– Delivered 27% Net Sales Growth –

– Gained 30 Basis Points of Market Share in Nielsen U.S. Color Cosmetics –

– Raises Fiscal 2022 Net Sales Guidance –

e.l.f. Beauty (NYSE: ELF) today announced results for the three and six months ended September 30, 2021.

“I am proud of the e.l.f. Beauty team for delivering our eleventh consecutive quarter of net sales growth,” said Tarang Amin, e.l.f. Beauty's Chairman and Chief Executive Officer. “In the second quarter, e.l.f. grew sales 27% versus year ago and was again the only top 5 color cosmetics brand to grow market share above pre-pandemic levels, per Nielsen. Our performance demonstrates that our five strategic imperatives are driving results and we remain confident in the long-term growth potential for our portfolio of brands.”

Three Months Ended September 30, 2021 Results

For the three months ended September 30, 2021, compared to the three months ended September 30, 2020:

• Net sales increased 27% to $91.9 million, primarily driven by strength in our national and international retailers.
• Gross margin decreased approximately 200 basis points to 63%, primarily driven by unfavorable foreign exchange rates, an increase in freight and shipping costs and an increase in inventory adjustments, partially mitigated by price increases, cost savings and mix.
• Selling, general and administrative expenses ("SG&A") increased $5.3 million to $50.4 million or 55% of net sales. Adjusted SG&A (SG&A excluding the items identified in the reconciliation table below) increased $7.9 million to $45.2 million, or 49% of net sales. The increase in SG&A was primarily due to investments in marketing and digital and increased operational costs.
• The provision for income taxes was $0.5 million.
• Net income was $5.7 million on a GAAP basis. Adjusted net income (net income excluding the items identified in the reconciliation table below) was $11.3 million.
• Diluted earnings per share were $0.11 on a GAAP basis. Adjusted diluted earnings per share (diluted earnings per share calculated with adjusted net income excluding the items identified in the reconciliation table below) were $0.21.
• Adjusted EBITDA (EBITDA excluding the items identified in the reconciliation table below) was $18.5 million, or 20% of net sales, up 29% year over year.

Six Months Ended September 30, 2021 Results

For the six months ended September 30, 2021, compared to the six months ended September 30, 2020:

• Net sales increased 38% to $188.9 million, primarily driven by strength in our national and international retailers.
• Gross margin decreased approximately 260 basis points to 63.5%, primarily driven by unfavorable foreign exchange rates and elevated transportation costs.
• SG&A increased $15.7 million to $101.2 million or 53.6% of net sales. Adjusted SG&A increased $20.4 million to $90.7 million, or 48.0% of net sales. The increase in SG&A was primarily due to investments in marketing and digital and increased operational costs.
• The provision for income taxes was $2.0 million.
• Net income was $14.0 million on a GAAP basis. Adjusted net income was $25.6 million.
• Diluted earnings per share were $0.26 on a GAAP basis. Adjusted diluted earnings per share were $0.48.
• Adjusted EBITDA was $40.2 million or 21.3% of net sales, up 35% year over year.

Balance Sheet

As of September 30, 2021, the Company had $41.7 million in cash and cash equivalents and $93.9 million in long-term debt and finance lease obligations, as compared to $41.0 million in cash and cash equivalents and $118.6 million of long-term debt and finance lease obligations as of September 30, 2020.

Fiscal 2022 Outlook

The Company is providing the following updated outlook for fiscal 2022. When compared to the previous outlook, the updated outlook for fiscal 2022 reflects an expected 14-16% increase in net sales, as compared to an expected 12-14% increase previously.

Webcast Details

The Company will hold a webcast to discuss the results from its second quarter fiscal 2022 today, November 3, 2021, at 4:30 p.m. Eastern Time. The webcast will be broadcast live at https://investor.elfbeauty.com/news-and-events/events. For those unable to listen to the live broadcast, an archived version will be available at the same location.

About e.l.f. Beauty

e.l.f. Beauty stands with every eye, lip, face and paw. This deep commitment to inclusive, accessible, cruelty-free beauty has fueled the success of our namesake e.l.f. Cosmetics brand since 2004. With the addition of pioneering clean-beauty brand W3LL PEOPLE and launch of the lifestyle beauty brand Keys Soulcare created with Alicia Keys, we continue to strategically expand our portfolio with brands that support our purpose and values. Our family of brands is available online, and across leading beauty, mass-market, and clean beauty specialty retailers.

Learn more by visiting investor.elfbeauty.com.

