UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

_______________________________________________________________

FORM 10-Q

_______________________________________________________________

(Mark One)


☒			~~Quarterly Report Pursuant to Section~~QUARTERLY REPORT PURSUANT TO SECTION 13 ~~or 15(d) of the Securities Exchange Act of~~OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~

December 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ______ to ______

Commission File Number: 001-37873

_______________________________________________________________

e.l.f. Beauty, Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-4464131

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


570 10th Street
Oakland,	CA	94607

(Address of principal executive offices)(Zip code)

_______________________________________________________________


(510)			778-7787

(Registrant’s telephone number, including area code)

_______________________________________________________________


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
~~570 10~~^th ~~Street~~ ~~Oakland, CA 94607~~ ~~(510) 778-7787~~ ~~(Address~~
Title of ~~registrant’s principal executive offices, including zip code,~~ ~~and telephone number, including area code)~~ each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ELF	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). ☒ Yes ☐ No

Indicate by ~~checkmark~~check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer

☒

☐

Accelerated filer

☐

Non- accelerated filer

☐

☒ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares of the registrant’s common stock, par value $0.01 per share, outstanding as of ~~November~~February 1, ~~2017~~2024 was ~~46,259,817~~55,506,934 shares.

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” ”believe,” “contemplate,” “continue,” "could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, our actual results and the timing of selected events may differ materially. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk factors” in Part II, Item 1A of this Quarterly Report and elsewhere in this Quarterly Report. 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 of this Quarterly Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSINESS

The principal risks and uncertainties affecting our business include the following:

•The beauty industry is highly competitive, and if we are unable to compete effectively our results will suffer.

•Our new product introductions may not be as successful as we anticipate.

•Any damage to our reputation or brands may materially and adversely affect our business, financial condition and results of operations.

•Our success depends, in part, on the quality, performance and safety of our products.

•We may not be able to successfully implement our growth strategy.

•Our growth and profitability are dependent on a number of factors, and our historical growth may not be indicative of our future growth.

•We may be unable to continue to grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

•Acquisitions or investments, such as our acquisition of Naturium LLC, could disrupt our business and harm our financial condition.

•A disruption in our operations, including a disruption in the supply chain for our products, could materially and adversely affect our business.

•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.

•Adverse economic conditions in the United States or any of the other countries in which we conduct significant business could negatively affect our business, financial condition and results of operations.

•We depend on a limited number of retailers for a large portion of our net sales, and the loss of one or more of these retailers, or business challenges at one or more of these retailers, could adversely affect our results of operations.

•We have significant operations in China, which exposes us to risks inherent in doing business in that country.

•We are subject to international business uncertainties.

•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.

•Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

The summary risk factors described above should be read together with the text of the full risk factors below in the section titled “Risk factors” and the other information set forth in this Quarterly Report, including our unaudited condensed consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission (the “SEC”). The risks summarized above or described in the section titled “Risk factors” are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

e.l.f. Beauty, Inc.

Table of Contents


PART I. FINANCIAL INFORMATION		3 5
Item 1. Financial statements (unaudited)		3 5
Condensed consolidated balance sheets		3 5
Condensed consolidated statements of operations		4 6

Condensed consolidated statements of comprehensive income		7
Condensed consolidated statements of stockholders’ equity		8
Condensed consolidated statements of cash flows		5 10
Notes to condensed consolidated financial statements (unaudited)		6 11

Item 2. Management’s discussion and analysis of financial condition and results of operations		15 22

Item 3. Quantitative and qualitative disclosures about market risk		21 28

Item 4. Controls and procedures		21 28

PART II. OTHER INFORMATION		21 29

Item 1. Legal proceedings		21 29

Item 1A. Risk factors		21 29

Item 2. Unregistered sales of equity securities and use of proceeds		46 56

Item 3. Defaults upon senior securities		46 57

Item 4. Mine safety disclosures		46 57

Item 5. Other information		46 57

Item 6. Exhibits		47 57

SIGNATURES		48

	58

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PART I. ~~FINANCI~~ALFINANCIAL INFORMATION

Item 1. Financial statements (unaudited)

e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated balance sheets

(unaudited)

(in thousands, except share and per share data)

		September 30, 2017			December 31, 2016
	December 31, 2023							December 31, 2023	March 31, 2023	December 31, 2022
Assets
Current assets:
Cash		$	5,677		$	15,295
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net			35,627			37,825
Inventories			63,571			69,397
Inventory, net
Prepaid expenses and other current assets			8,302			2,387
Total current assets			113,177			124,904
Property and equipment, net			16,635			17,151
Intangible assets, net			107,636			113,003
Goodwill			157,264			157,264
Investments			2,875			-
Other assets			9,433			2,407
Total assets		$	407,020		$	414,729

Liabilities and stockholders' equity
Liabilities and stockholders' equity
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and capital lease obligations		$	18,140		$	8,650
Current liabilities:
Current liabilities:
Current portion of long-term debt and finance lease obligations
Current portion of long-term debt and finance lease obligations
Current portion of long-term debt and finance lease obligations
Accounts payable			21,007			37,944
Accrued expenses and other current liabilities			12,937			33,676
Total current liabilities			52,084			80,270
Long-term debt and capital lease obligations			149,690			156,177
Long-term debt and finance lease obligations
Deferred tax liabilities			34,408			34,212
Long-term operating lease obligations
Other long-term liabilities			2,878			3,208
Total liabilities			239,060			273,867

Commitments and contingencies (Note 7)
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 9)

Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of September 30, 2017 and December 31, 2016; 46,242,817 and 45,276,137 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively			459			438
Stockholders' equity:
Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of December 31, 2023, March 31, 2023 and December 31, 2022; 55,412,234, 53,770,482 and 53,165,462 shares issued and outstanding as of December 31, 2023, March 31, 2023 and December 31, 2022, respectively
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of December 31, 2023, March 31, 2023 and December 31, 2022; 55,412,234, 53,770,482 and 53,165,462 shares issued and outstanding as of December 31, 2023, March 31, 2023 and December 31, 2022, respectively
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of December 31, 2023, March 31, 2023 and December 31, 2022; 55,412,234, 53,770,482 and 53,165,462 shares issued and outstanding as of December 31, 2023, March 31, 2023 and December 31, 2022, respectively
Additional paid-in capital			715,953			700,871
Accumulated other comprehensive loss
Accumulated deficit			(548,452	)		(560,447	)
Total stockholders' equity			167,960			140,862
Total liabilities and stockholders' equity		$	407,020		$	414,729

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of operations ~~and comprehensive income (loss)~~

(unaudited)

(in thousands, except share and per share data)


	Three months ended September 30,						Nine months ended September 30,						Three months ended December 31,		Nine months ended December 31,
	2017			2016			2017			2016			2023	2022		2023	2022
Net sales	$	71,865		$	56,312		$	188,295		$	153,132
Cost of sales		28,952			23,834			71,264			66,217
Gross profit		42,913			32,478			117,031			86,915
Selling, general and administrative expenses		33,133			31,002			98,843			78,807

Operating income
Operating income
Operating income		9,780			1,476			18,188			8,108
Other income (expense), net		(379	)		288			(1,422	)		2,253
Impairment of equity investment
Interest expense, net		(2,262	)		(5,192	)		(6,805	)		(11,588	)
Income (loss) before provision for income taxes		7,139			(3,428	)		9,961			(1,227	)
Income tax benefit (provision)		(1,274	)		1,051			2,034			(61	)
Net income (loss)	$	5,865		$	(2,377	)	$	11,995		$	(1,288	)
Comprehensive income (loss)	$	5,865		$	(2,377	)	$	11,995		$	(1,288	)
Net income (loss) per share (Note 9):
Loss on extinguishment of debt
Income before provision for income taxes
Income tax provision
Net income

Net income per share:
Net income per share:
Net income per share:
Basic
Basic
Basic	$	0.13		$	(73.13	)	$	0.27		$	(234.34	)
Diluted	$	0.12		$	(73.13	)	$	0.24		$	(234.34	)
Weighted average shares outstanding (Note 9):
Weighted average shares outstanding:
Basic
Basic
Basic		45,813,801			5,109,016			45,132,567			2,151,324
Diluted		49,283,247			5,109,016			49,462,166			2,151,324

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of ~~cash flows~~

comprehensive income

(unaudited)

(in thousands)

Nine months ended September 30,

2017

2016

Cash flows from operating activities:

Net income (loss)

$
11,995

$
(1,288
)
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:

Amortization of intangible and other non-current assets

5,555

6,209

Depreciation of property and equipment

5,121

3,369

Stock-based compensation expense

9,720

5,589

Amortization of debt issuance costs and discount on debt

605

1,504

Deferred income taxes

(1
)

193

Debt prepayment penalty

-

400

Loss on disposal of fixed assets

241

235

Loss/(gain) on foreign currency forward contracts

-

(8,333
)
Other, net

194

(93
)
Changes in operating assets and liabilities:

Accounts receivable

1,993

(11,503
)
Inventories

5,837

(9,907
)
Prepaid expenses and other assets

(13,030
)

(8,315
)
Accounts payable and accrued expenses

(34,067
)

23,592

Other liabilities

(330
)

897

Net cash provided by (used in) operating activities

(6,167
)

2,549

Cash flows from investing activities:

Purchase of property and equipment

(4,371
)

(5,553
)
Investment in equity securities

(2,875
)

-

Proceeds from sale of property and equipment

-

84

Net cash used in investing activities

(7,246
)

(5,469
)

Cash flows from financing activities:

Proceeds from revolving line of credit

24,100

5,500

Repayment of revolving line of credit

(14,600
)

(13,200
)
Proceeds from long-term debt

-

62,294

Repayment of long-term debt

(6,188
)

(42,369
)
Debt issuance costs paid

(519
)

-

Cash received from issuance of common stock

1,309

64,034

Proceeds from repayment of employee note receivable

-

7,912

Deferred offering costs paid

-

(5,574
)
Dividend paid

-

(68,000
)
Debt prepayment penalty

-

(400
)
Other, net

(307
)

(197
)
Net cash provided by financing activities

3,795

10,000

Net increase (decrease) in cash

(9,618
)

7,080

Cash - beginning of period

15,295

14,004

Cash - end of period

$
5,677

$
21,084


	Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022
Net income	$	26,888	$	19,105	$	113,136	$	45,284
Other comprehensive loss, net of tax
Foreign currency translation adjustment	(58)		—		(58)		—
Other comprehensive loss, net of tax	(58)		—		(58)		—
Comprehensive income	$	26,830	$	19,105	$	113,078	$	45,284

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of stockholders’ equity

(unaudited)

(in thousands, except share data)


	Common stock					Additional paid-in capital	Accumulated other comprehensive loss		Accumulated deficit				Total stockholders' equity
		Shares			Amount
Balance as of March 31, 2023		53,571,577	$	535			$	832,481	$	—	$	(421,999)		$	411,017
Net income		—	—				—		—		52,977			52,977
Stock-based compensation		—	—				7,223		—		—			7,223
Exercise of stock options and vesting of restricted stock		754,953	8				477		—		—			485

Balance as of June 30, 2023		54,326,530	$	543			$	840,181	$	—	$	(369,022)		$	471,702
Net income		—	—				—		—		33,271			33,271
Stock-based compensation		—	—				11,190		—		—			11,190
Exercise of stock options and vesting of restricted stock		203,982	2				263		—		—			265

Balance as of September 30, 2023		54,530,512	$	545			$	851,634	$	—	$	(335,751)		$	516,428
Net income		—	—				—		—		26,888			26,888
Stock-based compensation		—	—				11,051		—		—			11,051
Exercise of stock options and vesting of restricted stock		213,014	2				2,141		—		—			2,143
Issuance of common stock as consideration for acquisition		577,659	6				57,766		—		—			57,772

Foreign currency translation adjustment		—	—				—		(58)		—			(58)
Balance as of December 31, 2023		55,321,185	$	553			$	922,592	$	(58)	$	(308,863)		$	614,224

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of stockholders’ equity

(unaudited)

(in thousands, except share data)


	Common stock					Additional paid-in capital	Accumulated deficit				Total stockholders' equity
		Shares			Amount
Balance as of March 31, 2022		51,524,307	$	515			$	795,443	$	(483,529)		$	312,429
Net income		—	—				—		14,469			14,469
Stock-based compensation		—	—				6,549		—			6,549
Exercise of stock options and vesting of restricted stock		558,336	2				—		—			2

Balance as of June 30, 2022		52,082,643	$	517			$	801,992	$	(469,060)		$	333,449
Net income		—	—				—		11,710			11,710
Stock-based compensation		—	—				8,022		—			8,022
Exercise of stock options and vesting of restricted stock		471,966	8				3,771		—			3,779

Balance as of September 30, 2022		52,554,609	$	525			$	813,785	$	(457,350)		$	356,960
Net income		—	—				—		19,105			19,105
Stock-based compensation		—	—				7,239		—			7,239
Exercise of stock options and vesting of restricted stock		269,051	3				1,997		—			2,000

Balance as of December 31, 2022		52,823,660	$	528			$	823,021	$	(438,245)		$	385,304

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)


	Nine months ended December 31,
	2023		2022
Cash flows from operating activities:
Net income	$	113,136	$	45,284
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	24,247		16,496

Stock-based compensation expense	29,459		21,833
Amortization of debt issuance costs and discount on debt	290		271
Deferred income taxes	(1,684)		(1,819)
Impairment of equity investment	1,720		—
Acquisition-related seller expenses	(10,549)		—
Loss on extinguishment of debt	—		176

Other, net	27		(1)
Changes in operating assets and liabilities:
Accounts receivable	(45,878)		(20,620)
Inventory	(106,898)		3,248
Prepaid expenses and other assets	(50,696)		(15,223)
Accounts payable and accrued expenses	84,733		22,610
Other liabilities	(3,768)		(3,254)
Net cash provided by operating activities	34,139		69,001

Cash flows from investing activities:
Acquisition, net of cash acquired	(274,973)		—
Purchase of property and equipment	(5,984)		(1,647)


Net cash used in investing activities	(280,957)		(1,647)

Cash flows from financing activities:
Proceeds from revolving line of credit	89,500		—

Proceeds from long-term debt	115,000		—
Repayment of long-term debt	(5,188)		(28,750)
Debt issuance costs paid	(665)		—

Cash received from issuance of common stock	2,893		5,652



Other, net	(489)		(588)
Net cash provided by (used in) financing activities	201,051		(23,686)

Effect of exchange rate changes on cash and cash equivalents	(56)		—

Net (decrease) increase in cash, cash equivalents and restricted cash	(45,823)		43,668
Cash, cash equivalents and restricted cash - beginning of period	120,778		43,353
Cash, cash equivalents and restricted cash - end of period	$	74,955	$	87,021

The accompanying notes are an integral part of these condensed consolidated financial statements.

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e.l.f. Beauty, Inc. and subsidiaries

Notes to condensed consolidated financial statements (unaudited)

Note ~~1 ̶~~ 1—Nature of operations

e.l.f. Beauty, Inc. ~~and subsidiaries (the “Company,” “we,” “us,” “its” and “our”) was formed as~~, a Delaware corporation ~~on December 20, 2013 under~~(“e.l.f. Beauty” and together with its subsidiaries, the ~~name J.A. Cosmetics Holdings, Inc. In April 2016,~~“Company”), is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and cruelty-free cosmetics and skincare products. The Company's mission is to make the best of beauty accessible to every eye, lip, face and skin concern.

The Company believes its ability to deliver cruelty-free, clean, vegan and premium-quality products at accessible prices with broad appeal differentiates it in the beauty industry. The Company believes the combination of its value proposition, innovation engine, ability to attract and engage consumers, and its world-class team’s ability to execute with speed, has positioned the Company ~~changed its name~~well to navigate the competitive beauty market.

The Company's family of brands includes e.l.f. ~~Beauty, Inc.~~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. The Company ~~and its subsidiaries conduct business under the name e.l.f. Cosmetics, and offer high-quality, prestige-inspired products for eyes, lips and face to consumers through~~has strong relationships with its retail customers ~~e.l.f. stores~~such as Target, Walmart, Ulta Beauty and ~~e-commerce channels.~~

other leading retailers that have enabled the Company to expand distribution both domestically and internationally.

Note ~~2 ̶~~ 2—Summary of significant accounting policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“USU.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange ~~Commission (the “SEC”).~~Commission. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, these interim financial statements contain all adjustments, ~~consisting of only~~including normal recurring adjustments, necessary for a fair statement of its financial position as of ~~September 30, 2017,~~December 31, 2023, March 31, 2023 and December 31, 2022, and its results of operations and stockholders' equity for the three and nine months ended ~~September 30, 2017,~~December 31, 2023 and December 31, 2022 and its cash flows for the nine months ended ~~September 30, 2017. The condensed consolidated balance sheet at~~ December 31, ~~2016, was derived from audited annual financial statements, but does not contain all of the footnote disclosures from the annual financial statements.~~2023 and December 31, 2022. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements ~~as of and for the year ended December 31, 2016~~ and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~December~~March 31, ~~2016~~2023 (the “Annual Report”). Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Use of estimates

The preparation of financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities ~~and disclosure of contingent assets and liabilities~~ at the date of the financial statements and ~~the~~ reported amounts of revenues and expenses during the reporting period. Actual results could differ from ~~those~~these estimates.

Segment reporting

Operating segments are components of an enterprise for which separate financial information is available that is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Utilizing these criteria, the Company manages its business on the basis of one operating segment and one reportable segment.

It is impracticable for the Company to provide revenue by product line.

Significant accounting policies

Business combinations

The purchase price of a business acquisition is allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the business combination date. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires the Company to make estimates, which are based on all available information and in some cases

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assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. Unanticipated events or circumstances may occur that could affect the accuracy of the Company’s fair value estimates, and under different assumptions, the resulting valuations could be materially different.

Costs that are incurred to complete the business combination, such as legal and other professional fees, are not considered as a part of consideration transferred and are charged to selling, general and administrative expense as they are incurred.

The Company made no ~~significant~~other material changes in the application of its significant accounting policies that were disclosed in Note 2, “Summary of significant accounting policies,” to the audited consolidated financial statements as of and for the fiscal year ended ~~December~~March 31, ~~2016~~2023 included in the Annual Report.

Revenue recognition

The Company ~~has prepared~~distributes products both through national and international retailers, as well as direct-to-consumers through its e-commerce channel. The marketing and consumer engagement benefits that the direct-to-consumer channel provides are integral to the Company’s brand and product development strategy and drive sales across channels. As such, the Company views its two primary distribution channels as components of one integrated business, as opposed to discrete revenue streams.

The Company sells a variety of beauty products but does not consider them to be meaningfully different revenue streams given similarities in the nature of the products, the target consumer and the innovation and distribution processes.

The following table provides disaggregated revenue from contracts with customers by geographical market, as the nature, amount, timing and uncertainty of revenue and cash flows can differ between domestic and international customers (in thousands).


	Three months ended December 31,				Nine months ended December 31,
Net sales by geographic region:	2023		2022		2023		2022
United States	$	229,101	$	127,457	$	599,552	$	343,869
International	41,842		19,080		103,237		47,618
Total net sales	$	270,943	$	146,537	$	702,789	$	391,487

As of December 31, 2023, other than accounts receivable, the Company had no material contract assets, contract liabilities or deferred contract costs recorded on its unaudited condensed consolidated balance sheet.

Recent accounting pronouncements

No new accounting pronouncements issued but not yet adopted are expected to have a material impact on the Company's unaudited condensed consolidated financial statements.

Note 3—Restricted cash

Restricted cash amounting to $2.3 million as of December 31, 2023, included in prepaid expenses and other current assets on the accompanying unaudited condensed consolidated ~~financial statements~~balance sheets, represents part of the purchase consideration held in escrow for the settlement of general representation and warranty provisions in connection with the Company’s acquisition of Naturium LLC (“Naturium”). The Company determines current or non-current classification of restricted cash based on the ~~same basis as~~expected duration of the ~~audited consolidated financial statements included~~restriction.

Table of Contents

The reconciliation of cash, cash equivalents and restricted cash recorded in the ~~Annual Report.~~

~~Recent accounting pronouncements~~

~~The following table provides a brief description~~condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of ~~recent accounting pronouncements that could have a material effect on the Company’s financial statements:~~

~~Standard~~	~~Description~~	~~Date of expected adoption/adoption~~	~~Effect on the financial statements or other significant matters~~
~~Standards that are not yet adopted~~
~~ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~	The standard will replace existing revenue recognition standards and significantly expand the disclosure requirements for revenue arrangements. It may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts with remaining performance obligations as of the effective date.	~~January 1, 2018~~	~~The Company expects the standard to impact the methods used to reserve for discounts, refunds and other customer incentives, which may impact the timing of revenue recognition.~~ The Company expects to apply the modified retrospective method of adoption and is currently evaluating other possible impacts of the standard on its consolidated financial statements and related disclosures.
~~ASU 2015-14, Revenue from Contracts with Customers (Topic 606)~~cash flows are as follows (in thousands): ~~Deferral of the Effective Date~~	~~In August 2015, the FASB issued ASU 2015-14, which deferred the effective date from annual periods beginning on or after December 15, 2016 to annual periods beginning on or after December 15, 2017.~~
~~ASU 2016-08,~~ ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~ ~~ASU 2016-10,~~ ~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing~~ ~~ASU 2016-12,~~ ~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients~~	In March, April and May 2016, the FASB issued ASU 2016-08, ASU 2016-10 and ASU 2016-12. These standards provide supplemental adoption guidance and clarification to ASU 2014-09, and must be adopted concurrently with the adoption of ASU 2014-09.
~~ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~	The standard makes targeted improvements to US GAAP, including significant revisions to an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value.	~~January 1, 2018~~	~~The Company is currently evaluating the effect of the standard but does not expect it to have a material effect on its consolidated financial statements and related disclosures.~~


		Nine months ended December 31,
	Balance sheet classification	2023		2022
Cash and cash equivalents	Cash and cash equivalents	$	72,705	$	87,021
Restricted cash held in escrow	Prepaid expenses and other current assets	2,250		—
Cash, cash equivalents and restricted cash - end of period		$	74,955	$	87,021

~~Standard~~

~~Description~~

~~Date of expected adoption/adoption~~

~~Effect on the financial statements or other significant matters~~

~~ASU 2016-02,~~ ~~Leases (Topic 842)~~

~~The standard will require lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases (other than leases that meet~~

the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model (e.g., certain definitions, such as initial direct costs, have been updated) and the new revenue recognition standard.

~~It requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application.~~

~~January 1, 2019~~

~~The Company expects the standard to result in increased assets and liabilities related to operating leases currently not recorded on the balance sheet.~~

~~The Company is currently evaluating other possible impacts of the adoption of this standard on its consolidated financial statements and related disclosures.~~

Note ~~3 ̶~~ 4—Investment in equity securities

On April 14, 2017, the Company ~~entered into an agreement to make a minority equity investment~~invested $2.9 million in a social media analytics company, ~~(“Investee”). Pursuant to this agreement,~~which is included in investments on its unaudited condensed consolidated balance sheets. The Company has elected the measurement alternative for equity investments that do not have readily determinable fair values. The Company recorded an impairment charge of $1.7 million on its investment as a separate line under other income (expense), net during the three months ended June 30, 2023, as an identified event or change in circumstances resulted in an indicator of impairment. The Company did not record an additional impairment charge on its investment during the three months ended December 31, 2023.

