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What changed in e.l.f. Beauty, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of e.l.f. Beauty, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+353 added−308 removedSource: 10-K (2025-05-29) vs 10-K (2024-05-23)

Top changes in e.l.f. Beauty, Inc.'s 2025 10-K

353 paragraphs added · 308 removed · 229 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe promote DEI at all levels of our workforce, and our senior leadership team owns and is responsible for our DEI initiatives and programs. 5 Table of C ontents The following table provides certain statistics of our team as of March 31, 2024: Board of Directors Executive Team (1) Directors and Above (2) All Employees (2) Gender Female 67% 57% 72% 75% Male 33% 43% 28% 25% Age Gen Z and Millennial —% —% 44% 67% All Other 100% 100% 56% 33% Race / Ethnicity Black or African American 11% 14% 1% 4% Hispanic or LatinX —% —% 11% 16% Asian 22% 29% 16% 17% Native American —% —% 1% —% Two or More Races —% —% 4% 5% White 67% 57% 67% 57% (1) Executive Team includes our Executive Officers and the Vice President, General Manager of our China operations.
Biggest changeThe following table provides certain statistics of our team as of March 31, 2025: Board of Directors (1) Executive Team (2) Directors and Above (3) All Employees (3) Gender Female 67% 57% 72% 71% Male 33% 43% 28% 29% Age Gen Z and Millennial —% —% 45% 54% All Other 100% 100% 55% 46% Race / Ethnicity Black or African American 11% 14% 2% 5% Hispanic or LatinX 11% —% 11% 16% Asian 22% 29% 16% 17% Native American —% —% 1% —% Two or More Races —% —% 2% 4% White 56% 57% 67% 58% (1) Board of Directors statistics reflect the resignation of Beth Pritchard, effective March 31, 2025, as well as the appointment of Charles (“Chip”) Victor Bergh to the Board, effective as of April 1, 2025.
SKIN Win in skin the clean + kind way with e.l.f. SKIN. We create targeted, ingredient-focused, dermatologist-developed formulas for every eye, lip, face and skin concern. Our ambition is to make skin care accessible to all with innovative, efficacious formulas at get-real prices.
SKIN Win in skin the clean + kind way with e.l.f. SKIN. We create targeted, ingredient-focused, dermatologist-developed formulas for every eye, lip and face. Our ambition is to make skin care accessible to all with innovative, efficacious formulas at get-real prices.
All full-time employees receive a base salary, are bonus eligible under the same bonus plan tied to our financial performance and receive an equity award in e.l.f. Beauty stock.
All full-time employees receive a base salary, are bonus eligible under the same bonus plan tied to our financial performance and receive an annual equity award in e.l.f. Beauty stock.
Under MoCRA, the FDA was also granted new enforcement authorities over cosmetics, such as the ability to initiate mandatory recalls and to obtain access certain product records.
Under MoCRA, the FDA was also granted enforcement authorities over cosmetics, such as the ability to initiate mandatory recalls and to obtain access certain product records.
The raw materials used in our products are broadly available and have regular quality testing for ingredient integrity. Our distribution centers are operated by leading third-party logistics providers. Our distribution center in California mainly serves our national retail customers, while our distribution centers in Utah, Ohio and Georgia serve our e-commerce consumers.
The raw materials used in our products are broadly available and have regular quality testing for ingredient integrity. Our distribution centers are operated by leading third-party logistics providers. Our distribution center in California mainly serves our national retail customers, while our distribution centers in Utah, Ohio, Georgia, California and New Jersey serve our e-commerce consumers.
To be a different kind of beauty company by building brands that disrupt industry norms, shape culture and connect communities through positivity, inclusivity and accessibility. • Our Mission . We make the best of beauty accessible to every eye, lip, face and skin concern. • Our Purpose . We stand with every eye, lip, face and paw.
To be a different kind of beauty company by building brands that disrupt industry norms, shape culture and connect communities through positivity, inclusivity and accessibility. • Our Mission . We make the best of beauty accessible to every eye, lip and face. • Our Purpose . We stand with every eye, lip, face and paw.
The overarching requirement is that a cosmetic product made available on the E.U. market must be safe for human health when used under normal or reasonably foreseeable conditions of use, taking account, in particular, of the following: (a) presentation including conformity with Directive 87/357/EEC regarding health and safety of consumers; (b) labelling; (c) instructions for use and disposal; and (d) any other indication or information provided by the responsible person. 9 Table of C ontents Generally, there is no requirement for pre-market approval of cosmetic products in the E.U.
The overarching requirement is that a cosmetic product made available on the E.U. market must be safe for human health when used under normal or reasonably foreseeable conditions of use, taking account, in particular, of the following: (a) presentation including conformity with Directive 87/357/EEC regarding health and safety of consumers; (b) labelling; (c) instructions for use and disposal; and (d) any other indication or information provided by the responsible person. 8 Table of Contents Generally, there is no requirement for pre-market approval of cosmetic products in the E.U.
We are proud to be one of only four public companies in the United States with a Board of Directors that is at least two-thirds women and at least one-third diverse (out of over 4,200 public companies).
We are proud to be one of only three public companies in the United States with a Board of Directors that is at least two-thirds women and at least one-third diverse (out of over 4,200 public companies).
Each of our brands has accessible pricing relative to its competitive set and furthers our mission of making the best of beauty accessible to every eye, lip, face and skin concern. As an example, e.l.f.
Each of our brands has accessible pricing relative to its competitive set and furthers our mission of making the best of beauty accessible to every eye, lip and face. As an example, e.l.f.
We believe this approach – which applies across all employee levels and geographies – is unique in the beauty industry and contributes to our success in hiring and retaining top talent and driving business results.
We believe this approach, which applies across all employee levels and geographies, is unique in the beauty industry and contributes to our success in hiring and retaining top talent and driving business results. • Value Proposition .
For more information regarding customer concentration, see Part II, Item 7 “Management’s discussion and analysis of financial condition and results of operations” of this report under the heading “Overview.” 4 Table of C ontents Supply Chain We have developed a scalable, asset-light supply chain centered on the combination of speed to market, high-quality and low costs.
For more information regarding customer concentration, see Part II, Item 7 “Management’s discussion and analysis of financial condition and results of operations” of this report under the heading “Overview.” Supply Chain We have developed a scalable, asset-light supply chain centered on the combination of speed to market, high-quality and low costs.
We have strong relationships with our retail customers such as Target, Walmart, Ulta Beauty and other leading retailers that have enabled us to expand distribution both domestically and internationally. 2 Table of C ontents e.l.f. Cosmetics Since 2004, e.l.f. Cosmetics has made the best of beauty accessible to every eye, lip and face.
We have strong relationships with our retail customers such as Target, Walmart, Ulta Beauty, Amazon and other leading retailers that have enabled us to expand distribution both domestically and internationally. 2 Table of Contents e.l.f. Cosmetics Since 2004, e.l.f. Cosmetics has made the best of beauty accessible to every eye, lip and face.
SKIN,” and “Keys Soulcare,” Well People, Inc., which conducts business under the name “Well People,” and Naturium LLC, which conducts business under the name “Naturium.” 10 Table of C ontents Available Information We make available on or through our website, www.elfbeauty.com, certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
SKIN,” “Keys Soulcare,” Well People, Inc., which conducts business under the name “Well People,” and Naturium LLC, which conducts business under the name “Naturium.” 9 Table of Contents Available Information We make available on or through our website, www.elfbeauty.com, certain reports and amendments to those reports that we file with, or furnish to, the SEC in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations. 8 Table of C ontents Cosmetics are not subject to pre-market approval by the FDA; however, certain ingredients, such as color additives, must be pre-approved for the specific intended use of the product and are subject to certain restrictions on their use.
The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations. 7 Table of Contents Cosmetics are not subject to pre-market approval by the FDA; however, certain ingredients, such as color additives, must be pre-approved for the specific intended use of the product and are subject to certain restrictions on their use.
We believe innovation is key to our success and we were named to Fast Company's list of “The World's Most Innovative Companies of 2023.” We believe we are a leader in the beauty industry in speed and first-to-mass product introductions. Our flagship e.l.f.
We believe innovation is key to our success and we are proud to be named to Fast Company's list of “The World's Most Innovative Companies of 2025.” We believe we are a leader in the beauty industry in speed and first-to-mass product introductions. Our flagship e.l.f.
“Exhibits, financial statement schedules” under the heading “Segment reporting.” For information regarding the risks related to our non-US operations, see Part I, Item 1A “Risk factors.” Corporate Information e.l.f. Beauty was formed as a Delaware corporation on December 20, 2013 under the name J.A. Cosmetics Holdings, Inc. and we changed our name to e.l.f. Beauty, Inc. in April 2016.
For information regarding the risks related to our non-US operations, see Part I, Item 1A “Risk factors.” Corporate Information e.l.f. Beauty was formed as a Delaware corporation on December 20, 2013 under the name J.A. Cosmetics Holdings, Inc. and we changed our name to e.l.f. Beauty, Inc. in April 2016.
We’re also proud that our employee base, which is 75% women, over 40% diverse and over 65% millennial and Gen Z, is representative of the young, diverse communities we serve.
We’re also proud that our employee base, which is over 70% women, over 40% diverse and over 50% millennial and Gen Z, is representative of the young, diverse communities we serve.
Government Regulation We and our products are subject to various federal, state and international laws and regulations, including regulation in the United States by the US Food and Drug Administration (the “FDA”), the Consumer Product Safety Commission (the “CPSC”), the Federal Trade Commission (the “FTC”), and regulations outside of the United States by Health Canada and the European Commission, among others.
Government Regulation We and our products are subject to various federal, state and international laws and regulations, including regulation in the United States by the FDA, the Consumer Product Safety Commission (the “CPSC”), the Federal Trade Commission (the “FTC”), and regulations outside of the United States by Health Canada and the European Commission, among others.
We work closely with our suppliers on new product innovation and quality. Our China-based sourcing, quality and innovation teams work with their US-based counterparts to deliver ongoing product quality, innovation and cost savings. We are not overly dependent on any single raw material.
Our broad supply base gives us the ability to fulfill our product requirements and remain cost competitive. We work closely with our suppliers on new product innovation and quality. Our China-based sourcing, quality and innovation teams work with their US-based counterparts to deliver ongoing product quality, innovation and cost savings. We are not overly dependent on any single raw material.
For our international operations, we utilize third-party logistics providers in the UK, Germany and Canada to distribute to certain international customers and distributors. We have invested capital in picking, packaging, scanning and conveying technology to more fully automate our processes.
For our international operations, we utilize third-party logistics providers in the UK, Germany, Canada and China to distribute to certain international customers and distributors. We have invested capital in picking, packaging, scanning and conveying technology to more fully automate our processes. Employees and Human Capital Management As of March 31, 2025, we had 633 full-time employees.
Details can be found in our Impact Report on our website (https://www.elfbeauty.com/social-impact/). The information on, or that can be accessed through, our website, including our Impact Report and related materials, is not incorporated by reference into this Annual Report or any other filings we make with the SEC. We are committed to: • Encourage Self Expression .
The information on, or that can be accessed through, our website, including our Impact Report and related materials, is not incorporated by reference into this Annual Report or any other filings we make with the SEC.
Customers We have strong relationships with our retail customers such as Target, Walmart, Ulta Beauty and other leading retailers that have enabled us to expand distribution both domestically and internationally. Our largest three customers, Target, Walmart and Ulta Beauty, accounted for 25%, 17% and 16%, respectively, of our net sales in the fiscal year ended March 31, 2024.
The United States accounted for 81% of our net sales in the fiscal year ended March 31, 2025. The remaining 19% was attributable to international markets. Customers We have strong relationships with our retail customers such as Target, Walmart, Ulta Beauty, Amazon and other leading retailers that have enabled us to expand distribution both domestically and internationally.
We sell our products in the United States primarily in the mass, drug store, food and specialty retail channels. • e-commerce. e-commerce is an important component of our engagement and innovation model. Our roots as an e-commerce company and our digital engagement model drive conversion on our e-commerce websites and our mobile applications, where we sell our full product offerings.
We sell our products in the United States primarily in the mass, drug store, food, dollar, and specialty retail channels. • e-commerce. e-commerce is an important component of our engagement and innovation model.
In addition, under the Modernization of Cosmetic Regulation Act of 2022 (“MoCRA”), manufacturers of cosmetic products will become subject to more onerous FDA obligations once implemented via regulation, including adverse event reporting and record retention requirements, safety substantiation requirements, facility registration requirements, product listing requirements, mandatory GMP requirements and labeling requirements for certain products.
In addition, under the Modernization of Cosmetic Regulation Act of 2022 (“MoCRA”), manufacturers and processors of cosmetic products are required to register their facilities and list their products with the FDA, and are subject to additional obligations, including adverse event reporting and record retention requirements, safety substantiation requirements and, once implemented by regulation, mandatory GMP requirements and labeling requirements for certain products.
The higher net sales in our third and fourth fiscal quarters are largely attributable to the increased levels of purchasing by retailers for the holiday season and customer shelf reset activity, respectively. Lower holiday season purchases or shifts in customer shelf reset activity could have a disproportionate effect on our results of operations for the entire fiscal year.
The higher net sales in our third and fourth fiscal quarters are largely attributable to the increased levels of purchasing by retailers for the holiday season and customer shelf reset activities, respectively.
Substantially all of our products are sourced and manufactured in China through close collaboration with a network of third-party manufacturers. We have ample manufacturing capacity as well as redundant capabilities in the event that one or more suppliers cannot meet our needs. Our broad supply base gives us the ability to fulfill our product requirements and remain cost competitive.
Our products are sourced and manufactured through close collaboration with a network of third-party manufacturers, primarily in China, with a portion of our products also sourced in Thailand, Taiwan, Europe, and the United States. We have ample manufacturing capacity as well as redundant capabilities in the event that one or more suppliers cannot meet our needs.
Color cosmetics and skin care products are broadly sold through food, drug and mass channels, as well as through department stores, online and in specialty channels.
Markets and Competition We operate across beauty categories including eye, lip and face makeup, beauty tools and accessories, and skin care products. Color cosmetics and skin care products are broadly sold through food, drug and mass channels, as well as through department stores, online and in specialty channels.
(2) Employee demographic figures based on our full-time employees as of March 31, 2024. Race/ethnicity percentages exclude our employees outside of the United States. Note: We are an equal opportunity employer and do not use race, ethnicity, gender or any other protected criteria as a factor in any employment decisions, such as hiring, promotions or compensation.
Note: We are an equal opportunity employer and do not use race, ethnicity, gender or any other protected criteria as a factor in any employment decisions, such as hiring, promotions or compensation.
