1、UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-K_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31,2024OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the t
2、ransi?on period from to Commission File Number 001-37873_e.l.f.Beauty,Inc.(Exact name of registrant as specified in its charter)_Delaware46-4464131(State or other jurisdic?on ofincorpora?on or organiza?on)(I.R.S.EmployerIden?fica?on No.)570 10th StreetOakland,CA 94607(Address of principal execu?ve o
3、ffices)(Zip code)_(510)778-7787(Registrants telephone number,including area code)_ Securi?es registered pursuant to Sec?on 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$0.01 par valueELFNew York Stock ExchangeSecuri?es registered pursuant
4、to Sec?on 12(g)of the Act:None_Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securi?es Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Sec?on 13 or 15(d)of the Act.Yes No Indicate by check mark w
5、hether the registrant:(1)has filed all reports required to be filed by Sec?on 13 or 15(d)of the Securi?es Exchange Act of 1934 during the preceding12 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 pa
6、st90 days.Yes No Indicate by check mark whether the registrant has submi?ed electronically every Interac?ve Data File required to be submi?ed pursuant to Rule 405 of Regula?on S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to su
7、bmit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller repor?ng company,or an emerging growthcompany.See the defini?ons of“large accelerated filer,”“accelerated filer,”“smaller repor?ng company,”and“em
8、erging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filerSmaller repor?ng companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transi?on period for complyi
9、ng with any new or revised financialaccoun?ng standards provided pursuant to Sec?on 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and a?esta?on to its managements assessment of the effec?veness of its internal control over financialrepor?ng under Sec?on
10、 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accoun?ng firm that prepared or issued its audit report.If securi?es are registered pursuant to Sec?on 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect th
11、ecorrec?on of an error to previously issued financial statements.Indicated by check mark whether any of those error correc?ons are restatements that required a recovery analysis of incen?ve-based compensa?on received by any of theregistrants execu?ve officers during the relevant recovery period purs
12、uant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of September 30,2023,the last business day of the registrants most recently completed second fiscal quarter,the aggregate market value of the vo?ng and non-vo
13、?ngstock held by non-affiliates of the registrant was approximately$4.2 billion.The number of shares of registrants common stock outstanding as of May 16,2024 was 55,939,080 shares.DOCUMENTS INCORPORATED BY REFERENCEPor?ons of the registrants Defini?ve Proxy Statement rela?ng to the registrants 2024
14、 annual mee?ng of stockholders are incorporated by reference into Part III of this AnnualReport on Form 10-K.Such Defini?ve Proxy Statement will be filed with the Securi?es and Exchange Commission within 120 days of the registrants fiscal year ended March 31,2024.e.l.f.Beauty,Inc.Table of Contents P
15、agePART I Item 1.Business2Item 1A.Risk factors11Item 1B.Unresolved staff comments40Item 1C.Cybersecurity40Item 2.Proper?es41Item 3.Legal proceedings41Item 4.Mine safety disclosures41 PART II Item 5.Market for registrants common equity,related stockholder ma?ers and issuer purchases of equity securi?
16、es42Item 6.Reserved44Item 7.Managements discussion and analysis of financial condi?on and results of opera?ons45Item 7A.Quan?ta?ve and qualita?ve disclosures about market risk53Item 8.Financial statements and supplementary data55Item 9.Changes in and disagreements with accountants on accoun?ng and f
17、inancial disclosure55Item 9A.Controls and procedures55Item 9B.Other informa?on57Item 9C.Disclosure regarding foreign jurisdic?ons that prevent inspec?ons58 PART III Item 10.Directors,execu?ve officers and corporate governance59Item 11.Execu?ve compensa?on59Item 12.Security ownership of certain benef
18、icial owners and management and related stockholder ma?ers59Item 13.Certain rela?onships and related transac?ons,and director independence59Item 14.Principal accoun?ng fees and services59 PART IV Item 15.Exhibits,financial statement schedules60Item 16.Form 10-K summary63 Signatures65 Table of Conten
19、tsCAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K(“Annual Report”)contains forward-looking statements within the meaning of the federal securi?es laws concerning ourbusiness,opera?ons and financial performance and condi?on,as well as our plans,objec?ves and expecta?on
20、s for our business opera?ons and financialperformance and condi?on.Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.Insome cases,you can iden?fy forward-looking statements by terminology such as“aim,”“an?cipate,”“assume,”“beli
21、eve,”“contemplate,”“con?nue,”“could,”“due,”“es?mate,”“expect,”“goal,”“intend,”“may,”“objec?ve,”“plan,”“predict,”“poten?al,”“posi?oned,”“seek,”“should,”“target,”“will,”“would”andother similar expressions that are predic?ons of or indicate future events and future trends,or the nega?ve of these terms
22、or other comparable terminology.These forward-looking statements are based on managements current expecta?ons,es?mates,forecasts and projec?ons about our business and the industryin which we operate and managements beliefs and assump?ons and are not guarantees of future performance or development an
23、d involve known andunknown risks,uncertain?es and other factors that are in some cases beyond our control.Although we believe that the expecta?ons reflected in the forward-looking statements contained herein are reasonable,our actual results and the?ming of selected events may differ materially.Fact
24、ors that may cause actualresults to differ materially from current expecta?ons include,among other things,those listed under Part I,Item 1A.“Risk factors”and elsewhere in thisAnnual Report.Poten?al investors are urged to consider these factors carefully in evalua?ng the forward-looking statements.Th
25、ese forward-lookingstatements speak only as of the date of this Annual Report.Except as required by law,we assume no obliga?on to update or revise these forward-lookingstatements for any reason,even if new informa?on becomes available in the future.SUMMARY OF MATERIAL RISKS ASSOCIATED WITH OUR BUSIN
26、ESSThe principal risks and uncertain?es affec?ng our business include the following:The beauty industry is highly compe?ve,and if we are unable to compete effec?vely our results will suffer.Our new product introduc?ons may not be as successful as we an?cipate.Any damage to our reputa?on or brands ma
27、y materially and adversely affect our business,financial condi?on and results of opera?ons.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 fact
28、ors,and our historical growth may not be indica?ve of our future growth.We may be unable to con?nue to grow our business effec?vely or efficiently,which would harm our business,financial condi?on and results ofopera?ons.Acquisi?ons or investments,such as our acquisi?on of Naturium LLC,could disrupt
29、our business and harm our financial condi?on.A disrup?on in our opera?ons,including a disrup?on in the supply chain for our products,could materially and adversely affect our business.We rely on a number of third-party suppliers,manufacturers,distributors and other vendors,and they may not con?nue t
30、o produce products or provideservices that are consistent with our standards or applicable regulatory requirements,which could harm our brands,cause consumer dissa?sfac?on,andrequire us to find alterna?ve suppliers of our products or services.Adverse economic condi?ons in the United States or any of
31、 the other countries in which we conduct significant business could nega?vely affect ourbusiness,financial condi?on and results of opera?ons.1Table of ContentsWe depend on a limited number of retailers for a large por?on of our net sales,and the loss of one or more of these retailers,or business cha
32、llenges atone or more of these retailers,could adversely affect our results of opera?ons.We have significant opera?ons in China,which exposes us to risks inherent in doing business in that country.We are subject to interna?onal business uncertain?es.If we are unable to protect our intellectual prope
33、rty,the value of our brands and other intangible assets may be diminished,and our business may beadversely affected.Our success depends on our ability to operate our business without infringing,misappropria?ng or otherwise viola?ng the trademarks,patents,copyrights and other proprietary rights of th
34、ird par?es.The summary risk factors described above should be read together with the text of the full risk factors below in the sec?on?tled“Risk factors”and the otherinforma?on set forth in this Annual Report,including our consolidated financial statements and the related notes,as well as in other d
35、ocuments that we filewith the US Securi?es and Exchange Commission(the“SEC”).The risks summarized above or described in the sec?on?tled“Risk factors”are not the onlyrisks that we face.Addi?onal risks and uncertain?es not precisely known to us or that we currently deem to be immaterial may also mater
36、ially adverselyaffect our business,financial condi?on,results of opera?ons,and future growth prospects.PART IItem 1.Business.Overviewe.l.f.Beauty,Inc.(“e.l.f.Beauty”and together with our subsidiaries,the“Company,”or“we”)is a mul?-brand beauty company that offers inclusive,accessible,clean,vegan and
37、cruelty free cosme?cs and skin care products.Our Vision.To be a different kind of beauty company by building brands that disrupt industry norms,shape culture and connect communi?es throughposi?vity,inclusivity and accessibility.Our Mission.We make the best of beauty accessible to every eye,lip,face
38、and skin concern.Our Purpose.We stand with every eye,lip,face and paw.Our BrandsOur family of brands includes e.l.f.Cosme?cs,e.l.f.SKIN,Naturium,Well People and Keys Soulcare.Our brands are available online and across leading beauty,mass-market and specialty retailers.We have strong rela?onships wit
39、h our retail customers such as Target,Walmart,Ulta Beauty and other leading retailersthat have enabled us to expand distribu?on both domes?cally and interna?onally.2Table of Contentse.l.f.Cosme?csSince 2004,e.l.f.Cosme?cs has made the best of beauty accessible to every eye,lip and face.We make premi
40、um-quality,pres?ge-inspired cosme?cs at an extraordinary value.We offer a range of products that are clean,vegan,cruelty free and manufactured in a FairTrade Cer?fied facility.As one of the first digital disruptors,e.l.f.con?nues to a?ract a highly engaged audience,leveraging social anddigital pla?o
41、rms to connect with our community.e.l.f.SKINWin in skin the clean+kind way with e.l.f.SKIN.We create targeted,ingredient-focused,dermatologist-developed formulas for everyeye,lip,face and skin concern.Our ambi?on is to make skin care accessible to all with innova?ve,efficacious formulas at get-real
42、prices.We offer a range of products that are clean,vegan,cruelty free and manufactured in a Fair Trade Cer?fied facility.NaturiumDriven by the belief that skin care should be and can be high performance,skin compa?ble and affordable,Naturium was born.Naturium unlocks the benefits of natural botanica
43、ls and powerful ac?ves with innova?ve technology by formula?ng skin care formulasthat work.Well PeopleSince 2008,Well People has raised the standard for plant-powered,high-performance beauty.A clean beauty pioneer withapproximately 100 EWG VERIFIED products,Well People was founded so that all people
44、 can be well people with dermatologist-developed,“clean”and planet minded products.Keys SoulcareInspired by Alicia Keys personal skin care and self-discovery journey,Keys Soulcare combines skin-nourishing offerings with soul-nurturing rituals to care for the whole self.Developed by board-cer?fied de
45、rmatologist Dr.Rene Snyder,our premium-quality skin careformulas are also clean,cruelty free and manufactured in a Fair Trade Cer?fied facility.Our Products and StrategyWe believe our ability to deliver cruelty free,clean,vegan and premium-quality products at accessible prices with broad appeal diff
46、eren?ates us in the beautyindustry.We believe the combina?on of our value proposi?on,powerhouse innova?on,disrup?ve marke?ng engine and our world-class teams ability toexecute with quality and speed has posi?oned us well to navigate the compe?ve beauty market.Our strategy is underpinned by four key
47、pillars:Value Proposi?on.Each of our brands has accessible pricing rela?ve to its compe?ve set and furthers our mission of making the best of beauty accessibleto every eye,lip,face and skin concern.As an example,e.l.f.Cosme?cs average product price point is approximately$6,as compared to other leadi
48、ngmass cosme?cs brands which have average product price points over$9 and pres?ge cosme?cs brands which have average product price points over$20,according to Nielsen.Powerhouse Innova?on.We believe innova?on is key to our success and we were named to Fast Companys list of“The Worlds Most Innova?veC
49、ompanies of 2023.”We believe we are a leader in the beauty industry in speed and first-to-mass product introduc?ons.Our flagship e.l.f.Cosme?cs brand is known for its“holy grail”innova?on:beauty products that deliver premium quality at extraordinary prices withbroad appeal.As consumers are increasin
50、gly savvy and knowledgeable about trends in the pres?ge market,they look for ways to get the best of beautyat an accessible price.Examples of our“holy grails”include the e.l.f.Cosme?cs Power Grip Primer at$10 versus a pres?ge item at$38,the e.l.f.Cosme?cs Halo Glow Liquid Filter at$14 versus a pres?
