Greetings and welcome to the e.l.f. Beauty Inc. Fourth Quarter Fiscal Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allison Malkin of ICR. Thank you Ms. Malkin, you may begin.

Good afternoon, everyone, thank you for joining us today to discuss e.l.f. fourth quarter and full-year 2016 earnings results. A copy of today's press release is available in the Investor Relations section of elfcosmetics.com. A recording of the call will also be available for 90 days on elfcosmetics.com. As a reminder, this call contains forward-looking statements that are based on management's beliefs and assumption, expectations, estimates and projections. These statements, including those relating to the Company’s fiscal year 2017 outlook are subject to known and unknown risks and uncertainties and therefore actual results may differ materially. Important factors that may cause actual results to differ from those expressed or implied from such forward-looking statements are detailed in today’s press release and the Company’s SEC filings. In addition, the Company's presentation today includes information presented on a non-GAAP basis. We refer you to today's press release for a reconciliation of the differences between the non-GAAP presentation and the most directly comparable GAAP measures. With us from management today are Tarang Amin, Chairman and Chief Executive Officer and John Bailey, President and Chief Financial Officer. For today's call Tarang will begin with an overview of our results. And as typical for us, John and Tarang will then alternate sharing the progress we made against our growth strategies and providing additional detail related to our financial performance and guidance. This will be followed by a Q&A session. It is now my pleasure to turn the call over to Tarang.

Thank you Alison, and good afternoon everyone. Our call today appropriately falls on International Women's Day, celebrating women and their achievements. This year’s theme to be bold for change resonates strongly with it. At e.l.f our mission is to make luxurious beauty accessible for all women to play beautifully. I want to thank all of our team mates, the vast majority of whom are women for their hard work and dedication to bring this bold mission to life. We are pleased with our finish though a terrific year of growth that included significant accomplishments towards our mission. The fourth quarter was highlighted by a 17% increase in revenues, nearly 600 basis points expansion in gross margin and adjusted earnings per share growth of 36% to $0.19 from $0.14 in the fourth quarter of 2015. For the full-year net sales grew 20%, gross margin expanded over 500 basis points and adjusted EPS climbed 33% to $0.36 from $0.27 in fiscal 2015. We continue to grow market share. According to IRI Multi Outlet Data for the 52 weeks ending December 25, 2016 our dollar share of the U.S. Mass Color Cosmetics markets increased from 2.7% at the end of 2015, to 3.4% at the end of 2016. We also made progress in our four growth strategy. Our first strategy is to build a great brand, e.l.f is an authentic brand that young diverse makeup enthusiasts love. Relative to the overall cosmetics category, we are twice as developed among millennial, over developed among Hispanics and have strong appeal was make-up enthusiasts. The consumers are driving categories. We know how to engage these consumers and they are our best advocates. During Q4, we built on the success of our Beauty Scape influencer program. We hosted a special e.l.f holiday celebration in Los Angeles with influencers or select base under their authentic ties to e.l.f. The event reached a combined audience of 76 million and helped us cross the 2 million follower remarks on Instagram. Through these activations we believe we can further build awareness and deepen engagement with our consumers. We also continue to build momentum behind our loyalty program Beauty Squad. During the fourth quarter, we more than doubled enrollment and now have over a 190,000 Beauty Squad members. On average, these consumers shop elfcosmetics.com 30% more often and purchase 50% more during each visit versus non-members. We are enthusiastic about the potential of Beauty Squad to build deeper relationships with our consumers. Stepping back, we have more than doubled unaided awareness of e.l.f. from 6% of couple years ago to 13% at the end of 2016 reflecting the effectiveness of our engagement efforts and the significant opportunity that remains ahead of us. I will now turn the call over to John to review progress against our innovation and brand penetration strategies.