Cosmetics’ average product price point is approximately $6, as compared to other leading mass cosmetics brands which have average product price points over $9 and prestige cosmetics brands which have average product price points over $20, according to Nielsen. • Powerhouse Innovation .
Cosmetics’ average product price point in the U.S. is approximately $6.50, as compared to other leading mass cosmetics brands which have average product price points over $9.50 and prestige cosmetics brands which have average product price points over $20, according to Nielsen. Importantly, with e.l.f., we believe our consumers don't have to compromise.
“Exhibits, financial statement schedules” under the heading “Segment reporting.” Geographic Information For information regarding the geographic source of our net sales and the location of our long-lived assets, see Note 2 Summary of significant accounting policies to our consolidated financial statements in Part IV, Item 15.
For more information regarding segment reporting, see Note 2, “Summary of significant accounting policies” in our consolidated financial statements. Geographic Information For information regarding the geographic source of our net sales and the location of our long-lived assets, see Note 2, “Summary of significant accounting policies” in our consolidated financial statements.
We believe the combination of our value proposition, powerhouse innovation, disruptive marketing engine and our world-class team’s ability to execute with quality and speed has positioned us well to navigate the competitive beauty market. Our strategy is underpinned by four key pillars: • Value Proposition .
We believe the combination of our passionate team of owners, value proposition, powerhouse innovation, disruptive marketing engine and productivity model has positioned us well to navigate the competitive beauty market. Our strategy is underpinned by five key pillars: • Passionate Team of Owners . Our talented employees are at the core of our business strategy.
Our products are also available at other e-commerce sites, such as Amazon, making our products widely accessible to our consumers. • International retailers. Our products are also sold in international markets, primarily in the United Kingdom (the “UK”) and Canada. In the fiscal year ended March 31, 2024, national and international retailers comprised 84% of our net sales.
Our products are also sold in international markets, primarily in the United Kingdom (the “UK”), Canada and Germany. In the fiscal year ended March 31, 2025, national and international retailers comprised 83% of our net sales. The remaining 17% came from e-commerce channels.
All full-time employees receive a base salary, are bonus eligible under the same bonus plan tied to our financial performance and receive an equity award in e.l.f. Beauty stock. We believe we are one of the few public consumer companies that grants equity on an annual basis to every employee—strongly aligning our team with the long-term interests of our stockholders.
We believe we are one of the few public consumer companies that grants equity on an annual basis to every employee—strongly aligning our team with the long-term interests of our stockholders.
No other individual customer accounted for 10% or more of our net sales in the fiscal year ended March 31, 2024. We expect that Target, Walmart and Ulta Beauty, along with a small number of other customers will, in the aggregate, continue to account for a large portion of our net sales in the future.
Our largest customers, Target, Walmart, Ulta Beauty and Amazon, accounted for 23%, 16%, 12% and 12%, respectively, of our net sales in the fiscal year ended March 31, 2025. No other individual customer accounted for 10% or more of our net sales in the fiscal year ended March 31, 2025.
Cosmetics Power Grip Primer at $10 versus a prestige item at $38, the e.l.f. Cosmetics Halo Glow Liquid Filter at $14 versus a prestige item at $49, and the e.l.f. SKIN Holy Hydration! Makeup Melting Cleansing Balm at $11 versus a prestige item at $38. • Disruptive Marketing Engine .
Glow Reviver Lip Oil at $8 versus a prestige item at $40, e.l.f. Cosmetics Power Grip Primer at $10 versus a prestige item at $38, and the e.l.f. SKIN Bronzing Drops at $12 versus a prestige item at $38. • Disruptive Marketing Engine .
To support anticipated higher sales during the third and fourth fiscal quarters, we make investments in working capital to ensure inventory levels can support demand. Fluctuations throughout the year are also driven by the timing of product restocking or rearrangement by our major retail customers as well as expansion into new retail customers.
Fluctuations throughout the year are also driven by the timing of product restocking or rearrangement by our major retail customers as well as expansion into new retail customers.
We seek to attract and engage consumers primarily through digital and social media, as compared to legacy beauty brands that engage consumers primarily through traditional media such as magazines, newspapers and television. We attract and engage existing and new consumers through buzz-worthy activations, unexpected creativity and unique collaborations.
We seek to attract and engage consumers primarily through digital and social media, as compared to legacy beauty brands that engage 3 Table of Contents consumers primarily through traditional media such as magazines, newspapers and television. We believe that our brand awareness is relatively low in comparison to legacy mass beauty brands.
In FY 2024, we were recognized on U.S. News & World Report’s annual list of the “2023-2024 Best Companies to Work For.” We are keenly interested in our employees’ well-being, development and overall satisfaction. Engagement is a key factor we look to because it measures our team’s connection and commitment to both e.l.f. Beauty and our vision, mission and values.
Our continued investments in our people and culture have positioned us as an employer of choice both in the beauty industry and our local communities. We are keenly interested in our employees’ well-being, development and overall satisfaction. Engagement is a key factor we look to because it measures our team’s connection and commitment to both e.l.f.
Encourage Self Expression: Promoting a Culture of Diversity, Equity and Inclusion We are deeply committed to diversity, equity and inclusion (“DEI”) as exemplified by the diversity of both our Board of Directors and our employee base.
Our Executive Team members review survey data and outcomes with their teams to create and evolve action plans to further enhance our employee experience. We are deeply committed to diversity, equity and inclusion as exemplified by the diversity of both our Board of Directors and our employee base.
As is customary in the industry, none of our customers are under any obligation to continue purchasing products from us in the future.
We expect that Target, Walmart, Ulta Beauty and Amazon, along with a small number of other customers will, in the aggregate, continue to account for a large portion of our net sales in the future. 4 Table of Contents As is customary in the industry, none of our customers are under any obligation to continue purchasing products from us in the future.
Our commitment to our people and our High Performance Team (“HPT”) culture is evident in our 91% employee engagement score and recognition by U.S. News & World Report on its annual list of the “2023-2024 Best Companies to Work For.” 3 Table of C ontents With regards to compensation, we take a unique “one-team” approach.
Our commitment to our people and our High Performance Team (“HPT”) culture is evident in our 90% employee engagement score, 18 percentage points above the consumer industry benchmark, with 97% of our employees recommending e.l.f. as a great place to work. With regards to compensation, we take a unique “one-team” approach.
As such, we treat all employees with respect, regardless of age, gender, ethnicity, religion, abilities or sexual orientation. We also expect our suppliers and partners to observe these principles when providing products and services to us. We are proud to be the first company in the beauty industry to have a third-party manufacturing facility Fair Trade Certified™.
We are proud to be the first beauty company to have a third-party manufacturing facility Fair Trade Certified™ – with more than 85% of our products now produced in Fair Trade Certified™ facilities. We choose to work with suppliers that uphold our principles and values and actively engage with them on sustainability topics.
Empower Others: Supporting the Full Potential of Our Employees Our talented employees are at the core of our business strategy. We place a high priority on attracting, recruiting, developing and retaining diverse global talent. Our continued investments in our people and culture have positioned us as an employer of choice both in the beauty industry and our local communities.
People: Our People Power Our Performance Our talented team of 633 people across the world immersed in our high performance, purpose-led culture fuels our results. We place a high priority on attracting, recruiting, developing and retaining diverse global talent.
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We believe that our brand awareness is relatively low in comparison to legacy mass beauty brands. This represents an opportunity for us, and we have a multi-faceted strategy to build brand awareness, affinity and loyalty.
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We continue to hear from consumers that we deliver quality that's often better than prestige. • Powerhouse Innovation .
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Total expenses for marketing and digital in the fiscal year ended March 31, 2024 were $256.0 million, approximately 25% of our net sales. • Unique One-Team Culture . Our talented employees are at the core of our business strategy.
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We believe we have a unique ability to combine the best of beauty, culture, and entertainment to attract and engage generations of consumers across a variety of platforms.
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We believe this approach, which applies across all employee levels and geographies, is unique in the beauty industry and contributes to our success in hiring and retaining top talent and driving business results. Markets and Competition We operate across beauty categories including eye, lip and face makeup, beauty tools and accessories, and skin care products.
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This represents an opportunity for us, and we have a multi-faceted strategy to build brand awareness, affinity and loyalty. Total expenses for marketing and digital in the fiscal year ended March 31, 2025 were $318.8 million, approximately 24% of our net sales. • Productivity Model . Founded as a digitally native brand, our flagship e.l.f.
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The remaining 16% came from e-commerce channels. The United States accounted for 85% of our net sales in the fiscal year ended March 31, 2024. The remaining 15% was attributable to international markets.
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Cosmetics brand is the only top five mass cosmetics brand with its own direct-to-consumer e-commerce site. We leverage insights from our site and Beauty Squad loyalty program to proactively change out up to 20% of our retail assortment each year.
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Employees and Human Capital Management As of March 31, 2024, we had 475 full-time employees (377 in the United States, the UK and Canada, and 98 in China). Social Impact and Commitments Our Impact Report sets out our social and environmental goals and strategy across three pillars - Encourage Self Expression, Empower Others and Embody Our Ethics.
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This approach has led us to be the most productive mass cosmetics brand on a dollar per linear foot basis with our largest retail customers globally. In addition to driving strong productivity, we believe we benefit our global retail partners and the beauty industry at large by driving more traffic, stronger category growth, and greater penetration among younger consumers.
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We celebrate diversity and make the best of beauty accessible. • Empower Others . We provide equal opportunities for growth and success. • Embody Our Ethics . We strive to do the right thing for all people, the planet and our furry friends.
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Our roots as an e-commerce company and our digital engagement model drive conversion on our e-commerce websites and our mobile applications, where we sell our full product offerings. Our products are also available at other e-commerce sites, such as Amazon, making our products widely accessible to our consumers. • International retailers.
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We are committed to enabling the appropriate levels of diversity – including but not limited to gender, race, sexual orientation, national origin, ability and age – to be represented across our entire team.
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Social Impact and Commitments Our Impact Report sets out our social and environmental goals and strategy across three categories - People, Product, and Planet. Details can be found in our Impact Report on our website (https://www.elfbeauty.com/impact).
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In FY 2024, we conducted our third annual engagement survey of all employees. All employees are offered the opportunity to participate, and 86% submitted a response. Our employee engagement results this year hit record highs relative to prior surveys and to consumer industry benchmarks.
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Similarly, our disclosures on sustainability and related environmental, social, and governance (“ESG”) matters—whether herein or elsewhere—are informed by various frameworks and stakeholder expectations and, as such, are not necessarily “material” for purposes of our SEC filings (even if we use “material” or similar language in discussing such matters).
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Our overall engagement score was 91% —19% above the industry benchmark and 2% above our survey administered the previous year. Our benefits and programs are designed to support the total well-being and promote the full potential of our employees. With regards to compensation, we take a unique “one-team” approach.
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Particularly in the ESG context, there are various definitions of materiality that differ from, and are often more expansive than, the definition under US federal securities laws We are committed to our: • People . We place a high priority on attracting, recruiting, developing, and retaining diverse global talent. • Product .
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In the United States, where over 70% of our workforce is located, the benefits for our full-time employees include, among other things: • Financial benefits, including competitive compensation as well as retirement savings plans and commuter benefits; • Healthcare benefits including flexible spending accounts, disability and life insurance - all of which begin on day 1 of employment; • Family support and flexibility benefits, including up to 20 weeks of gender-neutral parental leave, as well as fertility and adoption support; 6 Table of C ontents • Wellness and time off programs, including an employee assistance program, access to wellness coaches and flexible time off; • Community impact programs, including employee donation matching programs and paid time off for volunteering; and • Education and career development programs, including tuition reimbursement, High Performance Teamwork (“HPT”) coaching, as well as ongoing learning and training opportunities.
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We lean into our superpowers, delivering premium quality beauty products at extraordinary prices with broad appeal that are vegan, cruelty free, clean and Fair Trade Certified TM . • Planet . We are dedicated and committed to continually improving and taking meaningful actions to protect our planet.
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Outside of the United States, we provide similarly competitive benefit packages to those offered to our United States employees and tailored to market-specific practices. Embody Our Ethics: Doing the Right Thing for All People, the Planet and Our Furry Friends All People We proudly support human rights and individual expression and freedom.
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Beauty and our vision, mission and values. In FY 2025, we conducted our fourth annual engagement survey of all employees. Participation was at an all-time high at 91% — 10 percentage points above our participation rate two years ago. Our overall engagement score this year was 90% — 18 5 Table of Contents percentage points above the industry benchmark.
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A Fair Trade Certified™ seal on a product signifies that it was made according to rigorous fair trade standards that promote sustainable livelihoods and safe working conditions for factory employees, protection of the environment and transparent supply chains.
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(2) Executive Team includes our Executive Officers and the Vice President, General Manager of our China operations. (3) Employee demographic figures based on our full-time employees as of March 31, 2025. Race/ethnicity percentages exclude our employees outside of the United States.
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Our first third-party manufacturing facility in China was Fair Trade Certified™ in August 2022, and we have since expanded this program to certify additional facilities. To achieve certification, facilities are required to pass thorough audits and demonstrate adherence to over 100 compliance criteria that cover social responsibility, environmental responsibility, empowerment and economic development.
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Product: We Make the Best of Beauty Accessible to Every Eye, Lip and Face Delivering premium quality products at extraordinary prices is at the heart of our value proposition, democratizing access for millions of consumers who otherwise couldn't have the best of beauty.
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Facilities must pass a re-certification annually, which includes plans for continuous improvement. Each time a consumer buys one of our Fair Trade Certified™ products, e.l.f. Beauty makes a contribution to the facility workers who made the product for use in improving their communities.
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We believe that equally important is what goes into our products (and what doesn’t) and how our products are made.
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The Planet We are focused on reducing our environmental impact while providing our consumers with premium-quality beauty products. Product packaging represents a meaningful portion of our environmental footprint, driving our continued focus to further reduce this impact. Our packaging sustainability strategy is grounded in three principles: • Packaging footprint reduction.
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We were one of the first mass beauty brands to be vegan and cruelty free and are committed to formulating our products to meet high standards of clean beauty – choosing not to use over 2,500 ingredients in our formulations, compared to 11 ingredients restricted by the US Food and Drug Administration (the “FDA”).
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We are proud to have eliminated over 2.5 million pounds of excess packaging since the inception of “Project Unicorn.” Project Unicorn was launched in 2019 to elevate e.l.f. Cosmetics’ product assortment, presentation, and navigation on-shelf, and resulted in a significant streamlining in our product packaging footprint.
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And we are committed to responsibly sourcing forest materials and sensitive ingredients such as mica and palm oil derivatives. 6 Table of Contents Planet: We Are Committed to Improving and Protecting Our Planet We recognize the urgency of addressing environmental challenges head-on.
