e.l.f. Beauty, Inc.ELF
e.l.f. Beauty, Inc. Income Taxes Disclosure
Income taxes
The components of income (loss) before the provision for income taxes are as follows (in thousands):
Fiscal year ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Domestic | $ | 20,865 | $ | 130,386 | $ | 142,507 | |||||||||||
| Foreign | 19,594 | 15,109 | (1,517) | ||||||||||||||
| Total | $ | 40,459 | $ | 145,495 | $ | 140,990 | |||||||||||
The components of the provision for income taxes are as follows (in thousands):
Fiscal year ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current: | |||||||||||||||||
| US federal | $ | (11,168) | $ | (26,543) | $ | (12,505) | |||||||||||
| State | (4,690) | (6,286) | (4,078) | ||||||||||||||
| Foreign | (1,819) | (44) | (20) | ||||||||||||||
| Total current | (17,677) | (32,873) | (16,603) | ||||||||||||||
| Deferred: | |||||||||||||||||
| US federal | 5,113 | 2,660 | 2,130 | ||||||||||||||
| State | 1,902 | 491 | 746 | ||||||||||||||
| Foreign | (3,479) | (3,684) | 400 | ||||||||||||||
| Total deferred | 3,536 | (533) | 3,276 | ||||||||||||||
| Total provision for income taxes | $ | (14,141) | $ | (33,406) | $ | (13,327) | |||||||||||
The Company adopted ASU 2023-09 effective for its annual period beginning April 1, 2025 and adopted the changes to the tax disclosures guidance on a prospective basis. The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate before income taxes for the year of the adoption of ASU 2023-09:
| Fiscal year ended March 31, 2026 | |||||||||||
| Amount | Percent | ||||||||||
| Income before provision for income taxes | $ | 40,459 | |||||||||
| Federal statutory rate | (8,497) | 21.0 | % | ||||||||
State and local income taxes, net of federal income tax effect(1) | (1,639) | 4.1 | % | ||||||||
| Foreign tax effects: | |||||||||||
| United Kingdom: | |||||||||||
| Statutory tax rate difference between United Kingdom and United States | (710) | 1.8 | % | ||||||||
| Other adjustments | (495) | 1.2 | % | ||||||||
| Other foreign jurisdictions | (73) | 0.2 | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | (1,985) | 4.9 | % | ||||||||
| Subpart F | (546) | 1.3 | % | ||||||||
| Other | (53) | 0.1 | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| IRC section 162(m) limitation | (15,025) | 37.1 | % | ||||||||
Stock-based compensation(2) | 14,001 | (34.6) | % | ||||||||
| Enhanced inventory deduction | 645 | (1.6) | % | ||||||||
| Other | (372) | 0.9 | % | ||||||||
| Tax credits: | |||||||||||
| Foreign tax credits | 1,083 | (2.7) | % | ||||||||
| Change in valuation allowance | (24) | 0.1 | % | ||||||||
| Change in unrecognized tax benefits | (173) | 0.4 | % | ||||||||
| Other adjustments | (278) | 0.7 | % | ||||||||
| Effective tax rate | $ | (14,141) | 34.9 | % | |||||||
(1) State taxes in Texas, California, Oregon, New York and Illinois made up a majority (greater than 50 percent) of the tax effect in this category.
(2) This category includes the tax effects of share-based payment awards, such as windfalls and shortfalls.
The following table presents a reconciliation of the federal statutory rate to the Company’s effective tax rate before income taxes for years prior to the adoption of ASU 2023-09:
Fiscal year ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State tax, net of federal benefit | 3.2 | % | 1.8 | % | |||||||
| Nondeductible business expenses | 0.4 | % | 0.4 | % | |||||||
| Nondeductible employee compensation | 16.0 | % | 4.3 | % | |||||||
| Provision-to-return adjustment | (0.3) | % | (0.2) | % | |||||||
| Uncertain tax positions | 0.1 | % | — | % | |||||||
| Stock-based compensation | (19.3) | % | (18.4) | % | |||||||
| Change in valuation allowance | — | % | 0.4 | % | |||||||
| Effects of foreign operations | 1.6 | % | — | % | |||||||
| Others | 0.3 | % | 0.2 | % | |||||||
| Effective tax rate | 23.0 | % | 9.5 | % | |||||||
The amount of income tax paid, net of refunds, are as follows (in thousands):
Fiscal year ended March 31, | |||||
| 2026 | |||||
| US federal | $ | 14,440 | |||
| State: | |||||
| California | 1,077 | ||||
| All states representing less than five percent of total | 2,414 | ||||
| Total state | 3,491 | ||||
| Foreign: | |||||
| UK | 3,119 | ||||
| All jurisdictions representing less than five percent of total | 311 | ||||
| Total foreign | 3,430 | ||||
| Total cash taxes | $ | 21,361 | |||
The income taxes paid for the years ended March 31, 2025 and March 31, 2024 were $25.3 million and $12.4 million, respectively.