51、ge item at$49,and the e.l.f.SKIN Holy Hydra?on!Makeup Mel?ng Cleansing Balm at$11 versus apres?ge item at$38.Disrup?ve Marke?ng Engine.We believe that our brand awareness is rela?vely low in comparison to legacy mass beauty brands.This represents anopportunity for us,and we have a mul?-faceted strat
52、egy to build brand awareness,affinity and loyalty.We seek to a?ract and engage consumersprimarily through digital and social media,as compared to legacy beauty brands that engage consumers primarily through tradi?onal media such asmagazines,newspapers and television.We a?ract and engage exis?ng and
53、new consumers through buzz-worthy ac?va?ons,unexpected crea?vity andunique collabora?ons.Total expenses for marke?ng and digital in the fiscal year ended March 31,2024 were$256.0 million,approximately 25%of ournet sales.Unique One-Team Culture.Our talented employees are at the core of our business s
54、trategy.Our commitment to our people and our High PerformanceTeam(“HPT”)culture is evident in our 91%employee engagement score and recogni?on by U.S.News&World Report on its annual list of the“2023-2024 Best Companies to Work For.”TMTMTM3Table of ContentsWith regards to compensa?on,we take a unique“
55、one-team”approach.All full-?me employees receive a base salary,are bonus eligible under the samebonus plan?ed to our financial performance and receive an equity award in e.l.f.Beauty stock.We believe we are one of the few public consumercompanies that grants equity on an annual basis to every employ
56、eestrongly aligning our team with the long-term interests of our stockholders.Webelieve this approach,which applies across all employee levels and geographies,is unique in the beauty industry and contributes to our success in hiringand retaining top talent and driving business results.Markets and Co
57、mpe?onWe operate across beauty categories including eye,lip and face makeup,beauty tools and accessories,and skin care products.Color cosme?cs and skin careproducts are broadly sold through food,drug and mass channels,as well as through department stores,online and in specialty channels.The beauty i
58、ndustry is rela?vely concentrated,with a significant por?on of retail sales in the United States generated by brands owned by a few largemul?na?onal companies,such as LOral,Estee Lauder,Coty,Unilever,LVMH,Shiseido,Beiersdorf and Procter&Gamble.These large mul?na?onalcompanies typically own mul?ple b
59、rands.In addi?on to the tradi?onal brands against which we compete,small independent companies con?nue to enter themarket with new brands and customized product offerings.Distribu?onWe employ an omni-channel distribu?on strategy and sell our products with retailers in the United States,as well as in
60、terna?onally.We also sell our productsonline through our own direct e-commerce channels,as well as through other e-commerce websites.Our main channels of distribu?on are described below.Domes?c retailers.We sell our products in the United States primarily in the mass,drug store,food and specialty re
61、tail channels.e-commerce.e-commerce is an important component of our engagement and innova?on model.Our roots as an e-commerce company and our digitalengagement model drive conversion on our e-commerce websites and our mobile applica?ons,where we sell our full product offerings.Our products arealso
62、available at other e-commerce sites,such as Amazon,making our products widely accessible to our consumers.Interna?onal retailers.Our products are also sold in interna?onal markets,primarily in the United Kingdom(the“UK”)and Canada.In the fiscal year ended March 31,2024,na?onal and interna?onal retai
63、lers comprised 84%of our net sales.The remaining 16%came from e-commercechannels.The United States accounted for 85%of our net sales in the fiscal year ended March 31,2024.The remaining 15%was a?ributable to interna?onal markets.CustomersWe have strong rela?onships with our retail customers such as
64、Target,Walmart,Ulta Beauty and other leading retailers that have enabled us to expanddistribu?on both domes?cally and interna?onally.Our largest three customers,Target,Walmart and Ulta Beauty,accounted for 25%,17%and 16%,respec?vely,of our net sales in the fiscal year ended March31,2024.No other ind
65、ividual customer accounted for 10%or more of our net sales in the fiscal year ended March 31,2024.We expect that Target,Walmartand Ulta Beauty,along with a small number of other customers will,in the aggregate,con?nue to account for a large por?on of our net sales in the future.As is customary in th
66、e industry,none of our customers are under any obliga?on to con?nue purchasing products from us in the future.For more informa?on regarding customer concentra?on,see Part II,Item 7“Managements discussion and analysis of financial condi?on and results ofopera?ons”of this report under the heading“Over
67、view.”4Table of ContentsSupply ChainWe have developed a scalable,asset-light supply chain centered on the combina?on of speed to market,high-quality and low costs.Substan?ally all of ourproducts are sourced and manufactured in China through close collabora?on with a network of third-party manufactur
68、ers.We have ample manufacturingcapacity as well as redundant capabili?es in the event that one or more suppliers cannot meet our needs.Our broad supply base gives us the ability to fulfillour product requirements and remain cost compe?ve.We work closely with our suppliers on new product innova?on an
69、d quality.Our China-based sourcing,quality and innova?on teams work with their US-basedcounterparts to deliver ongoing product quality,innova?on and cost savings.We are not overly dependent on any single raw material.The raw materials usedin our products are broadly available and have regular qualit
70、y tes?ng for ingredient integrity.Our distribu?on centers are operated by leading third-party logis?cs providers.Our distribu?on center in California mainly serves our na?onal retailcustomers,while our distribu?on centers in Utah,Ohio and Georgia serve our e-commerce consumers.For our interna?onal o
71、pera?ons,we u?lize third-partylogis?cs providers in the UK,Germany and Canada to distribute to certain interna?onal customers and distributors.We have invested capital in picking,packaging,scanning and conveying technology to more fully automate our processes.Employees and Human Capital ManagementAs
72、 of March 31,2024,we had 475 full-?me employees(377 in the United States,the UK and Canada,and 98 in China).Social Impact and CommitmentsOur Impact Report sets out our social and environmental goals and strategy across three pillars-Encourage Self Expression,Empower Others and EmbodyOur Ethics.Detai
73、ls can be found in our Impact Report on our website(h?ps:/www.el? informa?on on,or that can beaccessed through,our website,including our Impact Report and related materials,is not incorporated by reference into this Annual Report or any other filingswe make with the SEC.We are commi?ed to:Encourage
74、Self Expression.We celebrate diversity and make the best of beauty accessible.Empower Others.We provide equal opportuni?es for growth and success.Embody Our Ethics.We strive to do the right thing for all people,the planet and our furry friends.Encourage Self Expression:Promo?ng a Culture of Diversit
75、y,Equity and InclusionWe are deeply commi?ed to diversity,equity and inclusion(“DEI”)as exemplified by the diversity of both our Board of Directors and our employee base.Weare proud to be one of only four public companies in the United States with a Board of Directors that is at least two-thirds wom
76、en and at least one-thirddiverse(out of over 4,200 public companies).Were also proud that our employee base,which is 75%women,over 40%diverse and over 65%millennial andGen Z,is representa?ve of the young,diverse communi?es we serve.We are commi?ed to enabling the appropriate levels of diversity incl
77、uding but not limited to gender,race,sexual orienta?on,na?onal origin,ability and age to be represented across our en?re team.We promote DEI at all levels of our workforce,and our senior leadership team owns and is responsible for our DEIini?a?ves and programs.5Table of ContentsThe following table p
78、rovides certain sta?s?cs of our team as of March 31,2024:Board of DirectorsExecu?ve TeamDirectors and AboveAll EmployeesGenderFemale67%57%72%75%Male33%43%28%25%AgeGen Z and Millennial%44%67%All Other100%100%56%33%Race/EthnicityBlack or African American11%14%1%4%Hispanic or La?nX%11%16%Asian22%29%16%
79、17%Na?ve American%1%Two or More Races%4%5%White67%57%67%57%Execu?ve Team includes our Execu?ve Officers and the Vice President,General Manager of our China opera?ons.Employee demographic figures based on our full-?me employees as of March 31,2024.Race/ethnicity percentages exclude our employees outs
80、ide ofthe United States.Note:We are an equal opportunity employer and do not use race,ethnicity,gender or any other protected criteria as a factor in any employmentdecisions,such as hiring,promo?ons or compensa?on.Empower Others:Suppor?ng the Full Poten?al of Our EmployeesOur talented employees are
81、at the core of our business strategy.We place a high priority on a?rac?ng,recrui?ng,developing and retaining diverse globaltalent.Our con?nued investments in our people and culture have posi?oned us as an employer of choice both in the beauty industry and our localcommuni?es.In FY 2024,we were recog
82、nized on U.S.News&World Reports annual list of the“2023-2024 Best Companies to Work For.”We are keenly interested in our employees well-being,development and overall sa?sfac?on.Engagement is a key factor we look to because it measures ourteams connec?on and commitment to both e.l.f.Beauty and our vi
83、sion,mission and values.In FY 2024,we conducted our third annual engagement survey ofall employees.All employees are offered the opportunity to par?cipate,and 86%submi?ed a response.Our employee engagement results this year hitrecord highs rela?ve to prior surveys and to consumer industry benchmarks
84、.Our overall engagement score was 91%19%above the industry benchmarkand 2%above our survey administered the previous year.Our benefits and programs are designed to support the total well-being and promote the full poten?al of our employees.With regards to compensa?on,wetake a unique“one-team”approac
85、h.All full-?me employees receive a base salary,are bonus eligible under the same bonus plan?ed to our financialperformance and receive an equity award in e.l.f.Beauty stock.We believe this approach which applies across all employee levels and geographies isunique in the beauty industry and contribut
86、es to our success in hiring and retaining top talent and driving business results.In the United States,where over 70%of our workforce is located,the benefits for our full-?me employees include,among other things:Financial benefits,including compe?ve compensa?on as well as re?rement savings plans and
87、 commuter benefits;Healthcare benefits including flexible spending accounts,disability and life insurance-all of which begin on day 1 of employment;Family support and flexibility benefits,including up to 20 weeks of gender-neutral parental leave,as well as fer?lity and adop?on support;(1)(2)(2)(1)(2
88、)6Table of ContentsWellness and?me off programs,including an employee assistance program,access to wellness coaches and flexible?me off;Community impact programs,including employee dona?on matching programs and paid?me off for volunteering;andEduca?on and career development programs,including tui?on
89、 reimbursement,High Performance Teamwork(“HPT”)coaching,as well as ongoinglearning and training opportuni?es.Outside of the United States,we provide similarly compe?ve benefit packages to those offered to our United States employees and tailored to market-specific prac?ces.Embody Our Ethics:Doing th
90、e Right Thing for All People,the Planet and Our Furry FriendsAll PeopleWe proudly support human rights and individual expression and freedom.As such,we treat all employees with respect,regardless of age,gender,ethnicity,religion,abili?es or sexual orienta?on.We also expect our suppliers and partners