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This was achieved by removing secondary cartons, vacuum formed trays and paper insert cards, slimming down secondary packaging, and designing a patented approach to display product on shelf.
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Our dedication to sustainability acknowledges the significant work ahead, and we are committed to continually improving and taking meaningful actions to protect our planet. Climate change stands as one of the most pressing issues of our time, and we are committed to reducing our carbon footprint across our entire business.
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In 2023, we established a new goal seeking to achieve a 20% reduction in packaging intensity by the end of our fiscal year ending March 31, 2030, and we are actively pursuing projects to lightweight our packaging. • Sustainably sourced packaging. Our initial focus is the use of Forest Stewardship Council (“FSC”)-certified paper for our products that use paper cartons.
Added
Our packaging is central to our brand identity, yet it represents a significant environmental impact. To address this, we are focused on reducing packaging intensity, increasing circularity, and sourcing materials sustainably. Understanding our water footprint is another critical aspect of our sustainability efforts.
Removed
FSC certification is a globally recognized standard that promotes products that come from responsibly managed forests that provide environmental, social and economic benefits.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

103 edited+61 added−39 removed317 unchanged
Biggest changeFurther, we may not have sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets. Any product liability claim or series of claims brought against us could harm our business significantly, particularly if a claim were to result in adverse publicity or damage awards outside or in excess of our insurance policy limits.
Biggest changeAny product liability claim or series of claims brought against us could harm our business significantly, particularly if a claim were to result in adverse publicity or damage awards outside or in excess of our insurance policy limits. 33 Table of Contents Risk factors related to intellectual property If we are unable to protect our intellectual property, the value of our brands and other intangible assets may be diminished, and our business may be adversely affected.
The failure of other banks and financial institutions and measures taken, or not taken, by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.
The failure of banks and financial institutions and measures taken, or not taken, by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.
In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, changes in consumer preferences or beauty trends, announcements of new products or significant price reductions by our competitors, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry, the level of success of releases of new products and in response the market price of shares of our common stock could decrease significantly.
In addition, our results of operations have been and in the future could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, changes in consumer preferences or beauty trends, announcements of new products or significant price reductions by our competitors, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry, the level of success of releases of new products and in response the market price of shares of our common stock could decrease significantly.
Further, our third-party manufacturers, suppliers and distributors may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; • be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, or to comply with applicable regulations, including those regarding the safety and quality of products and ingredients and good manufacturing practices; • have financial difficulties; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • disclose our confidential information or intellectual property to competitors or third parties; • engage in activities or employment practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors.
Further, our third-party manufacturers, suppliers and distributors may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; 16 Table of Contents • be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, or to comply with applicable regulations, including those regarding the safety and quality of products and ingredients and good manufacturing practices; • have financial difficulties; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • disclose our confidential information or intellectual property to competitors or third parties; • engage in activities or employment practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors.
The potential impacts of such public health crises include, but are not limited to: • the possibility of closures, reduced operating hours and/or decreased retail traffic for our retail customers, resulting in a decrease in sales of our products; • disruption to our distribution centers and our third-party suppliers and manufacturers, including the effects of facility closures as a result of disease outbreaks or other illnesses, or measures taken by federal, state or local governments to reduce its spread, reductions in operations hours, labor shortages and real-time changes in operating procedures, including for additional cleaning and disinfection procedures; and • significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.
The potential impacts of such public health crises include, but are not limited to: • the possibility of closures, reduced operating hours and/or decreased retail traffic for our retail customers, resulting in a decrease in sales of our products; • disruption to our distribution centers and our third-party suppliers and manufacturers, including the effects of facility closures as a result of disease outbreaks or other illnesses, or measures taken by federal, state or local governments to reduce its spread, reductions in operations hours, labor shortages and real-time changes in operating procedures, including for additional cleaning and disinfection procedures; and 18 Table of Contents • significant disruption of global financial markets, which could have a negative impact on our ability to access capital in the future.
The labor markets in the United States and China, where most of our employees are located, are hyper competitive, and attracting and retaining top talent requires significant organizational costs and attention.
The labor markets in the United States, China and the UK, where most of our employees are located, are hyper competitive, and attracting and retaining top talent requires significant organizational costs and attention.
Similarly, we cannot predict the impact that the high market volatility and instability of the banking sector more broadly could have on economic activity and our business in particular.
We cannot predict the impact that the high market volatility and instability of the banking sector more broadly could have on economic activity and our business in particular.
These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses, telecommunication failures, user errors, catastrophic events, malicious uses of AI and other data security and privacy threats.
These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, computer viruses, telecommunication failures, user errors, catastrophic events, malicious uses of AI and other data security and privacy threats, cyber and otherwise.
These factors may include: • any reduction in consumer traffic and demand at our retail customers as a result of economic downturns, pandemics or other health crises, changes in consumer preferences or reputational damage as a result of, among other developments, data privacy breaches, regulatory investigations or employee misconduct; • any credit risks associated with the financial condition of our retail customers; • the effect of consolidation or weakness in the retail industry or at certain retail customers, including store closures and the resulting uncertainty; and • inventory reduction initiatives and other factors affecting retail customer buying patterns, including any reduction in retail space committed to beauty products and retailer practices used to control inventory shrinkage.
These factors may include: • any reduction in consumer traffic and demand at our retail customers as a result of economic downturns, pandemics or other health crises, changes in consumer preferences or reputational damage as a result of, among other developments, data privacy breaches, regulatory investigations or employee misconduct; • any credit risks associated with the financial condition of our retail customers; • the effect of consolidation or weakness in the retail industry or at certain retail customers, including store closures and the resulting uncertainty; and 21 Table of Contents • inventory reduction initiatives and other factors affecting retail customer buying patterns, including any reduction in retail space committed to beauty products and retailer practices used to control inventory shrinkage.
We may learn additional information about Naturium that materially and adversely affects us and Naturium, such as unknown or contingent liabilities and liabilities related to compliance with applicable laws. Moreover, Naturium may be subject to audits, reviews, inquiries, investigations and claims of non-compliance and litigation by federal and state regulatory agencies which could result in liabilities or other sanctions.
We may learn additional information about rhode that materially and adversely affects us and rhode, such as unknown or contingent liabilities and liabilities related to compliance with applicable laws. Moreover, rhode may be subject to audits, reviews, inquiries, investigations and claims of non-compliance and litigation by federal and state regulatory agencies which could result in liabilities or other sanctions.
Adverse economic conditions in the United States, the UK, Canada, China or any of the other countries in which we conduct significant business, such as the current inflationary economic environment, rising interest rates, financial distress caused by recent or potential bank failures and the associated banking crisis, an economic recession, depression or downturn, a tightening of the credit markets, high energy prices or higher unemployment levels, may lead to decreased consumer spending, reduced credit availability and a decline in consumer confidence and demand, each of which poses a risk to our business.
Adverse economic conditions in the United States, Canada, the UK, the EU, China or any of the other jurisdictions in which we conduct significant business, such as the current inflationary economic environment, rising interest rates, financial distress caused by recent or potential bank failures and the associated banking crisis, an economic recession, depression or downturn, a tightening of the credit markets, high energy prices or higher unemployment levels, may lead to decreased consumer spending, reduced credit availability and a decline in consumer confidence and demand, each of which poses a risk to our business.
Among other things: • although we do not have a stockholder rights plan, these provisions allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • these provisions provide for a classified board of directors with staggered three-year terms; 37 Table of C ontents • these provisions require advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • these provisions prohibit stockholder action by written consent; • these provisions provide for the removal of directors only for cause and only upon affirmative vote of holders of at least 75% of the shares of common stock entitled to vote generally in the election of directors; and • these provisions require the amendment of certain provisions only by the affirmative vote of at least 75% of the shares of common stock entitled to vote generally in the election of directors.
Among other things: • although we do not have a stockholder rights plan, these provisions allow us to authorize the issuance of undesignated preferred stock in connection with a stockholder rights plan or otherwise, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of common stock; • these provisions provide for a classified board of directors with staggered three-year terms; • these provisions require advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; • these provisions prohibit stockholder action by written consent; • these provisions provide for the removal of directors only for cause and only upon affirmative vote of holders of at least 75% of the shares of common stock entitled to vote generally in the election of directors; and • these provisions require the amendment of certain provisions only by the affirmative vote of at least 75% of the shares of common stock entitled to vote generally in the election of directors.
Compliance with existing, forthcoming, and proposed privacy and data protection laws and regulations can be costly and can delay or impede our ability to market and sell our products, impede our ability to conduct business through websites and mobile applications we and our partners may operate, require us to modify or amend our information practices and policies, change and limit the way we use consumer information in operating our business, cause us to have difficulty maintaining a single operating model, result in negative publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or investigations, claims or other remedies, including significant fines and penalties, or demands that we modify or cease existing business practices.
Compliance with existing, forthcoming, and proposed privacy and data protection laws and regulations can be costly and can delay or impede our ability to market and sell our products, impede our ability to conduct business through websites and mobile applications we and our partners may operate, require us to modify or amend our information practices and policies, change and limit the way we use consumer information in operating our business, cause us to have difficulty maintaining a 31 Table of Contents single operating model, result in negative publicity, increase our operating costs, require significant management time and attention, or subject us to inquiries or investigations, claims or other remedies, including significant fines and penalties, or demands that we modify or cease existing business practices.
The process of integrating an acquired business, product or technology can create unforeseen operating difficulties, expenditures and other challenges such as: • potentially increased regulatory and compliance requirements; • implementation or remediation of controls, procedures and policies at the acquired business; • diversion of management time and focus from operation of our then-existing business to acquisition integration challenges; • coordination of product, sales, marketing and program and systems management functions; • transition of the users and customers of the acquired business, product, or technology onto our system; 14 Table of C ontents • retention of employees from the acquired business; • integration of employees from the acquired business into our organization; • integration of the acquired business’ accounting, information management, human resources and other administrative systems and operations into our systems and operations; • liability for activities of the acquired business, product or technology prior to the acquisition, including violations of law, commercial disputes and tax and other known and unknown liabilities; and • litigation or other claims in connection with the acquired business, product or technology, including claims brought by terminated employees, customers, former stockholders or other third parties.
The process of integrating an acquired business, product or technology can create unforeseen operating difficulties, expenditures and other challenges such as: • potentially increased regulatory and compliance requirements; • implementation or remediation of controls, procedures and policies at the acquired business; • diversion of management time and focus from operation of our then-existing business to acquisition integration challenges; • coordination of product, sales, marketing and program and systems management functions; • transition of the users and customers of the acquired business, product, or technology onto our system; 13 Table of Contents • retention of employees from the acquired business; • integration of employees from the acquired business into our organization; • integration of the acquired business’ accounting, information management, human resources and other administrative systems and operations into our systems and operations; • liability for activities of the acquired business, product or technology prior to the acquisition, including violations of law, commercial disputes and tax and other known and unknown liabilities; and • litigation or other claims in connection with the acquired business, product or technology, including claims brought by terminated employees, customers, former stockholders or other third parties.
If the financial institutions with which we do business enter receivership or become insolvent in the future, there is no guarantee that the Department of the Treasury, the Federal Reserve and the FDIC will intercede to provide us and other 19 Table of C ontents depositors with access to balances in excess of the $250,000 FDIC insurance limit or that we would be able to: (i) access our existing cash, cash equivalents and investments; (ii) maintain any required letters of credit or other credit support arrangements; or (iii) adequately fund our business for a prolonged period of time or at all.
If the financial institutions with which we do business enter receivership or become insolvent in the future, there is no guarantee that the Department of the Treasury, the Federal Reserve and the FDIC will intercede to provide us and other depositors with access to balances in excess of the $250,000 FDIC insurance limit or that we would be able to: (i) access our existing cash, cash equivalents and investments; (ii) maintain any required letters of credit or other credit support arrangements; or (iii) adequately fund our business for a prolonged period of time or at all.
See also “Risk factors related to our acquisition of Naturium.” To the extent that we pay the consideration for any acquisitions or investments in cash, it reduces the amount of cash available to us for other purposes.
See also “Risk factors related to our acquisition of rhode.” To the extent that we pay the consideration for any acquisitions or investments in cash, it reduces the amount of cash available to us for other purposes.
We have made certain assumptions relating to our acquisition of Naturium that may prove to be inaccurate, including as the result of the failure to realize the expected benefits of the acquisition, failure to realize expected revenue growth rates and higher than expected operating, transaction and integration costs, as well as general economic and business conditions that adversely affect Naturium.
We have made certain assumptions relating to our potential acquisition of rhode that may prove to be inaccurate, including as the result of the failure to realize the expected benefits of the acquisition, failure to realize expected revenue growth rates and higher than expected operating, transaction and integration costs, as well as general economic and business conditions that adversely affect rhode.
If the assumptions are incorrect, our business, financial condition and results of operations may be materially adversely affected. Naturium may have liabilities that are not known to us. Naturium may have liabilities that we failed, or were unable, to discover in the course of performing our due diligence investigations in connection with our acquisition of Naturium.
If we consummate the acquisition of rhode and the assumptions are incorrect, our business, financial condition and results of operations may be materially adversely affected. rhode may have liabilities that are not known to us. rhode may have liabilities that we failed, or were unable, to discover in the course of performing our due diligence investigations in connection with our acquisition of rhode.
These interruptions or failures may be due to unforeseen events that are beyond our control or the control of our third-party delivery service providers, such as port congestion, container shortages, inclement weather, natural disasters, international conflict, labor unrest or other transportation disruptions.
These interruptions or failures may be due to unforeseen events that are beyond our control or the control of our 15 Table of Contents third-party delivery service providers, such as port congestion, container shortages, inclement weather, natural disasters, international conflict, labor unrest or other transportation disruptions.
Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business and decrease the use of our sites by consumers and suppliers and may result in the imposition of monetary liability.
Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business and decrease the use of our sites by consumers 32 Table of Contents and suppliers and may result in the imposition of monetary liability.
In addition, if we are found to infringe, misappropriate, dilute or otherwise violate third-party trademark, patent, copyright or other proprietary rights, our ability to use brands to the fullest extent we plan may be limited, we may need to obtain a license, which may not be available on commercially reasonable terms, or at all, or we may need to redesign or rebrand our marketing strategies or products, which may not be possible.
In addition, if we are found to infringe, misappropriate, dilute or otherwise violate third-party trademark, patent, copyright or other proprietary rights, our ability to use brands to the fullest extent we plan may be limited, we may need to obtain a license, which may not be available 34 Table of Contents on commercially reasonable terms, or at all, or we may need to redesign or rebrand our marketing strategies or products, which may not be possible.
