e.l.f. Beauty, Inc.

Previous wording

Many of our products are sourced and manufactured in China and have been subject to a US 25% tariff since May 2019. Throughout 2025, we were subject to a range of tariff rates on imports from China ranging from 25% to as high as 170%.

Current wording

A portion of our products are sourced and manufactured in China and have been subject to a US 25% tariff since May 2019. Throughout 2025, we were subject to a range of tariff rates on imports from China ranging from 25% to as high as 170%.

Previous wording

On July 31, 2025, the US administration issued a formal Executive Order modifying the reciprocal tariff regime under the IEEPA. However, in February 2026, the Supreme Court ruled that the IEEPA does not authorize the US administration to impose tariffs, and the tariffs paid by importers under the Executive Order are subject to refund. As of June 30, 2026, we paid approximately $60.3 million of IEEPA Tariffs. Of this amount, the Company received tariff refunds of approximately $51.1 million ($50.1 million and $1.0 million recognized as a reduction in cost of sales and inventory, respectively) plus $2.1 million in applicable interest (recognized as interest income) during the three months ended June 30, 2026. We are evaluating the impact of the Supreme Court ruling and the subsequent order issued by the CIT, and are monitoring related developments from the CBP regarding its plan to process refunds to importers of record, including the launch on April 20, 2026 of the CBP's Consolidated Administration and Processing of Entries (“CAPE”) system for submitting refund claims, as well as the potential outcome of the administration’s appeal of the CIT’s order.

Current wording

On July 31, 2025, the US administration issued a formal Executive Order modifying the reciprocal tariff regime under the IEEPA. However, in February 2026, the Supreme Court ruled that the IEEPA does not authorize the US administration to impose tariffs, and the tariffs paid by importers under the Executive Order are subject to refund. As of September 30, 2026, we paid approximately $60.3 million of IEEPA Tariffs. Of this amount, we received tariff refunds of approximately $51.7 million ($1.7 million and $51.7 million recognized as a reduction in cost of sales during the three and six months ended September 30, 2026, respectively) plus $2.1 million in applicable interest ($30.2 thousand and $2.1 million recognized as interest income during the three and six months ended September 30, 2026, respectively).

Previous wording

Effective February 24, 2026, the US administration imposed a 10% global tariff under Section 122 of the Trade Act of 1974 that could remain in place for up to 150 days, and may, by legislative action, be extended. Multiple legal challenges to the Section 122 tariffs have been filed, and on May 7, 2026, the CIT ruled that the Section 122 tariffs are unlawful; however, the court's injunction applies only to the named plaintiffs, and the tariffs remain in effect for all other importers pending appeal.

Current wording

Effective February 24, 2026, the US administration imposed a 10% global tariff under Section 122 of the Trade Act of 1974 that remained in place until July 24, 2026. Multiple legal challenges to the Section 122 tariffs were filed, and on May 7, 2026, the CIT ruled that the Section 122 tariffs to be unlawful; however, the court's injunction applied only to the named plaintiffs, and the tariffs remained in effect for all other importers pending appeal until their expiration in July 2026. The appeal is currently pending.

Previous wording

These tariffs, as well as a government’s adoption of “buy national” and similar policies or retaliation by another government against such tariffs or policies, could introduce significant uncertainty into the market and may affect the prices and supply of the products available to us. Tariffs also can impact our or our suppliers’ ability to source products efficiently or create other supply chain disruptions. We may not be able to fully or substantially mitigate the impact of these or future tariffs, pass price increases on to our customers or secure adequate alternative sources of products or materials for our products, which would have a material adverse effect on our business, financial condition and results of operations.

Current wording

These tariffs, as well as a government’s adoption of “buy national” and similar policies or retaliation by another government against such tariffs or policies, could introduce significant uncertainty into the market and may affect the prices and supply of the products available to us. Tariffs also can impact our suppliers’ ability to source products efficiently or create other supply chain disruptions. We may not be able to fully or substantially mitigate the impact of these or future tariffs, pass price increases on to our customers or secure adequate alternative sources of products or materials for our products, which would have a material adverse effect on our business, financial condition and results of operations.

Previous wording

See the risk factor titled “Changes in the US and international trade policies, including tariffs, trade restrictions and retaliatory trade measures taken by other countries and resulting trade wars may have a material adverse impact on our business, financial condition and results of operations” included as part of Item 1A. Risk factors of this Quarterly Report on Form 10-Q for additional information regarding risk related to tariffs.

