10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549 

_______________________________________________________________   

FORM 10-Q

_______________________________________________________________   

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

For the Quarterly Period Ended June 30, 2022

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

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, including 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:
Title of 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 every Interactive Data File required to be submitted 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 such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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	☐	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 July 29, 2022 was 52,424,445 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 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 grow our business effectively or efficiently, which would harm our business, financial condition and results of operations.

•A disruption in our operations, including a disruption in the supply chains 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.

•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.

•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 entitled “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 entitled “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	5
Item 1. Financial statements (unaudited)	5
Condensed consolidated balance sheets	5
Condensed consolidated statements of operations and comprehensive income	6
Condensed consolidated statements of stockholders’ equity	7
Condensed consolidated statements of cash flows	8
Notes to condensed consolidated financial statements (unaudited)	9
Item 2. Management’s discussion and analysis of financial condition and results of operations	19
Item 3. Quantitative and qualitative disclosures about market risk	23
Item 4. Controls and procedures	24
PART II. OTHER INFORMATION	25
Item 1. Legal proceedings	25
Item 1A. Risk factors	25
Item 2. Unregistered sales of equity securities and use of proceeds	50
Item 3. Defaults upon senior securities	50
Item 4. Mine safety disclosures	50
Item 5. Other information	50
Item 6. Exhibits	51
SIGNATURES	52

4

PART I. FINANCIAL 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)

	June 30, 2022		March 31, 2022		June 30, 2021
Assets
Current assets:
Cash and cash equivalents	$	72,248	$	43,353	$	63,402
Accounts receivable, net	52,281		45,567		43,127
Inventory, net	70,339		84,498		54,528
Prepaid expenses and other current assets	21,772		19,611		21,674
Total current assets	216,640		193,029		182,731
Property and equipment, net	9,339		10,577		15,561
Intangible assets, net	84,132		86,163		92,256
Goodwill	171,620		171,620		171,620
Investments	2,875		2,875		2,875
Other assets	29,251		30,368		33,349
Total assets	$	513,857	$	494,632	$	498,392
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt and finance lease obligations	$	5,793	$	5,786	$	32,247
Accounts payable	16,023		19,227		17,113
Accrued expenses and other current liabilities	39,916		40,004		33,617
Total current liabilities	61,732		65,017		82,977
Long-term debt and finance lease obligations	89,684		91,080		95,254
Deferred tax liabilities	13,538		9,593		17,750
Long-term operating lease obligations	14,637		15,744		19,053
Other long-term liabilities	817		769		736
Total liabilities	180,408		182,203		215,770
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2022, March 31, 2022 and June 30, 2021; 52,424,445, 52,243,764 and 51,826,156 shares issued and outstanding as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively	517		515		508
Additional paid-in capital	801,992		795,443		779,137
Accumulated deficit	(469,060)		(483,529)		(497,023)
Total stockholders' equity	333,449		312,429		282,622
Total liabilities and stockholders' equity	$	513,857	$	494,632	$	498,392

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

5

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

Condensed consolidated statements of operations and comprehensive income

(unaudited)

(in thousands, except share and per share data)

	Three months ended June 30,
	2022		2021
Net sales	$	122,601	$	97,047
Cost of sales	39,616		35,141
Gross profit	82,985		61,906
Selling, general and administrative expenses	61,555		50,749
Restructuring income	—		(14)
Operating income	21,430		11,171
Other expense, net	(1,663)		(162)
Interest expense, net	(663)		(745)
Loss on extinguishment of debt	—		(460)
Income before provision for income taxes	19,104		9,804
Income tax provision	(4,635)		(1,528)
Net income	$	14,469	$	8,276
Comprehensive income	$	14,469	$	8,276
Net income per share:
Basic	$	0.28	$	0.16
Diluted	$	0.27	$	0.15
Weighted average shares outstanding:
Basic	51,707,160		50,544,573
Diluted	53,834,732		53,408,443

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

6

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

	Common stock			Additional paid-in capital		Accumulated deficit		Total stockholders' equity
	Shares	Amount
Balance as of March 31, 2021	50,400,510	$	504	$	774,441	$	(505,299)	$	269,646
Net income	—	—		—		8,276		8,276
Stock-based compensation	—	—		4,190		—		4,190
Exercise of stock options and vesting of restricted stock	358,575	4		506		—		510
Balance as of June 30, 2021	50,759,085	$	508	$	779,137	$	(497,023)	$	282,622

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

7

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

Condensed consolidated statements of cash flows

(unaudited)

(in thousands)

	Three months ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	14,469	$	8,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,724		6,222
Restructuring income	—		(14)
Stock-based compensation expense	6,542		4,280
Amortization of debt issuance costs and discount on debt	91		118
Deferred income taxes	3,945		4,271
Loss on extinguishment of debt	—		460
Other, net	21		97
Changes in operating assets and liabilities:
Accounts receivable	(6,727)		(2,971)
Inventories	14,158		2,320
Prepaid expenses and other assets	(3,258)		(7,131)
Accounts payable and accrued expenses	(3,442)		(7,419)
Other liabilities	(945)		(1,017)
Net cash provided by operating activities	30,578		7,492
Cash flows from investing activities:
Purchase of property and equipment	(241)		(2,336)
Net cash used in investing activities	(241)		(2,336)
Cash flows from financing activities:
Proceeds from revolving line of credit	—		26,480
Proceeds from long-term debt	—		25,581
Repayment of long-term debt	(1,250)		(50,775)
Debt issuance costs paid	—		(1,064)
Cash received from issuance of common stock	2		463
Other, net	(194)		(207)
Net cash (used in) provided by financing activities	(1,442)		478
Net increase in cash and cash equivalents	28,895		5,634
Cash and cash equivalents - beginning of period	43,353		57,768
Cash and cash equivalents - end of period	$	72,248	$	63,402

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

8

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

Notes to condensed consolidated financial statements (unaudited)

Note 1—Nature of operations

e.l.f. Beauty, Inc., a Delaware corporation, (“e.l.f. Beauty” and together with its subsidiaries, the “Company,” or “we”) is a multi-brand beauty company that offers inclusive, accessible, clean and cruelty-free cosmetics and skincare products. Our mission is to make the best of beauty accessible to every eye, lip and face.

We believe our ability to deliver 100% cruelty-free, clean, premium-quality products at accessible prices with broad appeal differentiates us in the beauty industry. We believe the combination of our innovation engine, core value proposition, digitally-led strategy, as well as our world-class team’s ability to execute with speed has positioned us well to navigate a rapidly changing landscape in beauty.

Our family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Well People and Keys Soulcare. Our brands are available online and across leading beauty, mass-market and clean-beauty specialty retailers. We have strong relationships with our retail partners such as Walmart, Target, Ulta Beauty and other leading retailers that have enabled us to expand distribution both domestically and internationally.

Note 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 (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these interim financial statements contain all adjustments, including normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2022, March 31, 2022 and June 30, 2021, and its results of operations and stockholders' equity for the three months ended June 30, 2022 and June 30, 2021 and its cash flows for the three months ended June 30, 2022 and June 30, 2021. 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 and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (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 U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from 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

The Company made no 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 March 31, 2022 included in the Annual Report.

9

Revenue recognition

The Company 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 is integral to the Company’s brand and product development strategy and drives 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 June 30,
Net sales by geographic region:	2022		2021
United States	$	107,139	$	85,971
International	15,462		11,076
Total net sales	$	122,601	$	97,047

As of June 30, 2022, 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—Investment in equity securities

On April 14, 2017, the Company invested $2.9 million in a social media analytics company, 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 did not record an impairment charge on its investment during the three months ended June 30, 2022 and June 30, 2021, as any identified events or changes in circumstances did not result in an indicator for impairment. Further, there were no observable price changes in orderly transactions for the identical or a similar investment of the same issuer during the three months ended June 30, 2022.

Note 4—Goodwill and intangible assets

Information regarding the Company’s goodwill and intangible assets as of June 30, 2022 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(59,960)	$	17,640
Customer relationships – e-commerce	3 years	3,940		(3,931)		9
Trademarks	10 years	3,500		(817)		2,683
Total finite-lived intangibles		85,040		(64,708)		20,332
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(64,708)	$	255,752

10

Information regarding the Company’s goodwill and intangible assets as of March 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	$	(58,020)	$	19,580
Customer relationships – e-commerce	3 years	3,940		(3,928)		12
Trademarks	10 years	3,500		(729)		2,771
Total finite-lived intangibles		85,040		(62,677)		22,363
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(62,677)	$	257,783

Information regarding the Company’s goodwill and intangible assets as of June 30, 2021 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(52,200)	$	25,400
Customer relationships – e-commerce	3 years	3,940		(3,918)		22
Trademarks	10 years	3,500		(466)		3,034
Total finite-lived intangibles		85,040		(56,584)		28,456
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(56,584)	$	263,876

Amortization expenses on finite-lived intangible assets was $2.0 million for both the three months ended June 30, 2022 and June 30, 2021. Certain trademark assets have been classified as indefinite-lived intangible assets and accordingly, are not subject to amortization. There were no impairments of goodwill or intangible assets recorded in the three months ended June 30, 2022 and June 30, 2021.

The estimated future amortization expense related to finite-lived intangible assets, assuming no impairment as of June 30, 2022 is as follows (in thousands):

Remainder of fiscal 2023	$	6,091
2024	6,963
2025	1,230
2026	1,230
2027	1,230
Thereafter	3,588
Total	$	20,332

11

Note 5—Accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Accrued expenses	$	25,798	$	19,938	$	22,835
Current portion of operating lease liabilities	4,508		4,391		4,168
Accrued compensation	4,640		11,532		3,297
Taxes payable	3,232		2,128		1,245
Other current liabilities	1,738		2,015		2,073
Accrued expenses and other current liabilities	$	39,916	$	40,004	$	33,617

Note 6—Debt

The Company’s outstanding debt as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Revolving credit facility(1)	$	—	$	—	$	26,480
Term loan(1)	95,000		96,250		100,000
Finance lease obligations	1,226		1,419		1,993
Total debt(2)	96,226		97,669		128,473
Less: debt issuance costs	(749)		(803)		(972)
Total debt, net of issuance costs	95,477		96,866		127,501
Less: current portion	(5,793)		(5,786)		(32,247)
Long-term portion of debt	$	89,684	$	91,080	$	95,254

(1) See Note 8, “Debt,” to the consolidated financial statements included in the Annual Report for details regarding the Senior Secured Credit Agreement. As of June 30, 2022, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

(2) The gross carrying amounts of the Company’s long-term debt, before reduction of the debt issuance costs, and 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.

12

Amended credit agreement

On April 30, 2021, the Company amended and restated its prior credit agreement (the “Amended Credit Agreement”), amended and restated the prior term loan facility and the prior revolving credit facility, 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 “Amended Revolving Credit Facility”) and (ii) a $100 million term loan facility (the “Amended Term Loan Facility”). The Company's prior credit agreement consisted of a $165 million term loan and a $50 million revolving credit 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 our assets and requires payment of an unused fee ranging from 0.10% to 0.30% (based on our 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 under the Amended Revolving Credit Facility cannot exceed $100 million. The unused balance of the Amended Revolving Credit Facility as of June 30, 2022 was $100.0 million.

Both the Amended Revolving Credit Facility and the Amended Term Loan Facility bear interest, at borrowers’ option, at either (i) a rate per annum equal to an adjusted LIBOR rate determined by reference to the cost of funds for the United States dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from 1.25% to 2.125% based on our consolidated total net leverage ratio or (ii) a floating base rate plus an applicable margin ranging from 0.25% to 1.125% based on our consolidated total net leverage ratio. The interest rate as of June 30, 2022 for the Amended Term Loan Facility was approximately 3.5%.