Thanks Tarang. Our second strategy is to lead innovation, e.l.f’s combination of cost, quality and speed provides the key competitive advantage in the lifestyle makeup enthusiast to seek the latest to beauty. We launch products in as few as 20 weeks and on average introduce something new every week. In 2016, we had over 90 product introductions across eyes, lips, face, toes and skin care. Many of these items are first to mass or in other words products that formally could only be found in prestige outlook at much higher prices. We continue to demonstrate consumer preference over comparable prestige products on many of our first to mass items. Our innovation program is supported by influencer collaborations, including our recent product launch with Wei Lee Huang, an influencer with more than two million followers. We believe our depths and breadths of high-quality innovation at an extraordinary value sets us apart from other brands. Our third strategy is to expand brand penetration. e.l.f. is a true multi-channel brand, with strength across leading national retailers, e-commerce and e.l.f. stores. We are pleased with our combination of growth of existing customers as well as the opportunity to selectively increase the availability of our products in new accounts. While we continue to add new distribution, during 2016 approximately three quarters of our growth in national retailers came from existing doors. We are excited to announce another key highlights for our national retailers business. In Q4, we shipped pipelines to service a significant expansion of our presence at Target. Increasing our shelf space by more than 50%. While the process of setting shelves for the incremental space is not expected to be complete until the second quarter, we are pleased with the progress and it's reflection of our attracted consumer profile and innovation pipeline. In 2016, according to IRI, e.l.f. was a number one unit share brand at Target and number four Dollar share brand. e.l.f. had a 14.4% unit share and 8.8% dollar share. Our international business also advance in Q4, as we added a 150 new Walmart locations in Mexico. Our direct business which includes both elfcosmetics.com and e.l.f. stores continues to play a critically important role in driving consumer engagement and validating our innovation. E-commerce was supported during the quarter by the launch of new products, the growth of our Beauty Squad loyalty program and select seasonal promotions. We opened four e.l.f. stores in the quarter to bring our total to 19 including the expansion of our store portfolio to Los Angeles with locations at Glandale Galaria, Culvert City and Fashion Square. I will now turn it back to Tarang.

Thanks John. Our fourth strategy is to drive world-class operations, which starts with the world-class people. We are proud of the investments we have made and continue to make in the team and infrastructure to deal the business. We recently updated our employee demographics which I'm excited to share with you. over 85% of our employee the women over 75% are millennial and over 60% are diverse. In short, the vast majority of our employees are the same young diverse makeup enthusiast that we target. We believe this gives us a real edge. Our employees have a terrific combination of blue-chip, CPG and beauty experience with the ability to execute with speed and quality. Over the past 13 years we have honed in operations advantage to deliver an excellent combination of cost, quality and speed. in Q4 key highlights include successfully shipping an elevated holiday program, pipeline needed to support our expansion at Target and fill rates above 90% across national retailers. In summary we had a strong year as we grew the business and advance our growth strategy. I will now turn it back to John to provide a more detailed update on our financial progress.

Thanks Tarang. I will begin by reviewing the details of our fourth quarter and fiscal 2016 results and then Tarang will provide our outlook for the full-year. For the fourth quarter, net sales increased 17% or $11 million to $76.4 million. Net sales included a slight pull forward of shipments that were expected to be shipped in the first quarter in 2017. Gross margin expanded from 54% to 59% primarily driven by our innovation program and that sweetens the next initiatives. On an adjusted basis, selling and administrative expenses as a percentage of net sales were 37% compared to 35% in the fourth quarter of 2015 reflecting public Company expenses and continued strategic investments in people, infrastructure and brand building including the expansion of our direct business. Adjusted EBITDA was $22.1 million an increase of 26% from $17.6 million in the fourth quarter of 2015. Adjusted net income was $9.4 million or $0.19 per share based on a fully diluted share count of $50.2 million this compares to $6.9 million or $0.14 per share in the fourth quarter of 2015. For the full-year 2016, net sales increased 20%, gross margin expanded from 52% to 58%, adjusted EBITDA grew from $46 million to $54 million and adjusted net income grew 33%. Adjusted net income per diluted share rose to $0.36 for fiscal 2016 from $0.27 in the fiscal 2015 based on a pro forma diluted share count of 50.2 million. From a balance sheet perspective we ended the year with cash of $15.3 million. We finished with an inventory balance of $69.4 million, which is above targeted levels as we proactively increased suites of supply in our fastest moving items. We expect to return to targeted inventory levels as the year progresses. In December we also entered into a new debt facility that reduced pricing and is expected to result in significant annual cash interest saving, in addition to providing added flexibility. Capital expenditures totaled $3.7 million for the quarter and $9.2 million for the year and were primarily related to investment in fixturing for national retailers, our new Ontario warehousing and logistics facility, IT infrastructure and the opening of 14 new e.l.f. stores during the year. For fiscal 2017 we expect capital expenditures in the range of $6 million to $8 million primarily related to fixturing for national retailers, the opening of e.l.f. stores and technology investments. Tarang will now provide details of our 2017 outlook.