Current wording

See the risk factor titled “Changes in the US and international trade policies, including tariffs (and uncertainty related to the enforceability and implementation thereof), trade restrictions and retaliatory trade measures taken by other countries and resulting trade wars may have a material adverse impact on our business, financial condition and results of operations” included as part of Item 1A. Risk factors of this Quarterly Report on Form 10-Q for additional information regarding risk related to tariffs.

Previous wording

Gross profit increased $154.3 million, or 63%, to $398.8 million for the three months ended June 30, 2026, compared to $244.5 million for the three months ended June 30, 2025. This growth was inclusive of the benefit from a $50.1 million IEEPA tariff refund recognized as a reduction in cost of sales during the three months ended June 30, 2026. The remaining growth was primarily driven by a higher average item price and mix which drove an increase of $112.3 million, offset by lower volume impacting gross profit by $8.1 million. Gross margin increased approximately 1,400 basis points to 83% when compared to the three months ended June 30, 2025, including approximately 1,050 basis points benefit from the IEEPA tariff refunds, with the remaining increase primarily driven by pricing and lower year-over-year tariff rates.

Current wording

Gross profit increased $131.4 million, or 55%, to $370.2 million for the three months ended September 30, 2026, compared to $238.9 million for the three months ended September 30, 2025. This growth was inclusive of the benefit from $1.7 million in incremental IEEPA tariff refunds flowing through cost of sales during the three months ended September 30, 2026. The remaining growth was primarily attributable to higher volume which drove an increase of $74.8 million and a higher average item price and mix, together with lower year-over-year tariffs, increasing gross profit by $54.9 million. Gross margin increased approximately 160 basis points to 71% when compared to the three months ended September 30, 2025, including approximately 30 basis points benefit from the incremental IEEPA tariff refunds, with the remaining increase primarily driven by lower year-over-year tariffs and benefits from a favorable mix, partially offset by price investments.

Previous wording

SG&A expenses were $280.3 million for the three months ended June 30, 2026, an increase of $84.5 million, or 43%, from $195.8 million for the three months ended June 30, 2025. The $84.5 million increase was primarily related to increases in marketing, merchandising and distribution costs of $49.9 million, increased compensation and benefits expense of $18.6 million, and increased depreciation and amortization of $12.9 million.

Current wording

SG&A expenses were $300.1 million for the three months ended September 30, 2026, an increase of $69.0 million, or 30%, from $231.1 million for the three months ended September 30, 2025. The $69.0 million increase was primarily related to increases in marketing, merchandising and distribution costs of $44.5 million, increased compensation and benefits expense of $11.8 million, and increased depreciation and amortization of $5.8 million.

Previous wording

In connection with the rhode Acquisition, the Company recorded a fair value adjustment of $16.1 million for the three months ended June 30, 2026, driven by the outperformance of rhode's revenue results relative to the earnout thresholds set forth in the merger agreement entered into in connection with the rhode Acquisition.

Current wording

In connection with the rhode Acquisition, the Company recorded a fair value adjustment of $17.7 million for the three months ended September 30, 2026, driven by the outperformance of rhode's revenue results relative to the earnout thresholds set forth in the Merger Agreement entered into in connection with the rhode Acquisition.

Previous wording

Other expense, net totaled $0.3 million for the three months ended June 30, 2026, as compared to other income, net of $5.0 million for the three months ended June 30, 2025. The year-over-year variance was primarily due to a decrease in foreign currency exchange gain in the period primarily attributable to foreign currency rate fluctuation between the British pound and US dollar.

Current wording

Other income, net totaled $0.6 million for the three months ended September 30, 2026, as compared to other expense, net of $1.9 million for the three months ended September 30, 2025. The year-over-year variance was primarily due to a decrease in foreign currency exchange loss in the period primarily attributable to foreign currency rate fluctuation between the British pound and US dollar.

Previous wording

The income tax provision was $27.7 million, or an effective rate of 29.4%, for the three months ended June 30, 2026, as compared to a provision of $17.8 million, or an effective rate of 34.8%, for the three months ended June 30, 2025. The change in the income tax provision was primarily driven by the tax effects of an increase in income before taxes of $43.2 million, and a decrease in discrete tax benefits of $17.3 million, primarily related to stock-based compensation and the tax effects of IEEPA tariff refunds and associated interest.