91、 to observe these principles when providing products and services to us.We are proud to be the first company in the beauty industry to have a third-party manufacturing facility Fair Trade Cer?fied.A Fair Trade Cer?fied seal ona product signifies that it was made according to rigorous fair trade stan
92、dards that promote sustainable livelihoods and safe working condi?ons for factoryemployees,protec?on of the environment and transparent supply chains.Our first third-party manufacturing facility in China was Fair Trade Cer?fied inAugust 2022,and we have since expanded this program to cer?fy addi?ona
93、l facili?es.To achieve cer?fica?on,facili?es are required to pass thorough auditsand demonstrate adherence to over 100 compliance criteria that cover social responsibility,environmental responsibility,empowerment and economicdevelopment.Facili?es must pass a re-cer?fica?on annually,which includes pl
94、ans for con?nuous improvement.Each?me a consumer buys one of our FairTrade Cer?fied products,e.l.f.Beauty makes a contribu?on to the facility workers who made the product for use in improving their communi?es.The PlanetWe are focused on reducing our environmental impact while providing our consumers
95、 with premium-quality beauty products.Product packaging represents ameaningful por?on of our environmental footprint,driving our con?nued focus to further reduce this impact.Our packaging sustainability strategy isgrounded in three principles:Packaging footprint reduc?on.We are proud to have elimina
96、ted over 2.5 million pounds of excess packaging since the incep?on of“Project Unicorn.”Project Unicorn was launched in 2019 to elevate e.l.f.Cosme?cs product assortment,presenta?on,and naviga?on on-shelf,and resulted in a significantstreamlining in our product packaging footprint.This was achieved b
97、y removing secondary cartons,vacuum formed trays and paper insert cards,slimming down secondary packaging,and designing a patented approach to display product on shelf.In 2023,we established a new goal seeking toachieve a 20%reduc?on in packaging intensity by the end of our fiscal year ending March
98、31,2030,and we are ac?vely pursuing projects to lightweightour packaging.Sustainably sourced packaging.Our ini?al focus is the use of Forest Stewardship Council(“FSC”)-cer?fied paper for our products that use paper cartons.FSC cer?fica?on is a globally recognized standard that promotes products that
99、 come from responsibly managed forests that provide environmental,socialand economic benefits.We have set a goal for 100%of our paper cartons and 100%of our wood brush handles to be FSC-cer?fied across all of ourbrands by the end of our fiscal year ending March 31,2025.Recyclability and recycled con
100、tent.We have projects underway to increase the percentage of our packaging that is recyclable,refillable,reusable or madefrom recycled materials.We are also working to reduce our carbon footprint.In our fiscal year ended March 31,2022,we publicly disclosed our greenhouse gas(GHG)emissions ofour offi
101、ces,distribu?on centers and value chain.We have made meaningful progress since then.We have already met our science-based target for a 42%reduc?on in our Scope 1 and 2 emissions by 2030(from a 2022 base year)through the Science Based Targets ini?a?ve.We also iden?fied and began ac?ng onkey focus are
102、as to reduce our carbon footprint.As we progress this work,we plan to evaluate science-based targets for our Scope 3 emissions.As part of7Table of Contentsour transparency and repor?ng efforts,we made our first annual disclosure through CDPs Climate Change ques?onnaire in July 2023.Our Furry Friends
103、We are proud to be a 100%cruelty free company.We do not conduct or tolerate any tests on animals,nor do we use any ingredients that are tested onanimals in any of our products.We are double cer?fied as“cruelty free”across our e.l.f.Cosme?cs,e.l.f.SKIN,Well People and Keys Soulcare brands.Each ofthes
104、e brands is cer?fied by People for the Ethical Treatment of Animals(“PETA”)as“Global Animal Test-Free,”a creden?al given to companies and brandswho have verified that their own facili?es and their suppliers do not conduct,commission,pay for,or allow any tests on animals for their ingredients orfinis
105、hed products.In addi?on,each of the aforemen?oned brands is cer?fied by the Leaping Bunny Program.Companies with this creden?al cer?fy that noanimal tes?ng was conducted on materials or formula?ons at any stages of product development,in addi?on to recommi?ng to the program annually andbeing open to
106、 third-party audits.SeasonalityOur results of opera?ons are subject to seasonal fluctua?ons,with net sales in the third and fourth fiscal quarters typically being higher than in the first andsecond fiscal quarters.The higher net sales in our third and fourth fiscal quarters are largely a?ributable t
107、o the increased levels of purchasing by retailers forthe holiday season and customer shelf reset ac?vity,respec?vely.Lower holiday season purchases or shi?s in customer shelf reset ac?vity could have adispropor?onate effect on our results of opera?ons for the en?re fiscal year.To support an?cipated
108、higher sales during the third and fourth fiscal quarters,wemake investments in working capital to ensure inventory levels can support demand.Fluctua?ons throughout the year are also driven by the?ming ofproduct restocking or rearrangement by our major retail customers as well as expansion into new r
109、etail customers.Because a limited number of our retailcustomers account for a large percentage of our net sales,a change in the order pa?ern of one or more of our large retail customers could cause a significantfluctua?on of our quarterly results or impact our liquidity.Trademarks and Other Intellec
110、tual PropertyWe believe that our intellectual property has substan?al value and has contributed significantly to the success of our business.Our primary trademarksinclude“e.l.f.,”“e.l.f.eyes lips face,”“e.l.f.SKIN,”“Well People,”“Naturium”and“Keys Soulcare,”all of which are registered or have regist
111、ra?ons pending withthe US Patent and Trademark Office for our goods and services of primary interest.These trademarks are also registered or have registra?ons pending invarious foreign countries in which we operate.We also have other trademark registra?ons and pending trademark applica?ons for produ
112、ct names and taglines.Our trademarks are valuable assets that reinforce the dis?nc?veness of our brands and our consumers percep?on of our products.In addi?on totrademark protec?on,we own US Design Patents covering packaging,make-up tools and brush handle shapes and we own numerous domain names,incl
113、uding the domain names of our e-commerce websites.We also rely on and use commercially reasonable measures to protect our unpatented proprietarytechnology,which includes our exper?se and product formula?ons,con?nuing innova?on and other know-how to develop and maintain our compe?veposi?on.Government
114、 Regula?onWe and our products are subject to various federal,state and interna?onal laws and regula?ons,including regula?on in the United States by the US Food andDrug Administra?on(the“FDA”),the Consumer Product Safety Commission(the“CPSC”),the Federal Trade Commission(the“FTC”),and regula?ons outs
115、ideof the United States by Health Canada and the European Commission,among others.These laws and regula?ons principally relate to the ingredients,properlabeling,adver?sing,packaging,marke?ng,manufacture,safety,shipment and disposal of our products.Further,as the vast majority of our products areimpo
116、rted from overseas manufacturers,we are subject to Customs Border Patrol clearance regula?ons prior to goods being released into the United Statesmarket.In the United States,the Federal Food,Drug and Cosme?c Act(the“FDCA”),defines cosme?cs as ar?cles or components of ar?cles intended for applica?on
117、tothe human body to cleanse,beau?fy,promote a?rac?veness,or alter the appearance,with the excep?on of soap.The labeling of cosme?c products issubject to the requirements of the FDCA,the Fair Packaging and Labeling Act,the Poison Preven?on Packaging Act and other FDA regula?ons.8Table of ContentsCosm
118、e?cs are not subject to pre-market approval by the FDA;however,certain ingredients,such as color addi?ves,must be pre-approved for the specificintended use of the product and are subject to certain restric?ons on their use.If a company has not adequately substan?ated the safety of its products oring
119、redients by,for example,performing appropriate toxicological tests or relying on already available toxicological test data,then a specific warning label isrequired.The FDA may,by regula?on,require other warning statements on certain cosme?c products for specified hazards associated with such product
120、s.FDA regula?ons also prohibit or otherwise restrict the use of certain types of ingredients in cosme?c products.In addi?on,the FDA requires that cosme?c labeling and claims be truthful and not misleading.Moreover,cosme?cs may not be marketed or labeled for theiruse in trea?ng,preven?ng,mi?ga?ng,or
121、curing disease or other condi?ons or in affec?ng the structure or func?on of the body,as such claims would renderthe products to be a drug and subject to regula?on as a drug.The FDA has issued warning le?ers to cosme?c companies alleging improper drug claimsregarding their cosme?c products.In addi?o
122、n to FDA requirements,the FTC as well as state consumer protec?on laws and regula?ons can subject a cosme?cscompany to a range of requirements and theories of liability,including similar standards regarding false and misleading product claims,under which FTC orstate enforcement or class-ac?on lawsui
123、ts may be brought.In the United States,the FDA has not promulgated regula?ons establishing mandatory Good Manufacturing Prac?ces(“GMPs”)for cosme?cs.However,theFDAs dra?guidance on cosme?c GMPs,most recently updated in June 2013,provides recommenda?ons related to process documenta?on,recordkeeping,b
124、uilding and facility design,equipment maintenance and personnel,and compliance with these recommenda?ons can reduce the risk that FDA finds suchproducts have been rendered adulterated or misbranded in viola?on of applicable law.The FDA also recommends that manufacturers maintain productcomplaint and
125、 recall files and voluntarily report adverse events to the FDA.The FDA monitors compliance of cosme?c products through market surveillance and inspec?on of cosme?c manufacturers and distributors to ensure that theproducts are not manufactured under unsanitary condi?ons,or labeled in a false or misle
126、ading manner.Inspec?ons also may arise from consumer orcompe?tor complaints filed with the FDA.In the event the FDA iden?fies unsanitary condi?ons,false or misleading labeling,or any other viola?on of FDAregula?on,FDA may request or a manufacturer may independently decide to conduct a recall or mark
127、et withdrawal of products.In addi?on,under theModerniza?on of Cosme?c Regula?on Act of 2022(“MoCRA”),manufacturers of cosme?c products will become subject to more onerous FDA obliga?onsonce implemented via regula?on,including adverse event repor?ng and record reten?on requirements,safety substan?a?o
128、n requirements,facilityregistra?on requirements,product lis?ng requirements,mandatory GMP requirements and labeling requirements for certain products.Under MoCRA,theFDA was also granted new enforcement authori?es over cosme?cs,such as the ability to ini?ate mandatory recalls and to obtain access cer
129、tain productrecords.In addi?on to our cosme?c products,we also market certain non-prescrip?on drug products,including certain products that are intended to treat acne or beused as sunscreens,which are regulated as over-the-counter(“OTC”)drug products by the FDA.Certain OTC drug products are subject
130、to regula?on pursuantto the FDAs“monographs,”which provide rules applicable to each therapeu?c category of non-prescrip?on drug,and establishes condi?ons,such as ac?veingredients,uses(indica?ons),doses,labeling,and tes?ng procedures,under which an OTC drug within that par?cular category may be gener