If we do not make the necessary overhead expenditures to accommodate our future growth, we may not be successful in executing our growth strategy, and our results of operations would suffer. Acquisitions or investments, such as our acquisition of Naturium, could disrupt our business and harm our financial condition.
If we do not make the necessary overhead expenditures to accommodate our future growth, we may not be successful in executing our growth strategy, and our results of operations would suffer. Acquisitions or investments, such as our potential acquisition of rhode, could disrupt our business and harm our financial condition.
We also may incur significant losses in the future for a number of reasons, including the following risks and the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors: • we may lose one or more significant retail customers, or sales of our products through these retail customers may decrease; • the ability of our third-party suppliers and manufacturers to produce our products and of our distributors to distribute our products could be disrupted; 13 Table of C ontents • because substantially all of our products are sourced and manufactured in China, our operations are susceptible to risks inherent in doing business there; • our products may be the subject of regulatory actions, including, but not limited to, actions by the FDA, the FTC and the CPSC in the United States; • we may be unable to introduce new products that appeal to consumers or otherwise successfully compete with our competitors in the beauty industry; • we may be unsuccessful in enhancing the recognition and reputation of our brands, and our brands may be damaged as a result of, among other reasons, our failure, or alleged failure, to comply with applicable ethical, social, product, labor or environmental standards; • we may experience service interruptions, data corruption, cyber-based attacks or network security breaches which result in the disruption of our operating systems or the loss of confidential information of our consumers; • we may be unable to retain key members of our senior management team or attract and retain other qualified personnel; and • we may be affected by any adverse economic conditions in the United States or internationally.
We also may incur significant losses in the future for a number of reasons, including the following risks and the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors: • we may lose one or more significant retail customers, or sales of our products through these retail customers may decrease; • the ability of our third-party suppliers and manufacturers to produce our products and of our distributors to distribute our products could be disrupted; 12 Table of Contents • because the majority of our products are sourced and manufactured in China, our operations are susceptible to risks inherent in doing business there; • our products may be the subject of regulatory actions, including, but not limited to, actions by the FDA, the FTC and the CPSC and comparable foreign authorities outside the United States; • we may be unable to introduce new products that appeal to consumers or otherwise successfully compete with our competitors in the beauty industry; • we may be unsuccessful in enhancing the recognition and reputation of our brands, and our brands may be damaged as a result of, among other reasons, our failure, or alleged failure, to comply with applicable ethical, social, product, labor or environmental standards; • we may experience service interruptions, data corruption, cyber-based attacks or network security breaches which result in the disruption of our operating systems or the loss of confidential information of our consumers; • we may be unable to retain key members of our senior management team or attract and retain other qualified personnel; and • we may be affected by any adverse economic conditions in the United States or internationally.
For example, US and global markets have been experiencing volatility and disruption due to interest rate and inflation increases, such as higher inflation rates in the United States, which have remained above the Federal Reserve’s inflation target, as well as the continued escalation of geopolitical tensions, including those as a result of the conflicts between Russia and Ukraine and in the Middle East.
For example, US and global markets have been experiencing volatility and disruption due to interest rate and inflation increases, such as higher inflation rates in the United States, which increased in the second half of 2021 and have remained above the Federal Reserve’s inflation target, as well as the continued escalation of geopolitical tensions, including those as a result of the conflicts between Russia and Ukraine and in the Middle East.
Our ability to generate cash to meet our operating needs, expenditures and debt service obligations will depend on our future performance and financial condition, which will be affected by financial, business, economic, legislative, regulatory and other 20 Table of C ontents factors, including potential changes in costs, pricing, the success of product innovation and marketing, competitive pressure and consumer preferences.
Our ability to generate cash to meet our operating needs, expenditures and debt service obligations will depend on our future performance and financial condition, which will be affected by financial, business, economic, legislative, regulatory and other factors, including potential changes in costs, pricing, the success of product innovation and marketing, competitive pressure and consumer preferences.
As a result, we have retained, and may in the future retain additional services of various professionals to advise us in these matters, including legal, financial and communications advisers, the costs of which may negatively impact our future financial results.
As a result, we have retained, and may in the future retain additional services of various professionals to advise us in these matters, including 37 Table of Contents legal, financial and communications advisers, the costs of which may negatively impact our future financial results.
If our information technology systems suffer damage, disruption or shutdown, we may incur substantial cost in repairing or replacing these systems, and if we do not effectively resolve the issues in a timely manner, our business, financial condition 22 Table of C ontents and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results.
If our information technology systems suffer damage, disruption or shutdown, we may incur substantial cost in repairing or replacing these systems, and if we do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products in some parts of the world, which could result in the loss of brand recognition and could require us to devote resources to advertising and marketing new brands. 33 Table of C ontents We have limited patent protection, which limits our ability to protect our products from competition.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products in some parts of the world, which could result in the loss of brand recognition and could require us to devote resources to advertising and marketing new brands. We have limited patent protection, which limits our ability to protect our products from competition.
Further, our brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our products, our failure to maintain the quality of our products, product contamination, the failure of our products to deliver consistently positive consumer experiences, or our products becoming unavailable to consumers. 12 Table of C ontents Our success depends, in part, on the quality, performance and safety of our products.
Further, our brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our products, our failure to maintain the quality of our products, product contamination, the failure of our products to deliver consistently positive consumer experiences, or our products becoming unavailable to consumers. 11 Table of Contents Our success depends, in part, on the quality, performance and safety of our products.
We 25 Table of C ontents may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business. Payment methods used on our e-commerce websites subject us to third-party payment processing-related risks.
We may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of our business. Payment methods used on our e-commerce websites subject us to third-party payment processing-related risks.
If we are unable to continue to compete effectively, it could have a material adverse effect on our business, financial condition and results of operations. 11 Table of C ontents Our new product introductions may not be as successful as we anticipate. The beauty industry is driven in part by fashion and beauty trends, which may shift quickly.
If we are unable to continue to compete effectively, it could have a material adverse effect on our business, financial condition and results of operations. 10 Table of Contents Our new product introductions may not be as successful as we anticipate. The beauty industry is driven in part by fashion and beauty trends, which may shift quickly.
In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other 32 Table of C ontents personnel from our business operations.
In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations.
Use of influencers may materially and adversely affect our reputation and business. We rely in part upon social media influencers to market our brands and are unable to fully control their efforts.
Use of influencers may materially and adversely affect our reputation and business. 35 Table of Contents We rely in part upon social media influencers to market our brands and are unable to fully control their efforts.
Although the FDA has yet to establish or implement regulations for such GMP requirements, third-party manufacturers of our cosmetic products may be slow or unable to adapt to these forthcoming regulations, which may require us to find alternative suppliers 29 Table of C ontents for our products.
Although the FDA has yet to establish or implement regulations for such GMP requirements, third-party manufacturers of our cosmetic products may be slow or unable to adapt to these forthcoming regulations, which may require us to find alternative suppliers for our products.
International sales and increased international operations may be subject to risks such as: • difficulties in staffing and managing foreign operations; • burdens of complying with a wide variety of laws and regulations, including more stringent regulations relating to data privacy and security, particularly in the UK and the EU; • adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash; • political and economic instability; • terrorist activities and natural disasters; • trade restrictions; • disruptions or delays in shipments whether due to port congestion, container shortages, labor disputes, product regulations and/or inspections or other factors, natural disasters or health pandemics, or other transportation disruptions; • differing employment practices and laws and labor disruptions; • the imposition of government controls; • an inability to use or to obtain adequate intellectual property protection for our key brands and products; • tariffs and customs duties and the classifications of our goods by applicable governmental bodies; • a legal system subject to undue influence or corruption; • a business culture in which illegal sales practices may be prevalent; • logistics and sourcing; and • military conflicts.
International sales and increased international operations may be subject to risks such as: • changes in political, regulatory, legal or economic conditions, including as a result of the 2024 presidential election; • difficulties in staffing and managing foreign operations; • burdens of complying with a wide variety of laws and regulations, including more stringent regulations relating to data privacy and security, particularly in the UK and the EU; • adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash; 27 Table of Contents • political and economic instability; • terrorist activities and natural disasters; • trade restrictions; • disruptions or delays in shipments whether due to port congestion, container shortages, changes in ocean freight rates or capacity, labor disputes, product regulations and/or inspections or other factors, natural disasters or health pandemics, or other transportation disruptions; • differing employment practices and laws and labor disruptions; • the imposition of government controls; • an inability to use or to obtain adequate intellectual property protection for our key brands and products; • tariffs and customs duties and the classifications of our goods by applicable governmental bodies; • a legal system subject to undue influence or corruption; • a business culture in which illegal sales practices may be prevalent; • logistics and sourcing; and • military conflicts.
In addition, such problems may require us to find new third-party suppliers, 17 Table of C ontents manufacturers or distributors, and there can be no assurance that we would be successful in finding third-party suppliers, manufacturers or distributors meeting our standards of innovation and quality.
In addition, such problems may require us to find new third-party suppliers, manufacturers or distributors, and there can be no assurance that we would be successful in finding third-party suppliers, manufacturers or distributors meeting our standards of innovation and quality.
The FDA may inspect all of our facilities and those of our third-party manufacturers periodically to determine if we and our third-party manufacturers are complying with provisions of the FDCA and FDA regulations.
The FDA may inspect all of our facilities and those of our third-party manufacturers periodically to determine if 29 Table of Contents we and our third-party manufacturers are complying with provisions of the FDCA and FDA regulations.
As such, we will continue to invest in and implement modifications and upgrades to our information technology systems and procedures, including replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality, hiring employees with information technology expertise and building new policies, procedures, training programs and monitoring 23 Table of C ontents tools.
As such, we will continue to invest in and implement modifications and upgrades to our information technology systems and procedures, including replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality, hiring employees with information technology expertise and building new policies, procedures, training programs and monitoring tools.
If we lose a significant retail customer or if sales of our 21 Table of C ontents products to a significant retailer materially decrease, it could have a material adverse effect on our business, financial condition and results of operations.
If we lose a significant retail customer or if sales of our products to a significant retailer materially decrease, it could have a material adverse effect on our business, financial condition and results of operations.
For example, in connection with our acquisition of Naturium, we paid total consideration of approximately $333 million using an incremental term loan under our existing credit facility, borrowings on our existing revolving facility, cash on the balance sheet and approximately $58 million of our stock.
For example, in connection with our acquisition of Naturium, we paid total consideration of approximately $333 million using an incremental term loan under our existing credit facility, borrowings on our existing revolving facility, cash on the balance sheet and approximately $58 million of our stock. Risk factors related to our acquisition of rhode.
For example, we 34 Table of C ontents may receive third-party complaints that the comments or other content posted by users on our platforms infringe third-party intellectual property rights or otherwise infringe the legal rights of others.
For example, we may receive third-party complaints that the comments or other content posted by users on our platforms infringe third-party intellectual property rights or otherwise infringe the legal rights of others.
As a company engaged in distribution on a global scale, our operations, including those of our third-party manufacturers, suppliers, brokers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes, disruptions or delays in shipments, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, as well as natural disasters, pandemics (such as the coronavirus pandemic), border disputes, international conflict (such as the ongoing military conflict in Ukraine and the Middle East), acts of terrorism and other external factors over which we and our third-party manufacturers, suppliers, brokers and delivery service providers have no control.
As a company engaged in distribution on a global scale, our operations, including those of our third-party manufacturers, suppliers, brokers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes (such as the recent port strike), disruptions or delays in shipments, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, as well as natural disasters (such as the January 2025 Southern California wildfires and the 2024 Atlantic hurricanes), pandemics (such as the coronavirus pandemic), border disputes, international conflict (such as the ongoing military conflict in Ukraine and the Middle East), acts of terrorism and other external factors over which we and our third-party manufacturers, suppliers, brokers and delivery service providers have no control.
There is a risk that our suppliers and distribution centers may become less productive or encounter disruptions as a result of the emergence and spread of another 18 Table of C ontents disease, and/or these facilities may no longer be allowed to operate based on directives from public health officials or government authorities in the United States, China or other jurisdictions.
There is a risk that our suppliers and distribution centers may become less productive or encounter disruptions as a result of the emergence and spread of another disease, and/or these facilities may no longer be allowed to operate based on directives from public health officials or government authorities in the United States, Canada, the UK, the EU, China or other jurisdictions.
Further, we are subject to risks associated with disruptions or delays in shipments whether due to port congestion, container shortages, labor disputes, product regulations and/or inspections or other factors, natural disasters or health pandemics, or other transportation disruptions.
Further, we are subject to risks associated with disruptions or delays in shipments whether due to port congestion, container shortages, labor disputes (such as the recent port strike), product regulations and/or inspections or other factors, natural disasters or health pandemics, or other transportation disruptions.
If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. 39 Table of C ontents Item 1B. Unresolved staff comments. None.
Furthermore, if one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline. 40 Table of Contents Item 1B. Unresolved staff comments. None.
Many of the requirements were scheduled to become 28 Table of C ontents applicable on December 29, 2023, with some of the requirements, such as those relating to labeling, scheduled to become applicable later in 2024 and 2025; however, on November 8, 2023, the FDA advised that it does not intend to enforce the requirements related to cosmetic product facility registration and cosmetic product listing until July 1, 2024 to provide regulated industry additional time to comply with the requirements.
Many of the requirements were originally scheduled to become applicable on December 29, 2023, with some of the requirements, such as those relating to labeling, scheduled to become applicable later in 2024 and 2025; however, on November 8, 2023, the FDA advised that it would not enforce the requirements related to cosmetic product facility registration and cosmetic product listing until July 1, 2024 to provide regulated industry additional time to comply with the requirements.
Our success depends, in part, on our retention of key members of our senior management team and ability to attract and retain qualified personnel. Our success depends, in part, on our ability to attract and retain key employees, including our executive officers, senior management team and operations, finance, sales and marketing personnel.
Our success depends, in part, on our ability to attract and retain key employees, including our executive officers, senior management team and operations, finance, sales and marketing personnel.
This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common 38 Table of C ontents stock in spite of our operating performance.
This market volatility, as well as general economic, market or political conditions, could reduce the market price of shares of our common stock in spite of our operating performance.
In addition, we may not obtain or retain the requisite legal permits to continue to operate in 26 Table of C ontents China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.
In addition, we may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits.
Our operations are subject to the US Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where 31 Table of C ontents we do business.
Our operations are subject to the US Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where we do business.
Additionally, if a natural disaster, power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
Additionally, if a natural disaster (such as the January 2025 Southern California wildfires), power outage, connectivity issue, or other event occurs that impacts our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
For example, if the integration of Naturium's business with our business is more difficult, costly or time-consuming than expected, we may not fully realize the expected benefits of our acquisition of Naturium, which may adversely affect our business, financial condition and results of operations.