The components of net deferred taxes arising from temporary differences are as follows (in thousands):
| March 31, 2026 | March 31, 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Compensation | $ | — | $ | 88 | |||||||
| Inventory and receivables | 14,972 | 16,570 | |||||||||
| Accrued expenses | 9,330 | 5,124 | |||||||||
| Stock compensation | 10,474 | 8,186 | |||||||||
| Net operating losses | 31 | 403 | |||||||||
| Right of use liability | 12,817 | 9,730 | |||||||||
| Capitalized research and development | 2,593 | 3,514 | |||||||||
| Other | 2,961 | 1,925 | |||||||||
| Gross deferred tax assets | 53,178 | 45,540 | |||||||||
| Valuation allowance | (769) | (744) | |||||||||
| Net deferred tax assets | 52,409 | 44,796 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill | 402 | 3,906 | |||||||||
| Fixed assets and internally developed software | 21,009 | 9,548 | |||||||||
| Intangible assets | 17,524 | 22,872 | |||||||||
| Right of use asset | 11,383 | 9,255 | |||||||||
| Other | 824 | 1,487 | |||||||||
| Deferred tax liabilities | 51,142 | 47,068 | |||||||||
| Net deferred tax (assets) liabilities | $ | (1,267) | $ | 2,272 | |||||||
The deferred tax assets and liabilities are reported in the accompanying balance sheets as follows (in thousands):
| March 31, 2026 | March 31, 2025 | ||||||||||
| Deferred tax assets | $ | 7,464 | $ | 1,540 | |||||||
| Deferred tax liabilities | 6,197 | 3,812 | |||||||||
| Net deferred tax (assets) liabilities | $ | (1,267) | $ | 2,272 | |||||||
The valuation allowance was $0.8 million and $0.7 million as of March 31, 2026 and March 31, 2025, respectively, primarily relating to an investment impairment for which we do not believe a tax benefit is more likely than not to be realized.
As of March 31, 2026, the Company had gross federal, state and foreign net operating loss carryforwards of zero, $0.7 million and zero, respectively. The state net operating loss carryforwards can either be carried forward 20 years or indefinitely. The state net operating loss carryforwards will begin to expire in 2038.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Fiscal year ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Balance at beginning of year | $ | 550 | $ | 433 | $ | 442 | |||||||||||
| Increases for prior year tax positions | 105 | — | — | ||||||||||||||
| Increases for current year tax positions | 167 | 163 | 108 | ||||||||||||||
| Decreases for prior year tax positions | — | (6) | (19) | ||||||||||||||
| Decreases due to statutes lapsing | (108) | (40) | (98) | ||||||||||||||
| Balance at end of year | $ | 714 | $ | 550 | $ | 433 | |||||||||||
If all of the Company’s unrecognized tax benefits as of March 31, 2026, March 31, 2025 and March 31, 2024 were recognized, $0.7 million, $0.5 million and $0.4 million, respectively, of unrecognized tax benefits, would impact the effective tax rate.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. The Company's liability for unrecognized tax benefits is recorded within other long-term liabilities on the consolidated balance sheet. The Company had $0.3 million and $0.2 million of accrued gross interest and penalties as of March 31, 2026 and March 31, 2025, respectively. The Company recognized net interest and penalties (benefit)/expense of $43 thousand, $56 thousand and $(21) thousand for the fiscal years ended March 31, 2026, March 31, 2025 and March 31, 2024, respectively.
The Company files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. As of March 31, 2026, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax fiscal year ended March 31, 2022.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The legislation includes several changes to US federal tax law, including the permanent extension of certain expiring Tax Cuts and Jobs Act provisions and modifications to the US taxation of foreign activity. Certain provisions were effective for 2025, while others apply to tax years beginning after December 31, 2025. The Company has evaluated the impact of the OBBBA and incorporated the applicable provisions into its consolidated financial statements for the current reporting period. As part of its initial assessment of the corporate tax provisions, the Company expects to elect immediate expensing of US incurred research or experimental expenditures and full bonus depreciation for certain assets placed in service after January 19, 2025. As a result of these expected elections, US cash taxes decreased in fiscal year 2026 with no material impact to the Company’s effective tax rate.
The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with rules effective beginning in 2024 and expanding in 2025. Some jurisdictions in which the Company operates have enacted Pillar 2 legislation, while others continue to advance implementation; the U.S. has not adopted the rules. On January 5, 2026, the OECD/G20 released the Side by Side (SbS) package, which provides administrative simplifications and new safe harbors, including exemptions from certain top‑up taxes for qualifying US-parented groups and an extension of the Transitional Country-by-Country Reporting Safe Harbor through 2027. The Company is monitoring these developments and evaluating potential impacts. Based on current information, the Company has considered Pillar 2 tax within the provision for income taxes and does not expect Pillar 2 to have a material effect on its effective tax rate or consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 21, 2026 | Showing above |
| 2025 | May 29, 2025 | |
| 2024 | May 23, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 26, 2022 | |
| 2021 | May 27, 2021 | |
| 2020 | May 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 15, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.