Thanks John. Our team is focused on managing the business and delivering on our expectations over the course of the full-year. Our business is dynamic and will fluctuate quarter-to-quarter due to various customer shipping requirements and seasonality. For example, our pipeline shipments to Target in Q4 2016 and a significant pipeline in Q1 2016 will create a challenging comparison in Q1 2017. For the full-year 2017 we expect net sales of $285 million to $295 million representing year over year growth of 24% to 28%. Adjusted EBITDA of $61 million to $64 million reflecting the full-year impact of public Company expenses and continued investments in people, infrastructure and brand building. Adjusted net income of $21 million to $23 million and adjusted pro forma diluted EPS of $0.40 to $0.43 on 53.1 million diluted shares. In closing we are proud of our performance during 2016, we are even more excited about 2017 and believe we are well positioned to deliver on our objective. I would now like to ask the operator to open the call for your questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] our first question comes from the line of Steph Wissink with Piper Jaffray, please proceed with your question.

Thanks, good afternoon everyone and congratulations on a strong finish. John, I have a question for you, just a clarification, and then a bigger picture question. But first and foremost on the pull forward, if you could help us with the order of magnitude of how should we think about the first quarter and just the balance between kind of Q4 and Q1?

Yes Steph, hey how are you? Just generally speaking as you guys know very dynamic business, a lot that can move from quarter to quarter. As we describe the pipeline in Q4 it was a slight pull forward from Q1 of 2017, we don’t get into specifics around pipeline numbers. The other thing that I would point you to is, in Tarang's commentary he referenced some more material pipeline in Q1 of 2016 that we will be comping against in the first quarter of 2017, but in terms of what actually impacted Q4 it was fairly modest.

Okay. And then my question just with respect to your innovation because you had some pretty fantastic numbers, 90 new products in 2016, I think your plans for 2017 are also quite robust. So help us just think about the catalog size, how you are thinking about retirement of SKUs that maybe are underperforming? And then you also referenced I think 98% on your fill rates statistics, so how should we also think about the inventory complexity as your catalog gets larger and you bring more innovation? How do you balance that with some of the retirement of some underperforming SKUs on a relative basis? Thank you.

Sure. It’s something that we are consistently taking to look at. So just for context, we have about 900 SKUs on www.elfcosmetics.com, a subset of that about 450 to 600 SKUs in our own e.l.f. branded stores and about 150 SKUs in a 4-foot pangram, about 250 in an 8-foot set. And so we are consistently leveraging our model to migrate the best of into a physical retail footprint. From an overall innovation perspective to your point, we continue to have a pretty robust pipeline with a lot of new launches. But we are equally disciplined at retiring SKUs as well. So as you think about that 900 SKU assortment it may move up and down slightly, but we have kept that fairly contained over the years.

Thank you. Our next question comes from the line of Bill Chappell with SunTrust Robinson Humphrey. Please proceed with your question.

Just on the shelf space gains first with Target that’s obviously fantastic. Can you maybe talk on a competitive landscape, it looks like you have been taking share or I guess some of that hard shelf space from Cover Girl and maybe to some extent some of the other larger brands. Do you sense that there is a change, especially with Coty now owning brands versus P&G where there is as a bigger opportunity to take shelf space, whereas is this is kind of a natural evolution of the brand at Target or at other stores?