For example, if we consummate the acquisition of HRBeauty LLC (“rhode”) and the integration of rhode's business with our business is more difficult, costly or time-consuming than expected, we may not fully realize the expected benefits of our acquisition of rhode, which may adversely affect our business, financial condition and results of operations.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. When analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price may decline.
If we fail to comply with the rules or requirements of any provider of a payment method we accept, or if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, among other things, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our consumers, process electronic funds transfers or facilitate other types of online payments, and our reputation and our business, financial condition and results of operations could be materially and adversely affected.
If we fail to comply with the rules or requirements of any provider of a payment method we accept, or if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, among other things, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our consumers, process electronic funds transfers or facilitate other types of online payments, and our reputation and our business, financial condition and results of operations could be materially and adversely affected. 26 Table of Contents Risk factors related to conducting business internationally We have significant operations in China, which exposes us to risks inherent in doing business in that country.
Further, we recently opened an office in the UK and hired a team of employees to support our international expansion, and we are establishing additional relationships in other countries to grow our operations.
Further, we recently opened offices in the UK and India and hired new teams of employees to support our international expansion, and we are establishing additional relationships in other countries to grow our operations.
Data privacy continues to remain a matter of interest to lawmakers and regulators. In the United States, a number of privacy-related proposals (including proposed comprehensive privacy legislation) are pending before federal and state legislative and regulatory bodies and additional laws and regulations have been passed but are not yet effective, all of which could significantly affect our business.
A number of privacy-related proposals (including proposed comprehensive privacy legislation) are pending before federal and state legislative and regulatory bodies and additional laws and regulations have been passed but are not yet effective, all of which could significantly affect our business.
Risk factors related to our business operations and macroeconomic conditions A disruption in our operations, including a disruption in the supply chains for our products, could materially and adversely affect our business.
A disruption in our operations, including a disruption in the supply chains for our products, could materially and adversely affect our business.
Furthermore, we are subject to diverse laws and regulations in the United States, the European Union (the “EU”), and other international jurisdictions that require notification to affected individuals in the event of a breach involving personal information. These required notifications can be time-consuming and costly.
Furthermore, we are subject to diverse laws and regulations in the United States, the EU, and other international jurisdictions that require notification to affected individuals in the event of a breach involving personal information. These required notifications can be time-consuming and costly. Furthermore, failure to comply with these laws and regulations could subject us to regulatory scrutiny and additional liability.
Furthermore, it is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all, which could materially and adversely affect our business, financial condition and results of operations.
Furthermore, it is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all, which could materially and adversely affect our business, financial condition and results of operations. 20 Table of Contents Changes in tax law, in our tax rates or in exposure to additional income tax liabilities or assessments could materially and adversely affect our business, financial condition and results of operations.
We rely on the standard contractual clauses (“SCCs”) to transfer data outside of the EEA/ UK in some situations; however, the Court of Justice of the European Union (“CJEU”) has stated that reliance on the SCCs alone may not be sufficient.
We rely on the standard contractual clauses (“SCCs”) to transfer data outside of the EEA/ UK in some situations; however, the Court of Justice of the European Union has stated that reliance on the SCCs alone may not be sufficient, and we expect the existing legal complexity and uncertainty regarding international personal data transfers to continue.
Risk factors related to our acquisition of Naturium We have made certain assumptions relating to our acquisition of Naturium that may prove to be materially inaccurate.
We have made certain assumptions relating to our potential acquisition of rhode that may prove to be materially inaccurate.
Stockholders may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise. We had approximately 194.1 million shares of common stock authorized but unissued and 55.9 million shares of common stock outstanding as of May 16, 2024.
Stockholders may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise. We had approximately 193.7 million shares of common stock authorized but unissued and 56.3 million shares of common stock outstanding as of May 22, 2025.
In addition, we and our manufacturers and suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.
Our results of operations will be materially and adversely affected if our labor costs, or the labor costs of our suppliers and manufacturers, increase significantly. In addition, we and our manufacturers and suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China.
We and our service providers may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering our systems, disrupting business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on our e-commerce websites or mobile applications or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers’ systems.
We and our service providers may not be able to prevent third parties, including criminals, competitors, state-sponsored organizations, opportunistic hackers and hacktivists or others, from breaking into or altering our systems, disrupting business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software (including ransomware) on our e-commerce websites or mobile applications or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers’ systems, and we may be vulnerable to attack, damage and interruption from computer viruses and malware (e.g., ransomware), malicious code, misconfigurations, bugs or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) information technology systems, products or services.
These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to leverage our e-commerce channels, fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, acquisition and retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems.
These types of activities subject us to inherent costs and risks associated with replacing and changing these systems, including impairment of our ability to leverage our e-commerce channels, fulfill customer orders, potential disruption of our internal control structure, substantial capital expenditures, additional administration and operating expenses, acquisition and retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our current systems. 23 Table of Contents The implementation of new information technology systems, such as our implementation of SAP software, or any modification of our key information systems may not result in productivity improvements at a level that outweighs the costs of implementation, or at all.
Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations.
Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect our business, financial condition and results of operations. 36 Table of Contents Risk factors relating to our stockholders and ownership of our common stock Our business could be negatively impacted by corporate citizenship and sustainability matters.
Even if an active trading market is sustained, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. Securities markets often experience significant price and volume fluctuations.
The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations. Securities markets often experience significant price and volume fluctuations.
In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China.
In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China. Currently, considerable uncertainty surrounds the future trade relationship between the United States and China.
The loss of key personnel or the failure to attract and retain qualified personnel may have a material adverse effect on our business, financial condition and results of operations. 16 Table of C ontents We rely on a number of third-party suppliers, manufacturers, distributors and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brands, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
We rely on a number of third-party suppliers, manufacturers, distributors and other vendors, and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brands, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.
We may be unable to anticipate, detect, prevent, remediate or recover from future cybersecurity incidents, including attacks to our information systems and data. As new and improved technologies and methodologies become available to threat actors (for example, AI), increased risks and currently unknown vulnerabilities could result in significant future expenditures related to our information systems, technology infrastructure and operations.
As new and improved technologies and methodologies become available to threat actors (for example, AI), increased risks and currently unknown vulnerabilities could result in significant future expenditures related to our information systems, technology infrastructure and operations.
The ability of these third parties to supply and manufacture our products may be affected by competing orders placed by other persons and the demands of those persons.
We use multiple third-party suppliers and manufacturers, primarily based in China, to source and manufacture the majority of our products. The ability of these third parties to supply and manufacture our products may be affected by competing orders placed by other persons and the demands of those persons.
In addition, in May 2019, we announced that our board of directors authorized a share repurchase program allowing us to repurchase up to $25.0 million of our outstanding shares of common stock (“Share Repurchase Program”), of which approximately $17.1 million remains available for future share repurchases as of March 31, 2024.
On August 27, 2024, we announced that our board of directors authorized a new share repurchase program allowing us to repurchase up to $500 million of our outstanding shares of common stock (the “2024 Share Repurchase Program”), of which $450.0 million remains available for future share repurchases as of March 31, 2025.
We are implementing the use of AI solutions, including machine learning and generative AI tools that collect, aggregate, and analyze data to assist in the development of our products and in the use of internal tools that support our business. These applications may become increasingly important in our operations over time.
We are implementing the use of AI solutions, including machine learning and generative AI tools, to collect, aggregate, and analyze data in support of product development, internal operations, and other business functions. These applications are expected to become increasingly integral to our operations over time. The adoption of AI introduces a number of risks inherent to emerging technologies.
For example, Google’s Gmail service has a feature that organizes incoming emails into categories (for example, primary, social and promotions). 35 Table of C ontents Such categorization or similar inbox organizational features may result in our emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce the likelihood of that subscriber reading our emails.
Such categorization or similar inbox organizational features may result in our emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce the likelihood of that subscriber reading our emails.
As of March 31, 2024, we had a total of $262.9 million of indebtedness, consisting of amounts outstanding under our credit facilities and finance lease obligations, and a total availability of $10.5 million under our Amended Revolving Credit Facility (as defined in Part II, Item 7 “Management’s discussion and analysis of financial condition and results of operations” under the heading “Description of indebtedness”).
Risk factors related to our financial condition Our indebtedness may have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents As of March 31, 2025, we had a total of $256.7 million of indebtedness, consisting of amounts outstanding under our credit facilities and finance lease obligations, and a total availability of $243.3 million under our Amended Revolving Credit Facility (as defined in Part II, Item 7 “Management’s discussion and analysis of financial condition and results of operations” under the heading “Description of indebtedness”).
If the FDA determines that any of our products intended to be sold as cosmetics should be classified and regulated as drug products and we are unable to comply with applicable drug requirements, we may be unable to continue to market those products.
If the FDA determines that any of our products intended to be sold as cosmetics should be classified and regulated as drug products and we are unable to comply with applicable drug requirements, we may be unable to continue to market those products. 28 Table of Contents Any inquiry into the regulatory status of our cosmetics and any related interruption in the marketing and sale of these products could damage our reputation and image in the marketplace.
Changes in tax law, in our tax rates or in exposure to additional income tax liabilities or assessments could materially and adversely affect our business, financial condition and results of operations. We are subject to the income tax laws of the United States and several international jurisdictions.
We are subject to the income tax laws of the United States and several international jurisdictions. Changes in law and policy relating to taxes, including changes in administrative interpretations and legal precedence or changes ushered in by the Trump administration, could materially and adversely affect our business, financial condition and results of operations.
As such, we are unable to ascertain at this time the full impact that complying with MoCRA will have on our business. Compliance with the new requirements may further increase the cost of manufacturing certain of our products and could have a material adverse effect on our business, financial condition and results of operations.
Compliance with the new requirements may further increase the cost of manufacturing certain of our products and could have a material adverse effect on our business, financial condition and results of operations.
If a material security breach were to occur, our reputation and brands could be damaged, and we could be required to expend significant capital and other resources to alleviate problems caused by such breaches including exposure of litigation or regulatory action and a risk of loss and possible liability.
Contracted third-party delivery service providers may also violate their confidentiality or data processing obligations and disclose or use information about our consumers inadvertently or illegally. 25 Table of Contents If a material security breach were to occur, our reputation and brands could be damaged, and we could be required to expend significant capital and other resources to alleviate problems caused by such breaches including exposure of litigation or regulatory action and a risk of loss and possible liability.
See also “ Risk factors related to our retail customers, consumers and the seasonality of our business — Our quarterly results of operations fluctuate due to seasonality, order patterns from key retail customers and other factors, and we may not have sufficient liquidity to meet our seasonal working capital requirements .” Public health crises could adversely affect our business, financial condition and results of operations.
See also “ Risk factors related to our retail customers, consumers and the seasonality of our business — Our quarterly results of operations fluctuate due to seasonality, order patterns from key retail customers and other factors, and we may not have sufficient liquidity to meet our seasonal working capital requirements .” Our success depends, in part, on our retention of key members of our senior management team and ability to attract and retain qualified personnel.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur CDO has served in various roles in information technology and information security for over 25 years, and her background includes completing the Harvard Cybersecurity program and active involvement in the Silicon Valley Consortium, focusing on security and technological advancements in cybersecurity and data privacy.
Biggest changeOur CDO has served in various roles in information technology and cybersecurity leadership for over 25 years, has completed the Harvard Cybersecurity Program and is an active participant in industry consortia focused on data privacy and AI security. Her background includes developing and deploying enterprise risk management frameworks and leading initiatives that integrate AI into cybersecurity and compliance.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: a. risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; b. a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; c. the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes; d. cybersecurity awareness training of our employees; e. a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and f. a third-party risk management process for service providers based on our assessment of their criticality to our operations and respective risk profile.
Key elements of our cybersecurity risk management program include, but are not limited to, the following: a. risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; b. a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents; c. the use of external service providers, including third party advisory firms, where appropriate, to assess, test or otherwise assist with and/or audit aspects of our security processes; d. cybersecurity awareness training of our employees; e. a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents, including an enterprise-wide escalation protocol; and f. a third-party risk management process for service providers based on our assessment of their criticality to our operations and respective risk profile.
The full Board oversees management’s implementation of our cybersecurity risk management program. The Board receives periodic reports from management on our cybersecurity risks and our cyber risk management program. Board members receive presentations on cybersecurity topics from our Chief Digital Officer (“CDO”) as part of the Board’s continuing education on topics that impact public companies.
Board members also receive presentations on emerging topics in cybersecurity risk and regulation from our Chief Digital Officer (“CDO”) as part of the Board’s continuing education on topics that impact public companies.
Our CDO has primary responsibility for, and works collaboratively across the Company to implement, our cybersecurity risk management program designed to protect our information systems from cybersecurity threats and to respond to any 40 Table of C ontents cybersecurity incidents in accordance with our incident response plans.
In addition, management is prepared to update the Board, as it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially significant. 41 Table of Contents Our CDO has primary responsibility for, and works collaboratively across the Company to implement and maintain, our cybersecurity risk management program designed to protect our information systems from cybersecurity threats and to respond to any cybersecurity incidents in accordance with our incident response plans.
As a thought leader in the intersection of artificial intelligence and cybersecurity, her expertise aligns with the critical needs of the constantly changing cybersecurity landscape and managing digital risk.
As a thought leader in the intersection of artificial intelligence and cybersecurity, her expertise aligns with the critical needs of the constantly changing cybersecurity landscape and managing digital risk. The CDO is supported by two senior cybersecurity professionals — our external Chief Information Security Officer (“CISO”) and our Director, IT Infrastructure & Security.
Removed
In addition, management is prepared to update the Board, as it deems appropriate, regarding cybersecurity incidents it considers to be significant or potentially significant.
Added
The full Board oversees management’s implementation of our cybersecurity risk management program. The Board receives periodic reports from management on our cybersecurity threats, incident preparedness, mitigation strategies, and related cyber risk management program enhancements.
Removed
Working with our CDO in implementing our cybersecurity risk management program, our Chief Information Security Officer and our Associate Director, IT Infrastructure & Security, collectively have more than 30 years of experience in information technology and extensive education and industry experience managing cybersecurity risks, developing and implementing cybersecurity policies, and responding to cybersecurity incidents.
Added
The CISO brings over two decades of experience building and scaling cybersecurity programs in high-growth enterprise environments, including leading the security function for a publicly traded cloud technology company. This individual has previously served in cybersecurity leadership roles at global financial services and payment technology companies and currently advises Fortune 500 companies through virtual CISO services.