The Amended Credit Agreement contains a number of covenants that, among other things, 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.

In accordance with ASC 470, Debt, the amendment to the Company’s prior credit agreement was accounted for as both a debt modification and partial debt extinguishment, which resulted in the recognition of a loss on extinguishment of debt of $0.5 million for the year ended March 31, 2022. The Company incurred and capitalized $1.1 million of new debt issuance costs related to the amendment.

Note 7—Commitments and contingencies

Legal contingencies

The Company is from time to time 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.

13

Note 8—Stock-based compensation

Service-based vesting stock options

The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,543,499	$	15.05
Granted	—	—
Exercised	—	—
Canceled or forfeited	—	—
Balance as of June 30, 2022	1,543,499	$	15.05	4.4	$	24,131
Exercisable, June 30, 2022	1,416,384	$	15.20	4.2	$	21,919

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the Company's closing stock price of $30.68, as reported on the New York Stock Exchange on June 30, 2022.

The Company recognized stock-based compensation cost related to service-based vesting options of $0.1 million and $0.3 million in the three months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was $0.5 million of total unrecognized stock-based compensation cost related to unvested service-based stock options, which is expected to be recognized over the remaining weighted-average period of 1.9 years. All stock-based compensation cost is recorded in selling, general and administrative expenses.

Performance-based and market-based vesting stock options

The following table summarizes the activity for stock options that vest based upon the satisfaction of performance- or market-based vesting conditions for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,004,327	$	9.40
Granted	—	—
Exercised	—	—
Canceled or forfeited	(25,800)	26.84
Balance as of June 30, 2022	978,527	$	8.94	2.6	$	21,278
Exercisable, June 30, 2022	804,327	$	5.06	2.1	$	20,609

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the Company's closing stock price of $30.68, as reported on the New York Stock Exchange on June 30, 2022.

As of June 30, 2022 and June 30, 2021, there was no unrecognized compensation cost related to stock options with performance-based and market-based vesting conditions.

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Restricted stock and RSUs

The following table summarizes the activities for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) for the three months ended June 30, 2022:

	RSUs and shares of restricted stock outstanding	Weighted-average grant date fair value
Balance as of March 31, 2022	2,275,742	$	20.85
Granted	1,063,373	26.32
Vested	(558,336)	19.13
Canceled or forfeited	(154,247)	21.06
Balance as of June 30, 2022	2,626,532	$	23.04

As of June 30, 2022, there were 341,802 unvested shares subject to RSAs outstanding.

The Company recognized stock-based compensation cost related to RSAs and RSUs of $6.5 million and $4.0 million in the three months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was $55.6 million of total unrecognized stock-based compensation cost related to unvested shares subject to RSAs and RSUs, which is expected to be recognized over a weighted-average period of 2.6 years.

Note 9—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 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 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.

On April 30, 2021, the Company amended and restated its prior credit agreement. Subject to certain exceptions, 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 did not repurchase any shares during the three months ended June 30, 2022. A total of $17.1 million remains available for purchase under the Share Repurchase Program as of June 30, 2022.

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Note 10—Net income per share

The Company computes basic net income per share using the weighted-average number of shares of common stock outstanding. Diluted net income per share amounts are calculated using the treasury stock method for equity-based compensation awards. The following is a reconciliation of the numerator and denominator in the basic and diluted net income per common share computations (in thousands, except share and per share data):

	Three months ended June 30,
	2022		2021
Numerator:
Net income	$	14,469	$	8,276
Denominator:
Weighted-average common shares outstanding – basic	51,707,160		50,544,573
Dilutive common equivalent shares from equity awards	2,127,572		2,863,870
Weighted-average common shares outstanding – diluted	53,834,732		53,408,443
Net income per share:
Basic	$	0.28	$	0.16
Diluted	$	0.27	$	0.15
Weighted-average anti-dilutive shares from outstanding equity awards excluded from diluted earnings per share	741,016		—

Note 11—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 Company's sole discretion and such renewal options are included in the 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 material restrictive covenants. Most of the Company's equipment leases are finance leases of assets used to operate its distribution centers in Ontario, California and Columbus, Ohio.

Significant judgment is required to determine whether commercial contracts contain a lease for purposes of ASC 842. The discount rate used in measuring lease liabilities is generally based on the interest rate on the Company’s revolving line of credit, assuming sufficient unused capacity exists at the time the lease liability is measured.

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A reconciliation of the balance sheet line items that were impacted or created as a result of the Company's adoption of ASC 842 as of June 30, 2022, March 31, 2022 and June 30, 2021 were as follows (in thousands):

	Classification	June 30, 2022		March 31, 2022		June 30, 2021
Assets
Operating lease assets	Other assets	$	17,188	$	18,218	$	21,490
Finance lease assets (a)	Other assets	560		664		979
Total leased assets		$	17,748	$	18,882	$	22,469
Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	4,508	$	4,391	$	4,168
Finance	Current portion of long-term debt and finance lease obligations	793		786		768
Noncurrent
Operating	Long-term operating lease obligations	14,637		15,744		19,053
Finance	Long-term debt and finance lease obligations	433		633		1,225
Total lease liabilities		$	20,371	$	21,554	$	25,214

_____________________

(a) Finance leases are recorded net of accumulated amortization of $3.1 million, $3.0 million and $2.7 million as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

For the three months ended June 30, 2022 and June 30, 2021, the components of operating and finance lease costs were as follows (in thousands):

		Three months ended June 30,
	Classification	2022		2021
Operating lease cost	Selling, general and administrative (“SG&A”) expenses	$	1,157	$	1,070
Finance lease cost
Amortization of leased assets	SG&A expenses	105		121
Interest on lease liabilities	Interest expense, net	10		24
Total lease cost		$	1,272	$	1,215

As of June 30, 2022, 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 2023	$	3,752	$	613	$	4,365
2024	4,862		582		5,444
2025	4,071		58		4,129
2026	3,097		—		3,097
2027	1,441		—		1,441
Thereafter	3,224		—		3,224
Total lease payments	20,447		1,253		21,700
Less: Interest	1,302		27		1,329
Present value of lease liabilities	$	19,145	$	1,226	$	20,371

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

As of June 30, 2022 and June 30, 2021, the weighted-average remaining lease term (in years) and discount rate were as follows:

	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	5.0 years		5.8 years
Finance leases	1.6 years		2.6 years
Weighted-average discount rate
Operating leases	2.7	%	2.8	%
Finance leases	2.9	%	3.0	%

Operating cash outflows from operating leases for the three months ended June 30, 2022 and June 30, 2021 were $1.1 million and $1.3 million, respectively.

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Item 2. Management’s discussion and analysis of financial condition and results of 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 March 31, 2022 (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 (this “Quarterly Report”), which include additional information about our accounting policies, practices and the transactions underlying our financial results.

Overview and Business Trends

We are a multi-brand beauty company that offers inclusive, accessible, clean and cruelty-free cosmetics and skincare products. Our mission is to make the best of beauty accessible to every eye, lip and face.

We believe our ability to deliver 100% cruelty-free, clean, premium-quality products at accessible prices with broad appeal differentiates us in the beauty industry. We believe the combination of our innovation engine, core value proposition, digitally-led strategy, as well as our world-class team’s ability to execute with speed, has positioned us well to navigate a rapidly changing landscape in beauty.

Our family of brands includes e.l.f. Cosmetics, e.l.f. SKIN, Well People and Keys Soulcare. Our brands are available online and across leading beauty, mass-market, and clean-beauty specialty retailers. We have strong relationships with our retail partners such as Walmart, Target, Ulta Beauty and other leading retailers that have enabled us to expand distribution both domestically and internationally.

Global Supply Chain Disruptions

Since the start of the COVID-19 pandemic there has been disruption to the global supply chain, including manufacturing and transportation delays due to port closures and congestion, labor and container shortages, and shipment delays. As a result, we’ve seen higher transportation costs. In response to these higher costs, we increased prices on a portion of our products in March of 2022 to help mitigate the impact on our business. If we see further increases in transportation costs those could have an unfavorable impact on our results. Additionally, delays or further disruption to the global supply chain could cause out of stocks or unfavorably impact our ability to service demand.

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 customer shelf reset activities, respectively. Lower holiday purchases or shifts in customer shelf reset activity could have a disproportionate effect on our results of operations for the entire fiscal year. To support anticipated higher sales during the third and fourth fiscal quarters, we make investments in working capital to ensure inventory levels can support demand. Fluctuations throughout the year are also 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 impact our liquidity.

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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 June 30,
(in thousands)	2022		2021
Net sales	$	122,601	$	97,047
Cost of sales	39,616		35,141
Gross profit	82,985		61,906
Selling, general and administrative expenses	61,555		50,749
Restructuring income	—		(14)
Operating income	21,430		11,171
Other expense, net	(1,663)		(162)
Interest expense, net	(663)		(745)
Loss on extinguishment of debt	—		(460)
Income before provision for income taxes	19,104		9,804
Income tax provision	(4,635)		(1,528)
Net income	$	14,469	$	8,276
Comprehensive income	$	14,469	$	8,276

	Three months ended June 30,
(percentage of net sales)	2022		2021
Net sales	100	%	100	%
Cost of sales	32	%	36	%
Gross margin	68	%	64	%
Selling, general and administrative expenses	50	%	52	%
Restructuring income	—	%	—	%
Operating income	17	%	12	%
Other expense, net	(1)	%	—	%
Interest expense, net	(1)	%	(1)	%
Loss on extinguishment of debt	—	%	—	%
Income before provision for income taxes	16	%	10	%
Income tax provision	(4)	%	(2)	%
Net income	12	%	9	%
Comprehensive income	12	%	9	%

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021

Net sales

Net sales increased $25.6 million, or 26%, to $122.6 million for the three months ended June 30, 2022, compared to $97.0 million for the three months ended June 30, 2021. The increase was driven primarily by strength in our national and international retailers. Net sales increased $22.6 million, or 26%, in our retailer channels and increased $3.0 million, or 28%, in our e-commerce channels. From a price and volume perspective, a higher volume of units sold drove $10.9 million of the increase in net sales and a higher average item price within retailer and e-commerce orders drove the remaining $14.7 million increase in net sales as compared to the three months ended June 30, 2021.

Gross profit

Gross profit increased $21.1 million, or 34%, to $83.0 million for the three months ended June 30, 2022, compared to $61.9 million for the three months ended June 30, 2021. Gross margin increased to 68% from 64%, when compared to the

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three months ended June 30, 2021. From a rate and volume perspective, increased volume accounted for approximately $16.3 million of the increase in gross profit and a higher gross margin rate accounted for approximately $4.8 million of the increase in gross profit. The increase in gross margin rate in the three months ended June 30, 2022 was primarily driven by price increases, cost savings, and product mix, which helped to mitigate the impact of higher transportation costs in the quarter.

Selling, general and administrative expenses

Selling, general and administrative ("SG&A") expenses were $61.6 million for the three months ended June 30, 2022, an increase of $10.8 million, or 21%, from $50.7 million for the three months ended June 30, 2021. SG&A expenses as a percentage of net sales decreased to 50% for the three months ended June 30, 2022 from 52% for the three months ended June 30, 2021. The $10.8 million increase was primarily related to an increase in compensation and benefits of $5.5 million and marketing and digital spend of $3.6 million.