Note 5—Acquisition

On October 4, 2023, the Company, ~~invested $2.9 million~~through its wholly owned subsidiary, e.l.f. Cosmetics, Inc., completed its acquisition of Naturium (including the indirect acquisition of equity interests in Naturium through the purchase of a “tax blocker” holding company) (the “Acquisition”), which furthered the Company’s mission to make the best of beauty accessible to every eye, lip, face and ~~received 4.7 million shares of preferred stock, or approximately 15.0% of~~skin concern. Naturium is a skincare company that provides clinically effective products at an affordable price. The Company directly and indirectly acquired all rights, title and interest in and to the ~~total~~ outstanding ~~voting~~equity securities of ~~the Investee.~~Naturium for a purchase price of $333.0 million. The ~~Company’s investment is carried at cost.~~

~~It is not practicable to estimate~~following table summarizes the fair market value of the ~~shares of preferred stock of Investee, which is not publicly traded. There have been no identified events or changes in circumstances that may have a significant adverse effect on~~consideration transferred and how the Company calculates the goodwill resulting from the acquisition (in thousands):


Cash consideration			$	275,266
Equity consideration (common stock issued)(1)			57,772
Total consideration transferred			333,038
Less: Net assets acquired
Net assets acquired, excluding liability assumed for acquisition-related seller expenses	$	175,042
Liability assumed for acquisition-related seller expenses(2)	(10,549)
Net assets acquired			(164,493)
Goodwill			$	168,545

(1) The fair market value of the ~~investment.~~

~~Note 4 ̶ Goodwill~~$57.8 million common stock issued (equivalent to 577,659 shares of common stock) was determined on the basis of the opening market price of the Company’s stock of $100.01 per share on the acquisition date.

(2) In connection with the Acquisition, the Company paid Naturium’s acquisition-related expenses of $10.5 million recognized as an assumed liability at the acquisition date.

The Company incurred and expensed acquisition transaction costs of $0.6 million and $3.1 million during the three and nine months ended December 31, 2023, respectively, which are included as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

The Acquisition has been accounted for as a business combination under the acquisition method and, accordingly, the total purchase price is allocated to the tangible and intangible assets

~~Information regarding~~ acquired and the ~~Company’s~~liabilities assumed based on their respective fair values on the acquisition date. The purchase price allocation, deferred tax calculations and residual goodwill are preliminary and pending finalization. Naturium’s results of operations have been included in the Company's condensed consolidated financial statements from the date of acquisition.

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The following table presents the preliminary purchase price allocation recorded in the Company's condensed consolidated balance sheet on the acquisition date (in thousands):


Cash	$	293
Accounts receivable	7,388
Inventory	16,282
Prepaid expenses and other current assets	1,899
Property and equipment	28
Goodwill(1)	168,545
Intangible assets	162,800
Total assets acquired	357,235
Accounts payable	(15,897)
Accrued expenses and other current liabilities	(6,077)
Net deferred tax liability	(2,223)
Total liabilities assumed	(24,197)
Total purchase price	$	333,038

(1) The goodwill represents the excess value over both tangible and intangible assets asacquired and liabilities assumed. The goodwill recognized in this transaction is primarily attributable to the Company’s expectation that Naturium can continue to expand distribution and deliver new skincare products. A substantial amount of ~~September 30, 2017,~~the goodwill is expected to be deductible for tax purposes.

Intangible assets


	Fair Value		Estimated Useful Life
	(in thousands)		(in years)	Fair Value Methodology
Customer relationships – retailers	$	20,000	10	Excess earnings method
Customer relationships – e-commerce	18,300		3	Excess earnings method and with and without method
Trademarks	124,500		15	Relief from Royalty method
Total identified intangible assets	$	162,800

Certain financial information (unaudited)

The amounts of Naturium’s net sales included in the Company's condensed consolidated financial statements from the date of acquisition and the net sales of the combined companies on an unaudited pro forma basis, had the acquisition date been April 1, 2022), are as follows (in thousands):

Estimated useful life

Gross carrying amount

Accumulated amortization

Net carrying amount

Customer relationships – retailers

10 years

$
68,800

$
(25,227
)

$
43,573

Customer relationships – e-commerce

3 years

3,900

(3,867
)

33

Favorable leases, net

Varies

580

(350
)

230

Total finite-lived intangibles

73,280

(29,444
)

43,836

Trademarks

Indefinite

63,800

-

63,800

Goodwill

157,264

-

157,264

Total goodwill and other intangibles

$
294,344

$
(29,444
)

$
264,900


	Amount
Actual Naturium net sales from October 4, 2023 to December 31, 2023	$	22,458
Supplemental pro forma combined net sales for the three months ended December 31, 2023	271,579
Supplemental pro forma combined net sales for the nine months ended December 31, 2023	744,583
Supplemental pro forma combined net sales for the three months ended December 31, 2022	159,811
Supplemental pro forma combined net sales for the nine months ended December 31, 2022	425,423

The unaudited pro forma financial information shown in the table above are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place at April 1, 2022 (the beginning of comparable period presented).

The pro forma earnings of the combined companies are not presented as the effects of the Acquisition in earnings are not material in relation to the overall consolidated financial statements.

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Note 6—Goodwill and intangible assets

Information regarding the Company’s goodwill and intangible assets as of December 31, ~~2016,~~2023 is as follows (in thousands):


	Estimated useful life	Gross carrying amount		Accumulated amortization			Net carrying amount		Estimated useful life	Gross carrying amount	Accumulated amortization	Net carrying amount
Customer relationships – retailers	10 years	$	68,800	$	(20,067	)	$	48,733
Customer relationships – e-commerce	3 years		3,900		(3,736	)		164
Favorable leases, net	Varies		580		(274	)		306
Trademarks
Total finite-lived intangibles			73,280		(24,077	)		49,203
Trademarks	Indefinite		63,800		-			63,800
Goodwill			157,264		-			157,264
Total goodwill and other intangibles		$	294,344	$	(24,077	)	$	270,267

~~Amortization expense related to~~

Information regarding the Company’s goodwill and intangible assets ~~was $1.7~~as of March 31, 2023 is as follows (in thousands):


	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(65,780)	$	11,820
Customer relationships – e-commerce	3 years	3,940		(3,940)		—
Trademarks	10 years	3,500		(1,079)		2,421
Total finite-lived intangibles		85,040		(70,799)		14,241
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(70,799)	$	249,661

Information regarding the Company’s goodwill and intangible assets as of December 31, 2022 is as follows (in thousands):


	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(63,840)	$	13,760
Customer relationships – e-commerce	3 years	3,940		(3,938)		2
Trademarks	10 years	3,500		(991)		2,509
Total finite-lived intangibles		85,040		(68,769)		16,271
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(68,769)	$	251,691

Amortization expenses on finite-lived intangible assets were $6.1 million and ~~$5.4~~$2.0 million in the three months ended December 31, 2023 and December 31, 2022, respectively, and $10.2 million and $6.1 million in the nine months ended ~~September 30, 2017, respectively,~~December 31, 2023 and ~~$2.1 million and $6.2 million in the three and nine months ended September 30, 2016,~~December 31, 2022, respectively. ~~Trademark~~Certain trademark assets have been classified as indefinite-lived intangible assets and accordingly, are not subject to amortization.

~~Future amortization expense for intangible assets as of September 30, 2017 is as follows (in thousands):~~

Remainder of 2017

$
1,754

2018

7,007

2019

6,982

2020

6,880

2021

6,880

Thereafter

14,333

Total

$
43,836

No There were no impairments of goodwill or intangible assets ~~were~~ recorded in the three and nine months ended ~~September 30, 2017~~December 31, 2023 and ~~2016.~~

December 31, 2022.

Table of Contents

The estimated future amortization expense related to finite-lived intangible assets, assuming no impairment as of December 31, 2023 is as follows (in thousands):



Remainder of fiscal 2024	$	4,981
2025	17,630
2026	17,630
2027	14,580
2028	11,530
Thereafter	100,507
Total	$	166,858

Note ~~5 ̶~~ 7—Accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of ~~September 30, 2017~~December 31, 2023, March 31, 2023 and December 31, ~~2016~~2022 consisted of the following (in thousands):


	September 30, 2017		December 31, 2016		December 31, 2023	March 31, 2023	December 31, 2022
Accrued expenses	$	4,320	$	9,537
Accrued inventory
Accrued marketing
Current portion of operating lease liabilities
Accrued compensation
Taxes payable
Other current liabilities		1,871		9,249
Accrued compensation		6,746		7,111
Early exercised option deposit liability		-		4,074
Income taxes payable		-		3,705
Accrued expenses and other current liabilities	$	12,937	$	33,676

Note ~~6 ̶~~ 8—Debt

The Company’s outstanding debt as of ~~September 30, 2017~~December 31, 2023, March 31, 2023 and December 31, ~~2016~~2022 consisted of the following (in thousands):

	September 30, 2017			December 31, 2016
Revolving credit facility⁽¹⁾	$	9,500		$	-
							December 31, 2023	March 31, 2023	December 31, 2022

Revolving line of credit(1)
Revolving line of credit(1)
Revolving line of credit(1)
Term loan⁽¹⁾		156,332			162,627
Capital lease obligations		2,469			2,766
Finance lease obligations
Total debt⁽²⁾		168,301			165,393
Less: debt issuance costs		(471	)		(566	)
Total debt, net of issuance costs		167,830			164,827
Less: current portion		(18,140	)		(8,650	)
Long-term portion of debt	$	149,690		$	156,177

(1) See ~~Note 9, “Debt,” to~~further discussion below. As of December 31, 2023, the ~~consolidated~~Company was in compliance with all applicable financial ~~statements included in the Annual Report for details regarding the Senior Secured Credit Agreement (as defined below~~covenants under the ~~heading “Description of indebtedness”).~~

^{Amended Credit Agreement.}

(2) The gross carrying amounts of the Company’s long-term debt, before reduction of the debt issuance costs, and ~~capital~~finance lease obligations approximate their fair values, based on Level 2 inputs (quoted prices for similar assets and liabilities in active markets or inputs that are observable), as the stated rates approximate market rates for loans with similar terms. The Company did not transfer any liabilities measured at fair value on a recurring basis to or from Level 2 for any of the periods presented.

~~August 2017~~

Table of Contents

Amended Credit Agreement ~~Amendment~~

On ~~August 25, 2017,~~April 30, 2021, the Company ~~entered into a First Amendment~~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. The Amended Credit Agreement has a five year term and consists of (i) a $100 million revolving credit facility (the ~~“Amendment”), amending that certain Senior Secured~~“Amended Revolving Credit ~~Agreement, dated as of December 23, 2016 (the “Credit Agreement”~~Facility”).

~~Pursuant to the Amendment, borrowings under both the~~ and (ii) a $100 million term loan facility (the ~~“Term~~“Amended Term Loan Facility”).

All amounts under the Amended Revolving Credit Facility are available for draw until the maturity date on April 30, 2026. The Amended Revolving Credit Facility is 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 the 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. 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 December 31, 2023 was $10.5 million.

Prior to the Second Amendment (as defined below), both the Amended Revolving Credit Facility and the ~~revolving credit facility (“Revolving Credit Facility”) under the Credit Agreement bear~~Amended Term Loan Facility bore interest, at the ~~Company’s~~borrowers’ option, at either (i) a rate per annum equal to an adjusted LIBOR rate determined by reference to the cost of funds for ~~U.S.~~the United States (“US”) dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from ~~1.50%~~1.25% to ~~2.75% (amended from 2.00% to 3.50% as previously set forth in the Credit Agreement)~~2.125% based on ~~the Company’s~~our consolidated total net leverage ratio or (ii) a floating base rate plus an applicable margin ranging from ~~0.50%~~0.25% to ~~1.75% (amended from 1.00% to 2.50% as previously set forth in the Credit Agreement)~~1.125% based on ~~the Company’s~~our consolidated total net leverage ratio. 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 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%.

The interest rate as of December 31, 2023 for ~~both~~ the Amended Revolving Credit Facility and the Amended Term Loan Facility was approximately 6.7%.

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”). Pursuant to the Second Amendment, the Company may borrow incremental term loans in a principal amount equal to $115.0 million under the Amended Credit Agreement (the “Incremental Term Loan”). The Incremental Term Loan will bear 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, 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 amortizes at 5.00% per annum payable in equal quarterly installments of 1.25% per annum, commencing with the fiscal quarter ending on December 31, 2023. The Company used the Incremental Term Loan together with cash from its balance sheet and additional borrowings under its Amended Revolving Credit Facility to consummate the Acquisition (as defined in Note 5 hereto) and to pay related fees and expenses in connection with the Acquisition and Second Amendment.

The interest rate as of December 31, 2023 for the Incremental Term Loan was approximately ~~4.00% as of September 30, 2017.~~

6.9%.

The ~~Amendment amended the~~Amended Credit Agreement contains a number of covenants that, among other things and subject to ~~increase~~certain exceptions, restrict the ~~amount~~Company’s ability to pay dividends and distributions or repurchase capital stock, incur additional indebtedness, create liens on assets, engage in mergers or consolidations and sell or otherwise dispose of ~~the Revolving Credit Facility from $35.0 million to $50.0 million.~~assets. The ~~amount of the $165.0 million Term Loan Facility remains unchanged. The Amendment also amended the~~Amended Credit Agreement also includes reporting, financial and maintenance covenants that require the Company to, ~~extend the maturity date for both the Revolving Credit Facility~~among other things, comply with certain consolidated total net leverage ratios and ~~the Term Loan Facility to August 25, 2022. The unused balance~~consolidated fixed charge coverage ratios.

Table of ~~the Revolving Credit Facility as of September 30, 2017 was $40.0 million.~~

~~The Company paid approximately $0.5 million in fees related to the Amendment.~~

Contents

Note ~~7 ̶~~ 9—Commitments and contingencies

~~Operating leases~~

Legal contingencies

The Company ~~leases office, retail and warehouse space in New York, New Jersey, California and China~~is from third parties under non-cancelable operating leases that provide for minimum base rental payments (excluding taxes and other charges). The leases expire between 2018 and 2027. Total rent expense was $1.3 million and $3.8 million for the three and nine months ended September 30, 2017, respectively, and $1.0 million and $2.9 million for the three and nine months ended September 30, 2016, respectively.

~~Future minimum lease payments under the operating leases are as follows (in thousands):~~

Remainder of 2017

$
1,264

2018

5,108

2019

4,976

2020

4,483

2021

3,582

Thereafter

11,485

Total

$
30,898

~~Legal contingencies~~

~~From~~ time to time ~~the Company may become~~subject to, and is currently involved in legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not currently a party to any matters that management expects will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

Note ~~8 ̶ Stock-based compensation~~

~~Early exercise of stock options~~

~~Stock options granted pursuant to the~~10—Income taxes

The Company’s ~~2014 Equity Incentive Plan permit certain management-level option holders~~quarterly tax provision is based upon an estimated annual effective tax rate as adjusted for any discrete items. The Company’s provision for income taxes were $3.5 million and directors to elect to exercise unvested options prior to vesting (“early exercise”). In the event of termination of the option holder’s employment or directorship, all unvested shares issued upon the early exercise, so long as they remain unvested, are subject to

~~repurchase by the Company at the lower of the original exercise price or the fair market value of a share of common stock on the date of termination.~~

~~Consistent with authoritative guidance, early exercises are not considered substantive exercises for accounting purposes. Cash received~~$4.3 million for the exercise of unvested options is recorded as a liability, which is released to additional paid-in capital at each reporting date as the shares vest. A total of 1,522,826 shares subject to early exercised options vested during the ninethree months ended ~~September 30, 2017~~December 31, 2023 and ~~the associated deposit liability of $4.1~~December 31, 2022, respectively, and $16.7 million ~~was reclassified to additional paid-in capital. As of September 30, 2017, no early exercised options remain unvested.~~

~~Stock options~~

~~Service-based vesting options~~

~~The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition~~and $10.5 million for the nine months ended ~~September 30, 2017:~~

Options
outstanding

Weighted-average exercise price

Weighted-average remaining
contractual life
(in years)

Aggregate intrinsic
values
(in thousands)

Balance as of December 31, 2016

3,168,967

$
8.55

Granted

205,300

26.53

Exercised

(379,214
)

1.94

Forfeited

(141,331
)

17.58

Balance as of September 30, 2017

2,853,722

$
10.28

8.13

$
35,748

Exercisable, September 30, 2017

1,098,328

$
4.67

6.94

$
19,637

~~The aggregate intrinsic value is calculated as the difference between the exercise price~~December 31, 2023 and December 31, 2022, respectively, with an effective tax rate of ~~the underlying awards~~11.6% and ~~the fair market value of a share of common stock of $22.55 on September 30, 2017.~~

~~Stock-based compensation cost related to service-based vesting options was $0.7 million and $1.8 million in~~18.3% for the three months ended December 31, 2023 and December 31, 2022, respectively, and an effective tax rate of 12.8% and 18.9% for the nine months ended ~~September 30, 2017, respectively,~~December 31, 2023 and ~~$2.6~~December 31, 2022, respectively. The effective tax rate differs from the U.S. statutory tax rate primarily due to discrete tax benefit related to stock-based compensation.

Note 11—Stock-based compensation

Stock based compensation expense is recognized on a straight-line basis over the requisite service period. Total stock-based compensation is shown in the table below (in thousands):


	Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022
Service-based vesting options	$	41	$	89	$	128	$	266
Restricted stock and RSUs	11,001		7,168		29,331		21,567
Total stock compensation expense	$	11,042	$	7,257	$	29,459	$	21,833

As of December 31, 2023, there was $0.1 million and ~~$3.7~~$88.3 million ~~in the three and nine months ended September 30, 2016, respectively. As~~ of ~~September 30, 2017, there was $8.3 million in~~total unrecognized stock-based compensation cost related to unvested service-based stock options ~~which~~and shares subject to RSAs and RSUs, respectively. The unrecognized stock-based compensation is expected to be recognized over athe remaining weighted-average period of ~~3.2 years.~~

~~All stock-based compensation expense is recorded in selling, general and administrative expenses.~~

~~Performance-based and market-based vesting options~~

~~The following table summarizes the activity~~1.8 years for ~~options that vest based upon the satisfaction of performance or market conditions for the nine months ended September 30, 2017:~~

Options
outstanding

Weighted-average exercise price

Weighted-average remaining
contractual life
(in years)

Aggregate intrinsic
values
(in thousands)

Balance as of December 31, 2016

3,836,107

$
2.46

Granted

463,200

27.02

Exercised

(1,711,381
)

2.71

Forfeited

(43,350
)

27.29

Balance as of September 30, 2017

2,544,576

$
6.33

7.56

$
43,083

~~The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the fair market value of a share of common stock of $22.55 on September 30, 2017.~~

Prior to the initial public offering, the Company granted options that vested based upon the achievement of both a performance and market condition. The performance condition was based on the occurrence of a liquidity event, and was satisfied in connection with the initial public offering in September 2016. The market condition was based upon the achievement of a minimum rate of return from the liquidity event, and was satisfied in March 2017. Accordingly, all such outstanding options vested in March 2017.

In February 2017, the Company granted options that vest based upon the achievement of specified stock prices. The fair values and derived service periods were determined using a Monte Carlo simulation model. If the awards vest prior to the end of the derived service period, the remaining unamortized compensation cost will be recognized in the period of vesting.

Stock-based compensation cost related to performance-based and market-based vesting options was $1.1 million and $2.9 million in the three and nine months ended September 30, 2017, respectively, and $1.5 million in both the three and nine months ended September 30, 2016. As of September 30, 2017, there was $1.8 million in unrecognized stock-based compensation cost related to unvested performance-based and market-basedservice-based stock options ~~which is expected to be recognized over a weighted-average period of 0.6 years.~~

~~Restricted stock~~

~~The following table summarizes the activities~~and 2.0 years for ~~restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) for the nine months ended September 30, 2017:~~

Shares of restricted stock outstanding

Weighted-average grant date fair value

Balance as of December 31, 2016

586,224

$
17.00

Granted

884,081

26.60

Vested

(96,711
)

17.00

Forfeited

(126,523
)

23.27

Balance as of September 30, 2017

1,247,071

$
23.17

~~As of September 30, 2017, there were 302,200 unvested~~ shares subject to RSAs ~~outstanding.~~

and RSUs, respectively.

Note 12—Repurchase of common stock

On May 8, 2019, the Company announced that its board of directors authorized a share repurchase program to acquire up to $25.0 million of the Company’s common stock (the “Share Repurchase Program”). Purchases under the Share Repurchase Program may be made from time to time, in such amounts as management deems appropriate, through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, or by any combination of such methods. The timing and amount of any repurchases pursuant to the Share Repurchase Program will be determined based on market conditions, share price and other factors. The Share Repurchase Program does not have an expiration date, does not require the Company to repurchase any specific number of shares of its common stock, and may be modified, suspended or terminated at any time without notice. There is no guarantee that any additional shares will be purchased under the Share Repurchase Program and such shares are intended to be retired after purchase.

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.

The Company recognized stock-based compensation cost related to RSAs and RSUs of $2.0 million and $5.0 million in the three and nine months ended September 30, 2017, respectively, and $0.1 million in both the three and nine months ended September 30, 2016. As of September 30, 2017, there was $24.9 million in unrecognized stock-based compensation cost related to unvested RSAs and RSUs, which is expected to be recognized over a weighted-average period of 3.2 years.

~~Note 9 ̶ Net income (loss) per share~~

~~The Company computes basic earnings per share using the weighted average number of common~~did not repurchase any shares ~~outstanding. As the Company incurred a net loss attributable to common stockholders~~ during the three and nine months ended ~~September 30, 2016,~~December 31, 2023. A total of $17.1 million remains available for future share repurchases under the Share Repurchase Program as of December 31, 2023.

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Note 13—Net income per share

The Company computes basic ~~and diluted weighted average shares outstanding are~~net income per share using the ~~same in those periods. A portion~~weighted-average number of ~~the net loss attributable to common stockholders in prior periods reflects the accretion of preferred stock to the maximum redemption value. All outstanding~~ shares of ~~convertible preferred stock converted to~~ common stock ~~and~~outstanding. Diluted net income per share amounts are calculated using the ~~accreted value was reclassified into common~~treasury stock ~~and additional paid-in capital in the three months ended September 30, 2016.~~

method for equity-based compensation awards. The following is a reconciliation of the numerator and denominator in the basic and diluted net income ~~(loss)~~ per common share computations (in thousands, except share and per share data):

Three months ended September 30,

Nine months ended September 30,

2017

2016

2017

2016

Numerator:

Net income (loss)

$
5,865

$
(2,377
)

$
11,995

$
(1,288
)
Adjustments to numerator:

Dividend paid to preferred stockholders

-

-

-

(66,531
)
Accretion of convertible preferred stock to maximum
redemption value

-

(371,228
)

-

(436,317
)
Net income (loss) attributable to common stockholders

$
5,865

$
(373,605
)

$
11,995

$
(504,136
)

Denominator:

Weighted average common shares outstanding - basic

45,813,801

5,109,016

45,132,567

2,151,324

Diluted common equivalents from stock options

3,241,620

-

4,064,723

-

Diluted common equivalents from restricted stock units

227,826

-

256,394

-

Diluted common equivalents from restricted stock awards

-

-

8,482

-

Weighted average common shares outstanding - diluted

49,283,247

5,109,016

49,462,166

2,151,324

Net income (loss) per share:

Basic

$
0.13

$
(73.13
)

$
0.27

$
(234.34
)
Diluted

$
0.12

$
(73.13
)

$
0.24

$
(234.34
)

Anti-dilutive securities excluded from diluted EPS:

Stock options

601,749

7,083,483

503,516

7,083,483

Restricted stock units

444,274

596,217

13,688

596,217

Restricted stock awards

302,200

-

-

-

Total

1,348,223

7,679,700

517,204

7,679,700


	Three months ended December 31,				Nine months ended December 31,
	2023		2022		2023		2022
Numerator:




Net income	$	26,888	$	19,105	$	113,136	$	45,284

Denominator:
Weighted-average common shares outstanding – basic	55,140,887		52,707,406		54,503,518		52,239,761
Dilutive common equivalent shares from equity awards	2,889,228		3,132,731		3,046,576		2,666,304
Weighted-average common shares outstanding – diluted	58,030,115		55,840,137		57,550,094		54,906,065

Net income per share:
Basic	$	0.49	$	0.36	$	2.08	$	0.87
Diluted	$	0.46	$	0.34	$	1.97	$	0.82





Weighted-average anti-dilutive shares from outstanding equity awards excluded from diluted earnings per share	31,021		9,215		58,792		257,292

Note ~~10–Income taxes~~

~~We estimate our annual effective income tax rate~~14—Leases

The Company leases warehouses, distribution centers, office space and equipment. The majority of the Company's leases include one or more options to renew, with renewal terms that can extend the lease term for up to five years. The exercise of lease renewal options is at the ~~end of each quarterly period. This estimate takes into account~~Company's sole discretion and such renewal options are included in the ~~mix of expected income~~lease term if they are reasonably certain to be exercised. Certain leases also include options to purchase the leased asset. The Company's lease agreements do not contain any material residual value guarantees or ~~loss before income taxes by tax jurisdiction and enacted changes in tax laws. Our quarterly tax provision and quarterly estimate~~material restrictive covenants. Most of the ~~annual effective income tax~~Company's equipment leases are finance leases of assets used to operate its distribution center in Ontario, California.