131、ally recognizedas a safe and effec?ve(“GRASE”),and therefore can be marketed without obtaining pre-market approval of an new drug applica?on(“NDA”)or abbreviatednew drug applica?on(“ANDA”).To be legally marketed,among other things,OTC drug products marketed under an OTC monograph must be manufacture
132、d incompliance with the FDAs GMP requirements for drug products,and the failure to maintain compliance with these requirements could lead to FDAenforcement ac?on.Moreover,a failure to comply with the OTC monograph requirements could lead the FDA to determine that the drug is not GRASE,andthus is a“n
133、ew drug”requiring approval in accordance with the NDA or ANDA processes,or to make changes to its manufacturing processes or productformula?ons or labels.Moreover,the FTC regulates and can bring enforcement ac?on against cosme?c companies for decep?ve adver?sing and lack of adequate scien?ficsubstan
134、?a?on for claims.The FTC requires that companies have a reasonable basis to support marke?ng claims.What cons?tutes a reasonable basis can varydepending on the strength or type of claim made,or the market in which the claim is made,but objec?ve evidence substan?a?ng the claim is generallyrequired.In
135、 the E.U.,the sale of cosme?c products is regulated under the E.U.Cosme?cs Regula?on(EC)No 1223/2009 se?ng out the general regulatory frameworkfor finished cosme?c products placed on the E.U.market.The overarching requirement is that a cosme?c product made available on the E.U.market must besafe for
136、 human health when used under normal or reasonably foreseeable condi?ons of use,taking account,in par?cular,of the following:(a)presenta?onincluding conformity with Direc?ve 87/357/EEC regarding health and safety of consumers;(b)labelling;(c)instruc?ons for use and disposal;and(d)any otherindica?on
137、or informa?on provided by the responsible person.9Table of ContentsGenerally,there is no requirement for pre-market approval of cosme?c products in the E.U.However,centralized no?fica?on of all cosme?c products placedon the E.U.market is required.Manufacturers are required to no?fy their products vi
138、a the E.U.cosme?c products no?fica?on portal.Manufacturers areresponsible for safety of their marketed finished cosme?c products,and must ensure that they undergo an appropriate scien?fic safety assessment beforecosme?c products are sold.A special database with informa?on on cosme?c substances and i
139、ngredients,known as CosIng,enables easy access to data oncosme?c ingredients,including legal requirements and restric?ons.We rely on expert consultants for our E.U.product registra?ons and review of ourlabelling for compliance with E.U.regula?on.The E.U.Cosme?cs Regula?on requires the manufacture of
140、 cosme?c products to comply with GMPs,which is presumed where the manufacture is inaccordance with the relevant harmonized standards.In addi?on,in the labelling,making available on the market and adver?sing of cosme?c products,text,names,trademarks,pictures and figura?ve or other signs must not be u
141、sed to imply that these products have characteris?cs or func?ons they do not have;any product claims in labelling must be capable of being substan?ated.We are also subject to a number of federal,state and interna?onal laws and regula?ons that affect companies conduc?ng business on the Internet,inclu
142、dingregula?ons related to consumer protec?on,the promo?on and sale of merchandise,privacy,use and protec?on of consumer and employee personalinforma?on and data(including the collec?on of data from minors),behavioral tracking,and adver?sing and marke?ng ac?vi?es(including sweepstakes,contests and gi
143、veaways).Expenditures for Environmental ComplianceWe are subject to numerous foreign,federal,provincial,state,municipal and local environmental,health and safety laws and regula?ons rela?ng to,amongother ma?ers,safe working condi?ons,product stewardship and environmental protec?on,including those re
144、la?ng to emissions to the air,discharges to landand surface waters,genera?on,handling,storage,transporta?on,treatment and disposal of hazardous substances and waste materials,and the registra?onand evalua?on of chemicals.We maintain policies and procedures to monitor and control environmental,health
145、 and safety risks,and to monitor compliancewith applicable environmental,health and safety requirements.Compliance with such laws and regula?ons pertaining to the discharge of materials into theenvironment,or otherwise rela?ng to the protec?on of the environment,has not had a material effect upon ou
146、r capital expenditures,earnings or compe?veposi?on.SegmentsWe operate our business as a single opera?ng and reportable segment.For more informa?on regarding segment repor?ng,see Note 2 Summary of significantaccoun?ng policies to our consolidated financial statements in Part IV,Item 15.“Exhibits,fina
147、ncial statement schedules”under the heading“Segmentrepor?ng.”Geographic Informa?onFor informa?on regarding the geographic source of our net sales and the loca?on of our long-lived assets,see Note 2 Summary of significant accoun?ngpolicies to our consolidated financial statements in Part IV,Item 15.“
148、Exhibits,financial statement schedules”under the heading“Segment repor?ng.”Forinforma?on regarding the risks related to our non-US opera?ons,see Part I,Item 1A“Risk factors.”Corporate Informa?one.l.f.Beauty was formed as a Delaware corpora?on on December 20,2013 under the name J.A.Cosme?cs Holdings,
149、Inc.and we changed our name to e.l.f.Beauty,Inc.in April 2016.We completed the ini?al public offering of our common stock in September 2016.Our common stock is currently listed on the NewYork Stock Exchange(“NYSE”)under the symbol“ELF.Our principal execu?ve offices are located at 570 10th Street,Oak
150、land,California 94607.Our telephonenumber is(510)778-7787 and our investor rela?ons website can be found at www.el?.e.l.f.Beauty operates through its principal subsidiaries,e.l.f.Cosme?cs,Inc.,which conducts business under the names“e.l.f.Cosme?cs”or e.l.f.,”“e.l.f.SKIN,”and“Keys Soulcare,”Well Peop
151、le,Inc.,which conductsbusiness under the name“Well People,”and Naturium LLC,which conducts business under the name“Naturium.”10Table of ContentsAvailable Informa?onWe make available on or through our website,www.el?,certain reports and amendments to those reports that we file with,or furnish to,the
152、SECin accordance with the Securi?es Exchange Act of 1934,as amended(the“Exchange Act”).These include our Annual Reports on Form 10-K,our QuarterlyReports on Form 10-Q and our Current Reports on Form 8-K,and amendments to those reports filed or furnished pursuant to Sec?on 13(a)or 15(d)of theExchange
153、 Act.We make this informa?on available on or through our website free of charge as soon as reasonably prac?cable a?er we electronically file theinforma?on with,or furnish it to,the SEC.The informa?on on,or that can be accessed through,our website is not incorporated by reference into this AnnualRepo
154、rt or any other filings we make with the SEC.Item 1A.Risk factors.Certain risks may have a material and/or adverse effect on our business,financial condi?on and results of opera?ons.These risks include those describedbelow and may include addi?onal risks and uncertain?es not presently known to us or
155、 that we currently deem immaterial.These risks should be read inconjunc?on with the other informa?on in this Annual Report,including our consolidated financial statements and related notes thereto and“Managementsdiscussion and analysis of financial condi?on and results of opera?ons”in Part II,Item 7
156、 of this Annual Report.Risk factors related to the beauty industryThe beauty industry is highly compe?ve,and if we are unable to compete effec?vely our results will suffer.We face vigorous compe?on from companies throughout the world,including large mul?na?onal consumer products companies that have
157、many beautybrands under ownership and independent beauty and skincare brands,including those that may target the latest trends or specific distribu?on channels.Compe?on in the beauty industry is based on the introduc?on of new products,pricing of products,quality of products and packaging,brand awar
158、eness,perceived value and quality,innova?on,in-store presence and visibility,promo?onal ac?vi?es,adver?sing,editorials,e-commerce and mobile-commerceini?a?ves and other ac?vi?es.We must compete with a high volume of new product introduc?ons and exis?ng products by diverse companies across severaldif
159、ferent distribu?on channels.Many mul?na?onal consumer companies have greater financial,technical or marke?ng resources,longer opera?ng histories,greater brand recogni?on orlarger customer bases than we do and may be able to respond more effec?vely to changing business and economic condi?ons than we
160、can.Many of thesecompe?tors products are sold in a wider selec?on or greater number of retail stores and possess a larger presence in these stores,typically havingsignificantly more inline shelf space than we do.Given the finite space allocated to beauty products by retail stores,our ability to grow
161、 the number of retailstores in which our products are sold and expand our space alloca?on once in these retail stores may require the removal or reduc?on of the shelf space ofthese compe?tors.We may be unsuccessful in our growth strategy in the event retailers do not reallocate shelf space from our
162、compe?tors to us.Increasingshelf space allocated to our products may be especially challenging in instances when a retailer has its own brand.In addi?on,our compe?tors may a?emptto gain market share by offering products at prices at or below the prices at which our products are typically offered,inc
163、luding through the use of largepercentage discounts and“buy one and get one free”offers.Compe?ve pricing may require us to reduce our prices,which would decrease our profitabilityor result in lost sales.Our compe?tors,many of whom have greater resources than we do,may be be?er able to withstand thes
164、e price reduc?ons and lostsales.It is difficult for us to predict the?ming and scale of our compe?tors ac?vi?es in these areas or whether new compe?tors will emerge in the beauty industry.In recent years,numerous online,“indie,”celebrity and influencer-backed beauty companies have emerged and garner
165、ed significant followings.In addi?on,further technological breakthroughs,including new and enhanced technologies which increase compe?on in the online retail market,new product offeringsby compe?tors and the strength and success of our compe?tors marke?ng programs may impede our growth and the imple
166、menta?on of our businessstrategy.Our ability to compete also depends on the con?nued strength of our brands and products,the success of our marke?ng,innova?on and execu?on strategies,the con?nued diversity of our product offerings,the successful management of new product introduc?ons and innova?ons,
167、strong opera?onal execu?on,including in order fulfillment,our ability to adapt to changes in technology,including the successful u?liza?on of data analy?cs,ar?ficial intelligence(“AI”)andmachine learning,and our success in entering new markets and expanding our business in exis?ng geographies.If we
168、are unable to con?nue to competeeffec?vely,it could have a material adverse effect on our business,financial condi?on and results of opera?ons.11Table of ContentsOur new product introduc?ons may not be as successful as we an?cipate.The beauty industry is driven in part by fashion and beauty trends,w
169、hich may shi?quickly.Our con?nued success depends on our ability to an?cipate,gaugeand react in a?mely and cost-effec?ve manner to changes in consumer preferences for beauty products,consumer a?tudes toward our industry and brandsand where and how consumers shop for those products.We must con?nually
170、 work to develop,produce and market new products,maintain and enhance therecogni?on 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,evalua?on and valida?on of our new product concept
