Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<div><ul><li>Strong 1QFY27 results, even excluding tariff refund. On August 5, ELF reported sales, EBITDA, and EPS that exceeded consensus, even excluding a tariff refund that boosted EBITDA by $50 million and EPS by $0.68.</li><li>The beat was due mostly to Rhode’s outperformance and some shift in marketing spending to later in the year. </li><li>ELF plans to reinvest all of the refund, so the increase in FY27 guidance was all due to strength in the underlying business.</li></ul></div>

Strong 1QFY27 results, even excluding tariff refund. On August 5, ELF reported sales, EBITDA, and EPS that exceeded consensus, even excluding a tariff refund that boosted EBITDA by $50 million and EPS by $0.68.The beat was due mostly to Rhode’s outperformance and some shift in marketing spending to later in the year. ELF plans to reinvest all of the refund, so the increase in FY27 guidance was all due to strength in the underlying business.

<ul><li>4QFY26 results topped estimates across all key metrics. Net sales of $449.3MM increased 35% Y/Y, well above both our $418.8MM estimate and FactSet consensus of $423.0MM, with organic sales growth of 1% and rhode contributing $113MM.</li><li>Adjusted EPS of $0.32 exceeded our $0.28 estimate and consensus of $0.30.</li><li>Adjusted EBITDA of $59MM surpassed both our $48.2MM estimate and consensus of $50.4MM, though it declined from $81MM in 4Q25 as elevated marketing investment, including a Super Bowl campaign, and infrastructure spending pressured margins as expected.</li></ul>

4QFY26 results topped estimates across all key metrics. Net sales of $449.3MM increased 35% Y/Y, well above both our $418.8MM estimate and FactSet consensus of $423.0MM, with organic sales growth of 1% and rhode contributing $113MM.Adjusted EPS of $0.32 exceeded our $0.28 estimate and consensus of $0.30.Adjusted EBITDA of $59MM surpassed both our $48.2MM estimate and consensus of $50.4MM, though it declined from $81MM in 4Q25 as elevated marketing investment, including a Super Bowl campaign, and infrastructure spending pressured margins as expected.

ELF: Rhode Momentum Drives 4Q Upside; Initial FY27 Guidance Appears Conservative

Equity Research Focusing on the Consumer Sector, Small Cap Consumer Research

Small Cap Consumer Research

Equity Research Focusing on the Consumer Sector

Small Cap Consumer Research, LLC is a leading company-sponsored equity research provider focusing on the consumer sector (apparel, brand licensing and specialty retailing segments).

<ul><li>We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and did not provide 2024 guidance, as management continues to pivot to multiple new and expanded retailer relationships for virtually all their brands, including the addition of Costco as a key new partner.</li><li>We believe, beginning in 3Q24, Starco will take their stable of brands to a new level in terms of door penetration which, when combined with an aggressive focus on adding new categories, will position the company for strong top line and Adjusted EBITDA expansion for 2025 and beyond.</li><li>As such, we continue to view the future of Starco as strong, and we reiterate our Buy rating and $0.25 price target for STCB.</li></ul>

We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and did not provide 2024 guidance, as management continues to pivot to multiple new and expanded retailer relationships for virtually all their brands, including the addition of Costco as a key new partner.We believe, beginning in 3Q24, Starco will take their stable of brands to a new level in terms of door penetration which, when combined with an aggressive focus on adding new categories, will position the company for strong top line and Adjusted EBITDA expansion for 2025 and beyond.As such, we continue to view the future of Starco as strong, and we reiterate our Buy rating and $0.25 price target for STCB.

elf Beauty Inc - STCB: 2Q Review: Adding Costco, Planning for the Future, Reiterate Buy

<ul><li>We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close on Tuesday.</li><li>We believe, after resetting near-term expectations in 1Q due to multiple expansions for key brands in 2H and 2025 and Whipshots slightly plateauing, the 2Q call will be focused on laying out the road map for material expansion on multiple levels/brands and the longer term positive implications.</li><li>We believe there remain multiple pathways to upside for the company over the longer-term and, the model of leveraging the company's manufacturing and marketing infrastructure remains fully intact.</li></ul>

We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close on Tuesday.We believe, after resetting near-term expectations in 1Q due to multiple expansions for key brands in 2H and 2025 and Whipshots slightly plateauing, the 2Q call will be focused on laying out the road map for material expansion on multiple levels/brands and the longer term positive implications.We believe there remain multiple pathways to upside for the company over the longer-term and, the model of leveraging the company's manufacturing and marketing infrastructure remains fully intact.

elf Beauty Inc - STCB: 2Q Preview: Putting the Building Blocks Together; Reiterate Buy, PT

<ul><li>We are reiterating our Buy rating.</li><li>$0.25 price target and projections for Starco Brands as we look at key trends for 2H24 and beyond.</li><li>We believe 2024, while somewhat frustrating from an investor standpoint (given the downward revenue guidance and pulling of EBITDA guidance after 1Q), will be seen as a positive over the longer term, as the company has made material steps forward for all of their brands, positioning Starco for significant top line growth and going forward, material operating leverage, which we believe will become increasingly self-evident in 2025 and beyond.</li></ul>

We are reiterating our Buy rating.$0.25 price target and projections for Starco Brands as we look at key trends for 2H24 and beyond.We believe 2024, while somewhat frustrating from an investor standpoint (given the downward revenue guidance and pulling of EBITDA guidance after 1Q), will be seen as a positive over the longer term, as the company has made material steps forward for all of their brands, positioning Starco for significant top line growth and going forward, material operating leverage, which we believe will become increasingly self-evident in 2025 and beyond.

elf Beauty Inc - STCB: 2H Signposts; Building for a Better Tomorrow; Reiterate Buy, $0.25 PT

United States

e.l.f. Beauty, Inc. operates as a cosmetic company. The Company offers beauty products for eyes, lips, and face. e.l.f. Beauty provides eyeliners, lipsticks, lip care and brushes, powder, and skin care products.

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elf Beauty Inc (ELF US)

ELF: Rhode Is Paving the Road to Growth

On August 5, ELF reported sales, EBITDA, and EPS that exceeded consensus, even excluding a tariff refund that boosted EBITDA by $50 million and EPS...

Water Tower Research

ELF: Rhode Momentum Drives 4Q Upside; Initial FY27 Guidance Appears Conservative

4QFY26 results topped estimates across all key metrics. Net sales of $449.3MM increased 35% Y/Y, well above both our $418.8MM estimate and FactSet...

Water Tower Research

elf Beauty Inc - STCB: 2Q Review: Adding Costco, Planning for the Future, Reiterate Buy

We are reiterating our Buy rating and $0.25 price target, but reducing our projections after Starco Brands posted a lower than expected 2Q24 and...

Small Cap Consumer Research

elf Beauty Inc - STCB: 2Q Preview: Putting the Building Blocks Together; Reiterate Buy, PT

We are reiterating our Buy rating, price target and projections for Starco Brands with the company announcing 2Q24 (June) results after the close...

Small Cap Consumer Research

elf Beauty Inc - STCB: 2H Signposts; Building for a Better Tomorrow; Reiterate Buy, $0.25 PT

We are reiterating our Buy rating. $0.25 price target and projections for Starco Brands as we look at key trends for 2H24 and beyond. We believe...

Small Cap Consumer Research

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