Earnings call transcript: Oddity Tech Q4 2024 beats expectations

Oddity Tech Ltd reported a strong fourth quarter for 2024, significantly surpassing analysts’ expectations. The company posted an earnings per share (EPS) of $0.20, compared to the forecasted $0.11, marking a notable earnings surprise. Revenue for the quarter reached $124 million, exceeding the anticipated $119.03 million. Following the earnings announcement, Oddity Tech’s stock saw a modest increase, reflecting positive investor sentiment. According to InvestingPro data, the company maintains impressive gross profit margins of 71.85% and has earned a "GREAT" overall Financial Health Score of 3.52, supported by strong profitability and cash flow metrics.

Key Takeaways

• Oddity Tech’s Q4 2024 EPS of $0.20 beat the forecast by 81.8%.
• Revenue for the quarter was $124 million, surpassing expectations by $4.97 million.
• The company’s stock price increased by 0.68% following the earnings release.
• Oddity Tech plans to launch a telehealth platform in late 2025.
• The firm reported a strong free cash flow conversion rate of 130% of net income.

Company Performance

Oddity Tech showcased robust performance in Q4 2024, with a 27% year-over-year increase in revenue. The company’s strategic focus on direct-to-consumer sales and product innovation has positioned it favorably within the beauty and wellness industry. Compared to its competitors, Oddity Tech continues to excel in online sales and repeat customer purchases, driven by its unique AI-powered personalization platform. InvestingPro analysis reveals the company holds more cash than debt on its balance sheet, with a healthy current ratio of 2.07, indicating strong financial flexibility. For deeper insights into Oddity Tech’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

Financial Highlights

• Revenue: $124 million in Q4 2024 (+27% YoY)
• Earnings per share: $0.20
• Adjusted EBITDA: $150 million for the full year (23.3% margin, +40% YoY)
• Gross Margin: 72.7% in Q4 (+30 basis points YoY)

Earnings vs. Forecast

Oddity Tech’s Q4 2024 earnings per share of $0.20 represented an 81.8% positive surprise over the forecasted $0.11. This significant beat underscores the company’s effective cost management and strong sales growth. Revenue also exceeded expectations, coming in $4.97 million higher than analysts’ predictions.

Market Reaction

Following the earnings announcement, Oddity Tech’s stock price rose by 0.68% to $45.83. This movement places the stock closer to its 52-week high of $51, indicating investor confidence in the company’s growth prospects. The stock’s performance aligns with broader market trends, where tech and consumer-focused companies have shown resilience.

Outlook & Guidance

For 2025, Oddity Tech targets a 20% revenue growth and an adjusted EBITDA margin of 20%. The company plans to launch a new telehealth platform in the latter half of the year, expanding its product portfolio and tapping into high-growth market segments. Additionally, Oddity Tech aims to introduce five new products per brand in 2025, further driving innovation and market penetration. InvestingPro data shows the company’s strong execution potential, with a PEG ratio of 0.29 suggesting attractive valuation relative to growth prospects. The company’s return on invested capital stands at 30%, demonstrating efficient capital allocation.

Executive Commentary

CEO Ron Holtzman emphasized the strategic groundwork laid in previous years, stating, "Our success today is because of the hard work we did two and three years ago." He also highlighted the company’s focus on building robust infrastructure and processes, saying, "We are building something really meaningful in terms of infrastructure and processes."

Risks and Challenges

• Supply Chain Disruptions: Potential delays or increased costs could impact product availability.
• Market Saturation: Increasing competition in the beauty and wellness sectors may pressure margins.
• Regulatory Changes: New regulations, especially in international markets, could affect operational efficiency.
• Economic Conditions: Broader economic downturns could impact consumer spending on non-essential goods.

Q&A

During the earnings call, analysts inquired about Oddity Tech’s expansion into international markets and its strategies for maintaining customer engagement. The company assured that its modular technology platform and focus on personalization would support efficient brand launches and sustained customer loyalty. Additionally, Oddity Tech addressed concerns about potential macroeconomic impacts, stating that such factors have had minimal effect on its business operations.

Full transcript - Oddity Tech Ltd (ODD) Q4 2024:

Conference Operator: Good morning. Welcome to Oddity’s Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. Today’s call is being recorded. We have allocated time for prepared remarks and Q and A. At this time, I would like to turn the conference over to Maria Leekers, Investor Relations for Audity.

Thank you. You may begin.