Other expense, net

Other expense totaled $1.7 million for the three months ended June 30, 2022, as compared to other expense of $0.2 million for the three months ended June 30, 2021. The year-over-year variance was primarily related to unfavorable foreign exchange rate movements in the Euro and British pound on our cash balances held abroad, driving an unrealized loss in the quarter.

Interest expense, net

Interest expense, net decreased $0.1 million, or 11%, to $0.7 million for the three months ended June 30, 2022, as compared to $0.7 million for the three months ended June 30, 2021. This decrease was mainly due to a reduction in our long-term debt, partially offset by the increased interest rate on outstanding debt.

Income tax provision

The provision for income taxes was $4.6 million, or an effective rate of 24.3% for the three months ended June 30, 2022, as compared to a provision of $1.5 million, or an effective rate of 15.6% for the three months ended June 30, 2021. The change was primarily driven by an increase in income before taxes of $9.3 million and a decrease in discrete tax benefit of $0.2 million, primarily related to stock-based compensation.

Financial condition, liquidity and capital resources

Overview

As of June 30, 2022, we had $72.2 million of cash and cash equivalents. In addition, as of June 30, 2022, we had borrowing capacity of $100.0 million under our Amended Revolving Credit Facility.

Our primary cash needs are for capital expenditures, retail product displays and working capital. Capital expenditures typically vary depending on strategic initiatives selected for the fiscal year, including investments in infrastructure, digital capabilities and expansion within or to additional retailer store locations. We expect to fund ongoing capital expenditures from existing cash 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, compensation and benefits, rent, distribution costs, 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 and the general seasonality of our business. As of June 30, 2022, we had working capital, excluding cash, of $82.7 million, compared to $84.7 million as of March 31, 2022. Working capital, excluding cash and debt, was $88.5 million and $90.4 million as of June 30, 2022 and March 31, 2022, respectively.

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We believe that our operating cash flow, existing cash and cash equivalents and available financing under the Amended Revolving Credit Facility will be adequate to meet our planned operating, investing and financing needs for the next twelve months. If necessary, we can borrow funds under the 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 Part II, Item 1A “Risk 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, manage production and our supply chain.

Cash flows

	Three months ended June 30,
(in thousands)	2022		2021
Net cash provided by (used in):
Operating activities	$	30,578	$	7,492
Investing activities	(241)		(2,336)
Financing activities	(1,442)		478
Net increase in cash:	$	28,895	$	5,634

Cash provided by operating activities

For the three months ended June 30, 2022, net cash provided by operating activities was $30.6 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $30.8 million and an increase in operating assets and liabilities as shown on the statement of cash flows of $0.2 million. The increase was primarily driven by a $6.7 million increase in accounts receivable, a $3.3 million increase of prepaid expense and other assets, a $3.4 million decrease of accounts payable and accrued expenses, and a $0.9 million decrease of other liabilities. This was partially offset by a $14.2 million decrease related to inventory.

For the three months ended June 30, 2021, net cash provided by operating activities was $7.5 million. This included net income as adjusted for depreciation, amortization and other non-cash items of $23.7 million and an increase in operating assets and liabilities as shown on the statement of cash flows of $16.2 million.

Cash used in investing activities

For the three months ended June 30, 2022, net cash used in investing activities was $0.2 million. The change was primarily driven by a decrease in capital expenditures related to machinery, equipment and software during the three months ended June 30, 2022, as compared to net cash used in investing activities of $2.3 million during the three months ended June 30, 2021.

Cash (used in) provided by financing activities

For the three months ended June 30, 2022, net cash used in financing activities was $1.4 million and was primarily driven by repayment of the term loan facility.

For the three months ended June 30, 2021, net cash provided by financing activities was $0.5 million and was primarily related to proceeds from the amended revolving line of credit, net of term loan facility repayments, and cash received from the exercise of stock options.

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Description of indebtedness

Amended credit agreement

On April 30, 2021, we amended and restated the prior credit agreement (the "Amended Credit Agreement"), amended and restated the prior term loan facility and the prior revolving credit facility, 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 “Amended Revolving Credit Facility”) and (ii) a $100 million term loan facility (the "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 our assets and requires payment of an unused fee ranging from 0.10% to 0.30% (based on our 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 under the Amended Revolving Credit Facility cannot exceed $100 million. The unused balance of the Amended Revolving Credit Facility as of June 30, 2022 was $100.0 million.

Both the Amended Revolving Credit Facility and the Amended Term Loan Facility bear interest, at borrowers’ option, at either (i) a rate per annum equal to an adjusted LIBOR rate determined by reference to the cost of funds for the United States dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from 1.25% to 2.125% based on our consolidated total net leverage ratio or (ii) a floating base rate plus an applicable margin ranging from 0.25% to 1.125% based on our consolidated total net leverage ratio. The interest rate as of June 30, 2022 for the Amended Term Loan Facility was approximately 3.5%.

The Amended Credit Agreement contains a number of covenants that, among other things, 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 June 30, 2022, we were in compliance with all financial 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

The MD&A is based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these 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.

Recent accounting pronouncements

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

Item 3. Quantitative and qualitative disclosures about market risk.

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

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Item 4. Controls and procedures.

Evaluation of disclosure controls and procedures over financial reporting

As of June 30, 2022, 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 June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in 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 the Company’s senior management and board of directors as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

We have assessed the impact on changes to our internal controls over financial reporting and conclude that there have been no changes to our internal control over financial reporting that occurred during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal proceedings.

We are from time to time subject to, and are presently involved in legal proceedings, claims, and litigation arising in the ordinary course of business. We are not currently a party to any matters that management expects will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk 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 condensed consolidated financial statements and related notes thereto and “Management’s discussion and analysis of financial condition and results of operations” in Part I, Item 2 of this Quarterly Report.

Risks factors related to the beauty industry

The 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 beauty brands under ownership and independent beauty brands, including those that may target the latest trends or specific distribution channels. Competition in the 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 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 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 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 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, 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.

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

The 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 beauty

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products, consumer attitudes toward our industry and 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 brands, maintain a favorable mix of products and develop our approach as to how and where we market and sell our products.

We have a process for the development, evaluation and validation of our new product concepts. Nonetheless, each new product launch 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 we will need to continue to introduce new products in the color cosmetics and skincare categories, 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.

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

We believe that developing and maintaining our brands is critical and that our financial success is directly dependent on consumer perception of our brands. Furthermore, the importance of 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 beauty brands and maintaining and enhancing the recognition and reputation of our 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 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 brands.

The growth of our 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 our e-commerce websites and 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 brands may also suffer if our marketing plans or product initiatives do not have the desired impact on our brands' image or 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 products becoming unavailable to consumers.

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

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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.

Risks 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:

•drive demand in our brands;

•invest in digital capabilities;

•improve productivity and drive space expansion with our retailers;

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

•implement the necessary cost savings to help fund our marketing and digital investments; 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 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 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 FDA, the Federal Trade Commission (“FTC”) and the Consumer Product Safety Commission (“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 beauty industry;

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•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 any adverse economic conditions in the United States or internationally.

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

Growing our business will 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 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.

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. 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 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;

•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.

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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.

To the extent that we pay the consideration for any acquisitions or investments in cash, it would reduce the amount of cash available to us for other purposes. 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, financial condition and results of operations.

Risk factors related to our business operations

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, 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 materially and adversely affect our business, financial condition and results of operations.

We depend heavily on ocean container delivery 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 facilities and logistics providers, and from there to our retail customers. Further, we rely on postal and parcel carriers for the delivery of products sold directly to consumers through 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 or other transportation disruptions may increase the costs to supply or transport our products or the components of our 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 depends on the proper operation of our distribution 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 facilities, and any loss, damage or disruption of 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 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

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

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 persons and the demands of those 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.

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 warehouses and distribution facilities are managed and staffed by third-party service 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 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 employment practices that may harm our reputation; and

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

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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 of demand for, and popularity of, various products to make purchase 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 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 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 “—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.”

The COVID-19 global pandemic and related government, private sector and individual consumer responsive actions have adversely affected, and will continue to adversely affect, our business, financial condition and results of operations.

The COVID-19 virus and its variant strains continue to spread and impact the United States and other countries globally. Related government and private sector responsive actions, as well as changes in consumer shopping behaviors, have adversely affected, and will continue to adversely affect, our business, financial condition and results of operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, including any resurgence of the COVID-19 virus as a result of new variants or otherwise, as the situation is evolving.

While COVID-19 vaccination efforts are ongoing, the timing, speed, acceptance, and efficacy of vaccinations along with government and private sector responsive actions to the spread of the virus as a result of new variants remain unpredictable. In 2022, for example, government officials in Shanghai implemented a strict quarantine requirement that impacted our employees there, requiring them to work exclusively at-home, as well as some of our suppliers. There is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, including the possibility of new variants prolonging such disruptions and resulting in additional quarantines. Decreased activity at our retailers could result in a decrease in sales of our products, which in turn could adversely affect our business, financial condition and results of operations.

While our suppliers and distribution centers currently remain open, there is risk that any of these facilities may become less productive or encounter disruptions due to employees at the facilities becoming infected with the COVID-19 virus and/or 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.

As a result of the COVID-19 pandemic, over 60% of our personnel based in the United States are working under our hybrid model of three days in the office and two days remote. It is possible with nearly 40% of our personnel working remotely full time and the remainder of our personnel working remotely two days a week 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

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business for a substantial period of time. The increase in remote working may also result in consumer privacy, IT security and fraud concerns as well as increase our exposure to potential wage and hour issues.

COVID-19 vaccines are now broadly distributed and administered, and starting October 1, 2021 we required all U.S. employees to be fully vaccinated and have the same requirement for any vendor and contractors who engage in meetings or business activities in any of our offices. Our vaccine mandate may cause us to have difficulty recruiting new employees, which could adversely affect our business, financial condition and results of operations. As the COVID-19 pandemic evolves, we continue to evaluate and refine our work from home policy. Any changes to our remote work policy could also cause us to have difficulty retaining current employees and recruiting new employees, both of which could adversely affect our business, financial condition and results of operations.

The uncertainty around the duration of business disruptions and the extent of the spread of the COVID-19 pandemic in the United States and to other areas of the world will likely continue to adversely impact the national or global economy and negatively impact consumer spending and shopping behaviors. Any of these outcomes could have an adverse impact on our business, financial condition and results of operations.

The full extent to which the COVID-19 pandemic impacts 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, the pandemic's impact on capital and financial markets, and any new information that may emerge concerning the virus, vaccines and containment, all of which may vary across regions.

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 June 30, 2022, we had a total of $96.2 million of indebtedness, consisting of amounts outstanding under our credit facilities and finance lease obligations, and a total availability of $100.0 million under our Amended Revolving Credit Facility (as defined in Part I, Item 2 “Management’s discussion and analysis of financial condition and results of operations” under the heading “Description of indebtedness”). 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 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.

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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 (as defined in Part I, Item 2 “Management’s discussion and analysis of financial condition and results of operations” under the heading “Description of indebtedness”) 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.

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.

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 ("RMB"), and 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 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 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.

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

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:

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•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.

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 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. To support anticipated higher sales during the third and fourth fiscal quarters, we make investments in working capital to ensure inventory levels can support demand. Fluctuations throughout the year are also driven by the timing of product restocking or rearrangement by our major customers as well as our expansion into new 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 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, 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 electronic and financial information, 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 information systems to effectively process retail customer orders 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 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 or catastrophic events. 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 customer and e-commerce orders or engage in normal business activities. If our information technology systems suffer damage, disruption or 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.

