e.l.f. Beauty, Inc. (NYSE:ELF) Q2 2023 Earnings Conference Call November 2, 2022 4:30 PM ET

Company Participants

Tarang Amin - Chairman, CEO

Mandy Fields - SVP & CFO

KC Katten - VP of Corporate Development & IR

Conference Call Participants

Olivia Tong - Raymond James

Andrea Teixeira - JPMorgan

Ashley Helgans - Jefferies

Bill Chappell - Truist Securities

Linda Bolton-Weiser - D.A. Davidson

Anna Lizzul - Bank of America

Rupesh Parikh - Oppenheimer

Korinne Wolfmeyer - Piper Sandler

Mark Astrachan - Stifel

Oliver Chen - Cowen

KC Katten

Thank you for joining us today to discuss e.l.f. Beauty’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 Q2 results and our raised outlook for fiscal '23. We delivered another quarter well-ahead of our expectations. We grew net sales by 33%, increased gross margin by 190 basis points and delivered $27 million in adjusted EBITDA, up 47%.

Q2 marked our 15th consecutive quarter of net sales growth. Given our momentum, we're raising our full year guidance. We're encouraged by the growth we're seeing across the color cosmetics category.

In Q2, category trends grew 5% versus a year ago and were above pre-pandemic levels. e.l.f. cosmetics consumption was even stronger, up 27% in tracked channels. Our market share grew by 115 basis points overtaking Revlon for the number four position for the first time. We were the fastest growing top five brand by a wide margin. Looking at skincare, Q2 category trends were also strong, up 15% versus a year ago. e.l.f. Skin consumption was up 44% in tracked channels, well-above category growth rates.

Before diving into our growth drivers, I want to share a few Q2 highlights. In September, we launched our first ever impact report to highlight how the company is making a positive impact on people, the planet and our furry friends. The report showcases how we are creating a different kind of beauty company by building brands designed to disrupt industry norms, shape culture and connect communities through positivity, inclusivity and accessibility.

Our commitment to our culture and people was recently spotlighted by Newsweek who named e.l.f. Beauty to its annual list of the top 100 most loved workplaces. e.l.f. is a Gen-Z favorite. In Piper Sandler semi-annual Teen Survey, e.l.f. remained the number one favorite cosmetics brand among teens. We grew our share by 500 basis points versus a year ago and attained the number one rank across all income groups. elfcosmetics.com became a top 10 shopping destination for teens for the first time, the only stable brand site among major retailers.