Removed
Our management team takes steps to stay informed about and monitors efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
Added
In addition to operational leadership, this professional is also a cybersecurity educator, contributing to the development of future security talent at the collegiate level. Our Director, IT Infrastructure & Security holds an advanced degree in cybersecurity operations and leadership and has more than 20 years of experience managing IT infrastructure, enterprise security operations, and risk mitigation strategies.
Added
She has led initiatives to build and scale global Security Operations Centers (SOCs), implement zero trust architecture, and design infrastructure hardening practices across multiple sectors, including high-tech and financial institutions. Our management stays informed about cybersecurity developments and threats through internal and external threat intelligence, third-party risk assessments, and continuous monitoring systems deployed across the enterprise.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also use distribution centers that are operated by third-parties and located in West Chester Township, Ohio, West Jordan, Utah, Fairburn, Georgia, Vernon, California, Fairfield, New Jersey, Gosport Hants, England, Rodgau, Germany and Ontario, Canada.
Biggest changeWe also use distribution centers that are operated by third-parties and located in West Chester Township, Ohio, West Jordan, Utah, Fairburn, Georgia, Vernon, California, Fairfield, New Jersey, Gosport Hants, England, Rodgau, Germany, Milton, Canada and Shanghai, China. 42 Table of Contents
All of our properties are leased. The leases expire at various times through 2033, subject to renewal options. We consider our properties to be generally in good condition and believe that our existing facilities are adequate to support our existing operations.
All of our properties are leased. The leases expire at various times through 2036, subject to renewal options. We consider our properties to be generally in good condition and believe that our existing facilities are adequate to support our existing operations.
Location/Facility Leased/Owned Use Oakland, California Leased Corporate headquarters New York, New York Leased Corporate offices Los Angeles, California Leased Corporate offices Fairfield, New Jersey Leased Corporate offices London, UK Leased Corporate offices Shanghai, China Leased Corporate offices Ontario, California Leased Distribution Our properties total an aggregate of approximately 57,018 square feet of commercial space and approximately 465,219 square feet of commercial space for our distribution centers.
Location/Facility Leased/Owned Use Oakland, California Leased Corporate headquarters New York, New York Leased Corporate offices Los Angeles, California Leased Corporate offices Fairfield, New Jersey Leased Corporate offices London, UK Leased Corporate offices Shanghai, China Leased Corporate offices Ontario, California Leased Distribution Lutterworth, UK Leased Distribution Our properties total an aggregate of approximately 136,683 square feet of commercial space and approximately 554,695 square feet of commercial space for our distribution centers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal proceedings. We are from time to time subject to, and are presently involved in, litigation and other proceedings. We believe that there are no pending lawsuits or claims that, individually or in the aggregate, may have a material adverse effect on our business, financial condition or results of operations. Item 4. Mine safety disclosures.
Biggest changeItem 3. Legal proceedings. We are from time to time subject to, and are presently involved in, litigation and other proceedings. We believe that there are no pending lawsuits or claims that, individually or in the aggregate, may have a material adverse effect on our business, financial condition or results of operations.
Removed
Not applicable. 41 Table of C ontents PART II
Added
See Note 9 Commitments and Contingencies, in the Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for details regarding current legal proceedings. Item 4. Mine safety disclosures. Not applicable. 43 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSubject to certain exceptions, the covenants in the Amended Credit Agreement require the Company to be in compliance with certain leverage ratios to make repurchases under the Share Repurchase Program. We did not repurchase any shares during the fiscal year ended March 31, 2024, including pursuant to the Share Repurchase Program.
Biggest changeSubject to certain exceptions, the covenants in the Amended Credit Agreement require us 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. Item 6. [Reserved] 46 Table of Contents
The graph assumes an investment of $100 made at the closing of trading on March 31, 2019 in (i) our common stock, (ii) the stocks comprising the S&P 500 Index and (iii) the stocks comprising the S&P 500 Consumer Discretionary Index. All values assume reinvestment of the full amount of all dividends.
The graph assumes an investment of $100 made at the closing of trading on March 31, 2020 in (i) our common stock, (ii) the stocks comprising the S&P 500 Index and (iii) the stocks comprising the S&P 500 Consumer Discretionary Index. All values assume reinvestment of the full amount of all dividends.
Dividends There were no dividends declared or paid during the fiscal year ended March 31, 2024. Since our initial public offering on September 22, 2016, we have never declared or paid cash dividends on our capital stock.
Dividends There were no dividends declared or paid during the fiscal year ended March 31, 2025. Since our initial public offering on September 22, 2016, we have never declared or paid cash dividends on our capital stock.
The following graph compares the total cumulative stockholder return on our common stock with the S&P 500 Stock Index and the S&P Consumer Discretionary Index for the 5-year period covering March 31, 2019, through March 31, 2024.
The following graph compares the total cumulative stockholder return on our common stock with the S&P 500 Stock Index and the S&P Consumer Discretionary Index for the 5-year period covering March 31, 2020, through March 31, 2025.
The performance shown on the graph below is not intended to forecast or be indicative of possible future performance of our common stock. 42 Table of C ontents $100 investment in stock or index 3/31/19 6/30/19 9/30/19 12/31/19 3/31/20 6/30/20 9/30/20 e.l.f. Beauty, Inc.
The performance shown on the graph below is not intended to forecast or be indicative of possible future performance of our common stock. 44 Table of Contents $100 investment in stock or index 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 e.l.f. Beauty, Inc.
On May 16, 2024, the closing price for our common stock as reported by the NYSE was $162.26. Holders of record As of May 16, 2024, the approximate number of common stockholders of record was 25. This number does not include beneficial owners whose shares are held by nominees in street name.
On May 22, 2025, the closing price for our common stock as reported by the NYSE was $82.78. Holders of record As of May 22, 2025, the approximate number of common stockholders of record was 16. This number does not include beneficial owners whose shares are held by nominees in street name.
Purchases of equity securities by the issuer and affiliated purchasers In May 2019, we announced that our board of directors authorized the Share Repurchase Program, which authorizes us to repurchase up to $25.0 million of our outstanding shares of common stock.
(2) On August 27, 2024, we announced that our board of directors authorized the 2024 Share Repurchase Program, which authorizes us to repurchase up to $500.0 million of our outstanding shares of common stock.
(ELF) $100.00 $133.02 $165.19 $152.17 $92.83 $179.91 $173.30 S&P 500 Index (GSPC) $100.00 $103.79 $105.02 $113.98 $91.19 $109.38 $118.65 S&P 500 Consumer Discretionary Index (S5COND) $100.00 $105.28 $105.82 $110.55 $89.23 $118.54 $136.40 $100 investment in stock or index 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 e.l.f. Beauty, Inc.
(ELF) $100.00 $193.80 $186.69 $256.00 $272.66 $275.81 $295.22 S&P 500 Index (GSPC) $100.00 $119.95 $130.12 $145.33 $153.71 $166.27 $166.66 S&P 500 Consumer Discretionary Index (S5COND) $100.00 $132.86 $152.87 $165.16 $170.29 $182.12 $182.13 $100 investment in stock or index 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 e.l.f. Beauty, Inc.
Removed
(ELF) $237.64 $253.11 $256.04 $274.06 $313.30 $243.68 $289.43 S&P 500 Index (GSPC) $132.52 $140.17 $151.62 $151.97 $168.15 $159.84 $133.55 S&P 500 Consumer Discretionary Index (S5COND) $147.37 $151.95 $162.50 $162.51 $183.37 $166.82 $123.18 $100 investment in stock or index 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 3/31/24 e.l.f. Beauty, Inc.
Added
(ELF) $337.50 $262.50 $311.79 $382.32 $561.99 $836.89 $1,160.87 S&P 500 Index (GSPC) $184.41 $175.29 $146.46 $138.73 $148.55 $158.99 $172.19 S&P 500 Consumer Discretionary Index (S5COND) $205.51 $186.96 $138.06 $144.08 $129.41 $150.29 $172.19 $100 investment in stock or index 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 12/31/24 3/31/25 e.l.f. Beauty, Inc.
Removed
(ELF) $354.91 $521.70 $776.89 $1,077.64 $1,036.13 $1,361.70 $1,849.34 S&P 500 Index (GSPC) $126.50 $135.46 $144.98 $157.01 $151.29 $168.28 $185.38 S&P 500 Consumer Discretionary Index (S5COND) $128.55 $115.47 $134.09 $153.64 $146.26 $164.43 $172.62 43 Table of C ontents Recent sales of unregistered securities None.
Added
(ELF) $1,116.16 $1,466.87 $1,992.17 $2,141.46 $1,108.03 $1,275.91 $638.11 S&P 500 Index (GSPC) $165.91 $184.55 $203.30 $211.27 $222.96 $227.57 $217.13 S&P 500 Consumer Discretionary Index (S5COND) $163.92 $184.29 $193.46 $194.72 $209.91 $239.83 $206.73 45 Table of Contents Recent sales of unregistered securities None.
Removed
The Share Repurchase Program remains in effect through the earlier of (i) the date that $25.0 million of our outstanding common stock has been purchased under the Share Repurchase Program or (ii) the date that our board of directors cancels the Share Repurchase Program. On April 30, 2021, the Company amended and restated its prior credit agreement.
Added
Purchases of equity securities by the issuer and affiliated purchasers The following table presents the share repurchase activity by the Company during the three months ended March 31, 2025.
Removed
A total of $17.1 million remains available for purchase under the Share Repurchase Program as of March 31, 2024. Item 6. [Reserved] 44 Table of C ontents
Added
Period Total number of shares purchased Average price paid per share (1) Total number of shares purchased as part of publicly announced programs Maximum approximate dollar value of shares that may yet be purchased under the plans or programs (2) January 1 - January 31, 2025 — $ — — $ 500,000,000 February 1 - February 28, 2025 701,346 $ 71.29 701,346 $ 450,000,061 March 1 - March 31, 2025 — $ — — $ 450,000,061 (1) Includes broker commissions.
Added
Purchases under the 2024 Share Repurchase Program may be made from time to time in the open market, in privately negotiated transactions, block trades, accelerated share repurchase transactions, purchases through 10b5-1 trading plans, or by any combination of such methods.
Added
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.
Added
The 2024 Share Repurchase Program does not have an expiration date, does not require us to repurchase any specific number of shares of our common stock, and may be modified, suspended or terminated at any time without notice.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+31 added−5 removed43 unchanged
Biggest changeFiscal year ended March 31, 2024 2023 2022 Net sales $ 1,023,932 $ 578,844 $ 392,155 Cost of sales 299,836 188,448 140,423 Gross profit 724,096 390,396 251,732 Selling, general and administrative expenses 574,418 322,253 221,912 Restructuring expense — — 50 Operating income 149,678 68,143 29,770 Other income (expense), net 1,210 (1,875) (1,438) Impairment of equity investment (2,875) — — Interest expense, net (7,023) (2,018) (2,441) Loss on extinguishment of debt — (176) (460) Income before provision for income taxes 140,990 64,074 25,431 Income tax provision (13,327) (2,544) (3,661) Net income $ 127,663 $ 61,530 $ 21,770 Fiscal year ended March 31, (percentage of net sales) 2024 2023 2022 Net sales 100 % 100 % 100 % Cost of sales 29 % 33 % 36 % Gross profit 71 % 67 % 64 % Selling, general and administrative expenses 56 % 56 % 57 % Operating income 15 % 12 % 8 % Other income (expense), net — % — % — % Impairment of equity investment — % — % — % Interest expense, net (1) % — % (1) % Loss on extinguishment of debt — % — % — % Income before provision for income taxes 14 % 11 % 6 % Income tax provision (1) % — % (1) % Net income 12 % 11 % 6 % Comparison of the fiscal year ended March 31, 2024 to the fiscal year ended March 31, 2023 Net sales Net sales increased $445.1 million, or 77%, to $1,023.9 million in the fiscal year ended March 31, 2024, from $578.8 million in the fiscal year ended March 31, 2023.
Biggest changeFiscal year ended March 31, (in thousands) 2025 2024 2023 Net sales $ 1,313,517 $ 1,023,932 $ 578,844 Cost of sales 377,831 299,836 188,448 Gross profit 935,686 724,096 390,396 Selling, general and administrative expenses 777,659 574,418 322,253 Operating income 158,027 149,678 68,143 Other income (expense), net 1,294 1,210 (1,875) Impairment of equity investment — (2,875) — Interest expense, net (13,813) (7,023) (2,018) Loss on extinguishment of debt (13) — (176) Income before provision for income taxes 145,495 140,990 64,074 Income tax provision (33,406) (13,327) (2,544) Net income $ 112,089 $ 127,663 $ 61,530 49 Table of Contents Fiscal year ended March 31, (percentage of net sales) 2025 2024 2023 Net sales 100 % 100 % 100 % Cost of sales 29 % 29 % 33 % Gross profit 71 % 71 % 67 % Selling, general and administrative expenses 59 % 56 % 56 % Operating income 12 % 15 % 12 % Other income (expense), net — % — % — % Impairment of equity investment — % — % — % Interest expense, net (1) % (1) % — % Loss on extinguishment of debt — % — % — % Income before provision for income taxes 11 % 14 % 11 % Income tax provision (3) % (1) % — % Net income 9 % 12 % 11 % Comparison of the fiscal year ended March 31, 2025 to the fiscal year ended March 31, 2024 Net sales Net sales increased $289.6 million, or 28%, to $1,313.5 million in the fiscal year ended March 31, 2025, from $1,023.9 million in the fiscal year ended March 31, 2024.
See “Financial condition, liquidity and capital resources” below and a description of our indebtedness in Note 9 to the Notes to consolidated financial statements in Part IV, Item 15 “Exhibits, financial statement schedules.” Other income (expense), net We are exposed to periodic currency fluctuations given our purchasing and selling activities in various countries.
See “Financial condition, liquidity and capital resources” below and a description of our indebtedness in Note 8 to the Notes to consolidated financial statements in Part IV, Item 15 “Exhibits, financial statement schedules.” Other income (expense), net We are exposed to periodic currency fluctuations given our purchasing and selling activities in various countries.
There were no impairment charges recorded on long-lived assets during the fiscal years ended March 31, 2024, March 31, 2023 or March 31, 2022. We evaluate our indefinite-lived intangible asset to determine whether current events and circumstances continue to support an indefinite useful life. In addition, our indefinite-lived intangible asset is tested for impairment annually.
There were no impairment charges recorded on long-lived assets during the fiscal years ended March 31, 2025, March 31, 2024 or March 31, 2023. We evaluate our indefinite-lived intangible asset to determine whether current events and circumstances continue to support an indefinite useful life. In addition, our indefinite-lived intangible asset is tested for impairment annually.
On March 29, 2023, we 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.
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 increase was primarily due to additional borrowings for the fiscal year ended March 31, 2024 as well as higher interest costs, partially offset by increased interest earned on our cash balances. See Note 9, “Debt,” in our consolidated financial statements for further details on our debt.
The increase was primarily due to additional borrowings for the fiscal year ended March 31, 2024 as well as higher interest costs, partially offset by increased interest earned on our cash balances. See Note 8, “Debt,” in our consolidated financial statements for further details on our debt.
Our effective tax rate will change from period to period based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax audit settlements, the interaction of various tax strategies and the impact of permanent tax adjustments, such as those related to stock-based compensation.
Our effective tax rate will change from period to period based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax audit settlements, the interaction of various tax strategies and the impact of permanent tax adjustments, such as those related to stock-based compensation and executive compensation deduction limitations.
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 Incremental Term Loan amortized 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 Incremental Term Loan will bear interest at a rate per annum equal to, at our 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 bore 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, 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%.
Net income Our net income for future periods will be affected by the various factors described above. 46 Table of C ontents Results of operations The following table sets forth our consolidated statements of operations data in dollars and as a percentage of net sales for the periods presented.
Net income Our net income for future periods will be affected by the various factors described above. Results of operations The following table sets forth our consolidated statements of operations data in dollars and as a percentage of net sales for the periods presented.
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 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 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.
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.
The Amended Revolving Credit Facility is collateralized by substantially all of our assets and requires payment of an unused fee ranging from 0.10% to 0.30% (based on our 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 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 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.
Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are 49 Table of C ontents beyond our control, including those described elsewhere in Part I, Item 1A “Risk factors”.
Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control, including those described elsewhere in Part I, Item 1A “Risk factors”.
Cash provided by (used in) financing activities For the fiscal year ended March 31, 2024, net cash provided by financing activities was $200.9 million and was primarily driven by proceeds from the Amended Term Loan Facility of $115.0 million and Amended Revolving Credit Facility of $89.5 million and cash received from the exercise of stock options of $5.6 million.
For the fiscal year ended March 31, 2024, net cash provided by financing activities was $200.9 million and was primarily driven by proceeds from the Amended Term Loan Facility of $115.0 million and Amended Revolving Credit Facility of $89.5 53 Table of Contents million and cash received from the exercise of stock options of $5.6 million.
Cosmetics, Inc., Naturium, Blocker and various sellers. Pursuant to the Purchase Agreement, we acquired all rights, title and interest in and to the outstanding equity securities of Naturium and Blocker for a purchase price of $333.0 million paid in cash and shares of our common stock (the "Acquisition"). See Note 4, “Acquisition,” in our consolidated financial statements for further details.
Pursuant to the Purchase Agreement, we acquired all rights, title and interest in and to the outstanding equity securities of Naturium and Blocker for a purchase price of $333.0 million paid in cash and shares of our common stock (the "Acquisition"). See Note 3, “Acquisition,” in our consolidated financial statements for further details.
The increase was driven by strength across our retailer and e-commerce channels. Net sales increased $353.5 million, or 69%, in our retailer channels and $91.6 million, or 132%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $320.4 million of the increase in net sales.
Net sales increased $353.5 million, or 69%, in our retailer channels and $91.6 million, or 132%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $320.4 million of the increase in net sales.
We believe that our operating cash flow, cash on hand 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 March 31, 2024 was $10.5 million.
We believe that our operating cash flow, cash on hand 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 March 31, 2025 was $243.3 million.
The indefinite-lived intangible asset impairment test consists of a comparison of the fair value of each asset with its carrying value, with any 52 Table of C ontents excess of carrying value over fair value being recognized as an impairment loss.
The indefinite-lived intangible asset impairment test consists of a comparison of the fair value of each asset with its carrying value, with any excess of carrying value over fair value being recognized as an impairment loss.
No impairment of goodwill or our indefinite-lived intangible asset was recorded during the fiscal years ended March 31, 2024, March 31, 2023 or March 31, 2022. Stock based compensation We have several stock award plans, which are described in detail in Note 13 to consolidated financial statements in Part IV, Item 15.
No impairment of goodwill or our indefinite-lived intangible asset was recorded during the fiscal years ended March 31, 2025, March 31, 2024 or March 31, 2023. 56 Table of Contents Stock based compensation We have several stock award plans, which are described in detail in Note 12 to consolidated financial statements in Part IV, Item 15.
Description of indebtedness Amended Credit Agreement On April 30, 2021, we amended and restated our prior 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.
Description of indebtedness 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.
For the fiscal years ended March 31, 2023 and March 31, 2022, net cash used in investing activities was $1.7 million and $4.8 million, respectively, which was primarily driven by capital expenditures related to fixturing, equipment and software.
For the fiscal year ended March 31, 2023, net cash used in investing activities was $1.7 million, which was primarily driven by capital expenditures related to fixturing, equipment and software.
A higher average item price and mix within retailer and e-commerce orders drove the remaining $88.9 million increase in net sales as compared to the fiscal year ended March 31, 2022.
A higher average item price and mix within retailer and e-commerce orders drove the remaining $43.5 million increase in net sales as compared to the fiscal year ended March 31, 2024.
Beauty” and together with its subsidiaries, the “Company,” or “we”), is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and cruelty free cosmetics and skin care products. Our mission is to make the best of beauty accessible to every eye, lip, face and skin concern.
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.
As of March 31, 2024, we had working capital, excluding cash, of $69.8 million, compared to $74.6 million as of March 31, 2023. Working capital, excluding cash and debt, was $170.1 million and $80.1 million as of March 31, 2024 and March 31, 2023, respectively.
As of March 31, 2025, we had working capital, excluding cash, of $214.8 million, compared to $69.8 million as of March 31, 2024. Working capital, excluding cash and debt, was $214.8 million and $170.1 million as of March 31, 2025 and March 31, 2024, respectively.
Cash used in investing activities For the fiscal year ended March 31, 2024, net cash used in investing activities was $284.7 million. This includes $275.0 million paid for the Acquisition, net of cash acquired, capital expenditures related to fixturing, equipment and software of $8.7 million, and contributions to other investment of $1.0 million.
Cash used in investing activities For the fiscal year ended March 31, 2025, net cash used in investing activities was $19.1 million. This includes capital expenditures related to fixturing, equipment and software of $18.5 million, and contributions to other investment of $0.6 million. For the fiscal year ended March 31, 2024, net cash used in investing activities was $284.7 million.
Our largest three customers, Target, Walmart and Ulta Beauty, accounted for 25%, 17% and 16%, respectively, of our net sales in the fiscal year ended March 31, 2024. No other individual customer accounted for 10% or more of our net sales in the fiscal year ended March 31, 2024. National and international retailers comprised 84% of our net sales.
Our largest customers, Target, Walmart, Ulta Beauty and Amazon, accounted for 23%, 16%, 12%, and 12% respectively, of our net sales in the fiscal year ended March 31, 2025. No other individual customer accounted for 10% or more of our net sales in the fiscal year ended March 31, 2025. National and international retailers comprised 83% of our net sales.
This was partially offset by repayment on the Amended Term Loan Facility of $7.9 million and payment of debt issuance costs of $0.7 million associated with the Second Amendment. 50 Table of C ontents For the fiscal year ended March 31, 2023, net cash used in financing activities was $22.7 million, primarily driven by prepayment on the Amended Term Loan Facility of $25.0 million and quarterly debt payments, partially offset by cash received from the exercise of stock options to purchase common stock.
For the fiscal year ended March 31, 2023, net cash used in financing activities was $22.7 million, primarily driven by prepayment on the Amended Term Loan Facility of $25.0 million and quarterly debt payments, partially offset by cash received from the exercise of stock options to purchase common stock.
The increase in gross margin rate was primarily driven by favorable foreign exchange impacts, cost savings and mix, improved transportation costs, inventory adjustments, and international price increases, partially offset by costs related to retailer activity.
Gross margin increased from 67% in the fiscal year ended March 31, 2023 to 71% in the fiscal year ended March 31, 2024. The increase in gross margin rate was primarily driven by favorable foreign exchange impacts, cost savings and mix, improved transportation costs, inventory adjustments, and international price increases, partially offset by costs related to retailer activity.
Off-balance sheet arrangements We are not party to any off-balance sheet arrangements. Critical accounting policies and estimates Our consolidated financial statements included elsewhere in this Annual Report have been prepared in accordance with US generally accepted accounting principles.
Aggregate future minimum principal payments are $256.7 million due March 31, 2030. Off-balance sheet arrangements We are not party to any off-balance sheet arrangements. Critical accounting policies and estimates Our consolidated financial statements included elsewhere in this Annual Report have been prepared in accordance with US generally accepted accounting principles.
Higher unit volume drove $216.1 million of the increase in gross profit, with the remaining increase of $117.6 million driven by higher average item price and mix. Gross margin increased from 67% in the fiscal year ended March 31, 2023 to 71% in the fiscal year ended March 31, 2024.
Gross profit Gross profit increased $333.7 million, or 85%, to $724.1 million in the fiscal year ended March 31, 2024, compared to $390.4 million in the fiscal year ended March 31, 2023. Higher unit volume drove $216.1 million of the increase in gross profit, with the remaining increase of $117.6 million driven by higher average item price and mix.
The year-over-year variance is primarily due to an increase in unrealized gain in the fiscal year ended March 31, 2024 attributable to favorable foreign currency rate fluctuation. Impairment of equity investment Impairment of equity investment was $2.9 million in the fiscal year ended March 31, 2024. See Note 3, “Investments,” in our consolidated financial statements for further details.
The year-over-year variance is primarily due to an increase in unrealized gain in the fiscal year ended March 31, 2024 attributable to favorable foreign currency rate fluctuation. Impairment of equity investment Impairment of equity investment was $2.9 million in the fiscal year ended March 31, 2024.
Comparison of the fiscal year ended March 31, 2023 to the fiscal year ended March 31, 2022 Net sales Net sales increased $186.6 million, or 48%, to $578.8 million in the fiscal year ended March 31, 2023, from $392.2 million in the fiscal year ended March 31, 2022. The increase was driven by strength across our retailer and e-commerce channels.
Comparison of the fiscal year ended March 31, 2024 to the fiscal year ended March 31, 2023 Net sales Net sales increased $445.1 million, or 77%, to $1,023.9 million in the fiscal year ended March 31, 2024, from $578.8 million in the fiscal year ended March 31, 2023. The increase was driven by strength across our retailer and e-commerce channels.
For additional information regarding our business, see Part I, Item 1, “Business.” Our Acquisition of Naturium On October 4, 2023, we consummated our acquisition of Naturium LLC, a Delaware limited liability company (“Naturium”), and TCB-N Prelude Blocker Corp., a Delaware corporation (“Blocker”), pursuant to a Securities Purchase Agreement, dated August 28, 2023 (the "Purchase Agreement"), by and among the Company, e.l.f.
Our Acquisition of Naturium On October 4, 2023, we consummated our acquisition of Naturium LLC, a Delaware limited liability company (“Naturium”), and TCB-N Prelude Blocker Corp., a Delaware corporation (“Blocker”), pursuant to a Securities Purchase Agreement, dated August 28, 2023 (the "Purchase Agreement"), by and among the Company, e.l.f. Cosmetics, Inc., Naturium, Blocker and various sellers.
Financial condition, liquidity and capital resources Overview As of March 31, 2024, we had $108.2 million of cash and cash equivalents. In addition, as of March 31, 2024, we had borrowing capacity of $10.5 million under the Amended Revolving Credit Facility. Our primary cash needs are for working capital, fixturing, retail product displays and digital investment.
In addition, as of March 31, 2025, we had borrowing capacity of $243.3 million under the Amended Revolving Credit Facility. Our primary cash needs are for working capital, fixturing, retail product displays and digital investment.
Cost of sales includes the aggregate costs to procure our products, including the amounts invoiced by our third-party contract manufacturers for finished goods as well as costs related to transportation to our distribution center, customs and duties. Cost of sales also includes the effect of changes in the balance of reserves for excess and obsolete inventory.
Gross profit Gross profit is our net sales less cost of sales. Cost of sales includes the aggregate costs to procure our products, including the amounts invoiced by our third-party contract manufacturers for finished goods as well as costs related to transportation to our distribution center, customs and duties.
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. We believe the combination of our value proposition, innovation engine, ability to attract and engage consumers, and our world-class team’s ability to execute with speed has positioned us well to navigate the competitive beauty market.
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.
A higher average item price and mix within retailer and e-commerce orders drove the remaining $124.7 million increase in net sales as compared to the fiscal year ended March 31, 2023. 47 Table of C ontents Gross profit Gross profit increased $333.7 million, or 85%, to $724.1 million in the fiscal year ended March 31, 2024, compared to $390.4 million in the fiscal year ended March 31, 2023.
A higher average item price and mix within retailer and e-commerce orders drove the remaining $124.7 million increase in net sales as compared to the fiscal year ended March 31, 2023.
The increase on a dollar basis was primarily related to increased marketing and digital spend of $62.8 million, increased compensation and benefits expense of $19.4 million, increased operations costs of $9.6 million, and increased retail fixturing and visual merchandising costs of $5.6 million.
The increase on a dollar basis was primarily related to increased marketing and digital spend of $62.8 million, increased compensation and benefits expense of $60.3 million, increased operations costs of $23.2 million, increased retail fixturing and visual merchandising costs of $23.1 million, increased general and administrative costs of $18.9 million and increased depreciation and amortization of $13.9 million.
The change in the provision was primarily driven by an increase in income before taxes of $76.9 million, partially offset by an increase in discrete tax benefits of $14.4 million, primarily related to stock-based compensation.
The change in the income tax provision was primarily driven by a decrease in discrete tax benefits of $14.3 million, primarily related to limitations on executive compensation deductions for certain stock-based compensation, partially offset by the tax effects of an increase in income before taxes of $4.5 million, resulting in a higher provision.
Income tax provision The provision for income taxes was $2.5 million, or an effective rate of 4% for the twelve months ended March 31, 2023, as compared to a provision of $3.7 million, or an effective rate of 14% for the twelve months ended March 31, 2022.
Income tax provision The income tax provision was $33.4 million, or an effective rate of 23% for the twelve months ended March 31, 2025, as compared to a provision of $13.3 million, or an effective rate of 9% for the twelve months ended March 31, 2024.
Second Amended Credit Agreement On August 28, 2023, we entered into the Second Amendment to the Amended Credit Agreement (the “Second Amendment”). Pursuant to the Second Amendment, we may borrow incremental term loans in a principal amount equal to $115.0 million under the Amended Credit Agreement (the “Incremental Term Loan”).
Pursuant to the Second Amendment, the Company borrowed incremental term loans in a principal amount equal to $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 and to pay related fees and expenses in connection with the Naturium acquisition and Second Amendment. The interest rate as of March 31, 2024 for the Incremental Term Loan was approximately 6.9%.