Our e-commerce operations are important to our business. Our e-commerce websites and mobile applications serve as an extension of our marketing strategies by introducing potential new consumers to our brand, product offerings and enhanced content. Due to the importance of our 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 brands' reputation.

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We must continue to maintain and 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 to continually expand and improve our information technology systems and personnel to support expected future growth. As such we will continue to invest in and implement 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. 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 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 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 information technology, including our e-commerce websites and mobile applications. Our competitors are continually 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 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 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 and store data about our consumers, suppliers and others, including personal data, financial information, including consumer payment information, as well as other confidential and proprietary information important to our business. We also employ third-party service providers that collect, store, process and transmit personal data, and confidential, proprietary and financial information on our behalf.

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 pernicious ingenuity of criminals, new 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 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, 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 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. We are not aware of any breach or compromise of the personal data of consumers, but we have been subject to attacks (e.g. phishing, denial of

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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 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 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 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 a material security breach were to occur, our reputation and brands could be damaged, 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 a risk of loss 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, 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 relevant insurance, we cannot be certain that our insurance coverage will be adequate for all breach related liabilities, that insurance will continue to be available to us on economically reasonable terms, or at 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 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, payments made with gift cards processed by third-party providers and payment through third-party online payment platforms such as 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. Transactions on our e-commerce websites and mobile applications are 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. Requirements relating to consumer authentication and fraud detection with respect to online sales are 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 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

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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 in that country.

We currently source and manufacture a substantial number of our products from third-party suppliers and manufacturers in China. As of June 30, 2022, we had 78 employees in 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.

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 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, hygiene supervision and other matters. For example, the U.S. Congress recently passed 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.

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

Consumer spending on beauty products is influenced by general economic conditions and the availability of discretionary income. Adverse economic conditions in the United States, Europe, China or any of the other countries in which we do significant business, 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.

We are subject to international business uncertainties.

We sell some 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 and certain other foreign countries. We intend to continue to sell to customers outside the United States and maintain our relationships in China and other foreign countries where have suppliers and manufacturers. Further, we may establish additional relationships in other countries to grow our operations. The

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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 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. 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 United Kingdom and the European Union;

•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.

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

The ongoing conflict between Russia and Ukraine has caused, and is currently expected to 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 is currently expected to continue to cause, global political, economic, and social instability, 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 European Union, the United Kingdom, 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

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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 European Union, the United Kingdom 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.

We continue to monitor the situation in Ukraine and 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 or its impacts in Ukraine, Russia or Belarus 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 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.

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, in recent years, certain lawmakers have proposed giving the FDA additional authority to regulate cosmetics and their ingredients. This increased authority could require the FDA to impose increased testing and manufacturing requirements on cosmetic manufacturers or cosmetics or

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their ingredients before they may be marketed. We are unable to ascertain what, if any, impact any increased statutory or regulatory requirements may have on our business.

We 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.

Our facilities and those of our third-party manufacturers are subject to regulation under the Federal Food, Drug and Cosmetic Act (the “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 good manufacturing practices (“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 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 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 ensure they are qualified and in compliance. 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. 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,

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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 harm our business, financial condition and results of operations.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy and data 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 regarding privacy and data protection, some of 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 UK General Data Protection Regulation (the “UK GDPR”) and the European Union’s General Data Protection Regulation (the “GDPR”) each allows for a private right of action, imposes stringent data protection requirements on companies that offer goods or services to, or monitor the behavior of, individuals in the United Kingdom or the European Economic Area (the “EEA”), as applicable. The UK GDPR and the GDPR establishes a robust framework of data subjects’ rights and imposes onerous accountability obligations on companies, with penalties for noncompliance of up to the greater of 17.5 million British pounds or 20 million euros, respectively, or 4% of annual global revenue.

Furthermore, the California Consumer Privacy Act (the “CCPA”) requires new disclosures to California consumers, imposes new rules for collecting or using information about minors, affords California consumers new abilities to opt out of certain disclosures of personal information and also establishes significant penalties for noncompliance. Additionally, in November 2020, California voters passed the California Privacy Rights Act (the “CPRA”). The CPRA, which is expected to take effect on January 1, 2023, significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers such as correction of personal information and additional opt-out rights, and creates a new entity, the California Privacy Protection Agency, to implement and enforce the law. The effects of the CPRA 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.

We are also subject to European Union and United Kingdom (“UK”) rules with respect to cross-border transfers of personal data out of the EEA and the UK. Recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data outside the EEA and the UK, including to the US. In addition, on June 4, 2021, the European Commission published revised standard contractual clauses for data transfers from the EEA: the revised clauses must be used for relevant new data transfers from September 27, 2021; existing standard contractual clauses must be migrated to the revised clauses by December 27, 2022. We may be required to implement the revised standard contractual clauses in relation to various business arrangements within the relevant time frames, which could increase our compliance costs and adversely affect our business.

The United Kingdom’s Information Commissioner’s Office has also published new data transfer standard contracts for transfers from the UK under the UK GDPR. This new documentation will be mandatory for relevant data transfers from September 21, 2022; existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024. We will be required to implement the latest UK data transfer documentation for data transfers subject to the UK GDPR, in relation to relevant existing contracts and certain additional contracts and vendor and/or customer arrangements, within the relevant time frames. These recent developments will require us to review and amend the legal mechanisms by which we make and/ or receive personal data transfers to the US. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking 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 operate our business and could harm our business, financial condition and results of operations.

In addition, on June 28, 2021, the European Commission adopted an adequacy decision in favor of the UK, enabling data transfers from EEA member states to the UK without additional safeguards. However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/ extends that decision, and remains under review by the Commission during this period. The relationship between the UK and the EEA in relation to

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certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the UK will be regulated in the long term. These changes may lead to additional costs and increase our overall risk exposure.

Data privacy continues to remain a matter of interest to lawmakers and regulators. A number of proposals are pending before federal, state and foreign 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. Some U.S. states have enacted or are considering enacting stricter data privacy laws, some modeled on the GDPR, some modeled on the CCPA, and others potentially imposing completely distinct requirements. For example, on March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act (“CDPA”), a comprehensive privacy statute that shares similarities with the CCPA, CPRA, and legislation proposed in other states. Additionally, the United States is considering comprehensive federal privacy legislation, such as the Consumer Online Privacy Rights Act, which would significantly expand elements of the data protection rights and obligations existing within the GDPR and the CCPA to all U.S. consumers.

We are also subject to evolving EU and UK privacy laws on cookies, tracking technologies and e-marketing. In the EU and the UK under national laws derived from the ePrivacy Directive, informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. Consent is strictly defined, and includes a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. The current national laws that implement the ePrivacy Directive may be replaced across the EU (but not directly in the UK) by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance. While the text of the ePrivacy Regulation is still under development, a recent European court decision and regulators’ recent guidance are driving increased attention to cookies, web beacons and similar technology. These decisions and guidance, as well as the implementation of the ePrivacy Regulation, could affect our ability to use our consumer’s data for personalized advertising, and alter our ability to place advertisements across social media and the web. Furthermore, the current European Union member states’ and the UK local guidance has significantly increased the risk of penalties for breach of the GDPR, the UK GDPR, and law implementing the ePrivacy Directive. If regulators start to enforce the strict approach outlined in recent guidance, this could lead to substantial costs, require significant systems changes, broader restrictions on the way we market our products on a global basis and increase our risk of regulatory oversight our ability to reach our consumers, and our capability to provide our consumers with personalized services and experiences.

Several countries in Europe have also recently issued guidance on the use of cookies and similar tracking technologies which require an additional layer of consent from, and disclosure to, website users for third party advertising, social media advertising and analytics. 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 users’ 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. 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 revenues. In addition, legal uncertainties about the legality of cookies and other tracking technologies may increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws.

Compliance with existing, not yet effective, and proposed privacy and data protection laws and regulations can be costly and can delay or impede our ability to market and sell our products, impede our ability to 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 in operating our business, cause us to have difficulty maintaining a single operating model, result in negative publicity, increase our operating costs, require significant management time and attention, or 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 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 or other liabilities, as well as negative publicity and a potential loss of business. We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, and diversion of internal resources. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with the U.S. 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.

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We currently source and manufacture a substantial number of our products from third-party suppliers and manufacturers 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, including through distributors. Our operations are subject to the U.S. 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 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. Treasury, Office of Foreign Assets 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. 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 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.

Risk factors related to legal and regulatory proceedings

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.

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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, 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.

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 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.

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 primary trademarks include “e.l.f.,” “e.l.f. eyes lips face,” “Well People,” and “Keys Soulcare” all of which are registered or have registrations pending in the United States and in many other countries or registries. Our trademarks are valuable assets that support our brands 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 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.

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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.

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 intellectual property 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.

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.

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.

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 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

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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, Twitter, 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. 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.

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 brands, products and e-commerce platforms. We provide emails 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 business, financial condition and 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). 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 European Union and the United Kingdom are highly restrictive and differ greatly from those in the United States, which could cause fewer of individuals in the European Union or the United Kingdom 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 results of operations.

Risk factors relating to our stockholders and ownership of our common stock

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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 progress on such initiatives and goals. In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business, financial condition and results of operations.

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, climate change and other ESG-related legislation and regulation is being implemented across the world, including in the United States, and any such legislation or regulation 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.

We take into consideration the expected impact of ESG matters on the sustainability of our business over time and the potential impact of our 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 that we will successfully meet our customers’ or society’s expectations as to our proper role. If we fail to meet the ESG values, standards and metrics that we set for ourselves, or our articulated public benefit purposes, or fail to align to regulatory or market expectations or standards regarding such matters, we may experience negative publicity and a loss of customers as a result, which will adversely affect our business, financial condition, and results of operations.

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 us, disrupt our operations, and divert the attention of our board of directors, management, and employees, such as public proposals and requests for potential nominations of candidates for election to our board of directors, requests to pursue a strategic combination or other transaction, or other special requests. As a result, we have retained, and may in the future retain additional services of various professionals to advise us in these matters, including legal, financial and communications advisers, the costs of which may negatively impact our future financial results. In addition, perceived uncertainties as to our future direction, strategy, or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, harm our ability to attract new or retain existing investors, customers, directors, employees or other partners, and cause our stock price to experience periods of volatility 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.

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We had approximately 197.6 million shares of common stock authorized but unissued and 52.4 million shares of common stock outstanding as of July 29, 2022. 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.

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 and for stockholders to include matters to be considered at our annual meetings;

•these provisions prohibit stockholder action by written 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; 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.

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. 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.

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.

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

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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

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

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 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.

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.

In addition, in May 2019, we announced that our board of directors authorized a share repurchase program allowing us to repurchase up to $25 million of our outstanding shares of common stock (“Share Repurchase Program”). 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.

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The holders of up to 3,644,510 shares of our common stock, or approximately 7% of our outstanding common stock based on shares outstanding as of July 29, 2022, are entitled to rights with respect to registration of such shares under the Securities Act pursuant to a registration rights agreement. In addition, certain family trusts of our Chairman and Chief Executive Officer, Tarang Amin, have the right, subject to certain conditions, to require us to file registration statements covering its or their shares.

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.

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.

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.

Item 2. Unregistered sales of equity securities and use of 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 Plan 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 Plan or (ii) the date that our board of directors cancels the Share Repurchase Plan.

On April 30, 2021, we amended and restated our prior credit agreement. 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 June 30, 2022, including pursuant to the Share Repurchase Program. A total of $17.1 million remains available for purchase under the Share Repurchase Program as of June 30, 2022.