Hey Bill. It’s Tarang. What I would tell you, this is a continuation of what’s made us successful. So if you take a look at why Target awarded else significantly more space is really on the basis of three things. First and foremost, the consumer profile we bring into their stores in terms of young, diverse makeup enthusiasts. Second is that innovation pipeline that we talk about, a real strength of ours is the amount of innovation we can bring that frankly demands more space to be able to house that innovation that we have. And third is our ability to partner with them to continue to grow their category and bring incremental sales to their category. And so I think those three things more than any type of competitive impact really are kind of secrete to our success and very much why we’ll continue to pick up more space.

And just as a follow-up, I know your 2016 guidance didn’t assume any new retailers, is 2017 the same and with that in mind any update on getting into Ulta Actual stores?

So from a guidance perspective Bill, no specific reference to new distribution in the numbers that we have provided obviously familiar with our policy. We will talk about distribution and new account as we secured that distribution. And John.

Yes. And I want to tell you on Ulta is as you recall in the third quarter of 2016, we started selling ulta.com, we are very pleased with our results. Ulta has asked us not to share the specifics of that for competitive reasons. But I think both of us like about our businesses together is we are going after that enthusiast consumer. Our practice is to talk about distribution after we have it, so we don't comment on future opportunities.

Thank you. Our next question comes from the line of Jon Anderson with William Blair and Company. Please proceed with your question.

I just have one question. It's on the fill rates that you are running north of 98%, obviously that's a really good number and it gets to your point, Tarang, about world-class operations. Can you talk a little bit about how that high fill rate is translating to kind of in-stock levels in store? And I know this has been something you commented on in the past, it's just that's always an opportunity to perhaps improve upon that through technology, through people in the store to ensure that you are in-stock given the high velocity for the brand?

Sure, I mean I think one of the things we take great pride in is our operations advantage overall, and particularly kind of in our ability to kind of fill our customers, a big part of that has been if you recall last year we moved warehouses from the east coast to the west coast our Ontario warehouse and it's part of that we really wanted to get kind of our fill rates even higher with our customers expected in-stock. I will tell you in-stocks are always going to be a challenge for us just given how fast we move relative to the rest of the category; so it's something that we are going to continue to work on but I do feel good about our position in terms of how we are filling our customers and then just as importantly how much we have penetrated the supply chains of our customers. Our team has done a terrific job particularly with our main customers, really partnering with their operations people to really get after every opportunity we have both from the logistics standpoint as well as getting product to their shelves and I feel really great about that initiative as well.

Thank you. Our next question comes from the line of Mark Astrachan with Stifel. Please proceed with your question.

Hi, and thanks everybody, this is Claire Chamberlain on for Mark Astrachan. Thanks for taking my question. Just wanted to get a bit more color on what drove the increase in inventory both sequentially and year-on-year? And what gives you confidence that can come down through the course of 2017?

Sure, Claire. So, just to put it in context, obviously Tarang just alluded to that, but one of the biggest opportunities that we have seen in the business is actually just keeping retailers in-stock and if you think about, where we came in 2016 with respect to the warehouse move, we did want to make sure that we were in a position where we could fill our customers adequately. And to be completely candid, we probably swung the pendulum a little bit too far, and the good news is where we are carrying a little bit of extra inventory is in our fastest moving items. So, very high level of confidence in our ability to move through that inventory well and we would expect it to normalize throughout the course of 2017.

Thank you. Our next question comes from the line of Oliver Chen with Cowen and Company. Please proceed with your question.

It's Courtney Willson in on for Oliver tonight. Thanks for taking our question. We just had a question on the gross margin expansion that you saw during 4Q. Can you provide a bit more color on the drivers there? I know you mentioned Sweeten the Mix. And then also, regarding AUR opportunities for next year, are there certain categories where you believe you might have greater prospects for raising AUR? Thanks so much.

Courtney, I will take the first, Tarang you can take the second. Generally speaking obviously very pleased with the performance or expansions of our gross margin quarter-over-quarter. And I think it's been very consistent, in that a lot of the drivers underlying that gross margin expansion really due come back to our broader innovation program. So we talk a little bit about sweeten the mix which is really a combination of both, introduction of novel items at a margin profile that are accretive to that at the overall Company, as well s opportunities to look out across the existing range and introduce new items with consumer benefits, that are incremental and also delivering an incremental margin opportunity overtime. So that has been and will continue to be as we look forward into 2017, the lion share of that gross margin expansion.

And then to your question on average unit retail, we don’t look at AUR, kind of by category, as specific target, that way it is driven AUR is really throughout innovation. And in particular when you take a look at our first to mass innovation one of the things it will take great pride in, is our ability to introduce innovation that the consumer previous could only really find in prestige. And our ability now seen introduce high quality innovation at an extraordinary value but also innovation as preference relative to those prestige items. And that’s really has been the way we been able to drive AUR overtime is through our innovation program in specifically our first to mass item.

Thank you. Our next question comes from the line of Bonnie Herzog with Wells Fargo. Please proceed with your question.

Hi, I guess I would be curious to hear from you guys on, what you think the impact could be on your business and the category in general from the pricing talk coming out of Walmart and Target as well as the broad commentary we are hearing from retailers about inventory destocking?

So you know what I would tell you is, having more people are retailers over 25 years, we see different kind of cycle that they go through both in terms of their growth, inventories, et cetera. For us I would say a couple of things actually relating to both retailers. Beauty is the bright spot relative bright spot within their overall box, in terms of its role and how it does across the chain. And then within that we have been able to sustain strong growth regardless of the macro environment. I just think back a few years ago when Target had their credit card issues, so Walmart has certain traffic problems. We were able to maintain growth rate well above, where were the category was going, mainly because of the unique proposition we bring to them and kind of our position as we are continue to grow. So I would tell you, that we are quite bullish on the business as you can tell by our guidance on our sales growth, and it's quite consistent to kind of our 13 year history where we have been able consistently grow with e.l.f. what is going on this.

Do you think in any way it gives you may be more of an advantage relative to your competition, given some of the issues these retailers are facing? I’m just trying to think through given your, what you provide an offer for the customer relative to others as an advantage, you know?

We certainly believe we are in advantage, if you take a look at us, we look at opportunities when there challenges to be able to grow share and that’s exactly what we have been able to do. If you take a look at our share growth, last year throughout the entire year, we are quite confident, and mainly because of the uniqueness of our proposition. And we are offering something that many of the other players aren’t able to in terms of our consumers, innovation and ability to drive incremental growth to their category.

Thank you. [Operator Instructions] Our next question comes from the line of Andrea Teixiera with JPMorgan. Please proceed with your question.

Just following up a little bit on the competitive environment, it seems like what we saw in the Skinner data that actually promotions came down so was curious to see how you see the environment or are those initiatives just within mix pretty much what is driving that? So on a SKU basis like should we say the promotional environment has actually improved vis-à-vis what we saw in the past couple of quarters?

Yes, Andrea I'm not sure, at least for us we are not very promotional, we are not lot of players into these beauty spaces, you know our high or low, price of products higher and then use a lot of promotion to bring prices down. Our approach to this extraordinary value every single day and so I think that's been fairly consistent. And then even on our e-commerce business, you see we are much less promotional in 2016 than we were in 2015. So we feel very good about our overall value equitation and how we go-to-market. I can't speak as much due to the rest of the category and their approach just given how different we are.

No, I understand just on the trade discount sometimes you see like when you get [indiscernible] on like say CVS or some of these just to encourage people to try the product. There are some situations where I saw some promotions at CVS, so it's something that you feel where you are in the shelf space you are pretty much visible at this point and you don't see much of an activity either from your competitors like [NIX] (Ph) or the other guys. So should I assume that this is pretty much the way you should be? And moving forward we should see more of a gain and I want to reconcile one of the comments you are saying that there was no gain, you were just referring to the gains that you had in the past at Target, right, in the beginning of your remarks? That you are not counting on any gains on shelf space for this year, correct?

Yes, so couple of different things and there Andrea, I will try and take them one at a time. I think generally speaking to Tarang’s point from a relative perspective our level of sort of true promotional activity as SHADOW compared too many of the competitors that we have play against and obviously given the tremendous everyday accessibility of our brand we are quite insulated what others maybe doing in terms of promotional cadence. And then you want to.

And then on the second one what I tell you is back to our core business model it's so different than from the rest of the category that we are not really worried about that. And then if I think about Target in particular inside of the Target space, I go back to kind of how they were rewarded that, it didn’t have anything to do with any type of promotional set forth or cadence. It comes back to our consumers innovation, our ability to partner with them to grow the category and we are really seeing that as a big driver this year.

And just as a follow-up you did not see an increase throughout 2016 of shelf space, correct? In Target?

So what we have observed is Target tends to be on an every other year cadence in terms of large space gains. So the preponderance of our growth within that account in 2016 was largely driven through our innovation program and our ability to drive gains out of the same space that we have. Very different story in 2017 as we look forward and the highlight that we mentioned around our significant shelf space expansion in that account of greater than 50%.

Great than 15, 15 right?

50.

50 and that 50 for 2017 that is included in your guidance or because that was the announced that you just announced today, or is that in addition to what you just said in terms of guidance here on the press release?

Our guidance reflects our announcement of that shelf space increase, that's correct.

Okay and that is started in February, it's started now is it's started beginning of the year. Sorry, to be specific?

So we are currently working through the setting of the shelves at the moment as you may have heard in the preamble. That the setting of those shelves will likely take through the second quarter.

Second quarter, sorry. I didn't understand that well. Perfect. Thank you so much again, congrats.

Thank you. Our next question comes from the line of Shannon Coyne with BMO Capital Markets. Please proceed with your question.

Just quickly the Beauty Squad is growing very quickly. I was wondering if you could tell us how many of those new signups for new customers versus the existing customers? So in other words you think you are retaining new customers to that program or is it still signing up existing customers.

Yes we haven't disclosed what level our new customers versus existing. What I will you tell you by nature is it's our loyalty programs, so as I think about the customers we have in there who really pleased by the profile of those customers in terms of shopping more often on elfcosmetic.com and shopping more every time on this site. And so I think we what we were particularly see size as just how many people we are able to enroll have in that quarter with over 190,000. And so beyond the numbers I would say their level of engagement in the brand is quite high including in terms of being able to comment on our innovation and overall price.

And Shannon while we don't get into the specifics, it is the combination of the two.

And then secondly, I was just wondering about gross margin for next year. I think the fourth quarter is a little bit ahead as what we are working and just wondering about I know you said you have a lot of innovation next year. How comfortable you are extending gross margins again I guess to what extent in 2017? And is it mainly through more innovation or other factors?

Yes I would refer you back to our algorithm from 2016 to 2019 of 100 basis points of gross margin expansion or more. And as I said earlier, I think that really is going to be largely driven through our innovation program.

Thank you. Our next question is a follow up from Jon Anderson with William Blair & Company. Please proceed with your question.

Thanks for taking the follow-up. So you have called out Target and we have seen that space increases in some of the stores we visited, are you expecting other space gains with some of your other large existing national retail account. And if so, do those retailers handle it differently i.e. did the reset happen in a more phased fashion throughout the year? Thanks. Any color you can provide.

Yes. So you know as we said, we typically don't talk about new distribution till after we have distribution, but to your broader question of how do different retailers handle space, John mentioned how Target tends to do a big reset every other year. Our experience is Walmart it has been more continuous. So if you look at the course of 2016 we picked up space as the year progressed, based on every time they seemed to touch a store e.l.f. was one of the beneficiaries given what we deliver to them in their category. And so it does vary retailer-to-retailer in terms of are they doing a big reset or are the touching the store, I think the one constant is our proposition is pretty compelling in either of those scenarios.

Thank you, there are no further questions at this time, I would like to turn the call back over to Mr. Tarang Amin for closing remarks.

All right, thanks again everyone for joining us, we look forward to discussing our first quarter results in May, thanks everyone.

Thank you, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.