The Company used the Incremental Term Loan together with cash from its balance sheet and additional borrowings under our 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 remaining 16% came from e-commerce channels in the fiscal year ended March 31, 2024. The primary market for our products is in the United States, which accounted for 85% of our net sales in the fiscal year ended March 31, 2024.
The remaining 17% came from e-commerce channels in the fiscal year ended March 31, 2025. The primary market for our products is in the United States, which accounted for 81% of our net sales in the fiscal year ended March 31, 2025. The remaining 19% was attributable to international markets, primarily the UK and Canada.
Net sales increased $158.0 million, or 45%, in our retailer channels and $28.6 million, or 71%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $97.7 million of the increase in net sales.
The increase was driven by strength across our retailer and e-commerce channels. Net sales increased $221.6 million, or 26%, in our retailer channels and $68.0 million, or 42%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $246.1 million of the increase in net sales.
While our significant accounting policies are more fully described in the Note 2 to consolidated financial statements in Part IV, Item 15. “Exhibits, financial statement schedules,” we believe that the following accounting policies and estimates are critical to our business operations and understanding of our financial results.
While our significant accounting policies are more fully described in the Note 2 to consolidated financial statements in Part IV, Item 15.
The Amended Credit Agreement 51 Table of C ontents 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. As of March 31, 2024, we were in compliance with all financial covenants under the Amended Credit Agreement.
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. 54 Table of Contents 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”).
SG&A expenses as a percentage of net sales decreased to 56% for the fiscal year ended March 31, 2023 from 57% in the fiscal year ended March 31, 2022.
SG&A expenses as a percentage of net sales was 59% for the fiscal years ended March 31, 2025 and 56% for the fiscal year ended March 31, 2024.
Selling, general and administrative expenses Our selling, general and administrative (“SG&A”) expenses primarily consist of marketing and digital expenses, personnel-related costs, including salaries, bonuses, benefits and stock-based compensation, warehousing and distribution costs, costs related to merchandising, depreciation of property and equipment, amortization of retail product displays and amortization related to intangible assets and cloud computing costs.
Other drivers of changes in gross margin, include fluctuations in foreign exchange rates, tariffs, certain costs related to space expansion and retailer activity, changes in customer mix, and changes in the balance of reserves for excess and obsolete inventory, among other things. 48 Table of Contents Selling, general and administrative expenses Our selling, general and administrative (“SG&A”) expenses primarily consist of marketing and digital expenses, personnel-related costs, including salaries, bonuses, benefits and stock-based compensation, warehousing and distribution costs, costs related to merchandising, depreciation of property and equipment, amortization of retail product displays and amortization related to intangible assets and cloud computing costs.
The change in net working capital was driven by a $5.6 million increase in accounts receivable, a $27.7 million increase in inventory, a $10.6 million increase in prepaid and other assets and a $4.4 million decrease of other liabilities, partially offset by a $1.5 million increase of accounts payable and accrued expenses.
The increase in net working capital was primarily driven by a $2.7 million increase in accounts receivable, a $75.9 million increase in prepaid and other assets, a $7.9 million decrease in other liabilities, and a $23.4 million decrease of accounts payable and accrued expenses, partially offset by a $4.9 million decrease in inventory For the fiscal year ended March 31, 2024, net cash provided by operating activities was $71.2 million.
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; however, all amounts drawn under the Amended Revolving Credit Facility cannot exceed $100 million. The unused balance of the Amended Revolving Credit Facility as of March 31, 2024 was $10.5 million.
The Amended Revolving Credit Facility also provided for sub-facilities in the form of a $7 million letter of credit and a $5 million swing line loan.
The annual interest rate for SOFR borrowings will be equal to term SOFR, subject to a floor of 0%, plus a margin ranging from 1.25% to 2.125%. The interest rate as of March 31, 2024 for the Amended Revolving Credit Facility and the Amended Term Loan Facility was approximately 6.7%.
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”).
Historically, we have improved our gross margin largely through changes in our product mix, pricing, and cost reductions in our supply chain.
We have worked to evolve our supply chain to increase capacity and technical capabilities while maintaining or reducing overall costs as a percentage of sales. Historically, we have improved our gross margin largely through changes in our product mix, pricing, and cost reductions in our supply chain.
Gross profit Gross profit increased $138.7 million, or 55%, to $390.4 million in the fiscal year ended March 31, 2023, compared to $251.7 million in the fiscal year ended March 31, 2022. Higher average item price and mix accounted for approximately $75.9 million of the increase to gross profit, with the remaining $62.8 million driven by volume.
Gross profit Gross profit increased $211.6 million, or 29%, to $935.7 million in the fiscal year ended March 31, 2025, compared to $724.1 million in the fiscal year ended March 31, 2024. Higher unit volume drove $174.0 million of the increase in gross profit, with the remaining increase of $37.6 million driven by higher average item price and mix.
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 strong relationships with our retail customers such as Target, Walmart, Ulta Beauty and other leading retailers that have enabled us to expand distribution both domestically and internationally.
The Company's family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Naturium, Well People and Keys Soulcare. The Company's brands are available online and across leading beauty, mass-market and specialty retailers.
Revenue recognition We recognize revenue when control of promised goods or services is transferred to a customer in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Control of the substantial majority of the products that we sell is transferred at a point in time.
“Exhibits, financial statement schedules,” we believe that the following accounting policies and estimates are critical to our business operations and understanding of our financial results. 55 Table of Contents Revenue recognition We recognize revenue when control of promised goods or services is transferred to a customer in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.
Gross margin measures our gross profit as a percentage of net sales. We have an extensive network of third-party manufacturers from whom we purchase substantially all of our finished goods. We have worked to evolve our supply chain to increase capacity and technical capabilities while maintaining or reducing overall costs as a percentage of sales.
Cost of sales also includes the effect of changes in the balance of reserves for excess and obsolete inventory. Gross margin measures our gross profit as a percentage of net sales. We have an extensive network of third-party manufacturers from whom we purchase substantially all of our finished goods.
The change in the provision was primarily driven by an increase in discrete tax benefit of $12.7 million, primarily related to stock based compensation. The discrete benefit was partially offset by additional income taxes related to the increase in income before taxes of $38.6 million.
The change in the provision was primarily driven by an increase in income before taxes of $76.9 million, partially offset by an increase in discrete tax benefits of $14.4 million, primarily related to stock-based compensation. Financial condition, liquidity and capital resources Overview As of March 31, 2025, we had $148.7 million of cash and cash equivalents.
Interest expense, net Interest expense increased $5.0 million, or 248%, to $7.0 million in the fiscal year ended March 31, 2024, as compared to $2.0 million in the fiscal year ended March 31, 2023.
We did not record an impairment charge on our investment during the fiscal year ended March 31, 2023 as any identified events or changes in circumstances did not result in an indicator of impairment during that period. 51 Table of Contents Interest expense, net Interest expense increased $5.0 million, or 248%, to $7.0 million in the fiscal year ended March 31, 2024, as compared to $2.0 million in the fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, net cash used in financing activities was $29.1 million, driven by $54.5 million of repayment of the revolving line of credit and the term loan facility, offset by $25.6 million of cash received from net of proceeds from the Amended Revolving Credit Facility and the Amended Term Loan Facility.
Cash provided by (used in) financing activities For the fiscal year ended March 31, 2025, net cash used in financing activities was $74.4 million and was primarily driven by the repayment of previous Revolving Credit line of $89.5 million, repurchases of our common stock of $67.1 million, repayments on the Amended Term Loan Facility of $173.4 million and payment of debt issuance costs of $2.1 million associated with the new Revolving Credit Facility.
For the fiscal year ended March 31, 2022, net cash provided by operating activities was $19.5 million. This included net income, before deducting depreciation, amortization and other non-cash items, of $66.2 million and an increase in net working capital of $46.7 million.
This included net income, before deducting depreciation, amortization and other non-cash items of $238.9 million, partially offset by an increase in net working capital of $105.0 million.
In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will rely on our ability to provide innovative products to our consumers, manage production and our supply chain.
In addition to these general economic and industry factors, the principal factors in determining whether our cash flows will be sufficient to meet our liquidity requirements will rely on our ability to provide innovative products to our consumers, manage production and our supply chain. 52 Table of Contents Cash flows Fiscal year ended March 31, (in thousands) 2025 2024 2023 Net cash provided by (used in): Operating activities $ 133,840 $ 71,154 $ 101,883 Investing activities (19,097) (284,660) (1,723) Financing activities (74,449) 200,945 (22,735) Cash provided by operating activities For the fiscal year ended March 31, 2025, net cash provided by operating activities was $133.8 million.
Other income (expense), net Other income (expense), net was $1.9 million of expense in the fiscal year ended March 31, 2023, as compared to $1.4 million of expense in the fiscal year ended March 31, 2022. The change was primarily related to unfavorable foreign exchange rate movements, impacting cash and receivables, driving an unrealized loss in the period.
Other income (expense), net Other income, net was $1.3 million in the fiscal year ended March 31, 2025, as compared to other income, net of $1.2 million in the fiscal year ended March 31, 2024, relatively flat year-over-year.
The increase in gross margin rate was primarily driven by pricing, cost savings and product mix, partially offset by inventory adjustments. 48 Table of C ontents Selling, general and administrative expenses SG&A expenses were $322.3 million in the fiscal year ended March 31, 2023, an increase of $100.4 million, or 45%, from $221.9 million in the fiscal year ended March 31, 2022.
Selling, general and administrative expenses SG&A expenses were $777.7 million in the fiscal year ended March 31, 2025, an increase of $203.2 million, or 35%, from $574.4 million in the fiscal year ended March 31, 2024.
Removed
The remaining 15% was attributable to international markets, primarily the UK and Canada. 45 Table of C ontents Gross profit Gross profit is our net sales less cost of sales.
Added
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.
Removed
Other drivers of changes in gross margin, which could have a positive or negative impact, include fluctuations in foreign exchange rates, certain costs related to space expansion and retailer activity, changes in customer mix, and changes in the balance of reserves for excess and obsolete inventory, among other things.
Added
For additional information regarding our business, see Part I, Item 1, “Business.” Potential Impact of Tariffs Starting in July 2018, the US government announced a series of lists covering thousands of categories of Chinese origin products subject to US tariffs in addition to the tariffs that have historically applied to such products.
Removed
Gross margin increased from 64% in the fiscal year ended March 31, 2022 to 67% in the fiscal year ended March 31, 2023.
Added
The majority of our products are sourced and manufactured in China and have been subject to a US 25% tariff since May 2019. Furthermore, in March and April 2025, the Trump administration announced a series of additional tariffs on products from countries worldwide, some of which have been temporarily paused or reduced. The US tariff policies are continuing to evolve.
Removed
Interest expense, net Interest expense decreased $0.4 million, or 17%, to $2.0 million in the fiscal year ended March 31, 2023, as compared to $2.4 million in the fiscal year ended March 31, 2022. This decrease was due to increased interest earned on our cash balances and a lower average loan balance, offsetting higher interest rates.
Added
As a result, our risks and mitigation plans will also continue to evolve as further developments arise.
Removed
Cash flows Fiscal year ended March 31, (in thousands) 2024 2023 2022 Net cash provided by (used in): Operating activities $ 71,154 $ 101,883 $ 19,513 Investing activities (284,660) (1,723) (4,818) Financing activities 200,945 (22,735) (29,110) Cash provided by operating activities For the fiscal year ended March 31, 2024, net cash provided by operating activities was $71.2 million.
Added
Any alteration of trade agreements and terms between China and the United States, including limiting trade with China, imposing additional tariffs on imports from China and potentially imposing other restrictions on imports from China to the United States may result in further or higher tariffs or retaliatory trade measures by China.
Added
We are in the process of determining our incremental tariff cost exposure in light of continuing changes to tariff policies, and the full extent of our potential mitigation plans, as well as the associated timing to implement such plans. To mitigate our risk of ongoing exposure to tariffs, the Company will raise prices globally for all products sold.
Added
The Company may also seek to shift production outside of China into regions where we expect tariffs to be lower and to source the same products in more than one region, to the extent it is possible and not cost-prohibitive.
Added
See the risk factor titled “ Additional US tariffs or other restrictions placed on imports, retaliatory trade measures taken by other countries and resulting trade wars may have a material adverse impact on the Company’s financial condition and results of operations ” included as part of Item 1A.
Added
Risk Factors of this Annual Report on Form 10-K for additional information regarding risk related to tariffs. 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.
Added
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 a three-year timeframe.
Added
The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of Fiscal 2026.
Added
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 47 Table of Contents value as of the acquisition date.
Added
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed2 unchanged
Biggest changeWe also have exposure to the Chinese Renminbi as we source nearly all our products from China. We do not have an active hedging program. 53 Table of C ontents Foreign currency transaction exposure from a 10% movement of currency exchange rates would have a material impact on our reported cost of sales and net income.
Biggest changeWe also have exposure to the Chinese Renminbi as we primarily source our products from China. We do not have an active hedging program. Foreign currency transaction exposure from a 10% movement of currency exchange rates would have a material impact on our reported cost of sales and net income.
A hypothetical 1% increase or decrease of interest rates would result in a decrease or increase, respectively, in interest expense on an annualized basis of approximately $2.6 million as of March 31, 2024. Foreign exchange risk We are exposed to foreign exchange risk as we sell product into the UK, Europe, Canada and other smaller international markets.
A hypothetical 1% increase or decrease of interest rates would result in a decrease or increase, respectively, in interest expense on an annualized basis of approximately $2.5 million as of March 31, 2025. Foreign exchange risk We are exposed to foreign exchange risk as we sell product into the UK, Europe, Canada and other smaller international markets.
Interest rate risk We had cash and cash equivalents of $108.2 million and $120.8 million as of March 31, 2024 and March 31, 2023, respectively. Our cash and cash equivalents consist of cash and money market funds, which are highly liquid and, as such, are not sensitive to interest rate risk.
Interest rate risk We had cash and cash equivalents of $148.7 million and $108.2 million as of March 31, 2025 and March 31, 2024, respectively. Our cash and cash equivalents consist of cash and money market funds, which are highly liquid and, as such, are not sensitive to interest rate risk.
Based on a hypothetical 10% adverse movement in RMB as compared to the US dollar, our cost of sales and net income would be adversely affected by approximately $32.0 million for the fiscal year ended March 31, 2024. 54 Table of C ontents
Based on a hypothetical 10% adverse movement in RMB as compared to the US dollar, our cost of sales and net income would be adversely affected by approximately $42.0 million for the fiscal year ended March 31, 2025. 57 Table of Contents

Other ELF 10-K year-over-year comparisons