Item 3. Defaults upon senior securities.

None.

Item 4. Mine safety disclosures.

None.

Item 5. Other information.

None.

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Item 6. Exhibits.

			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.	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	XBRL Instance Document - Instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document.	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).	X

*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.

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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 its behalf by the undersigned, thereunto duly authorized.

	e.l.f. Beauty, Inc.
August 4, 2022	By:	/s/ Tarang P. Amin
Date		Tarang P. Amin Chief Executive Officer (Principal Executive Officer)
August 4, 2022	By:	/s/ Mandy Fields
Date		Mandy Fields Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Tarang P. Amin, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of e.l.f. Beauty, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2022

/s/ Tarang P. Amin

Tarang P. Amin

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mandy Fields, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of e.l.f. Beauty, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2022

/s/ Mandy Fields

Mandy Fields

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of e.l.f. Beauty, Inc. (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2022, as filed with the Securities and Exchange Commission (the “Report”), Tarang P. Amin, Chief Executive Officer of the Company, and Mandy Fields, Chief Financial Officer of the Company, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

•The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 4, 2022

/s/ Tarang P. Amin

Tarang P. Amin

Chief Executive Officer

(Principal Executive Officer)

/s/ Mandy Fields

Mandy Fields
Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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Cover Page - shares	3 Months Ended
	Jun. 30, 2022	Jul. 29, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	001-37873
Entity Registrant Name	e.l.f. Beauty, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	46-4464131
Entity Address, Address Line One	570 10th Street
Entity Address, City or Town	Oakland,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94607
City Area Code	(510)
Local Phone Number	778-7787
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	ELF
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		52,424,445
Amendment Flag	false
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001600033
Current Fiscal Year End Date	--03-31

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Condensed consolidated balance sheets (unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Current assets:
Cash and cash equivalents	$ 72,248	$ 43,353	$ 63,402
Accounts receivable, net	52,281	45,567	43,127
Inventory, net	70,339	84,498	54,528
Prepaid expenses and other current assets	21,772	19,611	21,674
Total current assets	216,640	193,029	182,731
Property and equipment, net	9,339	10,577	15,561
Intangible assets, net	84,132	86,163	92,256
Goodwill	171,620	171,620	171,620
Investments	2,875	2,875	2,875
Other assets	29,251	30,368	33,349
Total assets	513,857	494,632	498,392
Current liabilities:
Current portion of long-term debt and finance lease obligations	5,793	5,786	32,247
Accounts payable	16,023	19,227	17,113
Accrued expenses and other current liabilities	39,916	40,004	33,617
Total current liabilities	61,732	65,017	82,977
Long-term debt and finance lease obligations	89,684	91,080	95,254
Deferred tax liabilities	13,538	9,593	17,750
Long-term operating lease obligations	14,637	15,744	19,053
Other long-term liabilities	817	769	736
Total liabilities	180,408	182,203	215,770
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock, par value of $0.01 per share; 250,000,000 shares authorized as of June 30, 2022, March 31, 2022 and June 30, 2021; 52,424,445, 52,243,764 and 51,826,156 shares issued and outstanding as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively	517	515	508
Additional paid-in capital	801,992	795,443	779,137
Accumulated deficit	(469,060)	(483,529)	(497,023)
Total stockholders' equity	333,449	312,429	282,622
Total liabilities and stockholders' equity	$ 513,857	$ 494,632	$ 498,392

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Condensed consolidated balance sheets (unaudited) (Parenthetical) - $ / shares	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Statement of Financial Position [Abstract]
Common stock, par value (in USD per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	250,000,000	250,000,000	250,000,000
Common stock, shares issued (in shares)	52,424,445	52,243,764	51,826,156
Common stock, shares outstanding (in shares)	52,424,445	52,243,764	51,826,156

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Condensed consolidated statements of operations and comprehensive income (unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Net sales	$ 122,601	$ 97,047
Cost of sales	39,616	35,141
Gross profit	82,985	61,906
Selling, general and administrative expenses	61,555	50,749
Restructuring income	0	(14)
Operating income	21,430	11,171
Other expense, net	(1,663)	(162)
Interest expense, net	(663)	(745)
Loss on extinguishment of debt	0	(460)
Income before provision for income taxes	19,104	9,804
Income tax provision	(4,635)	(1,528)
Net income	14,469	8,276
Comprehensive income	$ 14,469	$ 8,276
Net income per share:
Basic (in USD per share)	$ 0.28	$ 0.16
Diluted (in USD per share)	$ 0.27	$ 0.15
Weighted average shares outstanding:
Basic (in shares)	51,707,160	50,544,573
Diluted (in shares)	53,834,732	53,408,443

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Condensed consolidated statements of stockholders' equity (unaudited) - USD ($) $ in Thousands	Total	Common stock	Additional paid-in capital	Accumulated deficit
Beginning balance at Mar. 31, 2021	$ 269,646	$ 504	$ 774,441	$ (505,299)
Beginning balance (in shares) at Mar. 31, 2021		50,400,510
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	8,276			8,276
Stock-based compensation	4,190		4,190
Exercise of stock options and vesting of restricted stock	510	$ 4	506
Exercise of stock options and vesting of restricted stock (in shares)		358,575
Ending balance at Jun. 30, 2021	282,622	$ 508	779,137	(497,023)
Ending balance (in shares) at Jun. 30, 2021		50,759,085
Beginning balance at Mar. 31, 2022	312,429	$ 515	795,443	(483,529)
Beginning balance (in shares) at Mar. 31, 2022		51,524,307
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	14,469			14,469
Stock-based compensation	6,549		6,549
Exercise of stock options and vesting of restricted stock	2	$ 2
Exercise of stock options and vesting of restricted stock (in shares)		558,336
Ending balance at Jun. 30, 2022	$ 333,449	$ 517	$ 801,992	$ (469,060)
Ending balance (in shares) at Jun. 30, 2022		52,082,643

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Condensed consolidated statements of cash flows (unaudited) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022
Cash flows from operating activities:
Net income	$ 14,469	$ 8,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,724	6,222
Restructuring income	0	(14)
Stock-based compensation expense	6,542	4,280
Amortization of debt issuance costs and discount on debt	91	118
Deferred income taxes	3,945	4,271
Loss on extinguishment of debt	0	460
Other, net	21	97
Changes in operating assets and liabilities:
Accounts receivable	(6,727)	(2,971)
Inventories	14,158	2,320
Prepaid expenses and other assets	(3,258)	(7,131)
Accounts payable and accrued expenses	(3,442)	(7,419)
Other liabilities	(945)	(1,017)
Net cash provided by operating activities	30,578	7,492
Cash flows from investing activities:
Purchase of property and equipment	(241)	(2,336)
Net cash used in investing activities	(241)	(2,336)
Cash flows from financing activities:
Proceeds from revolving line of credit	0	26,480
Proceeds from long-term debt	0	25,581
Repayment of long-term debt	(1,250)	(50,775)
Debt issuance costs paid	0	(1,064)
Cash received from issuance of common stock	2	463
Other, net	(194)	(207)
Net cash (used in) provided by financing activities	(1,442)	478
Net increase in cash and cash equivalents	28,895	5,634
Cash and cash equivalents - beginning of period	43,353	57,768	$ 57,768
Cash and cash equivalents - end of period	$ 72,248	$ 63,402	$ 43,353

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Nature of operations	3 Months Ended
	Jun. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of operations	Nature of operationse.l.f. Beauty, Inc., a Delaware corporation, (“e.l.f. Beauty” and together with its subsidiaries, the “Company,” or “we”) is a multi-brand beauty company that offers inclusive, accessible, clean and cruelty-free cosmetics and skincare products. Our mission is to make the best of beauty accessible to every eye, lip and face. We believe our ability to deliver 100% cruelty-free, clean, premium-quality products at accessible prices with broad appeal differentiates us in the beauty industry. We believe the combination of our innovation engine, core value proposition, digitally-led strategy, as well as our world-class team’s ability to execute with speed has positioned us well to navigate a rapidly changing landscape in beauty.

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Summary of significant accounting policies

3 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Summary of significant accounting policies

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 (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these interim financial statements contain all adjustments, including normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2022, March 31, 2022 and June 30, 2021, and its results of operations and stockholders' equity for the three months ended June 30, 2022 and June 30, 2021 and its cash flows for the three months ended June 30, 2022 and June 30, 2021. 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 and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (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 U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from 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

The Company made no 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 March 31, 2022 included in the Annual Report.

Revenue recognition

The Company 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 is integral to the Company’s brand and product development strategy and drives 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 June 30,
Net sales by geographic region:	2022		2021
United States	$	107,139	$	85,971
International	15,462		11,076
Total net sales	$	122,601	$	97,047

As of June 30, 2022, 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.

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Investment in equity securities	3 Months Ended
	Jun. 30, 2022
Investments, All Other Investments [Abstract]
Investment in equity securities	Investment in equity securitiesOn April 14, 2017, the Company invested $2.9 million in a social media analytics company, 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 did not record an impairment charge on its investment during the three months ended June 30, 2022 and June 30, 2021, as any identified events or changes in circumstances did not result in an indicator for impairment. Further, there were no observable price changes in orderly transactions for the identical or a similar investment of the same issuer during the three months ended June 30, 2022.

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Goodwill and intangible assets

3 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

Goodwill and intangible assets

Information regarding the Company’s goodwill and intangible assets as of June 30, 2022 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(59,960)	$	17,640
Customer relationships – e-commerce	3 years	3,940		(3,931)		9
Trademarks	10 years	3,500		(817)		2,683
Total finite-lived intangibles		85,040		(64,708)		20,332
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(64,708)	$	255,752

Information regarding the Company’s goodwill and intangible assets as of March 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	$	(58,020)	$	19,580
Customer relationships – e-commerce	3 years	3,940		(3,928)		12
Trademarks	10 years	3,500		(729)		2,771
Total finite-lived intangibles		85,040		(62,677)		22,363
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(62,677)	$	257,783

Information regarding the Company’s goodwill and intangible assets as of June 30, 2021 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(52,200)	$	25,400
Customer relationships – e-commerce	3 years	3,940		(3,918)		22
Trademarks	10 years	3,500		(466)		3,034
Total finite-lived intangibles		85,040		(56,584)		28,456
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(56,584)	$	263,876

Amortization expenses on finite-lived intangible assets was $2.0 million for both the three months ended June 30, 2022 and June 30, 2021. Certain trademark assets have been classified as indefinite-lived intangible assets and accordingly, are not subject to amortization. There were no impairments of goodwill or intangible assets recorded in the three months ended June 30, 2022 and June 30, 2021.

The estimated future amortization expense related to finite-lived intangible assets, assuming no impairment as of June 30, 2022 is as follows (in thousands):

Remainder of fiscal 2023	$	6,091
2024	6,963
2025	1,230
2026	1,230
2027	1,230
Thereafter	3,588
Total	$	20,332

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Accrued expenses and other current liabilities

3 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Accrued expenses	$	25,798	$	19,938	$	22,835
Current portion of operating lease liabilities	4,508		4,391		4,168
Accrued compensation	4,640		11,532		3,297
Taxes payable	3,232		2,128		1,245
Other current liabilities	1,738		2,015		2,073
Accrued expenses and other current liabilities	$	39,916	$	40,004	$	33,617

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Debt

3 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

The Company’s outstanding debt as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Revolving credit facility(1)	$	—	$	—	$	26,480
Term loan(1)	95,000		96,250		100,000
Finance lease obligations	1,226		1,419		1,993
Total debt(2)	96,226		97,669		128,473
Less: debt issuance costs	(749)		(803)		(972)
Total debt, net of issuance costs	95,477		96,866		127,501
Less: current portion	(5,793)		(5,786)		(32,247)
Long-term portion of debt	$	89,684	$	91,080	$	95,254

(1) See Note 8, “Debt,” to the consolidated financial statements included in the Annual Report for details regarding the Senior Secured Credit Agreement. As of June 30, 2022, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

(2) The gross carrying amounts of the Company’s long-term debt, before reduction of the debt issuance costs, and 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.