Significant judgment is required to determine whether commercial contracts contain a lease for purposes of ASC 842. The Company uses its incremental borrowing rate to determine the present value of lease payments.

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Supplemental balance sheet information related to leases as of December 31, 2023, March 31, 2023 and December 31, 2022 is ~~subject to significant volatility due to several factors, including having to forecast income or loss before income taxes by jurisdiction prior to the completion~~as follows (in thousands):


	Classification	December 31, 2023		March 31, 2023		December 31, 2022
Assets
Operating lease assets	Other assets	$	27,224	$	14,071	$	15,120
Finance lease assets (a)	Other assets	—		245		350
Total leased assets		$	27,224	$	14,316	$	15,470
Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	7,010	$	4,510	$	4,528
Finance	Current portion of long-term debt and finance lease obligations	144		575		690
Noncurrent
Operating	Long-term operating lease obligations	21,720		11,201		12,329
Finance	Long-term debt and finance lease obligations	—		58		142
Total lease liabilities		$	28,874	$	16,344	$	17,689

_____________________

(a) Finance leases are recorded net of ~~the full year, changes in non-deductible expenses or discrete items,~~accumulated amortization of $1.5 million, $3.4 million and $3.3 million as ~~well as the actual amount~~ of ~~income or loss before income taxes.~~ December 31, 2023, March 31, 2023 and December 31, 2022, respectively.

For ~~example, the impact of discrete items on our effective tax rate is greater when income or loss before income taxes is lower.~~

~~The effective tax rate for~~ the three and nine months ended ~~September 30, 2017, was 17.7%~~December 31, 2023 and ~~(20.3%), respectively, compared~~December 31, 2022, the components of operating and finance lease costs were as follows (in thousands):


		Three months ended December 31,				Nine months ended December 31,
	Classification	2023		2022		2023		2022
Operating lease cost	Selling, general and administrative (“SG&A”) expenses	$	2,203	$	1,149	$	4,905	$	3,458


Finance lease cost
Amortization of leased assets	SG&A expenses	—		105		210		315
Interest on lease liabilities	Interest expense, net	3		7		10		25
Total lease cost		$	2,206	$	1,261	$	5,125	$	3,798

As of December 31, 2023, the aggregate future minimum lease payments under non-cancellable leases presented in accordance with ASC 842 are as follows (in thousands):


	Operating leases		Finance leases		Total
Remainder of fiscal 2024	$	1,985	$	87	$	2,072
2025	8,434		58		8,492
2026	8,424		—		8,424
2027	5,060		—		5,060
2028	1,921		—		1,921
Thereafter	6,994		—		6,994
Total lease payments	32,818		145		32,963
Less: Interest	4,088		1		4,089
Present value of lease liabilities	$	28,730	$	144	$	28,874

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For leases commencing prior to ~~30.7%~~January 1, 2019, minimum lease payments exclude payments to landlords for real estate taxes and ~~(5.0%) for~~common area maintenance. These payments can be either fixed or variable, depending on the ~~three~~lease.

As of December 31, 2023 and ~~nine months ended September 30, 2016, respectively. The change in~~December 31, 2022, the ~~Company's effective tax~~weighted-average remaining lease term (in years) and discount rate ~~for the three months ended September 30, 2017 compared to the same period in 2016 was primarily due to the impact of discrete items, such~~were as stock option exercises, which generated a tax benefit of $0.5 million, and changes in uncertain tax positions, which generated a tax benefit of $0.5 million. The change in the Company's effective tax ratefollows:


	December 31, 2023		December 31, 2022
Weighted-average remaining lease term
Operating leases	4.8 years		4.7 years
Finance leases	0.4 years		1.1 years
Weighted-average discount rate
Operating leases	4.9	%	2.6	%
Finance leases	1.6	%	2.8	%

Operating cash outflows from operating leases for the nine months ended ~~September 30, 2017 compared to the same period in 2016 was primarily due to the impact of discrete items, such as stock option exercises, which generated a tax benefit of $4.9 million.~~

~~Note 11 ̶ Related party transactions~~

~~On October 11, 2016, the Company entered into a sublease agreement with Fit for Life, LLC pursuant to which the Company subleased certain office~~December 31, 2023 and showroom space in New York, New York. Joseph A. Shamah, a former member of the Company’s Board of Directors and a director and stockholder of J.A. Cosmetics Corp., the holder of approximately 10.0% of the Company’s outstanding common stock, is the Chief Executive Officer of Fit for Life, LLC. The annual base rent for the sublease is approximately $0.3 million per year and the sublease has a term of 39 months. The Company recognized $0.1December 31, 2022 were $3.2 million and ~~$0.2~~$3.6 million, ~~in sublease income from Fit for Life, LLC during the three and nine months ended September 30, 2017, respectively, and the estimated future sublease income as of September 30, 2017 is $0.7 million.~~

respectively.

~~Note 12~~—~~Subsequent events~~

The Company entered into a new e.l.f. store lease agreement with a minimum future lease commitment amount of $1.4 million. This lease also provides for the payment of contingent rent based on a percentage of sales.

Table of Contents

Item 2. Management’s ~~discussion~~discussion and analysis of financial condition and results of ~~operations~~

operations.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read together with the MD&A presented in the Annual Report on Form 10-K for the year ended ~~December~~March 31, ~~2016~~2023 (the “Annual Report”) and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q ~~(the~~(this “Quarterly Report”), which include additional information about our accounting policies, practices and the transactions underlying our financial results.

~~Cautionary note regarding forward-looking statements~~

~~This discussion~~

Overview and ~~analysis contain “forward-looking statements” within~~Business Trends

e.l.f. Beauty, Inc., a Delaware corporation (“e.l.f. Beauty” and together with its subsidiaries, the ~~meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”~~“Company,” or “we”), is a multi-brand beauty company that offers inclusive, accessible, clean, vegan and ~~Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that reflect our current views with respect to, among other things, our operations~~cruelty-free cosmetics and financial performance, and relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins profitability, capital expenditures, liquidity and capital resources and other financial and operating information. The words "may," "could," "should," "estimate," "project," "forecast," "intend," "expect," "anticipate," "believe," "target," "plan" and similar expressions are intended to identify forward-looking statements.skincare products. Our actual results and the timing of selected events may differ materially from those discussed in these forward-looking statements. You should carefully read the “Risk factors” section of this Quarterly Report to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

~~Overview~~

~~We are one of the fastest growing, most innovative cosmetics companies in the United States. Driven by our~~ mission is to make ~~luxurious~~the best of beauty accessible for all, we have challenged the traditional belief that quality cosmetics are only available at high prices in select channels. e.l.f. offers high-quality, prestige-inspired beauty products for eyes, lipsto every eye, lip, face and face at extraordinary value. Our price points encourage trial and experimentation, while our commitment to quality and a differentiated consumer engagement model engender loyalty among a passionate and vocal group of consumers.

skin concern.

We believe our ~~success is rooted in our innovation process and~~ ability to ~~build direct consumer relationships. Born as an e-commerce company over a decade ago, we have created a modern consumer engagement~~deliver cruelty-free, clean, vegan and ~~responsive innovation model that keeps our~~premium-quality products ~~on-trend and our consumers engaged as brand ambassadors. Our consumers provide~~at accessible prices with broad appeal differentiates us with real-time feedback through reviews and social media, which enables us to refine and augment our product assortment in response to their needs. We are able to launch high-quality products quickly by leveraging our fast-cycle product development and asset-light supply chain. Our products are first launched on elfcosmetics.com, and distribution is generally only broadened to our retail customers after we receive strong consumer validation online.

We sell our products in national and international retailers (with international primarily serviced by distributors) and direct-to-consumer channels, which include e-commerce and e.l.f. stores. We currently sell our products in retail stores in the ~~United States across mass, drug store, food and specialty retail channels.~~beauty industry. We believe the combination of our ~~affordable price points and on-trend, innovative product assortment encourages trial, offers a strong~~ value proposition, innovation engine, ability to attract and ~~appeals~~engage consumers, and our world-class team’s ability to ~~a broad base~~execute with speed has positioned us well to navigate the competitive beauty market.

Our family of ~~consumers. By combining our~~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 ~~with consumer engagement~~that have enabled us to expand distribution both domestically and internationally.

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. 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 5, “Acquisition,” in our ~~e.l.f. stores and through e-commerce, we are a true multi-channel brand.~~

unaudited condensed consolidated financial statements for further details.

Seasonality

Our results of operations are subject to seasonal fluctuations, with net sales in the third and fourth fiscal quarters typically being higher than in the first and second fiscal quarters. 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 ~~adverse events that occur during~~customer shelf reset activities, respectively. Lower inventory builds from our retailers in preparation for the ~~third~~holiday season or ~~fourth fiscal quarter~~shifts in customer shelf reset activity could have a disproportionate effect on our results of operations for the entire fiscal year. ~~As a result of~~To support anticipated higher sales during the third and fourth fiscal quarters, ~~our~~we make investments in working capital ~~needs are generally greater during the second and third fiscal quarters of the fiscal year.~~to ensure inventory levels can support demand. Fluctuations throughout the year ~~may~~are also be driven by the timing of product restocking or rearrangement by our major retail customers as well as expansion into new retail customers. Because a limited number of our retail customers account for a large percentage of our net sales, a change in the order pattern of one or more of our large retail customers could cause a significant fluctuation of our quarterly results or ~~reduce~~impact our liquidity.

Table o f Contents

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:


	Three months ended September 30,						Nine months ended September 30,							Three months ended December 31,		Nine months ended December 31,
(in thousands)	2017			2016			2017			2016			(in thousands)	2023	2022		2023	2022
Net sales	$	71,865		$	56,312		$	188,295		$	153,132
Cost of sales		28,952			23,834			71,264			66,217
Gross profit		42,913			32,478			117,031			86,915
Selling, general and administrative expenses		33,133			31,002			98,843			78,807

Operating income
Operating income
Operating income		9,780			1,476			18,188			8,108
Other income (expense), net		(379	)		288			(1,422	)		2,253
Impairment of equity investment
Interest expense, net		(2,262	)		(5,192	)		(6,805	)		(11,588	)
Income (loss) before provision for income taxes		7,139			(3,428	)		9,961			(1,227	)
Income tax benefit (provision)		(1,274	)		1,051			2,034			(61	)
Net income (loss)	$	5,865		$	(2,377	)	$	11,995		$	(1,288	)
Loss on extinguishment of debt
Income before provision for income taxes
Income tax provision
Net income


	Three months ended September 30,						Nine months ended September 30,							Three months ended December 31,					Nine months ended December 31,
(percentage of net sales)	2017			2016			2017			2016			(percentage of net sales)	2023			2022				2023			2022
Net sales		100	%		100	%		100	%		100	%	Net sales	100	%		100	%			100	%		100	%
Cost of sales		40	%		42	%		38	%		43	%	Cost of sales	29	%		33	%			29	%		33	%
Gross margin		60	%		58	%		62	%		57	%	Gross margin	71	%		67	%			71	%		67	%
Selling, general and administrative expenses		46	%		55	%		52	%		51	%	Selling, general and administrative expenses	59	%		51	%			52	%		51	%

Operating income
Operating income
Operating income		14	%		3	%		10	%		5	%	12	%		16	%			19	%		15	%
Other income (expense), net		(1	%)		1	%		(1	%)		1	%	Other income (expense), net	1	%		—	%			—	%		(1)	%
Impairment of equity investment													Impairment of equity investment	—	%		—	%			—	%		—	%
Interest expense, net		(3	%)		(9	%)		(4	%)		(8	%)	Interest expense, net	(1)	%		—	%			—	%		—	%
Income (loss) before provision for income taxes		10	%		(6	%)		5	%		(1	%)
Income tax benefit (provision)		(2	%)		2	%		1	%		(0	%)
Net income (loss)		8	%		(4	%)		6	%		(1	%)

Income before provision for income taxes
Income before provision for income taxes
Income before provision for income taxes														11	%		16	%			18	%		14	%
Income tax provision													Income tax provision	(1)	%		(3)	%			(2)	%		(3)	%
Net income													Net income	10	%		13	%			16	%		12	%

Comparison of the three months ended ~~September 30, 2017~~December 31, 2023 to the three months ended ~~September 30, 2016~~

December 31, 2022

Net sales

Net sales increased ~~$15.6~~$124.4 million, or ~~28%~~85%, to ~~$71.9~~$270.9 million for the three months ended ~~September 30, 2017,~~December 31, 2023, from ~~$56.3~~$146.5 million for the three months ended ~~September 30, 2016.~~December 31, 2022. The increase was ~~primarily~~ driven by ~~growth~~strength across both our retailer and e-commerce channels. Net sales increased $86.8 million, or 67%, in ~~leading national retailers due~~our retailer channels and $37.6 million, or 216%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $81.9 million of the increase in net sales and a higher average item price within retailer and e-commerce orders drove the remaining $42.5 million increase in net sales as compared to ~~increases in shelf space and productivity and~~ the ~~continued expansion of our direct channels.~~

three months ended December 31, 2022.

Gross profit

Gross profit increased ~~$10.4~~$93.2 million, or ~~32%~~94%, to ~~$42.9~~$192.0 million for the three months ended ~~September 30, 2017,~~December 31, 2023, compared to ~~$32.5~~$98.7 million for the three months ended ~~September 30, 2016. Increased~~December 31, 2022. Higher unit volume ~~accounted for $9.0~~drove $55.2 million of the increase in gross profit, with the remaining ~~$1.4~~increase of $38.0 million ~~attributable~~driven by higher average item price and mix. Gross margin increased to 71% from 67% when compared to the three months ended December 31, 2022. The increase in gross margin ~~accretive innovation, coupled with improvements in customer terms, freight costs and~~rate was primarily driven by favorable foreign exchange ~~rate movements. Gross margin expanded to 60% from 58%~~impacts, improved transportation costs, cost savings and mix in the three months ended September 30, 2017, primarily as a result of margin accretive innovation, coupled with improvements in customer terms, freight costs and foreign exchange rate movements, partially offset by customer mix.

December 31, 2023.

Table o f Contents

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were ~~$33.1~~$160.1 million for the three months ended ~~September 30, 2017,~~December 31, 2023, an increase of ~~$2.1~~$84.7 million, or 7%112%, from ~~$31.0~~$75.4 million for the three months ended ~~September 30, 2016.~~December 31, 2022. SG&A expenses as a percentage of net sales ~~decreased~~increased to ~~46% in~~59% for the three months ended ~~September 30, 2017~~December 31, 2023 from ~~55% in~~51% for the three months ended ~~September 30, 2016.~~December 31, 2022. The ~~decrease~~$84.7 million increase was primarily ~~a result of lower expenses~~ related to ~~warehousing~~an increase in marketing and ~~distribution~~digital spend of $44.0 million, increased compensation and benefits of $10.5 million, increased operations costs ~~prior year~~of $8.8 million, increased retail fixturing and visual merchandising costs ~~related to the move~~ of ~~our warehouse~~$7.4 million, increased depreciation and distribution facility from New Jersey to California in 2016 that were not repeated in the current year, as well as lower stock-based compensation expenses. These lower expenses were partially offset by higher investments in salesamortization of $5.9 million and ~~marketing to support brand awareness, expenses related to the operations~~increased professional fees of ~~additional e.l.f. stores and higher information technology costs to support infrastructure improvements and business capabilities.~~

$2.3 million.

Other income, ~~(expense),~~ net

Other income, ~~(expense) changed $0.7 million to expense of $0.4~~net totaled $2.6 million for the three months ended ~~September 30, 2017 from income of $0.3~~December 31, 2023, as compared to $0.7 million for the three months ended ~~September 30, 2016. This change was~~December 31, 2022. The year-over-year variance is primarily ~~related~~due to ~~the movement~~an increase in unrealized gain in the ~~Chinese renminbi (“RMB”) and the impact of legacy exchange~~quarter attributable to favorable foreign currency rate ~~forward contracts in the comparable 2016 period.~~

fluctuation.

Interest expense, net

Interest expense, ~~decreased $2.9 million, or 56%, to $2.3~~net was $4.0 million for the three months ended ~~September 30, 2017,~~December 31, 2023, as compared to ~~$5.2~~$0.5 million for the three months ended ~~September 30, 2016. This decrease~~December 31, 2022. The change compared to last year was primarily due to additional borrowings for the ~~paydown of a portion of our debt with proceeds from our initial public offering in September 2016,~~three months ended December 31, 2023 as well as ~~the refinancing of~~higher interest costs. See Note 8, “Debt,” in our ~~Credit Agreement (as defined below under the heading “Description of indebtedness”) in December 2016, and subsequent amendment in August 2017, resulting in lower interest rates.~~

unaudited condensed consolidated financial statements for further details on our debt.

Income ~~taxes~~

tax provision

The provision for income taxes ~~increased from a benefit of $1.1~~was $3.5 million, or an effective ~~tax~~ rate of ~~30.7%~~11.6%, for the three months ended ~~September 30, 2016~~December 31, 2023, as compared to ~~an expense~~a provision of ~~$1.3~~$4.3 million, or an effective ~~tax~~ rate of ~~17.7%~~18.3%, for the three months ended ~~September 30, 2017.~~December 31, 2022. The change in the provision for income ~~tax expense or benefit~~taxes was primarily driven by ~~a $10.6 million~~an increase in ~~pretax net income from a loss~~discrete tax benefits of ~~$3.4~~$3.7 million, to income of $7.2 million, offset by a change in discrete items impacting tax expense from an expense of $0.4 million to a benefit of $1.5 million. In the three months ended September 30, 2017, these discrete items primarily related to ~~a tax benefit generated~~stock-based compensation, partially offset by ~~stock option exercises~~an increase in income before taxes of ~~$0.5 million and a change in uncertain tax positions that resulted in a tax benefit~~$7.0 million.

Comparison of ~~$0.5 million.~~

~~Comparison of~~the nine months ended ~~September 30, 2017~~December 31, 2023 to the nine months ended ~~September 30, 2016~~

December 31, 2022

Net sales

Net sales increased ~~$35.2~~$311.3 million, or ~~23%~~80%, to ~~$188.3~~$702.8 million for the nine months ended ~~September 30, 2017, from $153.1~~December 31, 2023, compared to $391.5 million for the nine months ended ~~September 30, 2016.~~December 31, 2022. The increase was driven primarily ~~driven~~ by ~~growth~~strength in ~~leading national retailers due~~both our retailer and e-commerce channels. Net sales increased $249.2 million, or 72%, in our retailer channels and $62.1 million, or 142%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $220.2 million of the increase in net sales and a higher average item price within retailer and e-commerce orders drove the remaining $91.1 million increase in net sales as compared to ~~increases in shelf space and productivity, distribution in new accounts, and~~ the ~~continued expansion of our direct channels.~~

nine months ended December 31, 2022.

Gross profit

Gross profit increased ~~$30.1~~$235.6 million, or ~~35%~~90%, to ~~$117.0~~$496.9 million for the nine months ended ~~September 30, 2017,~~December 31, 2023, compared to ~~$86.9~~$261.3 million for the nine months ended ~~September 30, 2016. Increased~~December 31, 2022. Higher unit volume ~~accounted for $20.0~~drove $147.0 million of the increase in gross profit, with the remaining ~~$10.1~~increase of $88.6 million ~~attributable to margin accretive innovation, coupled with improvements in customer terms, freight costs~~driven by higher average item price and ~~foreign exchange rate movements.~~mix. Gross margin ~~expanded~~increased to ~~62%~~71% from ~~57%~~67% when compared to the nine months ended December 31, 2022. The increase in gross margin rate in the nine months ended ~~2017,~~December 31, 2023 was primarily ~~as a result of margin accretive innovation, coupled with improvements in customer terms, freight~~driven by favorable foreign exchange impacts, cost savings and mix, improved transportation costs, and ~~foreign exchange rate movements,~~lower inventory adjustments, partially offset by ~~customer mix.~~

costs associated with retailer activity and space expansion.

Selling, general and administrative expenses

SG&A expenses were ~~$98.8~~$364.2 million for the nine months ended ~~September 30, 2017,~~December 31, 2023, an increase of ~~$20.0~~$163.1 million, or ~~25%~~81%, from ~~$78.8~~$201.2 million for the nine months ended ~~September 30, 2016.~~December 31, 2022. SG&A expenses as a percentage of net sales increased to 52% infor the nine months ended ~~September 30, 2017~~December 31, 2023 from 51% infor the nine months ended ~~September 30, 2016.~~December 31, 2022. The $163.1 million increase was primarily ~~a result of higher investments in sales and marketing to support brand awareness, increases in personnel and stock-based compensation expenses, expenses~~ related to ~~the~~an increase in marketing and digital spend of $84.6 million, increased compensation and benefits of $22.3 million, increased operations costs of ~~additional e.l.f. stores~~$17.6 million, increased retail fixturing and ~~higher information technology~~visual merchandising costs ~~to support infrastructure improvements~~of $13.5 million, increased depreciation and ~~business capabilities. These were partially offset by costs related to the move~~amortization of ~~our warehouse~~$7.0 million and ~~distribution facility from New Jersey to California in 2016 that were not repeated in the current year.~~

increased professional fees of $6.9 million.

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Other income (expense), net

Other income, ~~(expense) changed $3.7 million to expense of $1.4~~net totaled $1.9 million for the nine months ended ~~September 30, 2017 from income~~December 31, 2023, as compared to other expense, net of ~~$2.3~~$2.2 million for the nine months ended ~~September 30, 2016. This change was~~December 31, 2022. The year-over-year variance is primarily ~~related~~due to ~~the movement~~an increase in unrealized gain in the ~~RMB and the impact~~period attributable to favorable foreign currency rate fluctuation.

Impairment of ~~legacy exchange rate forward contracts in the comparable 2016 period.~~

~~Interest expense, net~~

~~Interest expense decreased $4.8 million, or 41%, to $6.8~~equity investment

Impairment of equity investment was $1.7 million for the nine months ended ~~September 30, 2017, compared to $11.6~~December 31, 2023. See Note 4, “Investment in equity securities,” in our unaudited condensed consolidated financial statements for further details.

Interest expense, net

Interest expense, net was $3.0 million for the nine months ended ~~September 30, 2016. This decrease~~December 31, 2023, as compared to $1.9 million for the nine months ended December 31, 2022. The year-over-year variance was primarily due to additional borrowings for the ~~paydown of a portion of our debt with proceeds from our initial public offering in September 2016,~~three months ended December 31, 2023 as well as ~~the refinancing of~~higher interest costs, partially offset by increased interest earned on our ~~Credit Agreement~~cash balances. See Note 8, “Debt,” in ~~December 2016, and subsequent amendment in August 2017, resulting in lower interest rates.~~

our unaudited condensed consolidated financial statements for further details on our debt.