Note Regarding non-GAAP Financial Measures

This press release includes references to non-GAAP measures, including, adjusted EBITDA, adjusted net income and adjusted diluted earnings per share. The Company presents these non-GAAP measures because its management uses them as supplemental measures in assessing its operating performance, and believes they are helpful to investors, securities analysts and other interested parties in evaluating the Company’s performance. The non-GAAP measures included in this press release are not measurements of financial performance under GAAP and they should not be considered as alternatives to measures of performance derived in accordance with GAAP. In addition, these non-GAAP measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. These non-GAAP measures have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing the Company’s results as reported under GAAP. The Company’s definitions and calculations of these non-GAAP measures are not necessarily comparable to other similarly titled measures used by other companies due to different methods of calculation.

Adjusted EBITDA excludes costs or gains related to restructuring of operations, stock-based compensation, loss on extinguishment of debt and other non-cash and non-recurring costs. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, costs related to the automation of certain warehouse and distribution activities, and amortization related to certain cloud computing costs. Adjusted SG&A excludes costs related to stock-based compensation and other non-cash and non-recurring costs. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities. Adjusted effective tax rate is the tax rate when excluding the pre-tax impact of costs or gains related to restructuring of operations, stock-based compensation, other non-cash and non-recurring costs, amortization of acquired intangible assets, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the impact was incurred. Adjusted net income excludes costs or gains related to restructuring of operations, stock-based compensation, loss on extinguishment of debt, other non-cash and non-recurring costs, amortization of acquired intangible assets and the tax impact of the foregoing adjustments. Such other non-cash or non-recurring costs include proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

With respect to the Company’s expectations under “Fiscal 2022 Outlook” above, the Company is not able to provide a quantitative reconciliation of the adjusted EBITDA, adjusted net income and adjusted diluted earnings per share guidance non-GAAP measures to the corresponding net income and diluted earnings per share GAAP measures without unreasonable efforts. The Company cannot provide meaningful estimates of the non-recurring charges and credits excluded from these non-GAAP measures due to the forward-looking nature of these estimates and their inherent variability and uncertainty. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws, including those statements relating to the Company's outlook for fiscal 2022 under “Fiscal 2022 Outlook” above and those statements that the Company’s five strategic imperatives are driving results and that the Company remains confident regarding the long-term growth potential for its portfolio of brands. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, actual results and the timing of selected events may differ materially from those expectations. Factors that could cause actual results to differ materially from those in the forward looking statements include, among other things, the risks and uncertainties that are described in the Company's most recent Annual Report on Form 10-K, as updated from time to time in the Company's SEC filings, as well as the Company’s ability to effectively compete with other beauty companies; the Company’s ability to successfully introduce new products; the Company’s ability to attract new retail customers and/or expand business with its existing retail customers; the Company’s ability to optimize shelf space at its key retail customers; the loss of any of the Company’s key retail customers or if the general business performance of its key retail customers declines; the Company’s ability to effectively manage its SG&A and other expenses; and the uncertainty regarding the impact of the COVID-19 pandemic. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date hereof. Except as required by law, the Company assumes no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

(a) Restructuring expense during the three and six months ended September 30, 2021 relates to the closure of the Company’s manufacturing plant, including impairment of plant assets, the disposal of excess inventory on hand at the plant, the termination of manufacturing plant employees and sub lease income.

(b) Loss on extinguishment of debt includes the write-off of existing debt issuance costs and certain fees paid related to the amended credit agreement.

(c) Represents various non-cash or non-recurring costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, costs related to the automation of certain warehouse and distribution activities, and amortization related to certain cloud computing costs.

(a) Represents various non-cash or non-recurring costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

(a) Restructuring expense during the three and six months ended September 30, 2021 relates to the closure of the Company’s manufacturing plant, including impairment of plant assets, the disposal of excess inventory on hand at the plant, the termination of manufacturing plant employees and sub lease income.

(b) Represents various non-cash or non-recurring costs, including proxy contest expenses, pre-launch costs to develop the Company’s first new brand, Keys Soulcare, acquisition-related costs for W3LL PEOPLE, and costs related to the automation of certain warehouse and distribution activities.

(c) Loss on extinguishment of debt includes the write-off of existing debt issuance costs and certain fees paid related to the amended credit agreement.

(d) Represents amortization expense of acquired intangible assets consisting of customer relationships, trademarks and favorable leases.

(e) Represents the tax impact of the above adjustments.

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