171、s.Nonetheless,each new product launch involves risks,as wellas the possibility of unexpected consequences.For example,the acceptance of new product launches and sales to our retail customers may not be as high aswe an?cipate,due to lack of acceptance of the products themselves or their price,or limi
172、ted effec?veness of our marke?ng strategies.In addi?on,our ability to launch new products may be limited by delays or difficul?es affec?ng the ability of our suppliers or manufacturers to?melymanufacture,distribute and ship new products or displays for new products.Sales of new products may be affec
173、ted by inventory management by our retailcustomers,and we may experience product shortages or limita?ons in retail display space by our retail customers.We may also experience a decrease in salesof certain exis?ng products as a result of newly-launched products,the impact of which could be exacerbat
174、ed by shelf space limita?ons or any shelf spaceloss.Any of these occurrences could delay or impede our ability to achieve our sales objec?ves,which could have a material adverse effect on our business,financial condi?on and results of opera?ons.As part of our ongoing business strategy,we expect that
175、 we will need to con?nue to introduce new products in the color cosme?cs and skincare categories,while also expanding our product launches into adjacent categories in which we may have li?le to no opera?ng experience.The success of product launchesin adjacent product categories could be hampered by
176、our rela?ve inexperience opera?ng in such categories,the strength of our compe?tors or any of theother risks referred to above.Furthermore,any expansion into new product categories may prove to be an opera?onal and financial constraint which inhibitsour ability to successfully accomplish such expans
177、ion.Our inability to introduce successful products in our tradi?onal categories or in adjacent categoriescould limit our future growth and have a material adverse effect on our business,financial condi?on and results of opera?ons.Any damage to our reputa?on or brands may materially and adversely aff
178、ect our business,financial condi?on and results of opera?ons.We believe that developing and maintaining our brands is cri?cal and that our financial success is directly dependent on consumer percep?on of our brands.Furthermore,the importance of brand recogni?on may become even greater as compe?tors
179、offer more products similar to ours.We have rela?vely low brand awareness among consumers when compared to legacy beauty brands,and maintaining and enhancing the recogni?on andreputa?on of our brands is cri?cal to our business and future growth.Many factors,some of which are beyond our control,are i
180、mportant to maintaining ourreputa?on and brands.These factors include our ability to comply with ethical,social,product,labor and environmental standards.Any actual or perceivedfailure in compliance with such standards could damage our reputa?on and brands.The growth of our brands depends largely on
181、 our ability to provide a high-quality consumer experience,which in turn depends on our ability to bringinnova?ve products to the market at compe?ve prices that respond to consumer demands and preferences.Addi?onal factors affec?ng our consumerexperience include our ability to provide appealing stor
182、e sets in retail stores,the maintenance and stocking of those sets by our retail customers,the overallshopping experience provided by our retail customers,a reliable and user-friendly website interface and mobile applica?ons for our consumers to browse andpurchase products on our e-commerce websites
183、 and mobile applica?ons.If we are unable to preserve our reputa?on,enhance our brand recogni?on orincrease posi?ve awareness of our products and in-store and Internet pla?orms,it may be difficult for us to maintain and grow our consumer base,and ourbusiness,financial condi?on and results of opera?on
184、s may be materially and adversely affected.The success of our brands may also suffer if our marke?ng plans or product ini?a?ves do not have the desired impact on our brands image or our ability toa?ract consumers.Further,our brand value could diminish significantly due to a number of factors,includi
185、ng consumer percep?on that we have acted in anirresponsible manner,adverse publicity about our products,our failure to maintain the quality of our products,product contamina?on,the failure of ourproducts to deliver consistently posi?ve consumer experiences,or our products becoming unavailable to con
186、sumers.12Table of ContentsOur 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 contamina?on or product safety orquality failures,actual or perceived,or incl
187、usion of prohibited ingredients,could tarnish the image of our brands and could cause consumers to choose otherproducts.Allega?ons of contamina?on or other adverse effects on product safety or suitability for use by a par?cular consumer,even if untrue,may requireus to expend significant?me and resou
188、rces responding to such allega?ons and could,from?me to?me,result in a recall of a product from any or all of themarkets in which the affected product was distributed.Any such issues or recalls could nega?vely affect our profitability and image of our brands.If our products are found to be,or percei
189、ved to be,defec?ve or unsafe,or if they otherwise fail to meet our consumers expecta?ons,our rela?onships withconsumers could suffer,the appeal of our brands could be diminished,we may need to recall some of our products and/or become subject to regulatoryac?on,and we could lose sales or market shar
190、e or become subject to boyco?s or liability claims.In addi?on,safety or other defects in our compe?torsproducts could reduce consumer demand for our own products if consumers view them to be similar.Any of these outcomes could result in a materialadverse effect on our business,financial condi?on and
191、 results of opera?ons.Risk factors related to our growth and profitabilityWe 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 anumber of
192、 key ini?a?ves,including our ability to:build demand in our brands;invest in digital capabili?es;lead innova?on by providing pres?ge quality products at an extraordinary value;drive produc?vity and space expansion with our retailers;deliver profitable growth;andpursue strategic extensions that can l
193、everage our strengths and bring new capabili?es.There can be no assurance that we can successfully achieve any or all of the above ini?a?ves in the manner or?me period that we expect.Further,achievingthese objec?ves will require investments which may result in short-term cost increases with net sale
194、s materializing on a longer-term horizon and,therefore,may be dilu?ve to our earnings.We cannot provide any assurance that we will realize,in full or in part,the an?cipated benefits we expect our strategy willachieve.The failure to realize those benefits could have a material adverse effect on our b
195、usiness,financial condi?on and results of opera?ons.Our growth and profitability are dependent on a number of factors,and our historical growth may not be indica?ve of our future growth.Our historical growth may not be indica?ve of our future performance as we may not be successful in execu?ng our g
196、rowth strategy,and,even if we achieveour strategic impera?ves,we may not be able to sustain profitability.In future periods,our revenue could decline,or grow more slowly than we expect.Wealso may incur significant losses in the future for a number of reasons,including the following risks and the oth
197、er risks described in this report,and we mayencounter unforeseen expenses,difficul?es,complica?ons,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 m
198、anufacturers to produce our products and of our distributors to distribute our products could be disrupted;13Table of Contentsbecause substan?ally all of our products are sourced and manufactured in China,our opera?ons are suscep?ble to risks inherent in doing business there;our products may be the
199、subject of regulatory ac?ons,including,but not limited to,ac?ons by the FDA,the FTC and the CPSC in the United States;we may be unable to introduce new products that appeal to consumers or otherwise successfully compete with our compe?tors in the beauty industry;we may be unsuccessful in enhancing t
200、he recogni?on and reputa?on 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 interrup?ons,data corrup?on,cyber-based a?acks or netw
201、ork security breaches which result in the disrup?on of ouropera?ng systems or the loss of confiden?al informa?on of our consumers;we may be unable to retain key members of our senior management team or a?ract and retain other qualified personnel;andwe may be affected by any adverse economic condi?on
202、s in the United States or interna?onally.We may be unable to con?nue to grow our business effec?vely or efficiently,which would harm our business,financial condi?on and results of opera?ons.Since our forma?on,we have experienced significant growth in our business,customer base,employee headcount and
203、 opera?ons,and we expect to con?nueto grow our business.Growing our business has placed,and we expect that it will con?nue to place,strain on our management team,personnel,financial andinforma?on systems,supply chain and distribu?on capacity and other resources.To manage our growth effec?vely,we mus
204、t con?nue to enhance ouropera?onal,financial and management systems,including our warehouse management and inventory control;maintain and improve our internal controlsand disclosure controls and procedures;maintain and improve our informa?on technology systems and procedures;and expand,train and man
205、age ouremployee base while maintaining close coordina?on among our execu?ve,accoun?ng,finance,legal,human resources,marke?ng,regulatory,sales andopera?ons func?ons.We may not be able to con?nue to effec?vely manage our expansion in any one or more of these areas,and any failure to do so could signif
206、icantly harm ourbusiness,financial condi?on and results of opera?ons.Growing our business may make it difficult for us to adequately predict the expenditures we will needto make in the future.If we do not make the necessary overhead expenditures to accommodate our future growth,we may not be success
207、ful in execu?ng ourgrowth strategy,and our results of opera?ons would suffer.Acquisi?ons or investments,such as our acquisi?on of Naturium,could disrupt our business and harm our financial condi?on.We frequently review acquisi?on and strategic investment opportuni?es that would expand our current pr
208、oduct offerings,our distribu?on channels,increasethe size and geographic scope of our opera?ons or otherwise offer growth and opera?ng efficiency opportuni?es.There can be no assurance that we will beable to iden?fy suitable candidates or consummate these transac?ons on favorable terms.The process o
209、f integra?ng an acquired business,product ortechnology can create unforeseen opera?ng difficul?es,expenditures and other challenges such as:poten?ally increased regulatory and compliance requirements;implementa?on or remedia?on of controls,procedures and policies at the acquired business;diversion o
210、f management?me and focus from opera?on of our then-exis?ng business to acquisi?on integra?on challenges;coordina?on of product,sales,marke?ng and program and systems management func?ons;transi?on of the users and customers of the acquired business,product,or technology onto our system;14Table of Co
211、ntentsreten?on of employees from the acquired business;integra?on of employees from the acquired business into our organiza?on;integra?on of the acquired business accoun?ng,informa?on management,human resources and other administra?ve systems and opera?ons into oursystems and opera?ons;liability for
212、 ac?vi?es of the acquired business,product or technology prior to the acquisi?on,including viola?ons of law,commercial disputes and tax andother known and unknown liabili?es;andli?ga?on or other claims in connec?on with the acquired business,product or technology,including claims brought by terminat