Amended credit agreement

On April 30, 2021, the Company amended and restated its prior credit agreement (the “Amended Credit Agreement”), amended and restated the prior term loan facility and the prior revolving credit facility, 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 “Amended Revolving Credit Facility”) and (ii) a $100 million term loan facility (the “Amended Term Loan Facility”). The Company's prior credit agreement consisted of a $165 million term loan and a $50 million revolving credit 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 our assets and requires payment of an unused fee ranging from 0.10% to 0.30% (based on our 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 under the Amended Revolving Credit Facility cannot exceed $100 million. The unused balance of the Amended Revolving Credit Facility as of June 30, 2022 was $100.0 million.

Both the Amended Revolving Credit Facility and the Amended Term Loan Facility bear interest, at borrowers’ option, at either (i) a rate per annum equal to an adjusted LIBOR rate determined by reference to the cost of funds for the United States dollar deposits for the applicable interest period (subject to a minimum floor of 0%) plus an applicable margin ranging from 1.25% to 2.125% based on our consolidated total net leverage ratio or (ii) a floating base rate plus an applicable margin ranging from 0.25% to 1.125% based on our consolidated total net leverage ratio. The interest rate as of June 30, 2022 for the Amended Term Loan Facility was approximately 3.5%.

The Amended Credit Agreement contains a number of covenants that, among other things, 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.

In accordance with ASC 470, Debt, the amendment to the Company’s prior credit agreement was accounted for as both a debt modification and partial debt extinguishment, which resulted in the recognition of a loss on extinguishment of debt of $0.5 million for the year ended March 31, 2022. The Company incurred and capitalized $1.1 million of new debt issuance costs related to the amendment.

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Commitments and contingencies

3 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

Legal contingencies

The Company is from time to time 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.

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Stock-based compensation

3 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based compensation

Stock-based compensation

Service-based vesting stock options

The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,543,499	$	15.05
Granted	—	—
Exercised	—	—
Canceled or forfeited	—	—
Balance as of June 30, 2022	1,543,499	$	15.05	4.4	$	24,131
Exercisable, June 30, 2022	1,416,384	$	15.20	4.2	$	21,919

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the Company's closing stock price of $30.68, as reported on the New York Stock Exchange on June 30, 2022.

The Company recognized stock-based compensation cost related to service-based vesting options of $0.1 million and $0.3 million in the three months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was $0.5 million of total unrecognized stock-based compensation cost related to unvested service-based stock options, which is expected to be recognized over the remaining weighted-average period of 1.9 years. All stock-based compensation cost is recorded in selling, general and administrative expenses.

Performance-based and market-based vesting stock options

The following table summarizes the activity for stock options that vest based upon the satisfaction of performance- or market-based vesting conditions for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,004,327	$	9.40
Granted	—	—
Exercised	—	—
Canceled or forfeited	(25,800)	26.84
Balance as of June 30, 2022	978,527	$	8.94	2.6	$	21,278
Exercisable, June 30, 2022	804,327	$	5.06	2.1	$	20,609

The aggregate intrinsic value is calculated as the difference between the exercise price of the options and the Company's closing stock price of $30.68, as reported on the New York Stock Exchange on June 30, 2022.

As of June 30, 2022 and June 30, 2021, there was no unrecognized compensation cost related to stock options with performance-based and market-based vesting conditions.

Restricted stock and RSUs

The following table summarizes the activities for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) for the three months ended June 30, 2022:

	RSUs and shares of restricted stock outstanding	Weighted-average grant date fair value
Balance as of March 31, 2022	2,275,742	$	20.85
Granted	1,063,373	26.32
Vested	(558,336)	19.13
Canceled or forfeited	(154,247)	21.06
Balance as of June 30, 2022	2,626,532	$	23.04

As of June 30, 2022, there were 341,802 unvested shares subject to RSAs outstanding.

The Company recognized stock-based compensation cost related to RSAs and RSUs of $6.5 million and $4.0 million in the three months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was $55.6 million of total unrecognized stock-based compensation cost related to unvested shares subject to RSAs and RSUs, which is expected to be recognized over a weighted-average period of 2.6 years.

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Repurchase of common stock

3 Months Ended

Jun. 30, 2022

Equity [Abstract]

Repurchase of common stock

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 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 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.

On April 30, 2021, the Company amended and restated its prior credit agreement. Subject to certain exceptions, 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 did not repurchase any shares during the three months ended June 30, 2022. A total of $17.1 million remains available for purchase under the Share Repurchase Program as of June 30, 2022.

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Net income per share

3 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Net income per share

Net income per share

The Company computes basic net income per share using the weighted-average number of shares of common stock outstanding. Diluted net income per share amounts are calculated using the treasury stock method for equity-based compensation awards. The following is a reconciliation of the numerator and denominator in the basic and diluted net income per common share computations (in thousands, except share and per share data):

	Three months ended June 30,
	2022		2021
Numerator:
Net income	$	14,469	$	8,276
Denominator:
Weighted-average common shares outstanding – basic	51,707,160		50,544,573
Dilutive common equivalent shares from equity awards	2,127,572		2,863,870
Weighted-average common shares outstanding – diluted	53,834,732		53,408,443
Net income per share:
Basic	$	0.28	$	0.16
Diluted	$	0.27	$	0.15
Weighted-average anti-dilutive shares from outstanding equity awards excluded from diluted earnings per share	741,016		—

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Leases

3 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

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 Company's sole discretion and such renewal options are included in the 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 material restrictive covenants. Most of the Company's equipment leases are finance leases of assets used to operate its distribution centers in Ontario, California and Columbus, Ohio.

Significant judgment is required to determine whether commercial contracts contain a lease for purposes of ASC 842. The discount rate used in measuring lease liabilities is generally based on the interest rate on the Company’s revolving line of credit, assuming sufficient unused capacity exists at the time the lease liability is measured.

A reconciliation of the balance sheet line items that were impacted or created as a result of the Company's adoption of ASC 842 as of June 30, 2022, March 31, 2022 and June 30, 2021 were as follows (in thousands):

	Classification	June 30, 2022		March 31, 2022		June 30, 2021
Assets
Operating lease assets	Other assets	$	17,188	$	18,218	$	21,490
Finance lease assets (a)	Other assets	560		664		979
Total leased assets		$	17,748	$	18,882	$	22,469
Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	4,508	$	4,391	$	4,168
Finance	Current portion of long-term debt and finance lease obligations	793		786		768
Noncurrent
Operating	Long-term operating lease obligations	14,637		15,744		19,053
Finance	Long-term debt and finance lease obligations	433		633		1,225
Total lease liabilities		$	20,371	$	21,554	$	25,214

_____________________

(a) Finance leases are recorded net of accumulated amortization of $3.1 million, $3.0 million and $2.7 million as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

For the three months ended June 30, 2022 and June 30, 2021, the components of operating and finance lease costs were as follows (in thousands):

		Three months ended June 30,
	Classification	2022		2021
Operating lease cost	Selling, general and administrative (“SG&A”) expenses	$	1,157	$	1,070
Finance lease cost
Amortization of leased assets	SG&A expenses	105		121
Interest on lease liabilities	Interest expense, net	10		24
Total lease cost		$	1,272	$	1,215

As of June 30, 2022, 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 2023	$	3,752	$	613	$	4,365
2024	4,862		582		5,444
2025	4,071		58		4,129
2026	3,097		—		3,097
2027	1,441		—		1,441
Thereafter	3,224		—		3,224
Total lease payments	20,447		1,253		21,700
Less: Interest	1,302		27		1,329
Present value of lease liabilities	$	19,145	$	1,226	$	20,371

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

As of June 30, 2022 and June 30, 2021, the weighted-average remaining lease term (in years) and discount rate were as follows:

	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	5.0 years		5.8 years
Finance leases	1.6 years		2.6 years
Weighted-average discount rate
Operating leases	2.7	%	2.8	%
Finance leases	2.9	%	3.0	%

Operating cash outflows from operating leases for the three months ended June 30, 2022 and June 30, 2021 were $1.1 million and $1.3 million, respectively.

Leases

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 Company's sole discretion and such renewal options are included in the 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 material restrictive covenants. Most of the Company's equipment leases are finance leases of assets used to operate its distribution centers in Ontario, California and Columbus, Ohio.

Significant judgment is required to determine whether commercial contracts contain a lease for purposes of ASC 842. The discount rate used in measuring lease liabilities is generally based on the interest rate on the Company’s revolving line of credit, assuming sufficient unused capacity exists at the time the lease liability is measured.

A reconciliation of the balance sheet line items that were impacted or created as a result of the Company's adoption of ASC 842 as of June 30, 2022, March 31, 2022 and June 30, 2021 were as follows (in thousands):

	Classification	June 30, 2022		March 31, 2022		June 30, 2021
Assets
Operating lease assets	Other assets	$	17,188	$	18,218	$	21,490
Finance lease assets (a)	Other assets	560		664		979
Total leased assets		$	17,748	$	18,882	$	22,469
Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	4,508	$	4,391	$	4,168
Finance	Current portion of long-term debt and finance lease obligations	793		786		768
Noncurrent
Operating	Long-term operating lease obligations	14,637		15,744		19,053
Finance	Long-term debt and finance lease obligations	433		633		1,225
Total lease liabilities		$	20,371	$	21,554	$	25,214

_____________________

(a) Finance leases are recorded net of accumulated amortization of $3.1 million, $3.0 million and $2.7 million as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

For the three months ended June 30, 2022 and June 30, 2021, the components of operating and finance lease costs were as follows (in thousands):

		Three months ended June 30,
	Classification	2022		2021
Operating lease cost	Selling, general and administrative (“SG&A”) expenses	$	1,157	$	1,070
Finance lease cost
Amortization of leased assets	SG&A expenses	105		121
Interest on lease liabilities	Interest expense, net	10		24
Total lease cost		$	1,272	$	1,215

As of June 30, 2022, 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 2023	$	3,752	$	613	$	4,365
2024	4,862		582		5,444
2025	4,071		58		4,129
2026	3,097		—		3,097
2027	1,441		—		1,441
Thereafter	3,224		—		3,224
Total lease payments	20,447		1,253		21,700
Less: Interest	1,302		27		1,329
Present value of lease liabilities	$	19,145	$	1,226	$	20,371

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

As of June 30, 2022 and June 30, 2021, the weighted-average remaining lease term (in years) and discount rate were as follows:

	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	5.0 years		5.8 years
Finance leases	1.6 years		2.6 years
Weighted-average discount rate
Operating leases	2.7	%	2.8	%
Finance leases	2.9	%	3.0	%

Operating cash outflows from operating leases for the three months ended June 30, 2022 and June 30, 2021 were $1.1 million and $1.3 million, respectively.

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Summary of significant accounting policies (Policies)

3 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of presentation

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 (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these interim financial statements contain all adjustments, including normal recurring adjustments, necessary for a fair statement of its financial position as of June 30, 2022, March 31, 2022 and June 30, 2021, and its results of operations and stockholders' equity for the three months ended June 30, 2022 and June 30, 2021 and its cash flows for the three months ended June 30, 2022 and June 30, 2021. 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 and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (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

Use of estimates

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

Segment reporting

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.

Revenue recognition

Revenue recognition

The Company 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 is integral to the Company’s brand and product development strategy and drives 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.

Recent accounting pronouncements

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.

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Summary of significant accounting policies (Tables)

3 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Disaggregation of Revenue

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 June 30,
Net sales by geographic region:	2022		2021
United States	$	107,139	$	85,971
International	15,462		11,076
Total net sales	$	122,601	$	97,047

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Goodwill and intangible assets (Tables)

3 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Information Regarding Company's Goodwill and Intangible Assets

Information regarding the Company’s goodwill and intangible assets as of June 30, 2022 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(59,960)	$	17,640
Customer relationships – e-commerce	3 years	3,940		(3,931)		9
Trademarks	10 years	3,500		(817)		2,683
Total finite-lived intangibles		85,040		(64,708)		20,332
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(64,708)	$	255,752

Information regarding the Company’s goodwill and intangible assets as of March 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	$	(58,020)	$	19,580
Customer relationships – e-commerce	3 years	3,940		(3,928)		12
Trademarks	10 years	3,500		(729)		2,771
Total finite-lived intangibles		85,040		(62,677)		22,363
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(62,677)	$	257,783

Information regarding the Company’s goodwill and intangible assets as of June 30, 2021 is as follows (in thousands):

	Estimated useful life	Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships – retailers	10 years	$	77,600	$	(52,200)	$	25,400
Customer relationships – e-commerce	3 years	3,940		(3,918)		22
Trademarks	10 years	3,500		(466)		3,034
Total finite-lived intangibles		85,040		(56,584)		28,456
Trademarks	Indefinite	63,800		—		63,800
Goodwill		171,620		—		171,620
Total goodwill and other intangibles		$	320,460	$	(56,584)	$	263,876

Future Amortization Expense for Intangible Assets

The estimated future amortization expense related to finite-lived intangible assets, assuming no impairment as of June 30, 2022 is as follows (in thousands):

Remainder of fiscal 2023	$	6,091
2024	6,963
2025	1,230
2026	1,230
2027	1,230
Thereafter	3,588
Total	$	20,332

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Accrued expenses and other current liabilities (Tables)

3 Months Ended

Jun. 30, 2022

Payables and Accruals [Abstract]

Summary of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Accrued expenses	$	25,798	$	19,938	$	22,835
Current portion of operating lease liabilities	4,508		4,391		4,168
Accrued compensation	4,640		11,532		3,297
Taxes payable	3,232		2,128		1,245
Other current liabilities	1,738		2,015		2,073
Accrued expenses and other current liabilities	$	39,916	$	40,004	$	33,617

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Debt (Tables)

3 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of Outstanding Debt

The Company’s outstanding debt as of June 30, 2022, March 31, 2022 and June 30, 2021 consisted of the following (in thousands):

	June 30, 2022		March 31, 2022		June 30, 2021
Revolving credit facility(1)	$	—	$	—	$	26,480
Term loan(1)	95,000		96,250		100,000
Finance lease obligations	1,226		1,419		1,993
Total debt(2)	96,226		97,669		128,473
Less: debt issuance costs	(749)		(803)		(972)
Total debt, net of issuance costs	95,477		96,866		127,501
Less: current portion	(5,793)		(5,786)		(32,247)
Long-term portion of debt	$	89,684	$	91,080	$	95,254

(1) See Note 8, “Debt,” to the consolidated financial statements included in the Annual Report for details regarding the Senior Secured Credit Agreement. As of June 30, 2022, the Company was in compliance with all applicable financial covenants under the Amended Credit Agreement.

(2) The gross carrying amounts of the Company’s long-term debt, before reduction of the debt issuance costs, and 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.

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Stock-based compensation (Tables)

3 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Summary of Stock Option Activity and Related Information

The following table summarizes the activity for options that vest solely based upon the satisfaction of a service condition for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,543,499	$	15.05
Granted	—	—
Exercised	—	—
Canceled or forfeited	—	—
Balance as of June 30, 2022	1,543,499	$	15.05	4.4	$	24,131
Exercisable, June 30, 2022	1,416,384	$	15.20	4.2	$	21,919

The following table summarizes the activity for stock options that vest based upon the satisfaction of performance- or market-based vesting conditions for the three months ended June 30, 2022:

	Shares subject to options outstanding	Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic values (in thousands)
Balance as of March 31, 2022	1,004,327	$	9.40
Granted	—	—
Exercised	—	—
Canceled or forfeited	(25,800)	26.84
Balance as of June 30, 2022	978,527	$	8.94	2.6	$	21,278
Exercisable, June 30, 2022	804,327	$	5.06	2.1	$	20,609

Summary of Activities for Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs")

The following table summarizes the activities for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) for the three months ended June 30, 2022:

	RSUs and shares of restricted stock outstanding	Weighted-average grant date fair value
Balance as of March 31, 2022	2,275,742	$	20.85
Granted	1,063,373	26.32
Vested	(558,336)	19.13
Canceled or forfeited	(154,247)	21.06
Balance as of June 30, 2022	2,626,532	$	23.04

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Net income per share (Tables)

3 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Reconciliation of Numerator and Denominator in Basic and Diluted Net Income Per Common Share Computations

The following is a reconciliation of the numerator and denominator in the basic and diluted net income per common share computations (in thousands, except share and per share data):

	Three months ended June 30,
	2022		2021
Numerator:
Net income	$	14,469	$	8,276
Denominator:
Weighted-average common shares outstanding – basic	51,707,160		50,544,573
Dilutive common equivalent shares from equity awards	2,127,572		2,863,870
Weighted-average common shares outstanding – diluted	53,834,732		53,408,443
Net income per share:
Basic	$	0.28	$	0.16
Diluted	$	0.27	$	0.15
Weighted-average anti-dilutive shares from outstanding equity awards excluded from diluted earnings per share	741,016		—

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Leases (Tables)

3 Months Ended

Jun. 30, 2022

Leases [Abstract]

Balance Sheet Information

A reconciliation of the balance sheet line items that were impacted or created as a result of the Company's adoption of ASC 842 as of June 30, 2022, March 31, 2022 and June 30, 2021 were as follows (in thousands):

	Classification	June 30, 2022		March 31, 2022		June 30, 2021
Assets
Operating lease assets	Other assets	$	17,188	$	18,218	$	21,490
Finance lease assets (a)	Other assets	560		664		979
Total leased assets		$	17,748	$	18,882	$	22,469
Liabilities
Current
Operating	Accrued expenses and other current liabilities	$	4,508	$	4,391	$	4,168
Finance	Current portion of long-term debt and finance lease obligations	793		786		768
Noncurrent
Operating	Long-term operating lease obligations	14,637		15,744		19,053
Finance	Long-term debt and finance lease obligations	433		633		1,225
Total lease liabilities		$	20,371	$	21,554	$	25,214

_____________________

(a) Finance leases are recorded net of accumulated amortization of $3.1 million, $3.0 million and $2.7 million as of June 30, 2022, March 31, 2022 and June 30, 2021, respectively.

As of June 30, 2022 and June 30, 2021, the weighted-average remaining lease term (in years) and discount rate were as follows:

	June 30, 2022		June 30, 2021
Weighted-average remaining lease term
Operating leases	5.0 years		5.8 years
Finance leases	1.6 years		2.6 years
Weighted-average discount rate
Operating leases	2.7	%	2.8	%
Finance leases	2.9	%	3.0	%

Components of Lease Expense

For the three months ended June 30, 2022 and June 30, 2021, the components of operating and finance lease costs were as follows (in thousands):

		Three months ended June 30,
	Classification	2022		2021
Operating lease cost	Selling, general and administrative (“SG&A”) expenses	$	1,157	$	1,070
Finance lease cost
Amortization of leased assets	SG&A expenses	105		121
Interest on lease liabilities	Interest expense, net	10		24
Total lease cost		$	1,272	$	1,215

Maturities of Operating Lease Liabilities

As of June 30, 2022, 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 2023	$	3,752	$	613	$	4,365
2024	4,862		582		5,444
2025	4,071		58		4,129
2026	3,097		—		3,097
2027	1,441		—		1,441
Thereafter	3,224		—		3,224
Total lease payments	20,447		1,253		21,700
Less: Interest	1,302		27		1,329
Present value of lease liabilities	$	19,145	$	1,226	$	20,371

Maturities of Finance Lease Liabilities

As of June 30, 2022, 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 2023	$	3,752	$	613	$	4,365
2024	4,862		582		5,444
2025	4,071		58		4,129
2026	3,097		—		3,097
2027	1,441		—		1,441
Thereafter	3,224		—		3,224
Total lease payments	20,447		1,253		21,700
Less: Interest	1,302		27		1,329
Present value of lease liabilities	$	19,145	$	1,226	$	20,371

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Summary of significant accounting policies - Additional Information (Details)	3 Months Ended
	Jun. 30, 2022 segment
Accounting Policies [Abstract]
Number of operating segments	1
Number of reporting segments	1

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Summary of significant accounting policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Total net sales	$ 122,601	$ 97,047
United States
Disaggregation of Revenue [Line Items]
Total net sales	107,139	85,971
International
Disaggregation of Revenue [Line Items]
Total net sales	$ 15,462	$ 11,076

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Investment in equity securities - Additional Information (Details) - USD ($)	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Apr. 14, 2017
Debt and Equity Securities, FV-NI [Line Items]
Impairment charges on investment	$ 0	$ 0
Social Media Analytics Company
Debt and Equity Securities, FV-NI [Line Items]
Amount invested in minority equity investment			$ 2,900,000

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Goodwill and intangible assets - Information Regarding Company's Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022
Schedule Of Intangible Assets And Goodwill [Line Items]
Total finite-lived intangibles, Gross carrying amount	$ 85,040	$ 85,040	$ 85,040
Total finite-lived intangibles, Accumulated amortization	(64,708)	(56,584)	(62,677)
Total	20,332	28,456	22,363
Goodwill, Gross carrying amount	171,620	171,620	171,620
Goodwill, Accumulated amortization	0	0	0
Goodwill, Net carrying amount	171,620	171,620	171,620
Total goodwill and other intangibles, Gross carrying amount	320,460	320,460	320,460
Total goodwill and other intangibles, Accumulated amortization	(64,708)	(56,584)	(62,677)
Total goodwill and other intangibles, Net carrying amount	255,752	263,876	257,783
Trademarks
Schedule Of Intangible Assets And Goodwill [Line Items]
Indefinite lived intangibles, Net carrying amount	$ 63,800	$ 63,800	$ 63,800
Customer relationships – retailers
Schedule Of Intangible Assets And Goodwill [Line Items]
Estimated useful life	10 years	10 years	10 years
Total finite-lived intangibles, Gross carrying amount	$ 77,600	$ 77,600	$ 77,600
Total finite-lived intangibles, Accumulated amortization	(59,960)	(52,200)	(58,020)
Total	$ 17,640	$ 25,400	$ 19,580
Customer relationships – e-commerce
Schedule Of Intangible Assets And Goodwill [Line Items]
Estimated useful life	3 years	3 years	3 years
Total finite-lived intangibles, Gross carrying amount	$ 3,940	$ 3,940	$ 3,940
Total finite-lived intangibles, Accumulated amortization	(3,931)	(3,918)	(3,928)
Total	$ 9	$ 22	$ 12
Trademarks
Schedule Of Intangible Assets And Goodwill [Line Items]
Estimated useful life	10 years	10 years	10 years
Total finite-lived intangibles, Gross carrying amount	$ 3,500	$ 3,500	$ 3,500
Total finite-lived intangibles, Accumulated amortization	(817)	(466)	(729)
Total	$ 2,683	$ 3,034	$ 2,771