Income ~~taxes~~

tax provision

The provision for income taxes ~~decreased from $0.1~~was $16.7 million, or an effective ~~tax~~ rate of ~~(5.0%)~~12.8%, for the nine months ended ~~September 30, 2016~~December 31, 2023, as compared to a ~~benefit~~provision of ~~$2.0~~$10.5 million, or an effective ~~tax~~ rate of ~~(20.3%)~~18.9%, for the nine months ended ~~September 30, 2017.~~December 31, 2022. The change in the provision for income taxes was primarily driven by an ~~$11.2 million~~ increase in ~~pretax net~~ income ~~from a loss~~before taxes of ~~$1.2~~$74.0 million, ~~to net income of $10.0 million,~~partially offset by ~~a decrease~~an increase in discrete ~~items impacting~~ tax ~~expense from an expense~~benefits of ~~$0.6~~$16.9 million, ~~to a benefit of $6.0 million. In the nine months ended September 30, 2017, these discrete items~~ primarily related to ~~a tax benefit generated by stock option exercises of $4.9 million.~~

stock-based compensation.

Financial condition, liquidity and capital resources

Overview

As of ~~September 30, 2017,~~December 31, 2023, we ~~held $5.7~~had $72.7 million of cash and cash ~~equivalents.~~equivalents and $2.3 million of restricted cash. In addition, as of ~~September 30, 2017,~~December 31, 2023, we had borrowing capacity of ~~$40.0~~$10.5 million under our Amended Revolving Credit ~~Facility (as defined below under the heading “Description of indebtedness”).~~

Facility.

Our primary cash needs are for working capital, ~~expenditures, customer~~ fixturing, ~~programs~~retail product displays and ~~working capital. Capital expenditures~~digital investments. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, ~~expansion into new national retailer doors~~digital capabilities and expansion ~~of our e.l.f.~~within or to additional retailer store ~~base.~~ locations.

We expect to fund ongoing ~~capital expenditures~~cash needs from existing cash ~~on hand,~~and cash equivalents, cash generated from operations and, if necessary, draws on our Amended Revolving Credit Facility.

Our primary working capital requirements are for product and product-related costs, ~~payroll, rent,~~compensation and benefits, distribution costs, ~~and~~ advertising and marketing. Fluctuations in working capital are primarily driven by the timing of when a retailer rearranges or restocks its products, expansion of space within our existing retailer base ~~expansion into~~or to new ~~retail stores~~retailers and the general seasonality of our business. As of ~~September 30, 2017,~~December 31, 2023, we had working capital, excluding cash and cash equivalents and restricted cash, of ~~$55.4~~$77.0 million, compared to ~~$29.3~~$74.6 million as of March 31, 2023. Working capital, excluding cash and cash equivalents, restricted cash and debt, was $177.4 million and $80.1 million as of December 31, ~~2016, primarily driven by the impact of deliberate increases in the inventory position of our top items. Working capital, excluding cash~~2023 and ~~debt, was $73.6 million and $38.0 million as of September 30, 2017 and December~~March 31, ~~2016,~~2023, respectively.

We believe that our operating cash flow, existing cash ~~on hand~~and cash equivalents and available financing under ~~our~~the Amended Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next 12twelve months. The unused balance of the Amended Revolving Credit Facility as of December 31, 2023 was $10.5 million. If necessary, we can borrow funds under our Amended Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources

of funds; however, such financing may not be available on favorable terms, or at all. 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 ~~this Quarterly Report under the heading~~Part II, Item 1A “Risk ~~Factors.~~factors.” 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 be based on our ability to provide innovative products to our customers, ~~and consumers and~~ manage production and our supply chain.

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Cash flows


	Nine months ended September 30,							Nine months ended December 31,
(in thousands)	2017			2016			(in thousands)	2023	2022
Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	$	(6,167	)	$	2,549
Investing activities		(7,246	)		(5,469	)
Financing activities		3,795			10,000
Net increase (decrease) in cash:	$	(9,618	)	$	7,080

Cash provided by ~~(used in)~~ operating activities

For the nine months ended ~~September 30, 2017,~~December 31, 2023, net cash ~~used in~~provided by operating activities was ~~$6.2~~$34.1 million. This included net income ~~before deducting~~as adjusted for depreciation, amortization and other non-cash items of ~~$33.4~~$167.2 million, and payment of acquisition-related seller expenses of $10.5 million in connection with the Acquisition, partially offset by ~~unfavorable increases~~an increase in ~~net working capital~~operating assets and liabilities as shown on the statement of ~~$39.6 million during this period.~~cash flows of $122.5 million. The ~~increases~~increase in ~~net working capital were largely~~operating assets and liabilities was primarily driven by a ~~$34.1~~$106.9 million increase in inventory. The increase was reflective of building inventory to support net sales growth, as well as $8.7 million related to Naturium inventory, and $27.7 million related to a change in certain vendor arrangements where we now take ownership of inventory at shipment from China versus when it enters our U.S. distribution center. Additional changes to assets and liabilities include a $50.7 million increase in prepaid expense and other assets, a $45.9 million increase in accounts receivable and a $3.8 million decrease related to other liabilities, partially offset by an $84.7 million increase in accounts payable and accrued expenses primarily due to payments for inventory ordered at the end of fiscal year 2016, and a $13.0 million increase in prepaid expenses and other assets primarily due to non-capital fixturing programs implemented during the quarter ended September 30, 2017. These uses of cash for working capital were partially offset by a $7.8 million decrease in accounts receivable and inventory.

expenses.

For the nine months ended ~~September 30, 2016,~~December 31, 2022, net cash provided by operating activities was ~~$2.5~~$69.0 million. This included net income ~~before deducting~~as adjusted for depreciation, amortization and other non-cash items of ~~$7.8~~$82.2 million ~~offset by increases~~and an increase in ~~net working capital~~operating assets and liabilities as shown on the statement of ~~$5.2 million during this period.~~cash flows of $13.2 million. The ~~increases~~increase in ~~net working capital were largely~~operating assets and liabilities was primarily driven by a ~~$23.6~~$15.2 million increase of prepaid expense and other assets, a $20.6 million increase in accounts receivable and a $3.3 million decrease related to other liabilities. This was partially offset by a $22.6 million increase in accounts payable and accrued expenses ~~due primarily to our growth~~ and ~~continued focus on working capital optimization, offset by an $11.5~~a $3.2 million ~~increase~~decrease in ~~accounts receivable driven both by growth~~inventory.

Cash used in ~~revenue and timing of billings, a seasonally-driven $9.9 million increase in inventory and an $8.3 million increase in prepaid and other current assets related to estimated income tax payments.~~

~~Cash provided by (used in)~~ investing activities

For the nine months ended ~~September 30, 2017,~~December 31, 2023, net cash used in investing activities was ~~$7.2~~$281.0 million. This includes $275.0 million ~~compared~~paid for the Acquisition, and capital expenditures related to ~~$5.5 million for~~fixturing, equipment and software of $6.0 million.

For the nine months ended ~~September 30, 2016. The increase~~December 31, 2022, net cash used in investing activities was ~~driven primarily by an investment in a social media analytics company in the second quarter~~$1.6 million consisting of ~~2017, partially offset by lower purchases of property~~capital expenditures related to fixturing, equipment and ~~equipment.~~

software.

Cash provided by (used in) financing activities

For the nine months ended ~~September 30, 2017,~~December 31, 2023, net cash provided by financing activities was ~~$3.8~~$201.1 million and was primarily driven ~~primarily~~ by proceeds from the ~~net drawdown~~Amended Term Loan Facility of ~~$9.5~~$115.0 million ~~from our~~and Revolving Credit Facility of $89.5 million and cash received from the exercise of stock options of $2.9 million. This was partially offset by ~~$6.2 million in mandatory principal payments under our~~repayment on the Amended Term Loan Facility ~~(as defined below under~~of $5.2 million and payment of debt issuance costs of $0.7 million associated with the ~~heading “Description of indebtedness”).~~

Second Amendment.

For the nine months ended ~~September 30, 2016,~~December 31, 2022, net cash ~~provided by~~used in financing activities was ~~$10.0~~$23.7 million and was primarily driven ~~primarily~~ by ~~net proceeds of $62.3 million from~~repayment on the ~~issuance of additional debt under our~~Amended Term Loan Facility ~~and $64.0~~of $28.8 million, ~~of proceeds from our initial public offering,~~ partially offset by cash received from the exercise of stock options of $5.7 million.

Description of indebtedness

Amended Credit Agreement

On April 30, 2021, we entered into the Amended Credit Agreement and refinanced all loans under the prior credit agreement. The Amended Credit Agreement has a ~~$68.0 million dividend paid to stockholders, $7.7 million~~five year term and consists of ~~net~~the Amended Revolving Credit Facility ~~repayments~~ and the ~~$42.4 million repayment of our second lien credit facility.~~

~~Description of indebtedness~~

On December 23, 2016, we entered into a new five-year, $200.0 million Senior Secured Credit Agreement (the “Credit Agreement”) with a syndicate consisting of several large financial institutions. The Credit Agreement was amended on August 25, 2017, increasing

the aggregate commitments to $215.0 million. The Credit Agreement, as amended, consists of a $50.0 million revolving line of credit (the “Revolving Credit Facility”) and a $165.0 million term loan (the “TermAmended Term Loan ~~Facility”).~~

Facility.

All amounts under the Amended Revolving Credit Facility are available for draw until the maturity date on ~~August 25, 2022.~~April 30, 2026. The Amended Revolving Credit Facility is collateralized by substantially all of our assets and requires payment of ~~a commitment~~an unused fee ranging from ~~0.35%~~0.10% to ~~0.25%~~0.30% (based on our consolidated total net leverage ~~ratio)~~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 also provides for sub-facilities in the form of a ~~$7.0~~$7 million letter of credit and a ~~$5.0~~$5 million

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swing line loan; however, all amounts drawn under the Amended Revolving Credit Facility cannot exceed ~~$50.0~~$100 million. The unused balance of the Amended Revolving Credit Facility as of ~~September 30, 2017~~December 31, 2023 was ~~$40.0~~$10.5 million.

~~The Term Loan Facility maturity date is also August 25, 2022, and is collateralized by substantially all of our assets. Amortization installment payments on~~

Prior to the Term Loan Facility are required to be made in quarterly installments of (i) $2,062,500 for fiscal quarters ending September 30, 2017 through June 30, 2019, (ii) $2,475,000 for fiscal quarters ending September 30, 2019 through June 30, 2020, (iii) $3,093,750 for fiscal quarters ending September 30, 2020 through June 30, 2021 and (iv) $4,125,000 for fiscal quarters ending September 30, 2021 through June 30, 2022. The remaining Term Loan Facility balance is due uponSecond Amendment (as defined below), both the maturity date. The Term Loan Facility can be prepaid at any time without penalty and is subject to mandatory prepayments when there is (i) excess cash flow, which is defined as EBITDA less certain customary deductions, (ii) non-ordinary course asset dispositions that result in net proceeds in excess of $2.5 million during a year, unless reinvested within twelve months, or (iii) issuance of additional debt.

~~Both the~~Amended Revolving Credit Facility and the Amended Term Loan Facility bear interest, at ~~our~~borrowers’ option, at either (i) a rate per annum equal to ~~(i)~~ an adjusted LIBOR rate determined by reference to the cost of funds for ~~U.S.~~the US dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from ~~1.50%~~1.25% to ~~2.75%~~2.125% based on our consolidated total net leverage ratio or (ii) a floating base rate plus an applicable margin ranging from ~~0.50%~~0.25% to ~~1.75%~~1.125% based on our consolidated total net leverage ratio. 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. 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 ~~on both~~as of December 31, 2023 for the Amended Revolving Credit Facility and the Amended Term Loan Facility was approximately 6.7%.

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”). 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 amortizes at 5.00% per annum payable in equal quarterly installments of 1.25% per annum, commencing with the fiscal quarter ending on December 31, 2023. 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 Acquisition and Second Amendment.

The interest rate as of December 31, 2023 for the Incremental Term Loan was approximately ~~4.00% as of September 30, 2017.~~

~~We paid approximately $0.5 million in fees related to the amendment of the Credit Agreement.~~

In connection with the December 2016 refinancing credit agreement, we incurred costs directly related to the Credit Agreement of $2.3 million, consisting primarily of lender fees of $2.1 million and third-party fees of $0.2 million. These fees were allocated between the Revolving Credit Facility and the Term Loan Facility, with the portion attributable to the Term Loan Facility recorded as a reduction of the carrying amount of the debt and the portion attributable to the Revolving Credit Facility recorded as a noncurrent asset.

6.9%.

The Amended Credit Agreement contains a number of covenants that, among other things and subject to certain exceptions, restrict our ability to ~~(subject to certain exceptions)~~ pay dividends and distributions or repurchase our capital stock, incur additional indebtedness, create liens on assets, engage in mergers or consolidations and sell or otherwise dispose of assets. 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. As of ~~September 30, 2017 and~~ December 31, ~~2016,~~2023, we were in compliance with all financial ~~covenants.~~

covenants under the Amended Credit Agreement.

Contractual obligations and commitments

There have been no material changes to our contractual obligations and commitments as included in the Annual Report.

Off-balance sheet arrangements

We are not party to any off-balance sheet arrangements.

Critical accounting policies and estimates

~~Management’s discussion and analysis of financial condition and results of operations~~

The MD&A is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting ~~principles (GAAP).~~principles. The preparation of these unaudited condensed consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results

may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in the Annual Report.

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Recent accounting pronouncements

Recent accounting pronouncements are disclosed in Note 2 to ~~the~~our unaudited condensed consolidated financial statements.

Item 3. Quantitative and qualitative disclosures about market ~~risk~~

risk.

There have been no material changes to our primary risk exposures or management of market risks from those disclosed in the Annual Report.

Item 4. Controls and ~~procedures~~

procedures.

Evaluation of disclosure controls and procedures over financial reporting

~~We have established~~

As of December 31, 2023, our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were effective to ~~ensure~~provide reasonable assurance that the information ~~we are~~ required to ~~disclose~~be disclosed by the Company in the reports that ~~we file~~it files or ~~submit~~submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~the Securities and Exchange Commission’s (the “SEC”)~~SEC rules and forms and that such information is accumulated and communicated to the officers who certify our financial reports and to the members of ~~our~~the Company’s senior management and board of directors as appropriate to allow timely decisions regarding required disclosure.

Based on management’s evaluation as of September 30, 2017, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective at the reasonable assurance level to ensure that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

~~There were~~

We have assessed the impact on changes to our internal controls over financial reporting and concluded that there have been no changes to our internal control over financial reporting that occurred during the ~~three months~~quarter ended ~~September 30, 2017~~December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal ~~controls~~control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal ~~proceedings~~

proceedings.

We are ~~involved~~ from time to time subject to, and are presently involved in, ~~various~~ legal proceedings, claims and litigation arising in the ordinary course of business. ~~Although the outcome of~~We are not currently a party to any ~~pending~~ matters ~~and the amount, if any, of our ultimate liability and any other forms of remedies with respect to these matters, cannot be determined or predicted with certainty, we do not believe~~ that ~~the ultimate outcome of these matters~~management expects will have a material adverse effect on our ~~business,~~consolidated financial position, results of operations or ~~financial condition.~~

cash flows.

Item 1A. Risk ~~factors~~

factors.

Certain risks may have a material and/or adverse effect on our business, financial condition and results of operations. These risks include those described below and may include additional risks and uncertainties not presently known to us or that we currently deem immaterial. These risks should be read in conjunction with the other information in this Quarterly Report, including our unaudited condensed consolidated financial statements and related ~~notes.~~

notes thereto and “Management’s discussion and analysis of financial condition and results of operations” in Part I, Item 2 of this Quarterly Report.

Risk factors related to the beauty industry

The ~~cosmetics~~beauty industry is highly competitive, and if we are unable to compete effectively our results will suffer.

We face vigorous competition from companies throughout the world, including large multinational consumer products companies that have many ~~cosmetics~~beauty brands under ownership and ~~standalone cosmetics~~independent beauty and skincare brands, including those that may target the latest trends or specific distribution channels. Competition in the ~~cosmetics~~beauty industry is based on the introduction of new products, pricing of products, quality of products and packaging, brand awareness, perceived value and quality, innovation, in-store presence and

visibility, promotional activities, advertising, editorials, e-commerce and mobile-commerce initiatives and other activities. We must compete with a high volume of new product introductions and existing products by diverse companies across several different distribution channels.

Many multinational consumer companies have greater financial, technical or marketing resources, longer operating histories, greater brand recognition or larger customer bases than we do and may be able to respond more effectively to changing business and economic conditions than we can. Many of these competitors’ products are sold in a wider selection or greater number of retail stores and possess a larger presence in these stores, typically having significantly more inline shelf space than we do. Given the finite space allocated to ~~cosmetic~~beauty products by retail stores, our ability to grow the number of retail stores in which our products are sold and expand our space allocation once in these retail stores may require the removal or reduction of the shelf space of these competitors. We may be unsuccessful in our growth strategy in the event retailers do not reallocate shelf space from our competitors to us. Increasing shelf space allocated to our products may be especially challenging in instances when a retailer has ~~their~~its own brand. In addition, our competitors may attempt to gain market share by offering products at prices at or below the prices at which our products are typically offered, including through the use of large percentage discounts and “buy one and get one free” offers. Competitive pricing may require us to reduce our prices, which would decrease our profitability or result in lost sales. Our competitors, many of whom have greater resources than we do, may be better able to withstand these price reductions and lost sales.

It is difficult for us to predict the timing and scale of our competitors’ activities in these areas or whether new competitors will emerge in the ~~cosmetics business.~~beauty industry. In recent years, numerous online, “indie,” celebrity and influencer-backed beauty companies have emerged and garnered significant followings. In addition, further technological breakthroughs, including new and enhanced technologies which increase competition in the online retail market, new product offerings by competitors and the strength and success of our competitors’ marketing programs may impede our growth and the implementation of our business strategy.

Our ability to compete also depends on the continued strength of our ~~brand~~brands and products, the success of our marketing, innovation and execution strategies, the continued diversity of our product offerings, the successful management of new product introductions and innovations, strong operational execution, including in order fulfillment, our ability to adapt to changes in technology, including the successful utilization of data analytics, artificial intelligence and machine learning, and our success in entering new markets and expanding our business in existing geographies. 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 and financial condition.~~

operations.

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Our new product introductions may not be as successful as we anticipate.

The ~~cosmetics~~beauty industry is driven in part by fashion and beauty trends, which may shift quickly. Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer preferences for ~~cosmetic~~beauty products, consumer attitudes toward our industry and ~~brand~~brands and where and how consumers shop for those products. We must continually work to develop, produce and market new products, maintain and enhance the recognition of our ~~brand,~~brands, maintain a favorable mix of products and develop our approach as to how and where we market and sell our products.

We have ~~an established~~a process for the development, evaluation and validation of our new product concepts. Nonetheless, each new product launch ~~online, through our e.l.f. stores and through our retail customers~~ involves risks, as well as the possibility of unexpected consequences. For example, the acceptance of new product launches and sales to our retail customers may not be as high as we anticipate due to lack of acceptance of the products themselves or their price or limited effectiveness of our marketing strategies. In addition, our ability to launch new products may be limited by delays or difficulties affecting the ability of our suppliers or manufacturers to timely manufacture, distribute and ship new products or displays for new products. Sales of new products may be affected by inventory management by our retail customers, and we may experience product shortages or limitations in retail display space by our retail customers. We may also experience a decrease in sales of certain existing products as a result of newly-launched products, the impact of which could be exacerbated by shelf space limitations or any shelf space loss. Any of these occurrences could delay or impede our ability to achieve our sales objectives, which could have a material adverse effect on our business, financial condition and results of operations.

As part of our ongoing business strategy, we expect that we will need to continue to introduce new products in ~~our traditional product~~the color cosmetics and skincare categories, ~~of eyes, lips, face and tools,~~ while also expanding our product launches into adjacent categories in which we may have little to no operating experience. The success of product launches in adjacent product categories could be hampered by our relative inexperience operating in such categories, the strength of our competitors or any of the other risks referred to above. Furthermore, any expansion into new product categories may prove to be an operational and financial constraint which inhibits our ability to successfully accomplish such expansion. Our inability to introduce successful products in our traditional categories or in adjacent

categories could limit our future growth and have a material adverse effect on our business, financial condition and results of operations.

We depend on a limited number of retailers for a large portion of our net sales, and the loss of one or more of these retailers, or business challenges at one or more of these retailers, could adversely affect our results of operations.

A limited number of our retail customers account for a large percentage of our net sales. We expect a small number of retailers will, in the aggregate, continue to account for the majority of our net sales for foreseeable future periods. Any changes in the policies or our ability to meet the demands of our retail customers relating to service levels, inventory de-stocking, pricing and promotional strategies or limitations on access to display space could have a material adverse effect on our business, financial condition and results of operations.

As is typical in our industry, our business with retailers is based primarily upon discrete sales orders, and we do not have contracts requiring retailers to make firm purchases from us. Accordingly, retailers could reduce their purchasing levels or cease buying products from us at any time and for any reason. 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.

Because a high percentage of our sales are made through our retail customers, our results are subject to risks relating to the general business performance of our key retail customers. Factors that adversely affect our retail customers’ businesses may also have a material adverse effect on our business, financial condition and results of operations. These factors may include:

any reduction in consumer traffic and demand at our retail customers as a result of economic downturns, 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 cosmetics and retailer practices used to control inventory shrinkage.

~~Our success depends, in part, on the quality, performance and safety of our products.~~

Any loss of confidence on the part of consumers in the ingredients used in our products, whether related to product contamination or product safety or quality failures, actual or perceived, or inclusion of prohibited ingredients, could tarnish the image of our brand and could cause consumers to choose other products. Allegations of contamination or other adverse effects on product safety or suitability for use by a particular consumer, even if untrue, may require us to expend significant time and resources responding to such allegations and could, from time to time, result in a recall of a product from any or all of the markets in which the affected product was distributed. Any such issues or recalls could negatively affect our profitability and brand image.

If our products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet our consumers’ expectations, our relationships with consumers could suffer, the appeal of our brand could be diminished, we may need to recall some of our products and/or become subject to regulatory action, and we could lose sales or market share or become subject to boycotts or liability claims. In addition, safety or other defects in our competitors’ products could reduce consumer demand for our own products if consumers view them to be similar. Any of these outcomes could result in a material adverse effect on our business, financial condition and results of operations.

~~We may not be able to successfully implement our growth strategy.~~

Our future growth, profitability and cash flows depend upon our ability to successfully implement our business strategy, which, in turn, is dependent upon a number of factors, including our ability to:

~~build a great brand by attracting new consumers and encouraging our current consumers to use more e.l.f. products;~~

~~continue to use innovation to drive sales and margin and expand into relevant adjacencies;~~

expand brand penetration by growing our space allocations with our existing national retail customers, increasing the number of our retail customers, growing our direct-to-consumer business and expanding internationally; and

~~leverage our high-performance team culture and executional capability to drive operating margins and efficiencies.~~

There can be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect. Further, achieving these objectives will require investments which may result in short-term costs without generating any current net sales and therefore may be dilutive to our earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations.

~~Our growth and profitability are dependent on a number of factors, and our historical growth may not be indicative of our future growth.~~

Although our net sales and profitability have grown rapidly in recent periods, this should not be considered as indicative of our future performance. We may not be successful in executing our growth strategy, and even if we achieve our strategic plan, we may not be able to sustain profitability. In future periods, our revenue could decline or grow more slowly than we expect. 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 Quarterly 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;~~

~~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 Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”) and the Consumer Product Safety Commission (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 cosmetics industry;~~

we may be unsuccessful in enhancing the recognition and reputation of our brand, and our brand 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 may be unable to manage our growth effectively, which would harm our business, financial condition and results of operations.~~

Our growth has placed, and will continue to place, a strain on our management team, financial and information systems, supply chain and distribution capacity and other resources. To manage growth effectively, we must continue to enhance our operational, financial and management systems, including our warehouse management, inventory control and in-store point-of-sale systems; maintain and improve our internal controls and disclosure controls and procedures; maintain and improve our information technology systems and procedures; and expand, train and manage our employee base.