Maria Leekers, Investor Relations, Oddity: Thank you, operator. I’m joined by Ron Holtzman, Audity’s Co Founder and CEO Niv Price, Oddity’s CTO and Lindsey Druckerman, Oddity’s Global CFO. As a reminder, management’s remarks on this call that do not concern past events are forward looking statements. These may include predictions, expectations or estimates, including statements about Oddity’s business strategy, market opportunity, future financial performance and potential long term success. Forward looking statements involve risks and uncertainties and actual results could differ materially due to a variety of factors.

These factors are described under forward looking statements in our earnings press release issued yesterday and in our most recent annual report on Form 20 F filed with the Securities and Exchange Commission. We do not undertake any obligation to update forward looking statements, which speak only as of today. Finally, during this call, we will discuss certain non GAAP financial measures, which we believe are useful supplemental measures for understanding our business. Additional information about these non GAAP financial measures, including their definitions, are are included in our earnings press release, which we issued yesterday. I’ll now hand the call over to Eran.

Ron Holtzman, Co-Founder and CEO, Oddity: Thanks, everyone, for joining our call today. 2024 was another strong year for us, both for financial achievements, but even more importantly, for the investments we’ve made to drive our business in the future. As I tell my teams, our success today is because the hard work we did two and three years ago. We are proud of it, but it is in the past. We must continue to work hard to invest today to ensure we keep winning.

It is for this reason that I’m bullish about 2025 and beyond. Our business is very strong and we are developing more engines of growth than ever before, engines across Audity Labs, new brands and AI. So let’s start with our 2024 performance. In 2024, we grew revenue 27% to $647,000,000 and delivered adjusted EBITDA of $150,000,000 at a 23.3% margin, growing adjusted EBITDA 40% year over year. We generated $134,000,000 of free cash flow converting over 130% of our net income into cash.

We again proved the power of online. We beat our earnings guidance every single quarter since going public and continuously raised our outlook on sales and profitability, every single quarter, seven quarters in a row. Both of our brands did great in 2024, each growing revenue double digits. Inmakiage crossed the $500,000,000 revenue mark in 2024 and Spoiled Child recently crossed the $150,000,000 mark for its third birthday anniversary this month. We maintained strong and consistent momentum across the year, including our fourth quarter, where we grew revenue by 27%.

This momentum continued into 2025 where we had a great start for the first quarter growing across brands and product categories. And given the importance of our first quarter, it put us in a good position to once again meet our annual target for revenue growth of 20% and adjusted EBITDA margin of 20%, which we are committed to doing every year. One of the most important focus metrics for us is repeat sales. Repeat is the best indicator we have of customer happiness and satisfaction and of our ability to sell new products into existing customers. And of course, repeat revenue is high margin for us and drives our strong profitability.

We are therefore pleased to have further strengthened our repeat sales in 2024 and increased it as a percentage of our business for 2023. This was driven by our strong twelve month revenue repeat rate of over 100%, a level that we believe is best in class across B2C. We are clearly an outlier versus other beauty companies that have reported weak demand and excess inventories. I want to explain why we are outperforming today and why we believe we will continue to do so in the future. First, we are deliberately focused on the most attractive growth areas of the market.

This include the shift to online and increasing consumer demand for high performance products. In our view, the move in recent quarters to online appears to be having more meaningful impact than in the past. There is too much product in too many physical points of distribution, while online is growing at a strong pace of a larger base. The global beauty industry is one of the most attractive markets in the world in our view, huge in size and highly profitable, with so many areas to innovate and grow. I believe that Incomets have under invested in technology and have been slow to adapt to a changing consumer.

We can see how it is hurting their business today and creates an opportunity for us as we continue to invest and strengthen our moat on those fronts. The second reason for our outperformance is our direct to consumer model, which has so many advantages over wholesale brands. And in a tough industry backdrop, those adventures really shine. We have a direct dialogue with consumers without retail interference. We understand the performance of every product by platform, by ad, by geography, by funnel, every hour of the day.

We double down on what is working and continuously optimize to make sure we never hit a wall. Due to our B2C model, we have a very accurate read and strong planning. We have full control of our inventory, avoiding the excess inventory that wholesale brands are facing today, including all the discounting that comes along with it. Turning now to physical product, one of the greatest strengths at Oddity is our ability to develop high performing products, launch them into our user base and create new zero franchises. From the very beginning, we’ve built a culture at Oddity that truly believes in product, product that solves her pain points and does it better than others, product that she loves and wants to come back to.