213、ed employees,customers,former stockholders or other third par?es.If we are unable to address these difficul?es and challenges or other problems encountered in connec?on with any acquisi?on or investment,we might notrealize the an?cipated benefits of that acquisi?on or investment,and we might incur u
214、nan?cipated liabili?es or otherwise suffer harm to our businessgenerally.For example,if the integra?on of Naturiums business with our business is more difficult,costly or?me-consuming than expected,we may not fullyrealize the expected benefits of our acquisi?on of Naturium,which may adversely affect
215、 our business,financial condi?on and results of opera?ons.See also“Risk factors related to our acquisi?on of Naturium.”To the extent that we pay the considera?on for any acquisi?ons or investments in cash,it reduces the amount of cash available to us for other purposes.Acquisi?ons or investments can
216、 also result in dilu?ve issuances of our equity securi?es or the incurrence of debt,con?ngent liabili?es,amor?za?on expenses,increased interest expenses or impairment charges against goodwill on our consolidated balance sheet,any of which could have a material adverse effect onour business,financial
217、 condi?on and results of opera?ons.For example,in connec?on with our acquisi?on of Naturium,we paid total considera?on ofapproximately$333 million using an incremental term loan under our exis?ng credit facility,borrowings on our exis?ng revolving facility,cash on the balancesheet and approximately$
218、58 million of our stock.Risk factors related to our acquisi?on of NaturiumWe have made certain assump?ons rela?ng to our acquisi?on of Naturium that may prove to be materially inaccurate.We have made certain assump?ons rela?ng to our acquisi?on of Naturium that may prove to be inaccurate,including a
219、s the result of the failure to realize theexpected benefits of the acquisi?on,failure to realize expected revenue growth rates and higher than expected opera?ng,transac?on and integra?on costs,as well as general economic and business condi?ons that adversely affect Naturium.If the assump?ons are inc
220、orrect,our business,financial condi?on andresults of opera?ons may be materially adversely affected.Naturium may have liabili?es that are not known to us.Naturium may have liabili?es that we failed,or were unable,to discover in the course of performing our due diligence inves?ga?ons in connec?on wit
221、h ouracquisi?on of Naturium.We may learn addi?onal informa?on about Naturium that materially and adversely affects us and Naturium,such as unknown orcon?ngent liabili?es and liabili?es related to compliance with applicable laws.Moreover,Naturium may be subject to audits,reviews,inquiries,inves?ga?on
222、sand claims of non-compliance and li?ga?on by federal and state regulatory agencies which could result in liabili?es or other sanc?ons.Any such liabili?es orsanc?ons,individually or in the aggregate,could have an adverse effect on our business,financial condi?on and results of opera?ons.Raw material
223、 sources for Naturium could be interrupted from?me to?me and,if interrupted,there is no guarantee that the supply of materials could beresumed within a reasonable?me frame and at an acceptable cost or at all.Naturium relies on certain third-party suppliers for raw materials necessary to produce Natu
224、rium products,and we intend to con?nue to rely on these thirdpar?es.There are a limited number of suppliers of raw materials used to produce Naturium products,and there may be a need to assess alternate suppliersto prevent a possible disrup?on of the availability of those raw materials.We cannot be
225、sure that these suppliers will remain in business,or that they will notbe purchased by one of our compe?tors or another company that is not interested in con?nuing to provide raw materials for our intended purpose.Inaddi?on,the lead?me needed to establish a rela?onship with a new supplier can be len
226、gthy,and we may experience delays in mee?ng demand in the eventa new supplier must be used.The?me and effort to qualify a new supplier could result in15Table of Contentsaddi?onal costs,diversion of resources or reduced manufacturing yields,any of which would nega?vely impact our opera?ng results.Any
227、 significant delay inthe supply of the raw materials needed to produce Naturium products could considerably delay product manufacturing and distribu?on,which would impairour ability to generate revenues from the sale of Naturium products and could ul?mately adversely affect our business,financial co
228、ndi?on and results ofopera?ons.Risk factors related to our business opera?ons and macroeconomic condi?onsA disrup?on in our opera?ons,including a disrup?on in the supply chains for our products,could materially and adversely affect our business.As a company engaged in distribu?on on a global scale,o
229、ur opera?ons,including those of our third-party manufacturers,suppliers,brokers and deliveryservice providers,are subject to the risks inherent in such ac?vi?es,including industrial accidents,environmental events,strikes and other labor disputes,disrup?ons or delays in shipments,disrup?ons in inform
230、a?on systems,product quality control,safety,licensing requirements and other regulatory issues,aswell as natural disasters,pandemics(such as the coronavirus pandemic),border disputes,interna?onal conflict(such as the ongoing military conflict inUkraine and the Middle East),acts of terrorism and othe
231、r external factors over which we and our third-party manufacturers,suppliers,brokers and deliveryservice providers have no control.The loss of,or damage to,the manufacturing facili?es or distribu?on centers of our third-party manufacturers,suppliers,brokers and delivery service providers could mater
232、ially and adversely affect our business,financial condi?on and results of opera?ons.We depend heavily on ocean container delivery,as well as fast boats,rail and air freight,to receive shipments of our products from our third-partymanufacturers located in China and contracted third-party delivery ser
233、vice providers to deliver our products to our distribu?on facili?es and logis?csproviders,and from there to our retail customers.Further,we rely on postal and parcel carriers for the delivery of products sold directly to consumersthrough our e-commerce websites and mobile applica?ons.Interrup?ons,to
234、 or failures in,these delivery services could prevent the?mely or successfuldelivery of our products.These interrup?ons or failures may be due to unforeseen events that are beyond our control or the control of our third-partydelivery service providers,such as port conges?on,container shortages,incle
235、ment weather,natural disasters,interna?onal conflict,labor unrest or othertransporta?on disrup?ons.In addi?on,port conges?on,container shortages,inclement weather,natural disasters,interna?onal conflict,labor unrest or othertransporta?on disrup?ons may increase the costs to supply or transport our p
236、roducts or the components of our products.If our products are not delivered on?me or are delivered in a damaged state,retail customers and consumers may refuse to accept our products and have less confidence in our services.Inaddi?on,a vessel and container shortage globally could delay future invent
237、ory receipts and,in turn,could delay deliveries to our retailer customers andavailability of products in our direct-to-consumer e-commerce channel.Such poten?al delays,addi?onal transporta?on expenses and shipping disrup?onscould nega?vely impact our results of opera?ons through higher inventory cos
238、ts 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 ourconsumers may nega?vely affect the shopping experience of our consumer
239、s,damage our reputa?on and cause us to lose consumers.Our ability to meet the needs of our consumers and retail customers depends on the proper opera?on of our distribu?on facili?es,where most of ourinventory that is not in transit is housed.Although we currently insure our inventory,our insurance c
240、overage may not be sufficient to cover the full extent ofany loss or damage to our inventory or distribu?on facili?es,and any loss,damage or disrup?on of the facili?es,or loss or damage of the inventory storedthere,could materially and adversely affect our business,financial condi?on and results of
241、opera?ons.Our success depends,in part,on our reten?on of key members of our senior management team and ability to a?ract and retain qualified personnel.Our success depends,in part,on our ability to a?ract and retain key employees,including our execu?ve officers,senior management team and opera?ons,f
242、inance,sales and marke?ng personnel.The labor markets in the United States and China,where most of our employees are located,are hyper compe?ve,and a?rac?ng and retaining top talent requires significant organiza?onal costs and a?en?on.We are a rela?vely small company that relies on a few keyemployee
243、s,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 moredisrup?ve to us than it would be to a larger company.Our success also depends,in part,on our con?nuing ability to iden?fy,hire,train and retain other highlyqualifie
244、d personnel.In addi?on,we may be unable to effec?vely plan for the succession of senior management,including our Chief Execu?ve Officer.The lossof key personnel or the failure to a?ract and retain qualified personnel may have a material adverse effect on our business,financial condi?on and results o
245、fopera?ons.16Table of ContentsWe rely on a number of third-party suppliers,manufacturers,distributors and other vendors,and they may not con?nue to produce products or provideservices that are consistent with our standards or applicable regulatory requirements,which could harm our brands,cause consu
246、mer dissa?sfac?on,andrequire us to find alterna?ve suppliers of our products or services.We use mul?ple third-party suppliers and manufacturers,primarily based in China,to source and manufacture substan?ally all of our products.We engageour third-party suppliers and manufacturers on a purchase order
247、 basis and are not party to long-term contracts with any of them.The ability of these thirdpar?es to supply and manufacture our products may be affected by compe?ng orders placed by other persons and the demands of those persons.Further,we are subject to risks associated with disrup?ons or delays in
248、 shipments whether due to port conges?on,container shortages,labor disputes,productregula?ons and/or inspec?ons or other factors,natural disasters or health pandemics,or other transporta?on disrup?ons.If we experience significantincreases in demand or need to replace a significant number of exis?ng
249、suppliers or manufacturers,there can be no assurance that addi?onal supply andmanufacturing capacity will be available when required on terms that are acceptable to us,or at all,or that any supplier or manufacturer will allocatesufficient capacity to us in order to meet our requirements.In addi?on,q
250、uality control problems,such as the use of ingredients and delivery of products that do not meet our quality control standards and specifica?onsor comply with applicable laws or regula?ons could harm our business.These quality control problems could result in regulatory ac?on,such as restric?onson i
251、mporta?on,products of inferior quality or product stock outages or shortages,harming our sales and crea?ng inventory write-downs for unusableproducts.We have also outsourced significant por?ons of our distribu?on process,as well as certain technology-related func?ons,to third-party service providers
252、.Specifically,we rely on third-party distributors to sell our products in a number of foreign countries,our warehouses and distribu?on facili?es are managedand staffed by third-party service providers,we are dependent on a single third-party vendor for credit card processing,and we u?lize a third-pa