We may not be able to effectively manage this expansion in any one or more of these areas, and any failure to do so could significantly harm our business, financial condition and results of operations. Our rapid growth also makes it difficult for us to adequately predict the expenditures we will need to make in the future. 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.~~

Any damage to our reputation or ~~brand~~brands may materially and adversely affect our business, financial condition and results of operations.

We believe that developing and maintaining our ~~brand~~brands is critical and that our financial success is directly dependent on consumer perception of our ~~brand.~~brands. Furthermore, the importance of ~~our~~ brand recognition may become even greater as competitors offer more products similar to ours.

We have relatively low brand awareness among consumers when compared to ~~other cosmetic~~legacy beauty brands, and maintaining and enhancing the recognition and reputation of our ~~brand~~brands is critical to our business and future growth. Many factors, some of which are beyond our control, are important to maintaining our reputation and ~~brand.~~brands. These factors include our ability to comply with ethical, social, product, labor and environmental standards. Any actual or perceived failure in compliance with such standards could damage our reputation and ~~brand.~~

brands.

The growth of our ~~brand~~brands depends largely on our ability to provide a high-quality consumer experience, which in turn depends on our ability to bring innovative products to the market at competitive prices that respond to consumer demands and preferences. Additional factors affecting our consumer experience include our ability to provide appealing store sets in retail stores, the maintenance and stocking of those sets by our retail customers, the overall shopping experience provided by our retail customers, a reliable and user-friendly website interface and mobile applications for our consumers to browse and purchase products on ~~elfcosmetics.com~~our e-commerce websites and ~~an engaging environment in our e.l.f. stores.~~mobile applications. If we are unable to preserve our reputation, enhance our brand recognition or increase positive awareness of our products and in-store and Internet platforms, it may be difficult for us to maintain and grow our consumer base, and our business, financial condition and results of operations may be materially and adversely affected.

The success of our ~~brand~~brands may also suffer if our marketing plans or product initiatives do not have the desired impact on our ~~brand’s~~brands' image or ~~its~~our ability to attract consumers. 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 ~~the~~our products becoming unavailable to consumers.

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Our success depends, in part, on the quality, performance and safety of our products.

Any loss of confidence on the part of consumers in the ingredients used in our products, whether related to product contamination or product safety or quality failures, actual or perceived, or inclusion of prohibited ingredients, could tarnish the image of our brands and could cause consumers to choose other products. Allegations of contamination or other adverse effects on product safety or suitability for use by a particular consumer, even if untrue, may require us to expend significant time and resources responding to such allegations and could, from time to time, result in a recall of a product from any or all of the markets in which the affected product was distributed. Any such issues or recalls could negatively affect our profitability and image of our brands.

If our products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet our consumers’ expectations, our relationships with consumers could suffer, the appeal of our brands could be diminished, we may need to recall some of our products and/or become subject to regulatory action, and we could lose sales or market share or become subject to boycotts or liability claims. In addition, safety or other defects in our competitors’ products could reduce consumer demand for our own products if consumers view them to be similar. Any of these outcomes could result in a material adverse effect on our business, financial condition and results of operations.

Risk factors related to our growth and profitability

We may not be able to successfully implement our growth strategy.

Our future growth, profitability and cash flows depend upon our ability to successfully implement our business strategy, which, in turn, is dependent upon a number of key initiatives, including our ability to:

•build demand in our brands;

•invest in digital capabilities;

•lead innovation by providing prestige quality products at an extraordinary value;

•drive productivity and space expansion with our retailers;

•deliver profitable growth; and

•pursue strategic extensions that can leverage our strengths and bring new capabilities.

There can be no assurance that we can successfully achieve any or all of the above initiatives in the manner or time period that we expect. Further, achieving these objectives will require investments which may result in short-term cost increases with net sales materializing on a longer-term horizon and, therefore, may be dilutive to our earnings. We cannot provide any assurance that we will realize, in full or in part, the anticipated benefits we expect our strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations.

Our growth and profitability are dependent on a number of factors, and our historical growth may not be indicative of our future growth.

Our historical growth may not be indicative of our future performance as we may not be successful in executing our growth strategy, and, even if we achieve our strategic imperatives, we may not be able to sustain profitability. In future periods, our revenue could decline or grow more slowly than we expect. 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;

•because substantially all of our products are sourced and manufactured in China, our operations are susceptible to risks inherent in doing business there;

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•our products may be the subject of regulatory actions, including, but not limited to, actions by the US Food and Drug Administration (the “FDA”), the Federal Trade Commission (the “FTC”) and the Consumer Product Safety Commission (the “CPSC”) in the United States 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 adverse economic conditions in the United States or internationally.

We may be unable to continue to grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

Since our formation, we have experienced significant growth in our business, customer base, employee headcount and operations, and we expect to continue to grow our business. Growing our business has placed, and we expect that it will continue to place, strain on our management team, personnel, financial and information systems, supply chain and distribution capacity and other resources. To manage our growth effectively, we must continue to enhance our operational, financial and management systems, including our warehouse management and inventory control; maintain and improve our internal controls and disclosure controls and procedures; maintain and improve our information technology systems and procedures; and expand, train and manage our employee base while maintaining close coordination among our executive, accounting, finance, legal, human resources, marketing, regulatory, sales and operations functions.

We may not be able to continue to effectively manage our expansion in any one or more of these areas, and any failure to do so could significantly harm our business, financial condition and results of operations. Growing our business may make it difficult for us to adequately predict the expenditures we will need to make in the future. 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.

We frequently review acquisition and strategic investment opportunities that would expand our current product offerings, our distribution channels, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. There can be no assurance that we will be able to identify suitable candidates or consummate these transactions on favorable terms. 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;

•retention of employees from the acquired business;

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•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 we are unable to address these difficulties and challenges or other problems encountered in connection with any acquisition or investment, we might not realize the anticipated benefits of that acquisition or investment, and we might incur unanticipated liabilities or otherwise suffer harm to our business generally. 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. 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. Acquisitions or investments can also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on our consolidated balance sheet, any of which 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 the Company’s existing credit facility, borrowings on the Company’s existing revolving facility, cash on the balance sheet and approximately $58 million of Company stock.

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 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 the Company. 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. 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. Any such liabilities or sanctions, individually or in the aggregate, could have an adverse effect on our business, financial condition and results of operations.

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.

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 Israel-Hamas war

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or the ongoing military conflict in Ukraine), acts of terrorism and other external factors over which we and our third-party manufacturers, suppliers, brokers and delivery service providers have no control. The loss of, or damage to, the manufacturing facilities or distribution centers of our third-party manufacturers, suppliers, brokers and delivery service providers could ~~have a material adverse effect on~~materially and adversely affect our business, financial condition and results of operations.

We depend heavily on ocean container delivery, as well as fast boats, rail and air freight, to receive shipments of our products from our third-party manufacturers located in China and contracted third-party delivery service providers to deliver our products to our distribution ~~facility located in Ontario, California or to our brokers~~facilities and logistics providers, ~~located in Canada and England,~~ and from there to our ~~e.l.f. stores or~~ retail customers. Further, we rely on postal and parcel carriers for the delivery of products sold directly to consumers through ~~elfcosmetics.com.~~our e-commerce websites and mobile applications. Interruptions, to or failures in, these delivery services could prevent the timely or successful delivery of our products. 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. In addition, port congestion, container shortages, inclement weather, natural disasters, international conflict, labor ~~unrest. For example, in December 2015, a parcel carrier returned five pallets~~unrest or other transportation disruptions may increase the costs to supply or transport our products or the components of ~~holiday shipments to us based on their service backlog, causing significant delays in~~ our ~~holiday shipments.~~products. If our products are not delivered on time or are delivered in a damaged state, retail customers and consumers may refuse to accept our products and have less confidence in our services. In addition, a vessel and container shortage globally could delay future inventory receipts and, in turn, could delay deliveries to our retailer customers and availability of products in our direct-to-consumer e-commerce channel. Such potential delays, additional transportation expenses and shipping disruptions could negatively impact our results of operations through higher inventory costs and reduced sales. Furthermore, the delivery personnel of contracted third-party delivery service providers act on our behalf and interact with our consumers personally. Any failure to provide high-quality delivery services to our consumers may negatively affect the shopping experience of our consumers, damage our reputation and cause us to lose consumers.

Our ability to meet the needs of our consumers and retail customers ~~and our e.l.f. stores~~ depends on the proper operation of our ~~Ontario, California~~ distribution ~~facility,~~facilities, where most of our inventory that is not in transit is housed. Although we currently insure our inventory, our insurance coverage may not be sufficient to cover the full extent of any loss or damage to our inventory or distribution ~~facility,~~facilities, and any loss, damage or disruption of ~~this facility,~~the facilities, or loss or damage of the inventory stored there, could materially and adversely affect our business, financial condition and results of operations.

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. 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. We are a relatively small company that relies on a few key employees, any one of whom would be difficult to replace, and because we are a small company, we believe that the loss of key employees may be more disruptive to us than it would be to a larger company. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. In addition, we may be unable to effectively plan for the succession of senior management, including our Chief Executive Officer. 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.

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 ~~brand,~~brands, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services.

~~We do not own or operate any manufacturing facilities.~~

We use multiple third-party suppliers and manufacturers, primarily based in China, to source and manufacture substantially all of our products. We engage our third-party suppliers and manufacturers on a purchase order basis and are not party to long-term contracts with any of them. The ability of these third parties to supply and manufacture our products may be affected by competing orders placed by other ~~customers~~persons and the demands of those ~~customers.~~persons. 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. If we experience significant increases in demand or need to replace a significant number of existing suppliers or manufacturers, there can be no assurance that additional supply and manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer will allocate sufficient capacity to us in order to meet our requirements.

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In addition, quality control problems, such as the use of ingredients and delivery of products that do not meet our quality control standards and specifications or comply with applicable laws or regulations could harm our business. These quality control problems could result in regulatory action, such as restrictions on importation, products of inferior quality or product stock outages or shortages, harming our sales and creating inventory write-downs for unusable products.

We have also outsourced significant portions of our distribution process, as well as certain technology-related functions, to third-party service providers. Specifically, we rely on third-party distributors to sell our products in a number of foreign countries, our ~~warehouse~~warehouses and distribution ~~center in California is~~facilities are managed and staffed by a third-party service ~~provider,~~providers, we are dependent on a single third-party vendor for credit card processing, and we utilize a third-party hosting and networking provider to host our ~~web services, including elfcosmetics.com.~~e-commerce websites and mobile applications. The failure of one or more of these entities to provide the expected services on a timely basis, or at all, or at the prices we expect, or the costs and disruption incurred in changing these outsourced functions to being performed under our management and direct control or that of a third-party, may have a material adverse effect on our business, financial condition and results of operations. We are not party to long-term contracts with some of our distributors, and upon expiration of these existing agreements, we may not be able to renegotiate the terms on a commercially reasonable basis, or at all.

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 ~~employ~~employment practices that may harm our reputation; and

•work with, be acquired by, or come under control of, our competitors.

The occurrence of any of these events, alone or together, could have a material adverse effect on our business, financial condition and results of operations. 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 management and oversight of the engagement and activities of our third-party suppliers, manufacturers and distributors requires substantial time, effort and expense of our employees, and we may be unable to successfully manage and oversee the activities of our third-party manufacturers, suppliers and distributors. If we experience any supply chain disruptions caused by our manufacturing process or by our inability to locate suitable third-party manufacturers or suppliers, or if our manufacturers or raw material suppliers experience problems with product quality or disruptions or delays in the manufacturing process or delivery of the finished products or the raw materials or components used to make such products, our business, financial condition and results of operations could be materially and adversely affected.

If we fail to manage our inventory effectively, our results of operations, financial condition and liquidity may be materially and adversely affected.

Our business requires us to manage a large volume of inventory effectively. We depend on our forecasts ofto estimate demand for and popularity of various products to make ~~purchase~~purchasing decisions and to manage our inventory of stock-keeping units. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product

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defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products and other factors, and our consumers may not purchase products in the quantities that we expect. It may be difficult to accurately forecast demand and determine appropriate levels of product or ~~componentry.~~components. We generally do not have the right to return unsold products to our suppliers.

If we fail to manage our inventory effectively or negotiate favorable credit terms with third-party suppliers, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, if we are required to lower sale prices in order to reduce inventory level or to pay higher prices to our suppliers, our profit margins might be negatively affected. Any of the above may materially and 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.~~requirements.”

Public health crises could adversely affect our business, financial condition and results of operations.

The COVID-19 pandemic and government and private sector responsive measures taken to contain or mitigate the effects of the pandemic, as well as related changes in consumer shopping behaviors, adversely affected our business, financial condition and results of operations. The emergence of another pandemic, epidemic or infectious disease outbreak could have a similar effect. 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 COVID-19 pandemic contributed significantly to global supply chain constraints, with restrictions and limitations on related activities causing disruption and delay. These disruptions and delays strained domestic and international supply chains, resulting in port congestion, transportation delays as well as labor and container shortages, and affected the flow or availability of certain products.

The emergence of another pandemic, epidemic or infectious disease outbreak, and any required or voluntary actions to help limit the spread of illness, could impact our ability to carry out our business and may materially adversely impact global economic conditions, our business, financial condition and results of operations. 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, China or other jurisdictions. Such events could materially increase our costs, negatively impact our sales and damage our results of operations and liquidity, possibly to a significant degree.

The full extent of the impact of a pandemic, such as the COVID-19 pandemic, an epidemic or an infectious disease outbreak on our business, financial condition and results of operations will depend on future developments that are highly uncertain and unpredictable, including the timing, acceptance and efficacy of vaccinations and possible achievement of herd immunity in various locations, the occurrence of virus mutations and variants, infection rates increasing or returning in various geographic areas, actions by government authorities to contain outbreaks or treat their impact, and any related impact on capital and financial markets and consumer behavior, including the impacts of any recession or inflationary pressures, all of which may vary across regions.

Adverse economic conditions in the United States or any of the other countries in which we conduct significant business could negatively affect our business, financial condition and results of operations.

Many of our products may be considered discretionary items for consumers. Consumer spending on beauty products is influenced by general economic conditions and the availability of discretionary income. Adverse economic conditions in the United States, Canada, the United Kingdom (the “UK”), 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

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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. As global economic conditions continue to be volatile and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future.

A decrease in consumer spending or in retailer and consumer confidence and demand for our products could have a significant negative impact on our net sales and profitability, including our operating margins and return on invested capital. These economic conditions could cause some of our retail customers or suppliers to experience cash flow or credit problems and impair their financial condition, which could disrupt our business and adversely affect product orders, payment patterns and default rates and increase our bad debt expense.

Volatility in the financial markets could have a material adverse effect on our business, financial condition and results of operations.

While we currently generate cash flows from our ongoing operations and have had access to credit markets through our various financing activities, credit markets may experience significant disruptions. Deterioration in global financial markets, rising interest rates and concerns over potential recessions could make future financing difficult or more expensive. If any financial institution party to our credit facilities or other financing arrangements were to declare bankruptcy or become insolvent, they may be unable to perform under their agreements with us. This could leave us with reduced borrowing capacity, which could have a material adverse effect on our business, financial condition and results of operations.

We regularly maintain cash balances at third-party financial institutions in excess of the Federal Deposit Insurance Corporation (the “FDIC”) insurance limit. In 2023, the FDIC took control and was appointed receiver of Silicon Valley Bank (“SVB”), Signature Bank and First Republic Bank, after each bank was unable to continue its operations. Although the Company did not have any cash or cash equivalent balances on deposit with SVB, Signature Bank or First Republic Bank and, therefore, did not experience any direct risk of loss, we are unable to predict the extent or nature of the impacts of the failures of these banks and related circumstances at this time. 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. 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.

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. Any of such events could have a material adverse effect on our current or projected business operations and results of operations and financial condition. In addition, if any parties with which we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to continue to fund their business and perform their obligations to us could be adversely affected, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

Risk factors related to our financial condition

Our ~~substantial~~ indebtedness may have a material adverse effect on our business, financial condition and results of operations.

As of ~~September 30, 2017,~~December 31, 2023, we had a total of ~~$168.3~~$265.7 million of indebtedness, consisting of amounts outstanding under our credit facilities and ~~capital~~finance lease obligations, and a total availability of ~~$40.0~~$10.5 million under our Amended Revolving Credit Facility. Our primary cash needs are for working capital, fixturing, retail product displays and digital investments. Cash needs typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities expansion within or to additional retailer store locations, and acquisitions. On August 28, 2023, we entered into the Second Amendment to the Amended and Restated Credit Agreement, pursuant to which we borrowed an incremental term loan in a principal amount equal to $115.0 million (the “Incremental Term Loan”), together with available cash from our balance sheet and additional borrowings under our Amended Revolving Credit Facility, to consummate and pay related fees and expenses in connection with our acquisition of Naturium.

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Our indebtedness could have significant consequences, including:

•requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements;

•reducing our flexibility to adjust to changing business conditions or obtain additional financing;

•exposing us to the risk of increased interest rates as our borrowings are at variable rates;

•making it more difficult for us to make payments on our indebtedness;

•subjecting us to restrictive covenants that may limit our flexibility in operating our business, including our ability to take certain actions with respect to indebtedness, liens, sales of assets, consolidations and mergers, affiliate transactions, dividends and other distributions and changes of control;

•subjecting us to maintenance covenants which require us to maintain specific financial ratios; and

•limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.

If our cash from operations is not sufficient to meet our current or future operating needs, expenditures and debt service obligations, our business, financial condition and results of operations may be materially and adversely affected.

We may require additional cash resources due to changed business conditions or other future developments, including any marketing initiatives, investments or additional acquisitions we may decide to pursue. To the extent we are unable to generate sufficient cash flow, we may be forced to cancel, reduce or delay these activities. Alternatively, if our sources of funding are insufficient to satisfy our cash requirements, we may seek to obtain an additional credit facility or sell equity or debt securities. The sale of equity securities would result in dilution of our existing stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and operating and financing covenants that could restrict our operations.

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. If our cash flows and capital resources are insufficient to fund our debt service obligations and other cash needs, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. Our credit facilities may restrict our ability to take these actions, and we may not be able to affect any such alternative measures on commercially reasonable terms, or at all. If we cannot make scheduled payments on our debt, the lenders under the Amended Credit Agreement can terminate their commitments to loan money under the Amended Revolving Credit Facility, and our lenders under the Amended Credit Agreement can declare all outstanding principal and interest to be due and payable and foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

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.

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. Changes in law and policy relating to taxes, including changes in administrative interpretations and legal precedence, could materially and adversely affect our business, financial condition and results of operations.

In addition, as we continue to expand our business internationally, the application and implementation of existing, new or future international laws could materially and adversely affect our business, financial condition and results of operations. Current economic and political conditions make tax rules in any jurisdiction, including those in which we operate, subject to significant change.

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Fluctuations in currency exchange rates may negatively affect our financial condition and results of operations.

Exchange rate fluctuations may affect the costs that we incur in our operations. The main currencies to which we are exposed are the Euro, British pound, Chinese Renminbi and Canadian dollar. The exchange rates between these currencies and the US dollar in recent years have fluctuated significantly and may continue to do so in the future. A depreciation of these currencies against the US dollar will decrease the US dollar equivalent of the amounts derived from foreign operations reported in our consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts. The cost of certain items, such as raw materials, manufacturing, employee compensation and benefits and transportation and freight, required by our operations may be affected by changes in the value of the relevant currencies.

To the extent that we are required to pay for goods or services in foreign currencies, the appreciation of such currencies against the US dollar will tend to negatively affect our business. There can be no assurance that foreign currency fluctuations will not have a material adverse effect on our business, financial condition and results of operations.

Risk factors related to our retail customers, consumers and the seasonality of our business

•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.

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.

~~We generate a significant portion~~

Our results of ~~our~~operations are subject to seasonal fluctuations, with net sales in the third and fourth fiscal quarters typically being higher than in the first and second fiscal quarters. The higher net sales in our third and fourth fiscal quarters are largely attributable to the increased levels of ~~our fiscal year as a result of higher sales during~~purchasing by retailers for the holiday season and ~~adverse~~customer shelf reset activity, respectively. Adverse events that occur during either the third or fourth fiscal quarter could have a disproportionate effect on our results of operations for the entire fiscal year. ~~As a result of~~To support anticipated higher sales during the third and fourth fiscal quarters, ~~our~~we make investments in working capital ~~needs are greater during the second and third quarters of the fiscal year. In addition~~ to ~~holiday seasonality, we may experience variability in net sales and net income~~ensure inventory levels can support demand.

Fluctuations throughout the year ~~as a result of~~are also driven by the ~~size and~~ timing of ~~orders from~~product restocking or rearrangement by our ~~retail~~major customers as well as our expansion into new customers. Because a limited number of our retail customers account for a large

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percentage of our net sales, a change in the order pattern of one or more of our large retail customers could cause a significant fluctuation of our quarterly results or reduce our liquidity.

Furthermore, product orders from our large retail customers may vary over time due to changes in their inventory or out-of-stock policies. If we were to experience a significant shortfall in sales or profitability, ~~or internally generated funds,~~ we may not have sufficient liquidity to fund our business. As a result of quarterly fluctuations caused by these and other factors, comparisons of our operating results across different fiscal quarters may not be accurate indicators of our future performance. Any quarterly fluctuations that we report in the future may differ from the expectations of market analysts and investors, which could cause the price of our common stock to fluctuate significantly.

Risk factors related to information technology and cybersecurity

We are increasingly dependent on information technology, and if we are unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, our operations could be disrupted.

We rely on information technology networks and systems to market and sell our products, to process ~~transmit and store~~ electronic and financial information, to assist with sales tracking and reporting, to manage a variety of business processes and activities and to comply with regulatory, legal and tax requirements. We are increasingly dependent on a variety of secure information systems to effectively process retail customer orders ~~manage the operations of our e.l.f. store base~~ and fulfill consumer orders from our e-commerce business. We depend on our information technology infrastructure for digital marketing activities and for electronic communications among our ~~e.l.f. stores,~~ personnel, retail customers, consumers, manufacturers and suppliers around the world. 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, ~~attacks by computer hackers,~~ telecommunication failures, user errors, catastrophic events and data security and privacy threats, cyber and otherwise. If our information technology systems suffer damage, disruption or ~~catastrophic events.~~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.

Data security and privacy threats are becoming increasingly difficult to detect and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” personnel (such as through theft or misuse), organized criminal threat actors, sophisticated nation states and nation-state supported actors. Some threat actors now engage and are expected to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks that could materially disrupt our systems and operations. Any material disruption of our systems, or the systems of our third-party service providers, could disrupt our ability to track, record and analyze the products that we sell and could negatively impact our operations, shipment of goods, ability to process financial information and transactions and our ability to receive and process retail ~~customers~~customer and e-commerce orders or engage in normal business activities. If our information technology systems suffer damage, disruption or shutdown and 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.

Our e-commerce operations are important to our business. Our ~~website serves~~e-commerce websites and mobile applications serve as an ~~effective~~ extension of our marketing strategies by ~~exposing~~introducing potential new consumers to our brand, product offerings and enhanced content. Due to the importance of our ~~website and~~ e-commerce operations, we are vulnerable to website downtime and other technical failures. Our failure to successfully respond to these risks in a timely manner could reduce e-commerce sales and damage our ~~brand’s~~brands' reputation.

The risks described here are heightened due to the increase in remote working. A portion of our personnel is currently working under our hybrid model of three days in the office and two days remote, while others work remote entirely. It is possible with this model that the execution of our business plans and operations could be negatively impacted. 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. The increase in remote working may also result in heightened consumer privacy, IT security and fraud concerns, potentially disrupting our operations.

We must ~~successfully~~continue to maintain and ~~upgrade~~make requisite or critical upgrades to our information technology systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.

We ~~have identified the need~~conduct annual penetration testing and vulnerability assessments to ~~significantly expand~~identify and ~~improve~~address potential security weaknesses in our ~~information technology~~ systems and ~~personnel~~third-party vendor environments to support ~~recent and~~ expected future growth. As such, we ~~are in process of implementing, and~~ will continue to invest in

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and implement ~~significant~~ 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. We are currently undertaking various technology upgrades and enhancements to support our business growth, including an implementation of SAP software to upgrade our platforms and systems worldwide. 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 implementations, modifications and upgrades~~

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. In addition, difficulties with implementing new technology systems, delays in our timeline for planned improvements, significant system failures, or our inability to successfully modify our information systems to respond to changes in our business needs may cause disruptions in our business operations and have a material adverse effect on our business, financial condition and results of operations.

If we fail to adopt new technologies or adapt our ~~website~~e-commerce websites and systems to changing consumer requirements or emerging industry standards, our business may be materially and adversely affected.

To remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our ~~Internet platform,~~information technology, including our e-commerce ~~website~~websites and mobile applications. Our competitors are continually ~~developing innovations~~innovating and introducing new products to increase their consumer base and enhance user experience. As a result, in order to attract and retain consumers and compete against our competitors, we must continue to invest resources to enhance our information technology and

improve our existing products and services for our consumers. The Internet and the online retail industry are characterized by rapid technological evolution, changes in consumer requirements and preferences, frequent introductions of new products and services embodying new technologies and the emergence of new industry standards and practices, any of which could render our existing technologies and systems obsolete. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in our business, and respond to technological advances and emerging industry standards and practices in a cost-effective and timely way. The development of our ~~website~~e-commerce websites, mobile applications and other proprietary technology entails significant technical and business risks. There can be no assurance that we will be able to properly implement or use new technologies effectively or adapt our ~~website~~e-commerce websites, mobile applications and systems to meet consumer requirements or emerging industry standards. If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or consumer requirements, whether for technical, legal, financial or other reasons, our business, financial condition and results of operations may be materially and adversely affected.

Failure to protect sensitive information of our consumers and information technology systems against security breaches could damage our reputation and brand and substantially harm our business, financial condition and results of operations.

We collect, maintain, transmit, store and ~~store~~otherwise process data about our consumers, suppliers, prospective and current employees and others, including ~~personally identifiable~~personal data, financial information, ~~and financial~~including consumer payment information, as well as other confidential and proprietary ~~information.~~information important to our business. We also employ third-party service providers that collect, store, process and transmit ~~proprietary,~~ personal data, and confidential, ~~information, including credit card~~proprietary and financial information on our behalf.

~~Advances~~

We have in place technical and organizational measures to maintain the security and safety of critical proprietary, personal, employee, customer and financial data which we continue to maintain and upgrade to industry standards. However, advances in technology, the ~~expertise~~pernicious ingenuity of criminals, new ~~discoveries in the field of~~exposures via cryptography, acts or omissions by our employees, contractors or service providers or other events or developments could result in a compromise or breach in the security of confidential or ~~sensitive information.~~personal data. 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, ~~conducting~~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 ~~website~~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.

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We are not aware of any material breach or compromise of the personal data of consumers, but we have been subject to attacks (e.g., phishing, denial of service) in the past and cannot guarantee that our security measures will be sufficient to prevent a material breach or compromise in the future.

Furthermore, such third parties may ~~further~~ engage in various other illegal activities using such information, including credit card fraud or identity theft, which may cause additional harm to us, our consumers and our ~~brand.~~brands. We also may be vulnerable to error or malfeasance by our own employees or other insiders. Third parties may attempt to fraudulently induce our or our service providers’ employees to misdirect funds or to disclose information in order to gain access to personal data we maintain about our consumers or website users. In addition, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our consumers may elect to make payment for purchases at our ~~website.~~e-commerce websites and mobile applications. 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.

If ~~any~~a material security breach ~~of information security~~ were to occur, our reputation and ~~brand~~brands could be damaged, ~~our business may suffer,~~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 ~~we could be exposed to~~ a risk of loss ~~litigation or regulatory action~~ and possible liability. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. In addition, any party who is able to illicitly obtain a subscriber’s password could access the subscriber’s financial, transaction or personal information. Any compromise or breach of our security measures, or those of our third-party service providers, may violate applicable privacy, data security, financial, cyber and other laws and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, all of which could have a material adverse effect on our business, financial condition and results of operations. We may be subject to post-breach review of the adequacy of our privacy and security controls by regulators and other third parties, which could result in post-breach regulatory investigation, fines and consumer litigation as well as regulatory oversight, at significant expense and risking reputational harm.

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, failure to comply with these laws and regulations could subject us to regulatory scrutiny and additional liability. Although we maintain ~~privacy, data breach and network security liability~~relevant insurance, we cannot be certain that our insurance coverage will be adequate for all breach related liabilities, ~~actually incurred or~~ that insurance will continue to be available to us on economically reasonable terms, or at ~~all.~~all, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations. 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 ~~Internet platform~~e-commerce websites subject us to third-party payment processing-related risks.

We accept payments from our consumers using a variety of methods, including online payments with credit cards and debit cards issued by major banks, ~~in the United States,~~ payments made with gift cards processed by third-party providers and payment through third-party online payment platforms such as ~~PayPal.~~PayPal, Afterpay and Apple Pay. We also rely on third parties to provide payment processing services. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. We may also be subject to fraud and other illegal activities in connection with the various payment methods we offer, including online payment options and gift cards. ~~For online consumers, these~~Transactions on our e-commerce websites and mobile applications are ~~card-not-~~

~~present~~card-not-present transactions, so they present a greater risk of fraud. Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information. ~~To the extent we are an online seller, requirements~~Requirements relating to consumer authentication and fraud detection with respect to online sales are ~~more~~ complex. We may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay charge-back fees. Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying money transfer amount. If our charge-back rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions. In addition, we may be subject to additional fraud risk if third-party service providers or our employees

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fraudulently use consumer information for their own gain or facilitate the fraudulent use of such information. Overall, we may have little recourse if we process a criminally fraudulent transaction.

We are subject to payment card association operating rules, certification requirements and various rules, regulations and requirements governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. As our business changes, we may also be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. 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.

Risk factors related to conducting business internationally

We have significant operations in China, which exposes us to risks inherent in doing business ~~there.~~

in that country.

We currently source and manufacture ~~substantially all~~a substantial number of our products from third-party suppliers and manufacturers in China. As of ~~September 30, 2017,~~December 31, 2023, we had ~~a team of 63~~94 employees in ~~China to manage our supply chain.~~China. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future. 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. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. These labor laws and related regulations impose liabilities on employers and may significantly increase the costs of workforce reductions. If we decide to change or reduce our workforce, these labor laws could limit or restrict our ability to make such changes in a timely, favorable and effective manner. Any of these events may materially and adversely affect our business, financial condition and results of operations. ~~See also “—Potential changes in tax law and other developments in the United States may have a material adverse effect on our business, financial condition and results of operations.”~~

Operating in China exposes us to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. Our ability to operate in China may be adversely affected by changes in ~~U.S.~~the United States and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, privacy, hygiene supervision and other matters. For example, in December 2021, the US Congress enacted the Uyghur Forced Labor Prevention Act in an effort to prevent what it views as forced labor and human rights abuses in the Xinjiang Uyghur Autonomous Region (“XUAR”). If it is determined that our third-party suppliers and manufacturers mine, produce or manufacture our products wholly or in part from the XUAR, then we could be prohibited from importing such products into the United States. 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. 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. Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.

~~Potential changes in tax law and other developments in the United States may have a material adverse effect on our business, financial condition and results of operations.~~

Changes in law and policy relating to taxes or trade may have an adverse effect on our business, financial condition and results of operations. Among other things, proposed tax reforms in the United States may result in significant changes to current U.S. tax rules and regulations. These changes could have a material adverse effect on our business, results of operations and liquidity as a result of the fact, among others, that we currently source and manufacture substantially all of our products from third-party suppliers and manufacturers in China.

Although we are unable to predict what, if any, changes will occur, the present U.S. administration has introduced a great deal of uncertainty regarding current tax and trade law, regulation and government policy, through a number of proposals for tax and other reform. These proposals are under evaluation by various legislative and administrative bodies, making it nearly impossible to accurately determine the overall impact of such proposals. Changes in U.S.-China trade relations and changes to U.S. tax or other laws (including new or changes in regulations promulgated by the U.S. Internal Revenue Service and the U.S. Department of the Treasury) as well as changes in Chinese laws and regulations, such as the imposition of or increase in tariffs or other trade barriers, could materially and adversely impact our effective tax rate, increase our costs and reduce the competitiveness of our products in the U.S. market.

We may require additional cash resources due to changed business conditions or other future developments, including any marketing initiatives, investments or acquisitions we may decide to pursue. To the extent we are unable to generate sufficient cash flow, we may be forced to cancel, reduce or delay these activities. Alternatively, if our sources of funding are insufficient to satisfy our cash requirements, we may seek to obtain an additional credit facility or sell equity or debt securities. The sale of equity securities would result in dilution of our existing stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and operating and financing covenants that could restrict our operations.

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. If our cash flows and capital resources are insufficient to fund our debt service obligations and other cash needs, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. Our credit facilities may restrict our ability to take these actions, and we may not be able to affect any such alternative measures on commercially reasonable terms, or at all. If we cannot make scheduled payments on our debt, the lenders under our Credit Agreement can terminate their commitments to loan money under our Revolving Credit Facility, and our lenders under our Credit Agreement can declare all outstanding principal and interest to be due and payable and foreclose against the assets securing their borrowings, and we could be forced into bankruptcy or liquidation.

Furthermore, it is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all, which could have a material adverse effect on our business, financial condition and results of operations.

~~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 retain our key employees, including our executive officers, senior management team and development, operations, finance, sales and marketing personnel. We are a small company that relies on a few key employees, any one of whom would be difficult to replace, and because we are a small company, we believe that the loss of key employees may be more disruptive to us than it would be to a large, international company. Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel. In addition, we may be unable to effectively plan for the succession of senior management, including our chief executive officer. 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.

Increasing the number of e.l.f. stores may not be successful and will subject us to risks associated with long-term non-cancelable leases and increased capital requirements that may adversely affect our business, financial condition and results of operations.

Our growth strategy is dependent in part on our ability to open and operate new brick-and-mortar e.l.f. stores in high-traffic areas in the United States. The success of this strategy is dependent upon, among other factors, the identification of suitable markets and sites for store locations, the negotiation of acceptable lease terms, the hiring, training and retention of competent sales personnel, the successful integration of these stores into our existing operations and information technology systems and making capital expenditures for these stores.

As a result of our limited experience in operating direct-to-consumer retail stores, e.l.f. stores may be less successful than we expect. Our current strategy includes pursuing continued expansion of e.l.f. stores in the United States. The effect of these stores,

particularly in growing numbers, on our business and results of operations is uncertain and dependent on various factors. Falling short in our pursuit of expansion could potentially lead to a negative impact on our growth plan while incurring significant financial costs, expenses and investments.

All of our e.l.f. stores are located on leased premises, and we expect that any new e.l.f. stores will also be located on leased premises. The leases for our stores generally have initial terms of 10 years and typically provide for a single renewal option in five-year increments as well as for rent escalations. We generally cannot terminate these leases before the end of the initial lease term and our ability to assign or sublease is subject to certain conditions. Additional sites that we lease are likely to be subject to similar long-term, non-terminable leases. If we close a store, we nonetheless may be obligated to perform our monetary obligations under the applicable lease, including, among other things, payment of the base rent for the balance of the lease term. In addition, if we fail to negotiate renewals, either on commercially acceptable terms or at all, as each of our leases expires we could be forced to close stores in desirable locations.

A majority of our e.l.f. stores are located in shopping malls and depend, in part, on the consumer traffic generated by the anchor tenants in the shopping mall. If unfavorable economic conditions or changes in consumer preferences, such as the shift to online shopping channels, cause declines in mall traffic, the sales generated from our e.l.f. stores could decline. There can be no assurance that we will be able to mitigate or offset the effects of declining mall traffic.

We depend on cash flows from operations to pay our lease expenses and to fulfill our other cash needs. If our business does not generate sufficient cash flow from operating activities, and sufficient funds are not otherwise available to us from borrowings under our Revolving Credit Facility or other sources, we may not be able to service our lease expenses or fund our other liquidity and capital needs, which would materially affect our business.

We plan to make capital expenditures to open additional e.l.f. stores. Furthermore, the commitments associated with any expansion will increase our operating expenses and may be costly to terminate if we decide to close a store or change our strategy. We are likely to incur costs associated with these investments earlier than some of the anticipated financial and other benefits, and the return on these investments may be lower, or may develop more slowly, than we expect. As a result, the carrying value of the related assets may be subject to an impairment charge, which could materially and adversely affect our results of operations.

~~Adverse U.S. or international economic conditions could negatively affect our business, financial condition and results of operations.~~

Consumer spending on cosmetic products is influenced by general economic conditions and the availability of discretionary income. Adverse U.S. or international economic conditions or periods of inflation or high energy prices may contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and declining consumer confidence and demand, each of which poses a risk to our business. A decrease in consumer spending or in retailer and consumer confidence and demand for our products could have a significant negative impact on our net sales and profitability, including our operating margins and return on invested capital. These economic conditions could cause some of our retail customers or suppliers to experience cash flow or credit problems and impair their financial condition, which could disrupt our business and adversely affect product orders, payment patterns and default rates and increase our bad debt expense.

~~The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.~~

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum. The referendum was advisory, and the terms of withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally initiated the withdrawal process. Nevertheless, the referendum has created significant uncertainty about the future relationship between the United Kingdom and the European Union, including with respect to the laws and regulations that will apply as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal. The referendum has also given rise to calls for the governments of other European Union member states to consider withdrawal. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to international business uncertainties.

We sell many of our products to customers located outside the United States. In addition, substantially all of our third-party suppliers and manufacturers are located in ~~China.~~China and certain other foreign countries. We intend to continue to sell to customers outside the United States and maintain our relationships in ~~China.~~China and other foreign countries where we have suppliers and manufacturers. Further, we ~~may establish~~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. The substantial up-front investment required, the lack of consumer awareness of our products in jurisdictions outside of the United States, differences in consumer preferences and trends between the United States and other jurisdictions, the risk of inadequate intellectual property protections and differences in packaging, labeling ~~cosmetics~~ and related laws, rules and regulations are all substantial matters that need to be evaluated prior to doing business in new territories. We cannot be assured that our international efforts will be successful.

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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 ~~European Union;~~

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; and~~

conflicts.

~~acts of terrorism.~~

The occurrence of any of these risks could negatively affect our international business and consequently our overall business, financial condition and results of operations.

In addition, the ultimate effects of the UK's withdrawal from the EU (“Brexit”) are still difficult to predict as there remains considerable uncertainty around the impact of post-Brexit regulations as the various agencies interpret the regulations and develop enforcement practices. Changes related to Brexit could subject us to heightened risks in that region, including disruptions to trade and free movement of goods, services and people to and from the UK, disruptions to our employees in the UK and the workforce of our business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political and economic uncertainty. If these actions impacting our international distribution and sales channels result in increased costs for us or our international partners, such changes could result in higher costs to us, adversely affecting our operations, particularly as we expand our international presence in the UK.

The ongoing conflict between Russia and Ukraine has caused, and may continue to cause, negative effects on geopolitical conditions and the global economy, including financial markets, inflation and the global supply chain, which could have an adverse impact on our business, financial condition and results of operations.

In February 2022, Russian military forces launched a full-scale military invasion of Ukraine that has resulted in an ongoing military conflict between the two countries. The length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, and the conflict has caused, and may continue to cause, global political, economic and social instability, and disruptions to the global economy, financial systems, international trade, the global supply chain and the transportation and energy sectors, among others.

Russia’s recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, the EU, the UK,

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Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic and the so-called Luhansk People’s Republic. In retaliation against new international sanctions and as part of measures to stabilize and support the volatile Russian financial and currency markets, Russian authorities imposed significant currency control measures aimed at restricting the outflow of foreign currency and capital from Russia, imposed various restrictions on transacting with non-Russian parties, banned exports of various products and other economic and financial restrictions. The situation is rapidly evolving as a result of the conflict in Ukraine, and the United States, the EU, the UK and other countries may implement additional sanctions, export controls or other measures against Russia, Belarus and other countries, regions, officials, individuals or industries in the respective territories. Such sanctions and other measures, as well as the existing and potential further responses from Russia or other countries to such sanctions, tensions and military actions, could adversely affect the global economy and financial markets and could adversely affect our business, financial condition and results of operations. In addition, it is possible that the conflict could expand beyond its current scope and involve additional countries and regions.

We continue to monitor the situation in Ukraine and are assessing its impact on our business, including our business partners and customers. We do not sell our products in Russia and, to date, we have not experienced any material interruptions in our infrastructure, supplies, technology systems or networks needed to support our operations. We have no way to predict the progress or outcome of the conflict in Ukraine, whether it will expand or its impacts in Ukraine, Russia, Europe, the United States or the rest of the world as the conflict, and any resulting government reactions, are rapidly developing and beyond our control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time. Any of the above-mentioned factors could affect our business, financial condition and results of operations.

Risk factors related to evolving laws and regulations and compliance with laws and regulations

New laws, regulations, enforcement trends or changes in existing regulations governing the introduction, marketing and sale of our products to consumers could harm our business.

There has been an increase in regulatory activity and activism in the United States and abroad, and the regulatory landscape is becoming more complex with increasingly strict requirements. If this trend continues, we may find it necessary to alter some of the ways we have traditionally manufactured and marketed our products in order to stay in compliance with a changing regulatory landscape, and this could add to the costs of our operations and have an adverse impact on our business. To the extent federal, state, local or foreign regulatory changes regarding consumer protection, or the ingredients, claims or safety of our products occur in the future, they could require us to reformulate or discontinue certain of our products, revise the product packaging or labeling, or adjust operations and systems, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations. Noncompliance with applicable regulations could result in enforcement action by the FDA or other regulatory authorities within or outside the United States, including but not limited to product seizures, injunctions, product recalls and criminal or civil monetary penalties, all of which could have a material adverse effect on our business, financial condition and results of operations.

In the United States, with the exception of color additives, the FDA does not currently require pre-market approval for products intended to be sold as cosmetics. However, the FDA may in the future require pre-market ~~approval, clearance or registration/notification of~~authorization for certain cosmetic products,

establishments or manufacturing facilities. Moreover, such products could also be regulated as both drugs and cosmetics simultaneously, as the categories are not mutually exclusive. The statutory and regulatory requirements applicable to drugs are extensive and require significant resources and time to ensure compliance. For example, if any of our products intended to be sold as cosmetics were to be regulated as drugs, we might be required to conduct, among other things, clinical trials to demonstrate the safety and efficacy of these products. We may not have sufficient resources to conduct any required clinical trials or to ensure compliance with the manufacturing requirements applicable to drugs. 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. 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.

In recent years, the FDA has issued warning letters to several cosmetic companies alleging improper claims regarding their cosmetic products. If the FDA determines that we have disseminated inappropriate drug claims for our products intended to be sold as cosmetics, we could receive a warning or untitled letter, be required to modify our product claims or take other actions to satisfy the FDA. In addition, plaintiffs’ lawyers have filed class action lawsuits against cosmetic companies after receipt of these types of FDA warning letters. There can be no assurance that we will not be subject to state and federal government actions or class action lawsuits, which could harm our business, financial condition and results of operations.

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Additional state and federal requirements may be imposed on consumer products as well as cosmetics, cosmetic ingredients, or the labeling and packaging of products intended for use as cosmetics. For example, ~~several lawmakers are currently focused~~ on ~~giving~~December 29, 2022, Congress enacted the Modernization of Cosmetics Regulation Act of 2022 (“MoCRA”). MoCRA created new compliance requirements for manufacturers of cosmetic products in the United States and also significantly expanded the FDA's authority to oversee and regulate cosmetics. Under MoCRA, companies must comply with new requirements for cosmetics, such as new labeling requirements for certain products, safety substantiation, facility registration, product listing, adverse event reporting, good manufacturing practice (“GMP”) requirements and mandatory recalls. In addition, MoCRA provided FDA with new enforcement authorities over cosmetics, such as the ability to initiate mandatory recalls and to obtain access certain product records. Many of the requirements were 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 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 ~~authority~~time to ~~regulate cosmetics and their ingredients. This increased authority could require~~comply with the requirements.

In either case, although the FDA is required under MoCRA to ~~impose increased testing~~propose mandatory GMPs for cosmetics by July 1, 2024, and although parties that operate facilities engaged in the manufacturing ~~requirements on~~or processing of cosmetic ~~manufacturers or cosmetics or their ingredients before they may be marketed. We~~products are required to register such facilities and submit product listing information to FDA by the same deadline, the FDA has yet to propose implementing regulations for MoCRA. As such, we are unable to ascertain ~~what, if any,~~at this time the full impact ~~any increased statutory or regulatory requirements may~~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.

We also sell a number of products as over-the-counter (“OTC”) drug products, which are subject to the FDA OTC drug regulatory requirements because they are intended to be used as sunscreen or to treat acne. The FDA regulates the formulation, manufacturing, packaging and labeling of OTC drug products. Our sunscreen and acne drug products are regulated pursuant to FDA OTC drug monographs that specify acceptable active drug ingredients and acceptable product claims that are generally recognized as safe and effective for particular uses. If any of these products that are marketed as OTC drugs are not in compliance with the applicable FDA monograph, we may be required to reformulate the product, stop making claims relating to such product or stop selling the product until we are able to obtain costly and time-consuming FDA approvals. We are also required to submit adverse event reports to the FDA for our OTC drug products, and failure to comply with this requirement may subject us to FDA regulatory action.

We also sell a number of consumer products, which are subject to regulation by the CPSC in the United States under the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008. These statutes and the related regulations ban from the market consumer products that fail to comply with applicable product safety laws, regulations and standards. The CPSC has the authority to require the recall, repair, replacement or refund of any such banned products or products that otherwise create a substantial risk of injury and may seek penalties for regulatory noncompliance under certain circumstances. The CPSC also requires manufacturers of consumer products to report certain types of information to the CPSC regarding products that fail to comply with applicable regulations. Certain state laws also address the safety of consumer products, and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action.

Our products are also subject to state laws and regulations, such as the California Safe Drinking Water and Toxic Enforcement Act, also known as “Prop 65,” and failure to comply with such laws may also result in lawsuits and regulatory enforcement that could have a material adverse effect on our business, financial condition and results of operations.

We are, and may in the future be, involved in litigation related to such state laws and regulations.

Our facilities and those of our third-party manufacturers are subject to regulation under the Federal Food, Drug and Cosmetic Act ~~(the “FDCA”~~(“FDCA”) and FDA implementing regulations.

Our facilities and those of our third-party manufacturers are subject to regulation under the FDCA and FDA implementing regulations. 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. In addition, third-party manufacturer’s facilities for manufacturing OTC drug products must comply with the FDA’s current ~~drug good manufacturing practices~~GMP (“~~GMP”~~cGMP”) requirements for drug products that require us and our manufacturers to maintain, among other things, good manufacturing processes, including stringent vendor qualifications, ingredient identification, manufacturing controls and record keeping.

Our operations could be harmed if regulatory authorities make determinations that we, or our vendors, are not in compliance with these regulations. If the FDA finds a violation of ~~GMPs,~~cGMPs, it may enjoin our manufacturer’s operations, seize product, restrict importation of goods, and impose administrative, civil or criminal penalties. If we or our third-party manufacturers fail

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to comply with applicable regulatory requirements, we could be required to take costly corrective actions, including suspending manufacturing operations, changing product formulations, suspending sales, or initiating product recalls. In addition, compliance with these regulations has increased and may further increase the cost of manufacturing certain of our products as we work with our vendors to ~~assure~~ensure they are qualified and in compliance. For example, under MoCRA, manufacturers of cosmetic products in the United States will become subject to mandatory GMP requirements. 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. Any of these outcomes could have a material adverse effect on our business, financial condition and results of operations.

Government regulations and private party actions relating to the marketing and advertising of our products and services may restrict, inhibit or delay our ability to sell our products and harm our business, financial condition and results of operations.