Current wording

The income tax provision was $13.0 million, or an effective rate of 30.2%, for the three months ended September 30, 2026, as compared to a tax benefit of $7.0 million, or an effective rate of 175.1%, for the three months ended September 30, 2025. The change in the income tax provision was primarily driven by the tax effects of an increase in income before taxes of $47.0 million, and a decrease in discrete tax benefits of $2.3 million, primarily related to stock-based compensation and the tax effects of IEEPA tariff refunds and associated interest.

Previous wording

Net sales increased $125.6 million, or 36%, to $479.4 million for the three months ended June 30, 2026, compared to $353.7 million for the three months ended June 30, 2025. Net sales growth was driven by strong performance in both our retailer and e-commerce channels. Net sales increased $80.0 million, or 129%, in our e-commerce channels and $45.6 million, or 16%, in our retailer channels. From a price and mix perspective, higher average item price and mix drove $137.4 million increase in net sales as compared to the three months ended June 30, 2025. This was partially offset by lower volume reducing net sales by $11.7 million.

Current wording

Net sales increased $302.5 million, or 43%, to $1,000.2 million for the six months ended September 30, 2026, compared to $697.7 million for the six months ended September 30, 2025. Net sales growth was driven by strong performance in both our retailer and e-commerce channels. Net sales increased $189.6 million, or 34%, in our retailer channels and $112.9 million, or 84%, in our e-commerce channels. From a price and mix perspective, higher average item price and mix drove $217.0 million increase in net sales as compared to the six months ended September 30, 2025. A higher volume drove the remaining increase in net sales by $85.5 million.

Previous wording

Interest expense, net was $7.8 million for the three months ended June 30, 2026, as compared to $2.6 million for the three months ended June 30, 2025. The year-over-year variance was primarily due to the Fifth Amendment which established the Term Facility and increased our outstanding debt. See Note 6, “Debt,” in the Notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details on our debt. The increase was partially offset by $2.1 million of interest income associated with the IEEPA refunds received during the three months ended June 30, 2026.

Current wording

Interest expense, net was $17.8 million for the six months ended September 30, 2026, as compared to $11.8 million for the six months ended September 30, 2025. The year-over-year variance was primarily due to the Fifth Amendment which established the Term Facility and increased our outstanding debt. See Note 7, “Debt,” in the Notes to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for further details on our debt. The increase was partially offset by $2.1 million of interest income associated with the IEEPA refunds received during the six months ended September 30, 2026.

Previous wording

As of June 30, 2026, we had $344.2 million of cash and cash equivalents. In addition, as of June 30, 2026, we had borrowing capacity of $243.3 million under our Amended Revolving Credit Facility.

Current wording

As of September 30, 2026, we had $350.8 million of cash and cash equivalents. In addition, as of September 30, 2026, we had borrowing capacity of $243.3 million under our Revolving Credit Facility.

Previous wording

Our primary cash needs are for working capital, fixturing, retail product displays and digital investment. We have also used cash for acquisitions. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities and expansion within or to additional retailer store locations. We expect to fund ongoing cash needs from existing cash and cash equivalents, cash generated from operations and, if necessary, draws on our Amended Revolving Credit Facility.

Current wording

Our primary cash needs are for working capital, fixturing, retail product displays and digital investment. We have also used cash for acquisitions. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities and expansion within or to additional retailer store locations. We expect to fund ongoing cash needs from existing cash and cash equivalents, cash generated from operations and, if necessary, draws on our Revolving Credit Facility.

Previous wording

Our primary working capital requirements are for product and product-related costs, payroll, rent, distribution costs and marketing. Fluctuations in working capital are primarily driven by the timing of when a retailer rearranges or restocks its products, expansion of space within our existing retailer base, expansion to new retailers and the general seasonality of our business. As of June 30, 2026, we had working capital, excluding cash and cash equivalents, of $177.9 million, compared to $163.5 million as of March 31, 2026. Working capital, excluding cash and cash equivalents and debt, was $207.9 million and $193.5 million as of June 30, 2026 and March 31, 2026, respectively.

Current wording

Our primary working capital requirements are for product and product-related costs, payroll, rent, distribution costs and marketing. Fluctuations in working capital are primarily driven by the timing of when a retailer rearranges or restocks its products, expansion of space within our existing retailer base, expansion to new retailers and the general seasonality of our business. As of September 30, 2026, we had working capital, excluding cash and cash equivalents, of $246.6 million, compared to $163.5 million as of March 31, 2026. Working capital, excluding cash and cash equivalents and debt, was $276.6 million and $193.5 million as of September 30, 2026 and March 31, 2026, respectively.

Previous wording

We believe that our operating cash flow, existing cash and cash equivalents and available financing under the Amended Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next twelve months. The unused balance of the Amended Revolving Credit Facility as of June 30, 2026 was $243.3 million. If necessary, we can borrow funds under our Amended Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Current wording

We believe that our operating cash flow, existing cash and cash equivalents and available financing under the Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next twelve months. The unused balance of the Revolving Credit Facility as of September 30, 2026 was $243.3 million. If necessary, we can borrow funds under our Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all.

Previous wording

For the three months ended June 30, 2026, net cash provided by operating activities was $111.7 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $133.9 million, which is inclusive of $52.1 million benefit from IEEPA tariff refunds, partially offset by an increase in working capital of $22.2 million. The increase in working capital was primarily driven by a $26.5 million increase in inventory, a $2.4 million decrease in accounts payable and accrued expenses, and a $1.7 million decrease related to other liabilities, partially offset by an $8.2 million decrease in prepaid expense and other assets, and a $0.2 million decrease in accounts receivable.

Current wording

For the six months ended September 30, 2026, net cash provided by operating activities was $126.3 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $226.8 million, which is inclusive of $53.8 million benefit from IEEPA tariff refunds and $33.8 million change in fair value of contingent consideration, partially offset by an increase in working capital of $100.5 million. The increase in working capital was primarily driven by a $71.4 million increase in accounts receivable, a $40.2 million increase in inventory, a $23.9 million increase in prepaid expense and other assets, and a $4.6 million decrease related to other liabilities, partially offset by a $39.7 million increase in accounts payable and accrued expenses.

Previous wording

For the three months ended June 30, 2025, net cash provided by operating activities was $27.2 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $74.5 million, partially offset by an increase in working capital of $47.2 million. The increase in working capital was primarily driven by a $46.2 million increase in accounts receivable, a $16.3 million increase in prepaid expense and other assets, a $1.5 million decrease in accounts payable and accrued expenses, and a $1.9 million decrease related to other liabilities, partially offset by an $18.7 million decrease in inventory.

Current wording

For the six months ended September 30, 2025, net cash provided by operating activities was $50.6 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $134.9 million, partially offset by acquisition-related seller expenses of $47.1 million in connection with the rhode Acquisition and an increase in working capital of $37.2 million. The increase in working capital was primarily driven by a $48.8 million increase in prepaid expense and other assets, and a $19.2 million increase in inventory, partially offset by a $24.4 million increase in accounts payable and accrued expenses, a $3.5 million increase related to other liabilities, and a $3.0 million decrease in accounts receivable.

Previous wording

For the three months ended June 30, 2026, net cash used in investing activities was $1.7 million primarily consisting of capital expenditures related to fixturing, equipment and software.

Current wording

For the six months ended September 30, 2026, net cash used in investing activities was $4.2 million primarily consisting of capital expenditures related to fixturing, equipment and software.

Previous wording

For the three months ended June 30, 2026, net cash used in financing activities was $55.5 million primarily driven by repurchases of our common stock of $50.0 million and repayments on the Amended Term Loan Facility of $7.5 million, partially offset by cash received from the exercise of stock options.

Current wording

For the six months ended September 30, 2026, net cash used in financing activities was $61.1 million primarily driven by repurchases of our common stock of $50.0 million and repayments on the Amended Term Loan Facility of $15.0 million, partially offset by cash received from the exercise of stock options.

Previous wording

The interest rate as of June 30, 2026 for the Amended Credit Agreement was approximately 5.4%.

Current wording

The interest rate as of September 30, 2026 for the Amended Credit Agreement was approximately 5.5%.

Previous wording

The interest rate as of June 30, 2026 for the Revolving Credit Facility was approximately 5.4%. The unused balance of the Revolving Credit Facility as of June 30, 2026 was $243.3 million.

Current wording

The interest rate as of September 30, 2026 for the Revolving Credit Facility was approximately 5.6%. The unused balance of the Revolving Credit Facility as of September 30, 2026 was $243.3 million.