didnot repurchase any shares under the 2024 Share Repurchase Program during the three and six months ended September 30, 2025. A total of $450.0 million remains available for future share repurchases under the 2024 Share Repurchase Program as of September 30, 2025.

Note 12—Net income per share

The Company computes basic net income per share using the weighted-average number of shares of common stock outstanding. Diluted net income per share amounts are calculated using the treasury stock method for equity-based compensation awards. 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 13—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.

Supplemental balance sheet information related to leases as of September 30, 2025, March 31, 2025 and September 30, 2024 is as follows (in thousands):

For the three and six months ended September 30, 2025 and September 30, 2024, the components of operating lease costs were as follows (in thousands):

As of September 30, 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 September 30, 2025 and September 30, 2024, the weighted-average remaining lease term (in years) and discount rate were as follows:

Operating cash outflows from operating leases for the six months ended September 30, 2025 and September 30, 2024 were $4.3 million and $4.6 million, respectively. Right-of-use assets obtained in exchange for lease obligations for the six months ended September 30, 2025 and September 30, 2024 were $3.3 million and $19.6 million, respectively.

Note 14—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 September 30, 2025, and September 30, 2024 (in thousands):

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