And this strength really shows in our numbers today. Starting with the original product portfolio we launched back in 2018, which continued to grow double digits. Based on industry data, we believe Inmacias is the number one foundation, the number one primer and the number two concealer in The U. S. Prestige Dollar sales.

Our product innovations are growing even faster. A good example is Inmacias Skin, which we launched in 2022 and as of 2024 represented around 30% of the brand revenue and it should continue to grow. Poll Child is another example, launched in 2022 and now makes up almost 25% of Auditory revenue today and growing double digits. Part of our product innovation machine is our direct connection with consumer that enable us to learn what she needs. Another is our strict development protocols that require any product we launch to beat competitors in large scale consumer trials.

If it isn’t perfect, we won’t launch it, even if it means we don’t launch new products. What was recently added to our existing Product First strategy is Oddity Labs, our biotech lab in Boston that is a major investment for us. Over 60 scientists full time working on discovering and developing new molecules that have the potential to disrupt our old industry completely. As I said before, I believe this will take time, but can be a true game changer for us. I want to close with some thoughts on why we are bullish on 2025 and discuss some of the investments we are making for the future.

Starting with the core business where we have incredible strength in both Inmacias and Spoiled Child, both as a great 2024 and are off to a strong start in 2025. Irma Kiaj is already one of the largest prestige beauty brands by revenue in The United States after only six years in the market based on industry data. And it is on track to reaching $1,000,000,000 of revenue by 2028. The color business continue to grow with great repeat. Skin is a massive opportunity.

As I mentioned, it reached 30% of Filmicayage brand sales in 2024 and will continue to get even larger. Remember that for most of our largest competitors, skin business is twice the size of color. International is another major opportunity that we have slowed play throughout the years. We began slowly accelerating our growth outside of The U. S.

In the first quarter of twenty twenty five, both by increasing scale in existing markets like UK, Germany and Australia, Australia, as well as large scale testing in new markets. So far it looks good and we continue to believe international will grow to big numbers. Spoiled Child, we are also billing to be a $1,000,000,000 brand. It has scaled at a healthy rate, passing the $150,000,000 LTM revenue mark and doing it with strong repeat rates and AOV. It shows how much unmet demand there is for the brand.

We have begun testing international market for spoilage in 2025 with good indications and see big potential there. Another reason that makes us bullish about our future is our new brands. With every brand, we push ourselves even more to not only disrupt the market, but disrupt ourselves again and again. Brantree is a telehealth platform for consumers that will start with medical grade skin and body issues like acne, eczema and other pigmentation, and then will expand to other health domains. Our offering includes a comprehensive and innovative product range and access to prescription and OTC treatments, enabling full personalization to user profiles, types and severities.

Individual treatment plans can be updated and adjusted to minimize side effects and increase efficacy. With Brand three, we are building a user experience and product portfolio that we believe can change the game. We have built new capabilities for it, including specialized vision technology for assessment and a mobile app with a treatment life cycle coaching engine to encourage compliance with the treatment routine. Brand three is on track to launch as scheduled in the second half of this year. We plan to soft launch in Q3 and then rollout of Fisher launch in Q4.

Brand ’4 is also a big opportunity that we’re very excited about. More details on that front to come. Moving to Audit Labs, where we are using pharma grade technologies and AI based molecule discovery to develop high efficacy sign back products for our industry. Our mission at Oddity Labs is to bring real science to our industry at high scale for the first time and turbocharge distribution through Oddity’s online platform. We continue to grow our team with new talent across bioengineering, computation, chemistry and delivery teams.

Our scientists are actively developing both short and long term innovation in skin, color, hair and body with a singular goal of exceeding the efficacy of existing products in these spaces. To achieve this, we are working on multiple parallel R and D strategies across each of our programs to increase the chances of success. In the short term, we are working on preparing to launch new molecules for Brant3 and Brant4. Several teams are working on longer term developments, ensuring we focus on both delivering short term impact while investing in the future. This longer term developments include our next generation of molecule delivery system, new modalities and new biological pathways to improve efficacy.

Beyond our internal R and D, we are doubling our power by partnering with leading platforms to accelerate target and heat discovery using cutting edge technology, including training and advanced human organoid models to identify new targets and predict neurological efficacy, AI based platform that identifies new targets and generates predictions that modulate a given target based on genetic data and RNA sequencing and Gen AI algorithms that develop new highly effective complexes composed of natural ingredients. Biology is just one part of the equation. