e.l.f. Beauty Inc Earnings - Q2 2027 Analysis & Highlights
e.l.f. Beauty’s Q2 FY27 call focused on strong sales and profit growth, performance across its brand portfolio, international and retail expansion, tariff-related reinvestment, and raised full-year guidance.
Key financial results
Q2 net sales grew 51% year over year; organic net sales grew approximately 35%, including an approximately 16-percentage-point contribution from rhode for the period before the acquisition anniversary.
U.S. net sales grew 25%, while international net sales grew 165%; pricing and product mix contributed approximately 20 percentage points to growth and unit volume contributed 31 percentage points.
Gross margin was 71%, up approximately 160 basis points year over year; 30 basis points came from tariff refunds, with the remaining increase driven by lower tariffs and better-than-planned mix, partly offset by price investments.
Adjusted SG&A was 53% of sales, compared with 56% a year earlier; marketing and digital investment was 21% of sales, versus 23%, partly due to spending timing.
Adjusted EBITDA was $123 million, up 86% from $66 million; adjusted net income was $73 million, or $1.21 per diluted share, compared with $41 million, or $0.68, a year earlier.
Business segment results
Management reported growth across all brands, but did not provide a full set of standalone brand revenue and profit figures; non-e.l.f. brands accounted for 30% of net sales, while skin care rose to 23% of sales.
e.l.f. Cosmetics gained 30 basis points of market share and regained unit momentum; its fall innovation held the number-one position in mass launches, with five of the top 10 products in both dollars and units.
rhode continued to set launch records, with its Sephora Europe expansion across 19 countries described as Sephora’s largest launch ever; it ranked first or second in 12 of 13 Sephora segments in which it competed.
Naturium remained one of the fastest-growing skin-care brands and had more than doubled since its acquisition three years earlier; its Sephora launches in Mexico and Canada quickly placed it among the top 10 brands in body.
e.l.f. Hair entered Target’s top 20 hair-care brands and top seven in styling during its first three months; approximately half of its consumers were new to e.l.f. brands.
Capital allocation
The company ended Q2 with $351 million in cash, versus $194 million a year earlier, and net leverage of approximately 1x adjusted EBITDA.
Management said cash priorities include supporting brand growth, technology investments such as AI and automation, and infrastructure investments to strengthen the brands’ retail execution.
After quarter-end, the company used part of its cash to make the first rhode earnout payment, citing the brand’s exceptional performance.
The company expects to reinvest the $52 million of tariff refunds received in the first half through lower prices on selected products and increased marketing, with a neutral full-year adjusted EBITDA impact.
Industry trends and dynamics
Management characterized the beauty category as growing at a low-single-digit rate and said the company expected its second-half growth to be multiples above that level.
The company cited U.S. hair care as a $17 billion category and fragrance as an $11 billion category, describing both as sizable opportunities.
Management said international markets represent significant headroom: they accounted for approximately 25% of e.l.f. Beauty’s trailing-12-month net sales, compared with approximately 70% for legacy peers.
Digital and connected commerce were significant routes to market, accounting for 31% of consumption; management highlighted strength on Amazon and TikTok Shop.
Competitive landscape
e.l.f. Cosmetics gained 30 basis points of market share in Q2, and management said the brand had built close to 900 basis points of share over the preceding few years, with further opportunity remaining.
In Piper Sandler’s teen survey, e.l.f. Cosmetics was the favorite teen cosmetics brand for a record ninth consecutive survey, with mindshare nearly five times that of the next closest brand; e.l.f. and rhode were the only brands in the top 10 for both cosmetics and skin care.
e.l.f. was the number-one cosmetics brand on Amazon in the U.S. and the platform’s most-searched cosmetics brand; it reached number two in cosmetics on TikTok Shop in Q2.
Management described rhode as Sephora’s number-one brand in North America, with high repeat rates, and said the brand was first or second in 12 of 13 Sephora segments in which it competed.
Management attributed e.l.f.’s performance to its value proposition, innovation, and disruptive marketing, including prestige-inspired products offered at accessible prices.
Macroeconomic environment
Tariffs affected gross margin: tariff refunds added 30 basis points to Q2 gross margin, while lower year-over-year tariffs also contributed to the increase.
The outlook assumes the company will reinvest the first-half $52 million of tariff refunds in lower prices on selected products and increased marketing, neutralizing the refunds’ impact on full-year adjusted EBITDA.
Management said manufacturing outside China had increased from 1% to nearly 70% over the prior three years.
Growth opportunities and strategies
Management outlined five strategic pillars: cultivate a passionate team of owners, co-create with the community, win with winners, expand the portfolio, and accelerate global expansion.
The company is extending e.l.f. into adjacent categories: e.l.f. Hair launched with six products priced at $10 or less, while e.l.f. POP launched in October on Amazon and TikTok Shop, with a fuller fragrance lineup planned later in the fiscal year.
The company is expanding brands through retail partners and markets, including rhode in Sephora Europe, e.l.f. in Sephora Brazil, and Naturium in Sephora Canada and Mexico.
Management said rhode was still in only about 40% of Sephora’s global doors after its recent expansions, indicating further distribution opportunity.
Management cited further U.S. and international retail expansion opportunities for Naturium, including additional expansion within Walmart and distribution with other customers.
The company is investing in e.l.f.’s international growth through market-specific marketing and retail execution, while also identifying Amazon and TikTok Shop as potential international growth channels.
Financial Guidance and Outlook
e.l.f. Beauty raised its fiscal ’27 net sales growth outlook to 22%–24%, from 18%–20%, and its organic sales growth outlook to 9%–11%, from 6%–7%.
Full-year adjusted EBITDA guidance increased to $421 million–$427 million from $401 million–$407 million; adjusted net income guidance rose to $231 million–$233 million from $212 million–$215 million, and adjusted EPS guidance rose to $3.82–$3.86 from $3.50–$3.55 per diluted share.
The company expects full-year adjusted gross margin to increase approximately 250 basis points year over year, compared with its prior 200-basis-point outlook; excluding tariff refunds, it expects gross margin to be approximately flat year over year.
For the second half, management expects net sales growth of approximately 7%–10%, with Q3 above that range and Q4 below it, primarily because of prior-year launch timing.
Full-year adjusted EBITDA growth is expected to be approximately 26%–27%, with adjusted EBITDA margin expanding about 50 basis points year over year; second-half adjusted EBITDA margin is expected in the low teens, reflecting reinvestment and shifted marketing spend.
The company continues to expect an adjusted tax rate of approximately 25%–26% and approximately 60.5 million fully diluted shares.
Management expects full-year marketing and digital investment at the higher end of its 23%–25% of net sales range.