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Goodwill and intangible assets - Additional Information (Details) - USD ($)	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of intangible assets	$ 2,000,000	$ 2,000,000
Goodwill and intangible asset impairment	$ 0	$ 0

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Goodwill and intangible assets - Future Amortization Expense for Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of fiscal 2023	$ 6,091
2024	6,963
2025	1,230
2026	1,230
2027	1,230
Thereafter	3,588
Total	$ 20,332	$ 22,363	$ 28,456

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Accrued expenses and other current liabilities - Summary of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Payables and Accruals [Abstract]
Accrued expenses	$ 25,798	$ 19,938	$ 22,835
Current portion of operating lease liabilities	4,508	4,391	4,168
Accrued compensation	4,640	11,532	3,297
Taxes payable	3,232	2,128	1,245
Other current liabilities	1,738	2,015	2,073
Accrued expenses and other current liabilities	$ 39,916	$ 40,004	$ 33,617

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Debt - Schedule of Outstanding Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Debt Instrument [Line Items]
Finance lease obligations	$ 1,226	$ 1,419	$ 1,993
Total debt	96,226	97,669	128,473
Less: debt issuance costs	(749)	(803)	(972)
Total debt, net of issuance costs	95,477	96,866	127,501
Less: current portion	(5,793)	(5,786)	(32,247)
Long-term portion of debt	89,684	91,080	95,254
Revolving Credit Facility
Debt Instrument [Line Items]
Debt	0	0	26,480
Term Loan
Debt Instrument [Line Items]
Debt	$ 95,000	$ 96,250	$ 100,000

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Debt - Narrative (Details) - USD ($)		3 Months Ended		12 Months Ended
	Apr. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022	Apr. 29, 2021
Debt Instrument [Line Items]
Loss on extinguishment of debt		$ 0	$ 460,000
Amended Credit Agreement
Debt Instrument [Line Items]
Debt instrument, term	5 years
Debt issuance costs				$ 1,100,000
Prior Credit Agreement
Debt Instrument [Line Items]
Loss on extinguishment of debt				$ 500,000
Revolving Credit Facility | Amended Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 100,000,000
Remaining borrowing capacity		$ 100,000,000
Revolving Credit Facility | Amended Credit Agreement | Minimum
Debt Instrument [Line Items]
Unused fee percentage	0.10%
Revolving Credit Facility | Amended Credit Agreement | Maximum
Debt Instrument [Line Items]
Unused fee percentage	0.30%
Revolving Credit Facility | Amended Credit Agreement | Minimum Floor
Debt Instrument [Line Items]
Basis spread on variable rate	0.00%
Revolving Credit Facility | Amended Credit Agreement | London Interbank Offered Rate (LIBOR) | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	1.25%
Revolving Credit Facility | Amended Credit Agreement | London Interbank Offered Rate (LIBOR) | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	2.125%
Revolving Credit Facility | Amended Credit Agreement | Base Rate | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	0.25%
Revolving Credit Facility | Amended Credit Agreement | Base Rate | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	1.125%
Revolving Credit Facility | Prior Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity					$ 50,000,000
Letter of Credit | Amended Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 7,000,000
Swing Line of Credit | Amended Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	5,000,000
Term Loan | Amended Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 100,000,000
Interest rate at period end		3.50%
Term Loan | Amended Credit Agreement | Minimum Floor
Debt Instrument [Line Items]
Basis spread on variable rate	0.00%
Term Loan | Amended Credit Agreement | London Interbank Offered Rate (LIBOR) | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	1.25%
Term Loan | Amended Credit Agreement | London Interbank Offered Rate (LIBOR) | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	2.125%
Term Loan | Amended Credit Agreement | Base Rate | Minimum
Debt Instrument [Line Items]
Basis spread on variable rate	0.25%
Term Loan | Amended Credit Agreement | Base Rate | Maximum
Debt Instrument [Line Items]
Basis spread on variable rate	1.125%
Term Loan | Prior Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity					$ 165,000,000

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Stock-based compensation - Summary of Activity for Options Vest Solely Based upon Satisfaction of Service Condition (Details) - Service-based Vesting Stock Options $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Shares subject to options outstanding
Beginning balance (in shares) | shares	1,543,499
Granted (in shares) | shares	0
Exercised (in shares) | shares	0
Canceled or forfeited (in shares) | shares	0
Ending balance (in shares) | shares	1,543,499
Options outstanding, Exercisable (in shares) | shares	1,416,384
Weighted-average exercise price
Beginning balance (in USD per share) | $ / shares	$ 15.05
Granted (in USD per share) | $ / shares	0
Exercised (in USD per share) | $ / shares	0
Canceled or forfeited (in USD per share) | $ / shares	0
Ending balance (in USD per share) | $ / shares	15.05
Weighted-average exercise price, Exercisable (in USD per share) | $ / shares	$ 15.20
Weighted-average remaining contractual life (in years), Outstanding	4 years 4 months 24 days
Weighted-average remaining contractual life (in years), Exercisable	4 years 2 months 12 days
Aggregate intrinsic values, Outstanding | $	$ 24,131
Aggregate intrinsic values, Exercisable | $	$ 21,919

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Stock-based compensation - Narrative (Details) - USD ($)	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Mar. 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing stock price (in USD per share)	$ 30.68
Service-based Vesting Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation cost	$ 100,000	$ 300,000
Unrecognized stock-based compensation cost	$ 500,000
Unrecognized stock-based compensation cost, expected weighted-average period of recognition	1 year 10 months 24 days
Performance-based and Market-based Vesting Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized stock-based compensation cost	$ 0	0
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested RSAs outstanding (in shares)	341,802
Restricted Stock Awards and Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation cost	$ 6,500,000	$ 4,000,000
Unrecognized stock-based compensation cost, expected weighted-average period of recognition	2 years 7 months 6 days
Unvested RSAs outstanding (in shares)	2,626,532		2,275,742
Unrecognized stock-based compensation cost	$ 55,600,000

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Stock-based compensation - Summary of Activity for Options Vest Based upon Performance or Market Conditions (Details) - Performance-based and Market-based Vesting Options $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Shares subject to options outstanding
Beginning balance (in shares) | shares	1,004,327
Granted (in shares) | shares	0
Exercised (in shares) | shares	0
Canceled or forfeited (in shares) | shares	25,800
Ending balance (in shares) | shares	978,527
Options outstanding, Exercisable (in shares) | shares	804,327
Weighted-average exercise price
Beginning balance (in USD per share) | $ / shares	$ 9.40
Granted (in USD per share) | $ / shares	0
Exercised (in USD per share) | $ / shares	0
Canceled or forfeited (in USD per share) | $ / shares	26.84
Ending balance (in USD per share) | $ / shares	8.94
Weighted-average exercise price, Exercisable (in USD per share) | $ / shares	$ 5.06
Weighted-average remaining contractual life (in years), Outstanding	2 years 7 months 6 days
Weighted-average remaining contractual life (in years), Exercisable	2 years 1 month 6 days
Aggregate intrinsic values, Outstanding | $	$ 21,278
Aggregate intrinsic values, Exercisable | $	$ 20,609

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Stock-based compensation - Summary of Activities for Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs") (Details) - Restricted Stock Awards and Restricted Stock Units	3 Months Ended
	Jun. 30, 2022 $ / shares shares
RSUs and shares of restricted stock outstanding
Beginning balance (in shares) | shares	2,275,742
Granted (in shares) | shares	1,063,373
Vested (in shares) | shares	(558,336)
Canceled or forfeited (in shares) | shares	(154,247)
Ending balance (in shares) | shares	2,626,532
Weighted-average grant date fair value
Beginning balance (in USD per share) | $ / shares	$ 20.85
Granted (in USD per share) | $ / shares	26.32
Vested (in USD per share) | $ / shares	19.13
Canceled or forfeited (in USD per share) | $ / shares	21.06
Ending balance (in USD per share) | $ / shares	$ 23.04

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Repurchase of common stock - Narrative (Details) - USD ($)	3 Months Ended
	Jun. 30, 2022	May 08, 2019
Equity [Abstract]
Amount authorized under share repurchase program		$ 25,000,000
Total shares repurchased (in shares)	0
Remaining authorized repurchase amount	$ 17,100,000

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Net income per share - Reconciliation of Numerator and Denominator in Basic and Diluted Net Income (Loss) Per Common Share Computations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Numerator:
Net income	$ 14,469	$ 8,276
Denominator:
Weighted average common shares outstanding - basic (in shares)	51,707,160	50,544,573
Dilutive common equivalent shares from equity awards (in shares)	2,127,572	2,863,870
Weighted average common shares outstanding - diluted (in shares)	53,834,732	53,408,443
Net income per share:
Basic (in USD per share)	$ 0.28	$ 0.16
Diluted (in USD per share)	$ 0.27	$ 0.15
Anti-dilutive securities excluded from diluted EPS:
Weighted average anti-dilutive shares from outstanding equity awards excluded from diluted earnings per share (in shares)	741,016	0

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Leases - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Lessee operating lease, option to extend	five years
Operating cash flows from operating leases	$ 1.1	$ 1.3

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Leases - Balance Sheet Line Items (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Assets
Operating lease assets	$ 17,188	$ 18,218	$ 21,490
Finance lease assets	560	664	979
Total leased assets	17,748	18,882	22,469
Current
Operating	4,508	4,391	4,168
Finance	793	786	768
Noncurrent
Operating	14,637	15,744	19,053
Finance	433	633	1,225
Total lease liabilities	$ 20,371	$ 21,554	$ 25,214
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other assets	Other assets	Other assets
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other assets	Other assets	Other assets
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	Accrued expenses and other current liabilities
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List]	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
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Long-term debt and finance lease obligations	Long-term debt and finance lease obligations	Long-term debt and finance lease obligations
Finance lease accumulated amortization	$ 3,100	$ 3,000	$ 2,700

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Operating lease cost	$ 1,157	$ 1,070
Finance lease cost
Amortization of leased assets	105	121
Interest on lease liabilities	10	24
Total lease cost	$ 1,272	$ 1,215

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Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2021
Operating leases
Remainder of fiscal 2023	$ 3,752
2024	4,862
2025	4,071
2026	3,097
2027	1,441
Thereafter	3,224
Total lease payments	20,447
Less: Interest	1,302
Present value of lease liabilities	19,145
Finance leases
Remainder of fiscal 2023	613
2024	582
2025	58
2026	0
2027	0
Thereafter	0
Total lease payments	1,253
Less: Interest	27
Present value of lease liabilities	1,226	$ 1,419	$ 1,993
Total
Remainder of fiscal 2023	4,365
2024	5,444
2025	4,129
2026	3,097
2027	1,441
Thereafter	3,224
Total lease payments	21,700
Less: Interest	1,329
Total lease liabilities	$ 20,371	$ 21,554	$ 25,214

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Leases - Weighted Average Assumptions (Details)	Jun. 30, 2022	Jun. 30, 2021
Weighted-average remaining lease term
Operating leases	5 years	5 years 9 months 18 days
Finance leases	1 year 7 months 6 days	2 years 7 months 6 days
Weighted-average discount rate
Operating leases	2.70%	2.80%
Finance leases	2.90%	3.00%