Government authorities regulate advertising and product claims regarding the performance and benefits of our products. These regulatory authorities typically require a reasonable basis to support any marketing claims. What constitutes a reasonable basis for substantiation can vary widely from market to market, and there is no assurance that the efforts that we undertake to support our claims will be deemed adequate for any particular product or claim. ~~The most~~A significant area of risk for such activities relates to improper or unsubstantiated claims about our products and their use or safety. If we are unable to show adequate substantiation for our product claims, or our promotional materials make claims that exceed the scope of allowed claims for the classification of the specific product, whether cosmetics, OTC drug products or other consumer products that we offer, the FDA, the FTC or other regulatory authorities could take enforcement action or impose penalties, such as monetary consumer redress, requiring us to revise our marketing materials, amend our claims or stop selling certain products, all of which could harm our business, financial condition and results of operations. Any regulatory action or penalty could lead to private party actions, or private parties could seek to challenge our claims even in the absence of formal regulatory actions which could ~~further~~ harm our business, financial condition and results of operations.

Our business is subject to complex and evolving ~~U.S.~~US and foreign laws and regulations regarding privacy and data ~~protection and other matters.~~protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased costs of operations or otherwise harm our business, financial condition and results of operations.

We are subject to a variety of laws and regulations in the United States and abroad ~~that involve matters central to our business, including~~regarding privacy and data protection, ~~intellectual property, advertising, marketing, distribution, consumer protection and online payment services. The sale~~some of products outside the United States, the introduction of new products or expansion of our activities in certain jurisdictions may subject us to additional laws and regulations. These U.S. federal and state and foreign laws and regulations, which can be enforced by private parties or government entities and some of which provide for significant penalties for non-compliance. Such laws and regulations restrict how personal information is collected, processed, stored, used and disclosed, as well as set standards for its security, implement notice requirements regarding privacy practices, and provide individuals with certain rights regarding the use, disclosure, and sale of their protected personal information.

For example, the California Consumer Privacy Act (the “CCPA”) requires certain disclosures to California residents regarding a business’s data processing activities, affords California consumers rights with respect to their personal information (including the rights related to access to and deletion of personal information, and the right to opt out of certain disclosures of their personal information), and establishes significant penalties for noncompliance. The California Privacy Rights Act (the “CPRA”), which took effect on January 1, 2023, significantly expands the CCPA, including by introducing additional obligations such as data minimization and retention requirements, granting additional rights to California residents such as correction of personal information and additional opt-out rights, and creating a new regulatory authority, the California Privacy Protection Agency, to implement and enforce the law. Comprehensive privacy legislation imposing similar obligations have been passed in several states and took effect in Virginia, Colorado, Connecticut and Utah in 2023. Following this trend, several other states are ~~constantly~~considering enacting data protection legislation that may impose significant obligations and restrictions. Additionally, there is discussion in Congress of a new comprehensive federal data protection law. The enactment of such laws could create conflicting requirements, compliance with which could result in additional compliance costs. The effects of these laws are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply, and increase our potential exposure to regulatory enforcement and/or litigation.

In addition, the UK General Data Protection Regulation and Data Protection Act 2018 (collectively, the “UK GDPR”) and the EU’s General Data Protection Regulation (the “EU GDPR”) (the EU GDPR and UK GDPR together referred to as the “GDPR”) impose comprehensive data privacy compliance obligations in relation to the collection, processing, sharing, disclosure, transfer and other use of data relating to an identifiable living individual, including a principle of accountability and the obligation to demonstrate compliance through policies, procedures, training and audits. Failure to comply with the UK GDPR

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or the GDPR could result in penalties for noncompliance of up to the greater of GBP 17.5 million/EUR 20 million (as applicable) or 4% of our global annual turnover, and companies can be fined under each of these regimes independently with respect to the same violation. In addition to fines, a violation of the UK GDPR or the GDPR may result in regulatory investigations, reputational damage, orders to cease/change data processing activities, enforcement notices, assessment notices (for a compulsory audit) and/or civil claims (including class actions).

We are also subject, under the GDPR, to restrictions on cross-border transfers of personal data out of the European Economic Area (the “EEA”) where recent legal developments have created complexity and uncertainty regarding transfers of personal data outside the EEA and the UK, including to the United States. 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. On October 7, 2022, President Biden signed an Executive Order on ‘Enhancing Safeguards for United States Intelligence Activities’ which introduced new redress mechanisms and binding safeguards to address some of the concerns raised by the CJEU. We expect the existing legal complexity and uncertainty regarding international personal data transfers to continue. Some European regulators have prevented companies from transferring personal data out of the EEA for allegedly violating the EU GDPR’s cross—border transfer rules. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or continue to take enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

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. The same may be true outside the United States, where various jurisdictions have enacted or are considering comprehensive data protection legislation. Additionally, at the federal level in the United States, various bills have been introduced to enact comprehensive federal privacy legislation, though to date none of these efforts have been successful. If comprehensive privacy legislation is enacted at the federal level in the United States, this could lead to additional costs and increase our overall risk exposure.

We are also subject to evolving privacy laws on cookies, tracking technologies and e-marketing. Regulation of cookies and similar technologies may lead to broader restrictions on our marketing and personalization activities and may negatively impact our efforts to understand consumers’ Internet usage, online shopping and other relevant online behaviors, as well as the effectiveness of our marketing and our business generally. Such regulations, including uncertainties about how well the advertising technology ecosystem can adapt to legal changes around the use of tracking technologies, may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition and marketing. We may also be subject to ~~significant change. For example,~~fines and penalties for non-compliance with any such laws and regulations. The decline of cookies or other online tracking technologies as a means to identify and target potential purchasers may increase the cost of operating our business and lead to a decline in ~~2015,~~revenues. In addition, legal uncertainties about the ~~European Union Court~~legality of ~~Justice invalidated the U.S.-EU Safe Harbor Agreement regarding the transfer of personal information between the United States~~cookies and ~~the European Union. European~~other tracking technologies may increase regulatory scrutiny and U.S. negotiators agreed in February 2016 on a new framework, the Privacy Shield, which replaced the Safe Harbor framework from August 2016 onwards. However, there is currently litigation against this frameworkincrease potential civil liability under data protection or consumer protection laws.

Compliance with existing, forthcoming, and ~~it is uncertain whether the Privacy Shield framework will~~proposed privacy and data protection laws and regulations can be ~~similarly invalidated by the EU court. It is not known whether the European Commission will accept the new, stricter requirements as adequate. Although we~~costly and can delay or impede our ability to market and sell our products, on a UK website, we do not have personnel or operations based in the European Union. We have not historically relied on the former Safe Harbor framework to justify the collection, storage and processing of European consumer data on our servers in the United States. If we were to in the future it is already clear that under the new framework, companies which rely on the new Privacy Shield framework will face more stringent obligations and the sanctions for non-compliance with the principles of the framework will be more robust. There is also uncertainty as to whether the Privacy Shield and other mechanisms used to achieve the lawful transfer of data from the EU to the United States will withstand legal challenges. In addition, the European Union is significantly amending its data protection laws in ways that may limitimpede our ability to ~~collect~~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 orin operating our business, cause us to have difficulty maintaining a single operating model, result in negative publicity, increase our ~~potential liability for misuse, loss~~operating costs, require significant management time and attention, or ~~a breach of security in data of EU residents.~~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. In ~~particular,~~addition, if our privacy or data security measures fail to comply with applicable current or future laws and regulations, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data or our marketing practices, fines ~~of up to 20 million Euros or up to 4% of the total worldwide annual turnover of the preceding financial year (whichever is higher)~~ or other liabilities, as well as negative publicity and a potential loss of business. ~~The application, interpretation and enforcement of these laws and regulations~~We may be uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction and inconsistently with our current policies and practices. Moreover, consumer data privacy remains a matter of interest to lawmakers and regulators, and a number of other proposals are pending before federal, state and foreign legislative and regulatory bodies that could significantly affect our business. These existing and proposed laws and regulations can be costly to comply with and can delay or impede our ability to market and sell our products, result in negative publicity, increase our operating costs, require significant

~~management time and attention, and subject us to inquiries or investigations,~~also face civil claims ~~or other remedies,~~ including ~~fines or demands that we modify or cease existing business practices.~~

~~Furthermore, foreign data protection, privacy~~representative actions and other ~~laws~~class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, and regulations are often more restrictive than those in the United States. The European Union, for example, traditionally has imposed stricter obligations under its laws and regulations relating to privacy, data protection and consumer protection than the United States. Under the present regime, individual EU member countries have discretion with respect to their interpretation and implementationdiversion of these laws and the penalties for breach and have their own regulators with differing attitudes towards enforcement, which results in varying privacy standards and enforcement risks from jurisdiction to jurisdiction. Legislation and regulation in the European Union and some EU member states require companies to give specific types of notice and in some cases seek consent from consumers before using their data for certain purposes, including some marketing activities. In the majority of EU member countries, consent must be obtained prior to setting cookies or other tracking technologies. In addition, new rules are expected to come into force which alter rules on third-party cookies, web beacons and similar technology for online behavioral advertising and impose stricter requirements on companies using these tools, which may significantly affect the success of our current marketing strategies, and non-compliance may lead to considerable fines. Outsideinternal resources. Any of the European Union, there are many countries with data protections laws, and new countries are adopting data protection legislation with increasing frequency. Many of these laws also require consent from consumers for the collection and use of data for various purposes, including marketing, which may reduce the ability to market our products. In particular, these laws may have an impact on our ability to conduct business through websites we and our partners may operate outside the United States. There is no harmonized approach to these laws and regulations globally although several frameworks exist. Consequently, the potential risk of non-compliance with applicable foreign data protection laws and regulations will increase as we continue our international expansion. We may need to change and limit the way we use consumer information in operating our business and may have difficulty maintaining a single operating model that is compliant. Compliance with such laws and regulations will result in additional costs and may necessitate changes to our business practices and divergent operating models, which may adversely affect our business, financial condition and results of operations.

We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations.

We are, and may in the future become, party to litigation, regulatory proceedings or other disputes. 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. These potential claims include but are not limited to personal injury and class action lawsuits, intellectual property claims, employment litigation and regulatory investigations relating to the advertising and promotional claims about our products. Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages thatforegoing could have a material adverse effect on our business, financial condition and results of operations.

~~We may be required to recall products and may face product liability claims, either of which could result in unexpected costs and damage our reputation.~~

We sell products for human use. Our products intended for use as cosmetics are not generally subject to pre-market approval or registration processes, so we cannot rely upon a government safety panel to qualify or approve our products for use. A product may be safe for the general population when used as directed but could cause an adverse reaction for a person who has a health condition or allergies, or who is taking a prescription medication. While we include what we believe are adequate instructions and warnings and we have historically had low numbers of reported adverse reactions, previously unknown adverse reactions could occur. If we discover that any of our products are causing adverse reactions, we could suffer further adverse publicity or regulatory/government sanctions.

Potential product liability risks may arise from the testing, manufacture and sale of our products, including that the products fail to meet quality or manufacturing specifications, contain contaminants, include inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances or for persons with health conditions or allergies, or cause adverse reactions or side effects. Product liability claims could increase our costs, and adversely affect our business, financial condition and results of operations. As we continue to offer an increasing number of new products, our product liability risk may increase. It may be necessary for us to recall products that do not meet approved specifications or because of the side effects resulting from the use of our products, which would result in adverse publicity, potentially significant costs in connection with the recall and could have a material adverse effect on our business, financial condition and results of operations.

In addition, plaintiffs in the past have received substantial damage awards from other cosmetic and drug companies based upon claims for injuries allegedly caused by the use of their products. Although we currently maintain general liability insurance, any claims brought against us may exceed our existing or future insurance policy coverage or limits. Any judgment against us that is in excess of our policy coverage or limits would have to be paid from our cash reserves, which would reduce our capital resources. In addition, we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage in the future. Further, 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.

~~If we are unable to protect our intellectual property the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.~~

We rely on trademark, copyright, trade secret, patent and other laws protecting proprietary rights, nondisclosure and confidentiality agreements and other practices, to protect our brands and proprietary information, technologies and processes. Our principal intellectual property assets include the registered trademarks “e.l.f.,” “eyes lips face” and “play beautifully.” Our trademarks are valuable assets that support our brand and consumers’ perception of our products. Although we have existing and pending trademark registrations for our brands in the United States and in many of the foreign countries in which we operate, we may not be successful in asserting trademark or trade name protection in all jurisdictions. We also have not applied for trademark protection in all relevant foreign jurisdictions and cannot assure you that our pending trademark applications will be approved. Third parties may also oppose our trademark applications domestically or abroad, or otherwise challenge our use of the trademarks. 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.

The efforts we have taken to protect our proprietary rights may not be sufficient or effective. In addition, effective trademark, copyright, patent and trade secret protection may be unavailable or limited for certain of our intellectual property in some foreign countries. Other parties may infringe our intellectual property rights and may dilute our brands in the marketplace. We may need to engage in litigation or other activities to enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of proprietary rights of others. Any such activities could require us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. If we fail to protect our intellectual property or other proprietary rights, our business, financial condition and results of operations may be materially and adversely affected.

Our success depends on our ability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

Our commercial success depends in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights, trade secrets and other proprietary rights of others. We cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate such rights. From time to time we receive allegations of trademark or patent infringement and third parties have filed claims against us with allegations of intellectual property infringement. In addition, third parties may involve us in intellectual property disputes as part of a business model or strategy to gain competitive advantage.

To the extent we gain greater visibility and market exposure as a public company or otherwise, we may also face a greater risk of being the subject of such claims and litigation. For these and other reasons, third parties may allege that our products or activities infringe, misappropriate, dilute or otherwise violate their trademark, patent, copyright or other proprietary rights. Defending against allegations and litigation could be expensive, occupy significant amounts of time, divert management’s attention from other business concerns and have an adverse impact on our ability to bring products to market. 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.

We may also be required to pay substantial damages or be subject to an order prohibiting us and our retail customers from importing or selling certain products or engaging in certain activities. Our inability to operate our business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could have a material adverse effect on our business, financial condition and results of operations.

~~Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties.~~

We rely to a large extent on our online presence to reach consumers, and we offer consumers the opportunity to rate and comment on our products on our website. Negative commentary regarding us or our products may be posted on our website or social media platforms and may be adverse to our reputation or business. Our target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction. In addition, we may face claims relating to information that is published or made available through the interactive features of our website. 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. While the Communications Decency Act (CDA) and Digital Millennium Copyright Act (DMCA) generally protect online service providers from claims of copyright infringement or other legal liability for the self-directed activities of its users, if it were determined that we did not meet the relevant safe harbor requirements under either law, we could be exposed to claims related to advertising practices, defamation, intellectual property rights, rights of publicity and privacy, and personal injury torts. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.

We also use third-party social media platforms as marketing tools. For example, we maintain Snapchat, Facebook, Twitter, Pinterest, Instagram, YouTube and Google+ accounts. As e-commerce and social media platforms continue to rapidly evolve, we must continue to maintain a presence on these platforms and establish presences on new or emerging popular social media platforms. If we are unable to cost-effectively use social media platforms as marketing tools, our ability to acquire new consumers and our financial condition may suffer. Furthermore, as laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and result of operations.

In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.

~~Volatility in the financial markets could have a material adverse effect on our business.~~

While we currently generate significant cash flows from our ongoing operations and have had access to credit markets through our various financing activities, credit markets may experience significant disruptions. Deterioration in global financial markets could make future financing difficult or more expensive. If any financial institution party to our credit facilities or other financing arrangements were to declare bankruptcy or become insolvent, they may be unable to perform under their agreements with us. This could leave us with reduced borrowing capacity, which could have a material adverse effect on our business, financial condition and results of operations.

~~Fluctuations in currency exchange rates may negatively affect our financial condition and results of operations.~~

Exchange rate fluctuations may affect the costs that we incur in our operations. The main currencies to which we are exposed are the RMB, the British pound and the Canadian dollar. The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. A depreciation of these currencies against the U.S. dollar will decrease the U.S. dollar equivalent of the amounts derived from foreign operations reported in our condensed consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts. The cost of certain items, such as raw materials, manufacturing, employee salaries and transportation and freight, required by our operations may be affected by changes in the value of the relevant currencies. To the extent that we are required to pay for goods or services in foreign currencies, the appreciation of such currencies against the U.S. dollar will tend to negatively affect our business. There can be no assurance that foreign currency fluctuations will not have a material adverse effect on our business, financial condition and results of operations.

~~Future acquisitions or investments could disrupt our business and harm our financial condition.~~

In the future, we may pursue acquisitions or investments that we believe will help us achieve our strategic objectives. 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;~~

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~~implementation or remediation of controls, procedures and policies at the acquired company;~~

~~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 acquired company’s users and customers onto our systems;~~

~~retention of employees from the acquired company;~~

~~integration of employees from the acquired company into our organization;~~

~~integration of the acquired company’s accounting, information management, human resources and other administrative systems and operations into our systems and operations;~~

~~liability for activities of the acquired company 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 company, including claims brought by terminated employees, customers, former stockholders or other third parties.~~

If we are unable to address these difficulties and challenges or other problems encountered in connection with any future acquisition or investment, we might not realize the anticipated benefits of that acquisition or investment and we might incur unanticipated liabilities or otherwise suffer harm to our business generally.

To the extent that we pay the consideration for any future acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes. Future acquisitions or investments could also result in dilutive issuances of our equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on our consolidated balance sheet, any of which could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to maintain effective internal controls, we may not be able to produce timely and accurate financial statements, and we or our independent registered public accounting firm may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our stock price.

Prior to our initial public offering in September 2016, we were a private company and were not required to test our internal controls on a systematic basis. As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), our management will be required to report upon the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) beginning with the annual report for our fiscal year ending December 31, 2017. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the date we are no longer an “emerging growth company” and reach accelerated filer status.

We are in the process of designing and implementing the system of internal control over financial reporting required to comply with our future obligations and to strengthen our overall control environment. This initiative is time consuming, costly, and might place significant demands on our financial and operational resources, as well as our information technology systems.

Our current efforts to design and implement an effective control environment may not be sufficient to remediate or prevent material weaknesses or significant deficiencies from occurring in the future. A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met. Moreover, any such changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and

harm our business. Furthermore, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price.

Failure to comply with the ~~U.S.~~US Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject us to penalties and other adverse consequences.

We currently source and manufacture ~~substantially all~~a substantial number of our products from third-party suppliers and manufacturers ~~in China,~~located outside of the United States, and we have an office in China from which we manage our international supply chain. We sell our products in several countries outside of the United States, ~~primarily~~including through distributors. Our operations are subject to the ~~U.S.~~US Foreign Corrupt Practices Act (the “FCPA”), as well as the anti-corruption and anti-bribery laws in the countries where we do business. The FCPA prohibits covered parties from offering, promising, authorizing or giving anything of value, directly or indirectly, to a “foreign government official” with the intent of improperly influencing the official’s act or decision, inducing the official to act or refrain from acting in violation of lawful duty, or obtaining or retaining an improper business advantage. The FCPA also requires publicly traded companies to maintain records that accurately and fairly represent their transactions, and to have an adequate system of internal accounting controls. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials, and some laws that may apply to our operations prohibit commercial bribery, including giving or receiving improper payments to or from non-government parties, as well as so-called “facilitation” payments. In addition, we are subject to ~~U.S.~~United States and other applicable trade control regulations that restrict with whom we may transact business, including the trade sanctions enforced by the ~~U.S.~~US Treasury, Office of Foreign Assets ~~Control (OFAC).~~

Control.

While we have implemented policies, internal controls and other measures reasonably designed to promote compliance with applicable anti-corruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with ~~U.S.~~US trade control laws, our employees or agents may engage in improper conduct for which we might be held responsible. Any violations of these anti-corruption or trade controls laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If we, or our employees or agents acting on our behalf, are found to have engaged in practices that violate these laws and regulations, we could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, delisting from securities exchanges and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our ~~brand~~brands and reputation, our sales activities or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or trade control laws and regulations.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection, social media marketing, third-party cookies, web beacons and similar technology for online behavioral advertising and gift cards. It is not clear how existing laws governing issues such as property ownership, sales taxes and other taxes and consumer privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. We cannot be sure that our practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. 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. We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to censor content available on our sites or may even attempt to completely block access to our sites. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our consumer base may be adversely affected, and we may not be able to maintain or grow our net sales and expand our business as anticipated.

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Risk factors related to legal and regulatory proceedings

We are, and may in the future become, party to litigation, regulatory proceedings or other disputes. 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. These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, privacy claims, employment litigation and regulatory investigations and causes of action relating to the advertising and promotional claims about our products. Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

We may be required to recall products and may face product liability claims, either of which could result in unexpected costs and damage our reputation.

We sell products for human use. Our products intended for use as cosmetics or skincare are not generally subject to pre-market approval or registration processes, so we cannot rely upon a government safety panel to qualify or approve our products for use. A product may be safe for the general population when used as directed but could cause an adverse reaction for a person who has a health condition or allergies, or who is taking a prescription medication. While we include what we believe are adequate instructions and warnings and we have historically had low numbers of reported adverse reactions, previously unknown adverse reactions could occur. If we discover that any of our products are causing adverse reactions, we could suffer adverse publicity or regulatory/government sanctions.

In addition, plaintiffs in the past have received substantial damage awards from other cosmetic and drug companies based upon claims for injuries allegedly caused by the use of their products. Although we currently maintain general liability insurance, any claims brought against us may be subject to policy exclusions or exceed our existing or future insurance policy coverage or limits. Any judgment against us that is not covered or in excess of our policy coverage or limits would have to be paid from our cash reserves, which would reduce our capital resources. In addition, we may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage in the future. Further, 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.

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.

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We also have not applied for trademark protection in all relevant foreign jurisdictions and cannot assure you that our pending trademark applications will be approved. Third parties may also attempt to register our trademarks abroad in jurisdictions where we have not yet applied for trademark protection, oppose our trademark applications domestically or abroad, or otherwise challenge our use of the trademarks. 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. We primarily rely on know-how to protect our products. It is possible that others will independently develop the same or similar know-how, which may allow them to sell products similar to ours. If others obtain access to our know-how, our confidentiality agreements may not effectively prevent disclosure of our proprietary information, technologies and processes and may not provide an adequate remedy in the event of unauthorized use of such information, which could harm our competitive position. Furthermore, advances in artificial intelligence technology may generate intellectual property developments, which existing intellectual property laws may not adequately protect and which may also give rise to a proliferation of infringement which we may not be able to address effectively.

Our commercial success depends in part on our ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights, trade secrets and other proprietary rights of others. We cannot be certain that the conduct of our business does not and will not infringe, misappropriate or otherwise violate such rights. From time to time we receive allegations of intellectual property infringement and third parties have filed claims against us with allegations of intellectual property infringement. We are, and may in the future be, subject to third-party claims of intellectual property infringement. In addition, third parties may involve us in intellectual property disputes as part of a business model or strategy to gain competitive advantage.

As we gain greater visibility and market exposure as a public company and otherwise, we also face a greater risk of being the subject of such claims and litigation. For these and other reasons, third parties may allege that our products or activities infringe, misappropriate, dilute or otherwise violate their trademark, patent, copyright or other proprietary rights. Defending against allegations and litigation could be expensive, occupy significant amounts of time, divert management’s attention from other business concerns and have an adverse impact on our ability to bring products to market. 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.

Our agreement with Alicia Keys for our Keys Soulcare brand may be terminated if specified conditions are not met.

We have an agreement with Alicia Keys regarding our Keys Soulcare brand, which, among other things, includes a license for her likeness and imposes various obligations on us. If we breach our obligations, our rights under the agreement could be terminated by Alicia Keys and we could, among other things, have to pay damages, lose our ability to associate the Keys Soulcare brand with her, lose our ability to sell products branded as Keys Soulcare, lose any upfront investments made in connection with the Keys Soulcare brand, and sustain reputational damage. Each of these risks could have an adverse effect on our business, results of operations and financial condition.