253、rty hos?ngand networking provider to host our e-commerce websites and mobile applica?ons.The failure of one or more of these en?es to provide the expectedservices on a?mely basis,or at all,or at the prices we expect,or the costs and disrup?on incurred in changing these outsourced func?ons to beingpe
254、rformed under our management and direct control or that of a third-party,may have a material adverse effect on our business,financial condi?on andresults of opera?ons.We are not party to long-term contracts with some of our distributors,and upon expira?on of these exis?ng agreements,we may notbe abl
255、e to renego?ate 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 ac?ons contrary to our instruc?ons,requests,policies or objec?ves;be unable or
256、 unwilling to fulfill their obliga?ons under relevant purchase orders,including obliga?ons to meet our produc?on deadlines,qualitystandards,pricing guidelines and product specifica?ons,or to comply with applicable regula?ons,including those regarding the safety and quality ofproducts and ingredients
257、 and good manufacturing prac?ces;have financial difficul?es;encounter raw material or labor shortages;encounter increases in raw material or labor costs which may affect our procurement costs;disclose our confiden?al informa?on or intellectual property to compe?tors or third par?es;engage in ac?vi?e
258、s or employment prac?ces that may harm our reputa?on;andwork with,be acquired by,or come under control of,our compe?tors.The occurrence of any of these events,alone or together,could have a material adverse effect on our business,financial condi?on and results of opera?ons.In addi?on,such problems m
259、ay require us to find new third-party suppliers,17Table of Contentsmanufacturers or distributors,and there can be no assurance that we would be successful in finding third-party suppliers,manufacturers or distributorsmee?ng our standards of innova?on and quality.The management and oversight of the e
260、ngagement and ac?vi?es of our third-party suppliers,manufacturers and distributors requires substan?al?me,effortand expense of our employees,and we may be unable to successfully manage and oversee the ac?vi?es of our third-party manufacturers,suppliers anddistributors.If we experience any supply cha
261、in disrup?ons caused by our manufacturing process or by our inability to locate suitable third-partymanufacturers or suppliers,or if our manufacturers or raw material suppliers experience problems with product quality or disrup?ons or delays in themanufacturing process or delivery of the finished pr
262、oducts or the raw materials or components used to make such products,our business,financial condi?onand results of opera?ons could be materially and adversely affected.If we fail to manage our inventory effec?vely,our results of opera?ons,financial condi?on and liquidity may be materially and advers
263、ely affected.Our business requires us to manage a large volume of inventory effec?vely.We depend on our forecasts to es?mate demand for and popularity of variousproducts to make purchasing decisions and to manage our inventory of stock-keeping units.Demand for products,however,can change significant
264、ly betweenthe?me inventory or components are ordered and the date of sale.Demand may be affected by seasonality,new product launches,rapid changes in productcycles and pricing,product defects,promo?ons,changes in consumer spending pa?erns,changes in consumer tastes with respect to our products and o
265、therfactors,and our consumers may not purchase products in the quan?es that we expect.It may be difficult to accurately forecast demand and determineappropriate levels of product or components.We generally do not have the right to return unsold products to our suppliers.If we fail to manage ourinven
266、tory effec?vely or nego?ate favorable credit terms with third-party suppliers,we may be subject to a heightened risk of inventory obsolescence,adecline in inventory values,and significant inventory write-downs or write-offs.In addi?on,if we are required to lower sale prices in order to reduceinvento
267、ry level or to pay higher prices to our suppliers,our profit margins might be nega?vely affected.Any of the above may materially and adversely affectour business,financial condi?on and results of opera?ons.See also“Risk factors related to our retail customers,consumers and the seasonality of ourbusi
268、nessOur quarterly results of opera?ons fluctuate due to seasonality,order pa?erns from key retail customers and other factors,and we may not havesufficient liquidity to meet our seasonal working capital requirements.”Public health crises could adversely affect our business,financial condi?on and res
269、ults of opera?ons.The COVID-19 pandemic and government and private sector responsive measures taken to contain or mi?gate the effects of the pandemic,as well as relatedchanges in consumer shopping behaviors,adversely affected our business,financial condi?on and results of opera?ons.The emergence of
270、another pandemic,epidemic or infec?ous disease outbreak could have a similar effect.The poten?al impacts of such public health crises include,but are not limited to:the possibility of closures,reduced opera?ng hours and/or decreased retail traffic for our retail customers,resul?ng in a decrease in s
271、ales of ourproducts;disrup?on to our distribu?on centers and our third-party suppliers and manufacturers,including the effects of facility closures as a result of diseaseoutbreaks or other illnesses,or measures taken by federal,state or local governments to reduce its spread,reduc?ons in opera?ons h
272、ours,laborshortages and real-?me changes in opera?ng procedures,including for addi?onal cleaning and disinfec?on procedures;andsignificant disrup?on of global financial markets,which could have a nega?ve impact on our ability to access capital in the future.The COVID-19 pandemic contributed signific
273、antly to global supply chain constraints,with restric?ons and limita?ons on related ac?vi?es causing disrup?onand delay.These disrup?ons and delays strained domes?c and interna?onal supply chains,resul?ng in port conges?on,transporta?on delays as well as laborand container shortages,and affected the
274、 flow or availability of certain products.The emergence of another pandemic,epidemic or infec?ous disease outbreak,and any required or voluntary ac?ons to help limit the spread of illness,couldimpact our ability to carry out our business and may materially adversely impact global economic condi?ons,
275、our business,financial condi?on and results ofopera?ons.There is a risk that our suppliers and distribu?on centers may become less produc?ve or encounter disrup?ons as a result of the emergence andspread of another18Table of Contentsdisease,and/or these facili?es may no longer be allowed to operate
276、based on direc?ves from public health officials or government authori?es in the UnitedStates,China or other jurisdic?ons.Such events could materially increase our costs,nega?vely impact our sales and damage our results of opera?ons andliquidity,possibly to a significant degree.The full extent of the
277、 impact of a pandemic,such as the COVID-19 pandemic,an epidemic or an infec?ous disease outbreak on our business,financialcondi?on and results of opera?ons will depend on future developments that are highly uncertain and unpredictable,including the?ming,acceptance andefficacy of vaccina?ons and poss
278、ible achievement of herd immunity in various loca?ons,the occurrence of virus muta?ons and variants,infec?on ratesincreasing or returning in various geographic areas,ac?ons by government authori?es to contain outbreaks or treat their impact,and any related impact oncapital and financial markets and
279、consumer behavior,including the impacts of any recession or infla?onary pressures,all of which may vary across regions.Adverse economic condi?ons in the United States or any of the other countries in which we conduct significant business could nega?vely affect ourbusiness,financial condi?on and resu
280、lts of opera?ons.Many of our products may be considered discre?onary items for consumers.Consumer spending on beauty products is influenced by general economiccondi?ons and the availability of discre?onary income.Adverse economic condi?ons in the United States,the UK,Canada,China or any of the other
281、 countriesin which we conduct significant business,such as the current infla?onary economic environment,rising interest rates,financial distress caused by recent orpoten?al bank failures and the associated banking crisis,an economic recession,depression or downturn,a?ghtening of the credit markets,h
282、igh energyprices or higher unemployment levels,may lead to decreased consumer spending,reduced credit availability and a decline in consumer confidence anddemand,each of which poses a risk to our business.For example,US and global markets have been experiencing vola?lity and disrup?on due to interes
283、t rateand infla?on increases,such as higher infla?on rates in the United States,which have remained above the Federal Reserves infla?on target,as well as thecon?nued escala?on of geopoli?cal tensions,including those as a result of the conflicts between Russia and Ukraine and in the Middle East.We ha
284、veexperienced and con?nue to experience infla?onary pressures in certain areas of our business.Although our business has not yet been materially nega?velyimpacted by such infla?onary pressures,we cannot be certain that neither we nor our consumers will be materially impacted by con?nued pressures.As
285、global economic condi?ons con?nue to be vola?le and economic uncertainty remains,trends in consumer discre?onary spending also remain unpredictableand subject to reduc?ons due to credit constraints and uncertain?es about the future.A decrease in consumer spending or in retailer and consumerconfidenc
286、e and demand for our products could have a significant nega?ve impact on our net sales and profitability,including our opera?ng margins andreturn on invested capital.These economic condi?ons could cause some of our retail customers or suppliers to experience cash flow or credit problems andimpair th
287、eir financial condi?on,which could disrupt our business and adversely affect product orders,payment pa?erns and default rates and increase ourbad debt expense.Vola?lity in the financial markets could have a material adverse effect on our business,financial condi?on and results of opera?ons.While we
288、currently generate cash flows from our ongoing opera?ons and have had access to credit markets through our various financing ac?vi?es,creditmarkets may experience significant disrup?ons.Deteriora?on in global financial markets,rising interest rates and concerns over poten?al recessions couldmake fut
289、ure financing difficult or more expensive.If any financial ins?tu?on party to our credit facili?es or other financing arrangements were to declarebankruptcy or become insolvent,they may be unable to perform under their agreements with us.This could leave us with reduced borrowing capacity,whichcould
290、 have a material adverse effect on our business,financial condi?on and results of opera?ons.We regularly maintain cash balances at third-party financial ins?tu?ons in excess of the Federal Deposit Insurance Corpora?on(the“FDIC”)insurance limit.In2023,the FDIC took control and was appointed receiver
291、of Silicon Valley Bank(“SVB”),Signature Bank and First Republic Bank,a?er each bank was unable tocon?nue its opera?ons.Although the Company did not have any cash or cash equivalent balances on deposit with SVB,Signature Bank or First Republic Bankand,therefore,did not experience any direct risk of l
292、oss,we are unable to predict the extent or nature of the impacts of the failures of these banks andrelated circumstances at this?me.Similarly,we cannot predict the impact that the high market vola?lity and instability of the banking sector more broadlycould have on economic ac?vity and our business
293、in par?cular.The failure of other banks and financial ins?tu?ons and measures taken,or not taken,bygovernments,businesses and other organiza?ons in response to these events could adversely impact our business,financial condi?on and results ofopera?ons.If the financial ins?tu?ons with which we do bus
294、iness enter receivership or become insolvent in the future,there is no guarantee that the Department of theTreasury,the Federal Reserve and the FDIC will intercede to provide us and other19Table of Contentsdepositors with access to balances in excess of the$250,000 FDIC insurance limit or that we wo
295、uld be able to:(i)access our exis?ng cash,cash equivalentsand investments;(ii)maintain any required le?ers of credit or other credit support arrangements;or(iii)adequately fund our business for a prolonged periodof?me or at all.Any of such events could have a material adverse effect on our current o
296、r projected business opera?ons and results of opera?ons andfinancial condi?on.In addi?on,if any par?es with which we conduct business are unable to access funds pursuant to such instruments or lendingarrangements with such a financial ins?tu?on,such par?es ability to con?nue to fund their business a
297、nd perform their obliga?ons to us could be adverselyaffected,which,in turn,could have a material adverse effect on our business,financial condi?on and results of opera?ons.Risk factors related to our financial condi?onOur indebtedness may have a material adverse effect on our business,financial cond
298、i?on and results of opera?ons.As of March 31,2024,we had a total of$262.9 million of indebtedness,consis?ng of amounts outstanding under our credit facili?es and finance leaseobliga?ons,and a total availability of$10.5 million under our Amended Revolving Credit Facility(as defined in Part II,Item 7“
299、Managements discussion andanalysis of financial condi?on and results of opera?ons”under the heading“Descrip?on of indebtedness”).Our primary cash needs are for working capital,fixturing,retail product displays and digital investments.Cash needs typically vary depending on strategic ini?a?ves selecte
300、d for the fiscal year,includinginvestments in infrastructure,digital capabili?es expansion within or to addi?onal retailer store loca?ons,and acquisi?ons.On August 28,2023,we enteredinto the Second Amendment to the Amended and Restated Credit Agreement,pursuant to which we borrowed an incremental te
301、rm loan in a principalamount equal to$115.0 million(the“Incremental Term Loan”),together with available cash from our balance sheet and addi?onal borrowings under ourAmended Revolving Credit Facility,to consummate and pay related fees and expenses in connec?on with our acquisi?on of Naturium.Our ind
302、ebtedness could have significant consequences,including:requiring a substan?al por?on of our cash flows to be dedicated to debt service payments instead of funding growth,working capital,capitalexpenditures,investments or other cash requirements;reducing our flexibility to adjust to changing busines
303、s condi?ons or obtain addi?onal 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;subjec?ng us to restric?ve covenants that may limit our flexibility in opera?ng our business,incl
304、uding our ability to take certain ac?ons with respect toindebtedness,liens,sales of assets,consolida?ons and mergers,affiliate transac?ons,dividends and other distribu?ons and changes of control;subjec?ng us to maintenance covenants which require us to maintain specific financial ra?os;andlimi?ng ou
305、r ability to obtain addi?onal financing for working capital,capital expenditures,debt service requirements and general corporate or otherpurposes.If our cash from opera?ons is not sufficient to meet our current or future opera?ng needs,expenditures and debt service obliga?ons,our business,financial
306、condi?on and results of opera?ons may be materially and adversely affected.We may require addi?onal cash resources due to changed business condi?ons or other future developments,including any marke?ng ini?a?ves,investmentsor addi?onal acquisi?ons we may decide to pursue.To the extent we are unable t
307、o generate sufficient cash flow,we may be forced to cancel,reduce or delaythese ac?vi?es.Alterna?vely,if our sources of funding are insufficient to sa?sfy our cash requirements,we may seek to obtain an addi?onal credit facility orsell equity or debt securi?es.The sale of equity securi?es would resul
308、t in dilu?on of our exis?ng stockholders.The incurrence of addi?onal indebtednesswould result in increased debt service obliga?ons and opera?ng and financing covenants that could restrict our opera?ons.Our ability to generate cash to meet our opera?ng needs,expenditures and debt service obliga?ons w
309、ill depend on our future performance and financialcondi?on,which will be affected by financial,business,economic,legisla?ve,regulatory and other20Table of Contentsfactors,including poten?al changes in costs,pricing,the success of product innova?on and marke?ng,compe?ve pressure and consumer preferen
310、ces.If ourcash flows and capital resources are insufficient to fund our debt service obliga?ons and other cash needs,we could face substan?al liquidity problems andcould be forced to reduce or delay investments and capital expenditures or to dispose of material assets or opera?ons,seek addi?onal deb
311、t or equity capitalor restructure or refinance our indebtedness.Our credit facili?es may restrict our ability to take these ac?ons,and we may not be able to affect any suchalterna?ve measures on commercially reasonable terms,or at all.If we cannot make scheduled payments on our debt,the lenders unde
312、r the Amended CreditAgreement(as defined in Part II,Item 7“Managements discussion and analysis of financial condi?on and results of opera?ons”under the heading“Descrip?on of indebtedness”)can terminate their commitments to loan money under the Amended Revolving Credit Facility,and our lenders under
313、theAmended Credit Agreement can declare all outstanding principal and interest to be due and payable and foreclose against the assets securing theirborrowings,and we could be forced into bankruptcy or liquida?on.Furthermore,it is uncertain whether financing will be available in amounts or on terms a
314、cceptable to us,if at all,which could materially and adversely affectour business,financial condi?on and results of opera?ons.Changes in tax law,in our tax rates or in exposure to addi?onal income tax liabili?es or assessments could materially and adversely affect our business,financial condi?on and
315、 results of opera?ons.We are subject to the income tax laws of the United States and several interna?onal jurisdic?ons.Changes in law and policy rela?ng to taxes,includingchanges in administra?ve interpreta?ons and legal precedence,could materially and adversely affect our business,financial condi?o
316、n and results ofopera?ons.In addi?on,as we con?nue to expand our business interna?onally,the applica?on and implementa?on of exis?ng,new or future interna?onal laws couldmaterially and adversely affect our business,financial condi?on and results of opera?ons.Current economic and poli?cal condi?ons m
317、ake tax rules in anyjurisdic?on,including those in which we operate,subject to significant change.Fluctua?ons in currency exchange rates may nega?vely affect our financial condi?on and results of opera?ons.Exchange rate fluctua?ons may affect the costs that we incur in our opera?ons.The main currenc
318、ies to which we are exposed are the Euro,Bri?sh pound,Chinese Renminbi(“RMB”),and Canadian dollar.The exchange rates between these currencies and the US dollar in recent years have fluctuated significantlyand may con?nue to do so in the future.A deprecia?on of these currencies against the US dollar
319、will decrease the US dollar equivalent of the amountsderived from foreign opera?ons reported in our consolidated financial statements,and an apprecia?on of these currencies will result in a correspondingincrease in such amounts.The cost of certain items,such as raw materials,manufacturing,employee c
320、ompensa?on and benefits and transporta?on andfreight,required by our opera?ons 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 apprecia?on of such currencies against the US dollar will tend t
321、onega?vely affect our business.There can be no assurance that foreign currency fluctua?ons will not have a material adverse effect on our business,financialcondi?on and results of opera?ons.Risk factors related to our retail customers,consumers and the seasonality of our businessWe depend on a limit
322、ed number of retailers for a large por?on of our net sales,and the loss of one or more of these retailers,or business challenges at oneor more of these retailers,could adversely affect our results of opera?ons.A limited number of our retail customers account for a large percentage of our net sales.W
323、e expect a small number of retailers will,in the aggregate,con?nue 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 ourretail customers rela?ng to service levels,inventory de-stocking,pricing and promo?onal
324、strategies or limita?ons on access to display space could have amaterial adverse effect on our business,financial condi?on and results of opera?ons.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
325、 to makefirm purchases from us.Accordingly,retailers could reduce their purchasing levels or cease buying products from us at any?me and for any reason.If we losea significant retail customer or if sales of our21Table of Contentsproducts to a significant retailer materially decrease,it could have a
326、material adverse effect on our business,financial condi?on and results of opera?ons.Because a high percentage of our sales are made through our retail customers,our results are subject to risks rela?ng to the general business performance ofour key retail customers.Factors that adversely affect our r
327、etail customers businesses may also have a material adverse effect on our business,financialcondi?on and results of opera?ons.These factors may include:any reduc?on in consumer traffic and demand at our retail customers as a result of economic downturns,pandemics or other health crises,changes incon
328、sumer preferences or reputa?onal damage as a result of,among other developments,data privacy breaches,regulatory inves?ga?ons or employeemisconduct;any credit risks associated with the financial condi?on of our retail customers;the effect of consolida?on or weakness in the retail industry or at cert
329、ain retail customers,including store closures and the resul?ng uncertainty;andinventory reduc?on ini?a?ves and other factors affec?ng retail customer buying pa?erns,including any reduc?on in retail space commi?ed to beautyproducts and retailer prac?ces used to control inventory shrinkage.Our quarter
330、ly results of opera?ons fluctuate due to seasonality,order pa?erns from key retail customers and other factors,and we may not have sufficientliquidity to meet our seasonal working capital requirements.Our results of opera?ons are subject to seasonal fluctua?ons,with net sales in the third and fourth
331、 fiscal quarters typically being higher than in the first andsecond fiscal quarters.The higher net sales in our third and fourth fiscal quarters are largely a?ributable to the increased levels of purchasing by retailers forthe holiday season and customer shelf reset ac?vity,respec?vely.Adverse event
332、s that occur during either the third or fourth fiscal quarter could have adispropor?onate effect on our results of opera?ons for the en?re fiscal year.To support an?cipated higher sales during the third and fourth fiscal quarters,wemake investments in working capital to ensure inventory levels can s
333、upport demand.Fluctua?ons throughout the year are also driven by the?ming of product restocking or rearrangement by our major customers as well as our expansion intonew customers.Because a limited number of our retail customers account for a large percentage of our net sales,a change in the order pa?ern of one ormore of our large retail customers could cause a significant fluctua?on of our quarter
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