e.l.f. Beauty, Inc. (NYSE:ELF) Q3 2023 Earnings Conference Call February 1, 2022 4:30 PM ET

Company Participants

KC Katten - VP of Corporate Development & IR

Tarang Amin - Chairman, CEO

Mandy Fields - SVP & CFO

Conference Call Participants

Olivia Tong - Raymond James

Andrea Teixeira - JPMorgan

Linda Bolton-Weiser - D.A. Davidson

Anna Lizzul - Bank of America

Susan Anderson - Canaccord Genuity

Jon Andersen - William Blair

Rupesh Parikh - Oppenheimer

Tom Nass - Cowen

Mark Astrachan - Stifel

KC Katten

Thank you for joining us today to discuss e.l.f. Beauty's third quarter fiscal '23 results. I'm KC Katten, Vice President of Corporate Development and Investor Relations. With me today are Tarang Amin, Chairman and Chief Executive Officer; and Mandy Fields, Senior Vice President and Chief Financial Officer.

We encourage you to tune into our webcast presentation for the best viewing experience, which you can access on our website at investor.elfbeauty.com. Since many of our remarks today contain forward-looking statements, please refer to our earnings release and reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements. In addition, the company's presentation today includes information presented on a non-GAAP basis. Our earnings release contains reconciliations of the differences between the non-GAAP presentation and the most directly comparable GAAP measure.

With that, let me turn the webcast over to Tarang.

Tarang Amin

Thank you, KC, and good afternoon, everyone. Today, we will discuss the drivers of our Q3 results and our raised outlook for fiscal '23. We delivered Q3 results well ahead of our expectations. We grew net sales by 49%, increased gross margin by 180 basis points and delivered $37 million in adjusted EBITDA, up 69%. Q3 marked our 16th consecutive quarter of net sales growth.

Given our momentum, we're raising our full year guidance. We are encouraged by the continued strength we are seeing across the color cosmetics category.

In Q3, category trends grew 8% versus a year ago. e.l.f. Cosmetics continued to significantly outperform the category, growing 36% in tracked channels. We grew our market share by 150 basis points and increased our rank to the #4 brand as compared to #5 a year ago. We continue to be the fastest-growing top five brand by a wide margin.

In skin care, Q3 category trends grew 6% versus a year ago. e.l.f. SKIN also significantly outperformed the category, growing 34% in tracked channels.