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Risk factors related to marketing activities

Use of social media may materially and adversely affect our reputation or subject us to fines or other penalties, and any failure in our marketing efforts through our social media presence could materially and adversely affect our business, financial condition and results of operations.

We rely to a large extent on our online presence to reach consumers, and we offer consumers the opportunity to rate and comment on our products on our e-commerce websites and mobile applications. Negative commentary or false statements regarding us or our products may be posted on our e-commerce websites, mobile applications, or social media platforms and may be harmful to our reputation or business. Our target consumers often value readily available information and may act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction. In addition, we may face claims relating to information that is published or made available through the interactive features of our e-commerce websites and mobile applications. 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. While the Communications Decency Act and Digital Millennium Copyright Act generally protect online service providers from claims of copyright infringement or other legal liability for the self-directed activities of its users, if it were determined that we did not meet the relevant safe harbor requirements under either law, we could be exposed to claims related to advertising practices, defamation, intellectual property rights, rights of publicity and privacy, and personal injury torts. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.

We also use third-party social media platforms as marketing tools. For example, we maintain Snapchat, Facebook, TikTok, X (formerly Twitter), Roblox, Twitch, Pinterest, Instagram and YouTube accounts. As e-commerce and social media platforms continue to rapidly evolve, we must continue to maintain a presence on these platforms and establish presences on new or emerging popular social media platforms. If we are unable to cost-effectively use social media platforms as marketing tools, our ability to acquire new consumers and our financial condition may suffer. Generally, the opportunities in and sophistication of newer advertising channels are relatively undeveloped and unproven, and there can be no assurance that we will be able to continue to appropriately manage and fine-tune our marketing efforts in response to these and other trends in the advertising industry. Furthermore, these newer advertising channels often change rapidly and can be subject to disruptions for reasons beyond our control. For example, lawmakers in the United States, Europe and Canada have recently escalated efforts to restrict access to TikTok. While a US judge in November 2023 blocked Montana’s first-of-its-kind proposed state ban of TikTok, other states, governmental bodies and institutions have voiced concerns that TikTok poses a national security threat and may pursue similar prohibitions. As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and result of operations. Any failure to successfully manage our marketing efforts on, or disruptions to, social media channels that we have come to depend on for marketing could materially adversely affect our business, financial condition and results of operations.

In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on us to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect our net revenue and business.

Our business is highly dependent upon email and other messaging services for promoting our ~~brand,~~brands, products and e-commerce platforms. We provide emails, text messages and “push” communications to inform consumers of new products, shipping specials and other promotions. We believe these messages are an important part of our consumer experience. If we are unable to successfully deliver emails or other messages to our subscribers, or if subscribers decline to open or read our messages, our ~~net revenue~~business, financial condition and ~~profitability would~~results of operations may be materially adversely affected. Changes in how web and mail services block, organize and prioritize email may reduce the number of subscribers who receive or open our emails. For example, Google’s Gmail service has a feature that organizes incoming emails into categories (for example, primary, social and promotions).

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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. Actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact our business. From time to time, Internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails or other messages to consumers.

Changes in the laws or regulations that limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications would also materially adversely impact our business. For example, electronic marketing and privacy requirements in the EU and the UK are highly restrictive and differ greatly from those in the United States, which could cause fewer of individuals in the EU or the UK to subscribe to our marketing messages and drive up our costs and risk of regulatory oversight and fines if we are found to be non-compliant.

Our use of email and other messaging services to send communications to consumers may also result in legal claims against us, which may cause us increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages. We also rely on social networking messaging services to send communications and to encourage consumers to send communications. 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 ~~operating results.~~

~~Our Sponsor~~results of operations.

Risk factors relating to our stockholders and J.A. Cosmetics Corp. have significant influence over our company, which could limit the ability of our other stockholders to influence matters requiring stockholder approval and could adversely affect our other stockholders.

Under our second amended and restated stockholders agreement (the “Stockholders Agreement”), TPG Growth II Management, LLC (our “Sponsor”) has the right to designate up to three members of our board of directors so long as it holds at least 30% of the shares of our outstanding common stock, two members of our board of directors so long as it holds less than 30% but greater than or equal to 20% of our outstanding common stock, and one member of our board of directors so long as it holds less than 20% but greater than or equal to 5% of our outstanding common stock. Our Sponsor’s designees currently comprise three of the seven members of our board of directors. In addition, as of September 30, 2017, our Sponsor held approximately 29%ownership of our common stock ~~J.A. Cosmetics Corp. held approximately 10%~~

Our business could be negatively impacted by corporate citizenship and sustainability matters.

There is an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning corporate citizenship and sustainability matters. From time to time, we may announce certain initiatives, including goals, regarding our focus areas, which include environmental matters, packaging, responsible sourcing and social investments. We could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could fail in accurately reporting our ~~common stock~~progress on such initiatives and our Sponsor may be deemed to beneficially own a majority of our common stock. Accordingly, our Sponsor and J.A. Cosmetics Corp. exert a significant degree of influence or actual control over our management, business policies and affairs and over matters requiring stockholder approval.

goals. In addition, ~~the Stockholders Agreement provides that for as long as our Sponsor owns or holds, directly or indirectly, at least 30% of our outstanding common stock,~~ we ~~must obtain the consent of our Sponsor before we or our subsidiaries are permitted to take any of the following actions:~~

~~authorize, issue or enter into any agreement providing~~could be criticized for the ~~issuance (contingent~~scope of such initiatives or ~~otherwise) of (x) any notes~~goals or ~~debt securities~~perceived as not acting responsibly in connection with ~~options, warrants~~these matters. Any such matters, or other rights to acquire equity securities or otherwise containing profit participation features or (y) any equity securities other than equity securities issued to employees, directors, consultants or advisors pursuant to a plan, agreement or arrangement approved by our board of directors;

~~liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction or series of transactions;~~

~~incur any indebtedness in an aggregate amount in excess of $50.0 million (other than indebtedness under the terms~~related corporate citizenship and ~~provisions of the Credit Agreement); and~~

~~increase or decrease the size of our board of directors.~~

Until such time as our Sponsor and J.A. Cosmetics Corp. cease collectively to beneficially own more than 50% of the outstanding shares of common stock, our Sponsor has the ability to call a special stockholder meeting, and our Sponsor and J.A. Cosmetics Corp. have the ability to take stockholder action by written consent without calling a stockholder meeting.

~~Concentrated control of our outstanding shares by our Sponsor and J.A. Cosmetics Corp. limits the ability of other stockholders to influence corporate~~sustainability matters, and, as a result, we may take actions that our other stockholders do not view as beneficial. Our Sponsor and J.A. Cosmetics Corp.’s combined voting control may also discourage or block transactions involving a change of control of our company, including transactions in which holders of our common stock might otherwise receive a premium for their shares over the then-current market price. For example, concentration of ownership by our Sponsor and J.A. Cosmetics Corp. could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their common stock.

In addition, our amended and restated certificate of incorporation provides that, until such time as our Sponsor and J.A. Cosmetics Corp. cease collectively to beneficially own more than 50% of the outstanding shares of common stock, we will not be subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), which prohibits persons deemed to be interested stockholders from engaging in a business combination with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Because we have elected to opt out of Section 203 of the DGCL until such time as our Sponsor and J.A. Cosmetics Corp. cease collectively to beneficially own more than 50% of the outstanding shares of common stock, generally any business combination transaction between our company and either our Sponsor or J.A. Cosmetics Corp. is not subject to the statutory protection otherwise afforded under Section 203 of the DGCL subject to prescribed exceptions.

Moreover, our Sponsor and J.A. Cosmetics Corp. are not prohibited from selling their shares of common stock to a third party and may do so without stockholder approval and without providing for a purchase of shares of common stock held by other stockholders. Accordingly, shares of our common stock may be worth less than they would be if our Sponsor and J.A. Cosmetics Corp. did not maintain significant influence over our company.

Our amended and restated certificate of incorporation contains provisions renouncing our interest and expectation to participate in certain corporate opportunities identified by or presented to our Sponsor.

Our Sponsor and its affiliates may engage in activities similar to our lines of business or have an interest in the same areas of corporate opportunities as we do. Our amended and restated certificate of incorporation provides that our Sponsor and its affiliates do not have any duty to refrain from (i) engaging, directly or indirectly, in the same or similar business activities or lines of business as us, including those business activities or lines of business deemed to be competing with us or (ii) doing business with any of our clients, customers or vendors. In the event that our Sponsor or any of its affiliates acquires knowledge of a potential business opportunity which may be a corporate opportunity for us, they have no duty to communicate or offer such corporate opportunity to us. Our amended and restated certificate of incorporation also provides that, to the fullest extent permitted by law, neither our Sponsor nor any of its affiliates will be liable to us, for breach of any fiduciary duty or otherwise, by reason of the fact that our Sponsor or any of its affiliates direct such corporate opportunity to another person, or otherwise does not communicate information regarding such corporate opportunity to us, and we have waived and renounced any claim that such business opportunity constituted a corporate opportunity that should have been presented to us. In addition, any member of our board of directors designated by our Sponsor pursuant to the Stockholders Agreement may consider both the interests of our Sponsor and our Sponsor’s obligations under the Stockholders Agreement in exercising such board member’s powers, rights and duties as a director of our company. The Stockholders Agreement contains similar provisions with respect to corporate opportunities as the provisions in our amended and restated certificate of incorporation described above. These potential conflicts of interest could have a material adverse effect on our business, results of operations, financial condition and prospects if attractive business opportunities are allocated by our Sponsor to itself, its affiliates or third parties instead of to us.

We have incurred and will continue to incur increased costs and are subject to additional regulations and requirements as a result of becoming a newly public company, and our management is required to devote substantial time to new compliance matters.

As a newly public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company. We are now subject to the reporting requirements of the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and the New York Stock Exchange (the “NYSE”) to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.

Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory “say-on-pay” voting requirements that will apply to us when we cease to be an emerging growth company. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

The rules and regulations applicable to public companies will continue to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. ~~The~~

In addition, a variety of organizations measure the performance of companies on environmental, social, and governance (“ESG”) topics, and the results of these assessments are widely publicized. Investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions. Topics taken into account in such assessments include, among others, the company’s efforts and impacts on climate change and human rights, ethics and compliance with law, and the role of the company’s board of directors in supervising various sustainability issues.

Furthermore, ESG-related legislation and regulation is being implemented across the world, including in the United States, and any such legislation or regulation, including the SEC’s proposed climate-related reporting requirements, may impose additional compliance burdens on us and on third parties in our value chain, which could potentially result in increased administrative costs, decreased demand in the marketplace for our products, and/or increased costs for our supplies and products. The SEC has proposed rule changes that would require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements. If approved, these new disclosure requirements will ~~decrease our net income or~~likely increase our ~~net loss, and may require us to reduce~~ costs ~~in other areas~~of compliance, which would then increase our operating expenses.

We take into consideration the expected impact of ESG matters on the sustainability of our business ~~or increase~~over time and the ~~prices~~potential impact of our ~~products~~business on society and the environment. However, in light of investors’ increased focus on ESG matters, and in light of increased and evolving legislation and regulation regarding ESG matters, there can be no certainty that we will manage such issues successfully, or ~~services. We cannot predict~~that we will successfully meet our customers’ or ~~estimate~~society’s expectations as to our proper role. If we fail to meet the ~~amount~~ESG values, standards and metrics that we set for ourselves, or ~~timing of additional costs~~our articulated public benefit purposes, or fail to align to regulatory or market expectations or standards regarding such matters, we may ~~incur~~experience negative publicity and a loss of customers as a result, which will adversely affect our business, financial condition, and results of operations.

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Actions of activist stockholders could be costly and time-consuming, divert management’s attention and resources, and have an adverse effect on our business.

While we value open dialogue and input from our stockholders, activist stockholders could take actions that could be costly and time-consuming to ~~respond to these requirements. The impact~~us, disrupt our operations, and divert the attention of ~~these requirements could also make it more difficult for us to attract and retain qualified persons to serve on~~ our board of directors, management, and employees, such as public proposals and requests for potential nominations of candidates for election to our board ~~committees~~of directors, requests to pursue a strategic combination or ~~as executive officers. Furthermore, if~~other transaction, or other special requests. As a result, we ~~are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions~~have retained, and ~~other regulatory action and potentially civil litigation.~~

~~An active trading market for our common stock~~ may ~~not be sustained, and the market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.~~

Prior to our initial public offering in September 2016, there was no public trading market for shares of our common stock. Although our common stock is now listed on the NYSE, the trading volume of our common stock has been limited, and there can be no assurances that an active trading market for our common stock will be sustained. In the absence of an active trading market for our common stock, stockholders may not be able to sell their common stock at the time or price they would like to sell.

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. 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, 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 cosmetic 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~~retain additional services of various professionals to advise us in ~~market valuations~~these matters, including legal, financial and communications advisers, the costs of ~~similar companies~~which may negatively impact our future financial results. In addition, perceived uncertainties as to our future direction, strategy, or ~~speculation~~leadership created as a consequence of activist stockholder initiatives may result in the ~~press~~loss of potential business opportunities, harm our ability to attract new or ~~investment community, announcements by~~retain existing investors, customers, directors, employees or other partners, and cause 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 the number of stores we open, close or convert in any period, and in response the marketstock price ~~of shares of our common stock could decrease significantly.~~

~~In the past, following~~to experience periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

or stagnation.

Because we have no current plans to pay cash dividends on our common stock, stockholders may not receive any return on investment unless they sell our common stock for a price greater than that which they paid for it.

We have no current plans to pay cash dividends on our common stock. The declaration, amount and payment of any future dividends will be at the sole discretion of our board of directors. Our board of directors may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, including restrictions under the Amended Credit Agreement and other indebtedness we may incur, and such other factors as our board of directors may deem relevant.

Stockholders may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.

We had approximately ~~203.7~~194.5 million shares of common stock authorized but unissued and 55.5 million shares of common stock outstanding as of ~~November~~February 1, ~~2017.~~2024. Our amended and restated certificate of incorporation authorizes us to issue these shares of common stock and stock options exercisable for common stock (and other equity awards) for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions or otherwise. Any common stock that we issue, including under our existing equity incentive plans or any additional equity incentive plans that we may adopt in the future, would dilute the percentage ownership held by existing investors.

~~Future sales, or~~ In connection with our acquisition of Naturium, we issued 577,659 shares of the ~~perception of future sales, by us or our stockholders in the public market could cause the market price for our~~Company’s common stock, ~~to decline.~~

~~The sale~~with a fair market value of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, including sales by our Sponsor, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. As of November 1, 2017, we had a total of 46,259,817 shares of common stock outstanding.

~~The holders of up to 24,641,752 shares of our common stock, or approximately 53% of our outstanding common stock based on shares outstanding~~$57.8 million as of ~~November 1, 2017, are entitled to rights with respect to registration~~the date of ~~such shares under~~ the Securities Act pursuant to a registration rights agreement. In addition, each of our Sponsor, J.A. Cosmetics Corp. and certain family trusts of our Chief Executive Officer, Tarang Amin, have the right, subject to certain conditions, to require us to file registration statements covering its or their shares or to include its or their shares in registration statements that we may file.

In addition, we have filed registration statements on Form S-8 under the Securities Act covering an aggregate of 12,940,811 shares of our common stock or securities convertible into or exchangeable for shares of our common stock issued pursuant to our equity incentive plans. We intend to file one or more registration statements on Form S-8 to cover additional shares of our common stock or securities convertible into or exchangeable for shares of our common stock pursuant to automatic increases in the number of shares reserved under our 2016 Equity Incentive Award Plan and our 2016 Employee Stock Purchase Plan. Accordingly, shares registered under these registration statements on Form S-8 will be available for sale in the open market.

As restrictions on resale end, the market price of shares of our common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of shares of our common stock or other securities.

Acquisition.

Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our board 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 ~~subject to the Stockholders Agreement,~~ and for stockholders to include matters to be considered at our annual meetings;

•these provisions prohibit stockholder action by written consent after such time as our Sponsor and J.A. Cosmetics Corp. cease collectively to beneficially own (directly or indirectly) more than 50% of the voting power of the outstanding shares of our common stock (the “Trigger Event”);

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 from~~directors; and ~~after the Trigger Event; 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 from and after the Trigger Event.~~

directors.

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Further, as a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find ~~beneficial, provided that we will not be subject to Section 203 of the DGCL until after such time as the Trigger Event occurs.~~beneficial. These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock. These provisions could also discourage proxy contests and make it more difficult for other stockholders to elect directors of their choosing and to cause us to take other corporate actions they may desire.

~~We are an emerging growth company, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.~~

We qualify as an emerging growth company as defined in the JOBS Act. As a result, we are permitted to, and do, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, for so long as we are an emerging growth company, we will not be required to:

~~engage an independent registered public accounting firm to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;~~

comply with any requirement that may be adopted by the PCAOB, regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

~~submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes;” or~~

disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

We may remain an emerging growth company until the fiscal year-end following the fifth anniversary of the completion of our initial public offering, though we may cease to be an emerging growth company earlier under certain circumstances, including (i) if we become a large accelerated filer, (ii) if our gross revenue exceeds $1.07 billion in any fiscal year or (iii) if we issue more than $1.07 billion in non-convertible notes in any three-year period.

The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot provide any assurances that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive if we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline and/or become more volatile.

Our board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval.

Our amended and restated certificate of incorporation authorizes our board of directors, without the approval of our stockholders, to issue up to 30 million shares of our preferred stock, subject to limitations prescribed by applicable law, rules and regulations and the provisions of our amended and restated certificate of incorporation, as shares of preferred stock in series, to establish from time to time the number of shares to be included in each such series and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The powers, preferences and rights of these additional series of preferred stock may be senior to or on parity with our common stock, which may reduce its value.

~~If securities analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could 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. 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. 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.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find this provision in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

General risk factors

An active trading market for our common stock may not be sustained, and the market price of shares of our common stock may be volatile, which could cause the value of your investment to decline.

Although our common stock is listed on the NYSE, there can be no assurances that an active trading market for our common stock will be sustained. In the absence of an active trading market for our common stock, stockholders may not be able to sell their common stock at the time or price they would like to sell.

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. 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, 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.

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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 December 31, 2023. Purchases under the Share Repurchase Program may be made from time to time in the open market, in privately negotiated transactions or otherwise. The timing and amount of any repurchases pursuant to the Share Repurchase Program will be determined based on market conditions, share price and other factors. The Share Repurchase Program may be suspended or discontinued at any time and there is no guarantee that any shares will be purchased under the Share Repurchase Program.

In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Future sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our common stock to decline.

The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

In addition, all the shares of common stock subject to stock options and restricted stock units and shares of restricted stock awards outstanding and reserved under our 2014 Equity Incentive Plan, our 2016 Equity Incentive Award Plan and our 2016 Employee Stock Purchase Plan have been registered on Form S-8 under the Securities Act and such shares, once the underlying equity award vests, will be eligible for sale in the public markets, subject to Rule 144 limitations applicable to affiliates. We intend to file one or more registration statements on Form S-8 to cover additional shares of our common stock or securities convertible into or exchangeable for shares of our common stock pursuant to automatic increases in the number of shares reserved under our 2016 Equity Incentive Award Plan and our 2016 Employee Stock Purchase Plan. Accordingly, shares registered under these registration statements on Form S-8 will be available for sale in the open market.

If securities analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

Item 2. Unregistered sales of equity securities and use of ~~proceeds~~

~~None~~

proceeds.

Issuer Purchases of Equity Securities

In May 2019, we announced that our board of directors authorized the Share Repurchase Program, which authorizes us to repurchase up to $25 million of our outstanding shares of common stock. The Share Repurchase Program remains in effect through the earlier of (i) the date that $25 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.

Subject 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 Share Repurchase Program.

We did not repurchase any shares during the three months ended December 31, 2023, including pursuant to the Share Repurchase Program. A total of $17.1 million remains available for future share repurchases under the Share Repurchase Program as of December 31, 2023.

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Item 3. Defaults upon senior ~~securities~~

~~None~~

securities.

None.

Item 4. Mine safety ~~disclosures~~

~~None~~

disclosures.

None.

Item 5. Other ~~information~~

~~None~~

information.

Rule 10b5-1 Trading Plans

During the three months ended December 31, 2023, no director or officer of the Company adopted, terminated or modified a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. E~~xhibits~~

Exhibits.

Incorporated by Reference
Exhibit
Number
Exhibit Description
Filed
Herewith
Form
Exhibit
Number
File Number
Filing Date

10.1
First Amendment to Credit Agreement, dated as of August 25, 2017, by and among e.l.f. Beauty, Inc., as parent guarantor, e.l.f. Cosmetics, Inc., JA 139 Fulton Street Corp., JA 741 Retail Corp., JA Cosmetics Retail, Inc., J.A. RF, LLC and J.A. Cherry Hill, LLC, each as a borrower, Bank of Montreal, as the administrative agent, swingline lender and l/c issuer, and the lenders from time to time party thereto.

8-K
10.1
001-39873
08/28/2017
31.1
Certification of the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act.
X

31.2
Certification of the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act.
X

32.1*
Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.
X

101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
XBRL Instance.
XBRL Taxonomy Extension Schema.
XBRL Taxonomy Extension Calculation Linkbase.
XBRL Taxonomy Extension Label Linkbase.
XBRL Taxonomy Extension Presentation Linkbase.
XBRL Taxonomy Extension Definition Linkbase.
X
X
X
X
X
X

Incorporated by Reference

Exhibit
Number

Exhibit Description

Filed
Herewith

Form

Exhibit
Number

File Number

Filing Date

3.1

Amended and Restated Certificate of Incorporation of e.l.f. Beauty, Inc.

8-K

3.1

001-37873

9/27/2016

3.2

Amended and Restated Bylaws of e.l.f. Beauty, Inc.

8-K

3.2

001-37873

9/27/2016

31.1

Certification of the Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2

Certification of the Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act.

32.1*

Certification of the Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS

XBRL Instance Document - Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

This certification is deemed furnished, and not filed, with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of e.l.f. Beauty, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

*This certification is deemed furnished, and not filed, with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in such filing.

Table of Contents~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on ~~November 9, 2017 on~~ its behalf by the undersigned, thereunto duly authorized.

e.l.f. Beauty, Inc.

~~November 9, 2017~~

February 7, 2024

By:

/s/ Tarang P. Amin

Date

Tarang P. Amin

~~Chairman,~~

Chief Executive Officer ~~and Director~~

(Principal Executive Officer)

February 7, 2024

By:

/s/ Mandy Fields

~~November 9, 2017~~

Date

~~By:~~

~~/s/~~ ~~John P. Bailey~~

~~Date~~

~~John P. Bailey~~

~~President and~~

Mandy Fields

Chief Financial Officer

(Principal Financial and Accounting Officer)

Remainder of 2017	$	1,754
2018		7,007
2019		6,982
2020		6,880
2021		6,880
Thereafter		14,333
Total	$	43,836

Remainder of 2017	$	1,264
2018		5,108
2019		4,976
2020		4,483
2021		3,582
Thereafter		11,485
Total	$	30,898

	Options outstanding			Weighted-average exercise price		Weighted-average remaining contractual life (in years)		Aggregate intrinsic values (in thousands)
Balance as of December 31, 2016		3,168,967		$	8.55
Granted		205,300			26.53
Exercised		(379,214	)		1.94
Forfeited		(141,331	)		17.58
Balance as of September 30, 2017		2,853,722		$	10.28		8.13	$	35,748

Exercisable, September 30, 2017		1,098,328		$	4.67		6.94	$	19,637

	Shares of restricted stock outstanding			Weighted-average grant date fair value
Balance as of December 31, 2016		586,224		$	17.00
Granted		884,081			26.60
Vested		(96,711	)		17.00
Forfeited		(126,523	)		23.27
Balance as of September 30, 2017		1,247,071		$	23.17