0001600033-25-000058
SEC filinge.l.f. Beauty's Q3 FY26 revenue grew 14% to $343.9M, but gross margin declined due to tariffs and SG&A surged from rhode acquisition, crushing operating income.
For the three months ended September 30, 2025, e.l.f. Beauty reported net sales of $343.9 million, a 14% increase from $301.1 million in the prior-year quarter. The growth was driven by a $62.2 million benefit from higher average item price and favorable mix, partially offset by a $19.4 million decline from lower unit volume. Retailer channels contributed $22.3 million (9% growth) and e-commerce added $20.6 million (39% growth). Gross profit rose 12% to $238.8 million, but gross margin contracted 165 basis points to 69% primarily due to tariffs, though pricing and mix provided some offset. SG&A expenses surged 24% to $231.1 million, or 67% of sales (up from 62%), driven by increased marketing ($23.0M), depreciation and amortization ($7.9M) from the rhode acquisition, compensation ($10.4M), and professional fees ($2.8M). Consequently, operating income tumbled 72% to $7.7 million. Net income dropped 84% to $3.0 million, including a $0.7 million loss on debt extinguishment and a higher effective tax rate benefit (175.1% vs. 31.9%) due to discrete tax items.
The MD&A does not report segment-level financials. The company operates as a single reporting segment. Channel-level performance showed retailer and e-commerce growth, with e-commerce outpacing at 39% versus 9% for retailers. The rhode brand, acquired in August 2025, is included but not broken out separately.
Management highlighted ongoing tariff risks, with a global price increase enacted on August 1, 2025, and plans to shift production outside China. The rhode acquisition is expected to contribute to future growth. Cash flow from operations was $50.6 million for the first six months, and the company had $194.4 million cash and $243.3 million available under its revolving credit facility. No specific numerical guidance was provided. Key priorities include managing tariff exposure, integrating rhode, and sustaining sales momentum through innovation and marketing.
As of September 30, 2025, e.l.f. Beauty held $194.4M in cash and equivalents, up from $148.7M at March 31, 2025, primarily due to debt proceeds from the rhode acquisition. Total assets surged to $2.32B from $1.25B, driven by $511.2M in goodwill and $380.9M in acquired intangible assets from rhode. Total debt rose to $856.7M (gross), including a $600M term loan and $256.7M drawn on the revolver. The company maintains compliance with financial covenants, with an unused revolver capacity of $243.3M. Stockholders' equity increased to $1.14B from $760.9M at March 31, 2025, bolstered by $300.3M in equity issued for rhode and retained earnings improvement.
The notes disclose no material purchase commitments beyond normal operations. Legal contingencies include two consolidated securities class actions and three derivative lawsuits, all in early stages; the company believes it has substantial defenses. Operating lease obligations total $86.0M in undiscounted payments, with $63.8M recognized as lease liabilities, weighted-average remaining term of 8.4 years and discount rate of 6.1%.
No share repurchases occurred in the current quarter; $450M remains authorized under the 2024 program. No dividends are paid. The company issued $600M in new term debt to fund the rhode acquisition, increasing total debt by $600M net. Capital expenditures for the six months were $13.9M, primarily for property and equipment. The company also incurred $7.2M in acquisition-related transaction costs expensed in SG&A.
The company operates as a single reportable segment, with the CODM evaluating performance based on consolidated net income. Geographic disaggregation for Q3 2025: U.S. net sales $278.2M (80.9% of total) and international $65.7M (19.1%). International sales grew marginally (+2% YoY) while U.S. sales increased 17.6% YoY. The rhode acquisition contributed $52.4M in net sales and $15.1M in net income post-acquisition (from August 5, 2025).