what no one is talking about re: rhode's p&l

It seems like everyone and their mother is talking about e.l.f’s disclosure of Rhode’s P&L and while I hate to jump on a bandwagon, there are some *things* I find interesting, that I have yet to see discussed… so let’s dig in shall we?

Let’s start with a theory - largely unproven, but interesting to explore nonetheless... Rhode’s 9x MER (marketing efficiency rate) was a strategic accounting maneuver, and G&A was the sacrificial lamb.

It’s largely accepted that Hailey is the secret sauce behind Rhode’s marketing efficiency (11%!!), which got me thinking - most brands pay celebrities cash for endorsements, which is then accounted for as a marketing expense. Rhode, however, paid Hailey in equity, categorized as a G&A expense.

Yes, yes, I know what you’re about to say - but Kira, Rhode is Hailey’s brand; she’s the Founder! Well, she’s still being incentivized and that compensation should still be accounted for, I’d argue, as a marketing expense. If anything, to help other emerging and growth-stage brands rest easier at night. That level of marketing efficiency is just not possible for most brands lacking involved (read: incentivized!) celebrity involvement. When you reclassify Hailey’s equity comp as marketing (which I’m positing it economically is), you get:

Marketing: 15% (vs 11.5%)

MER: 6.7x (vs 9x)

G&A: 27.3% (vs 30.7%)

This ^ makes Rhode look like a more normal, well-run celebrity brand, versus a marketing miracle.

Now, what we don’t have is cap table / ownership percentages, individual equity grant schedules, a breakdown of comp by person, vesting schedules, and option vs. unit grant details, so we’re left to infer.

2024 total equity based comp was $16,392,409 and 2025 H1 total equity comp was $865,535. 2024 distributions were $4,537,445 and 2025 H1 distributions were $43,425,131. If we assume distributions are proportional to ownership, and Hailey’s stake is roughly 35% (another rough estimate based on market comps and industry standards), she would have received approximately $5.7M of the $16.4M in equity compensation (about 3.4% of revenue), bringing MER closer to 6.7x versus 9x.

I’m not saying all equity comp should be reclassified as marketing expense - other employees’ equity comp is still standard retention/compensation IMO. And dependent on Hailey’s day-to-day at the brand, reclassifying her equity comp as purely a marketing expense may be unfair - she could be actively involved in formulation, in creative direction, in ops and logistics… but based on what I’ve seen for other celebrity-led brands, and even just in response to the rhetoric surrounding the Rhode’s financial performance and e.l.f’s acquisition strategy as an alternate viewpoint, perhaps Rhode is less so the marketing unicorn it’s being made out to be, and more so a workhorse, leveraging its assets and the tools at its disposal efficiently and effectively.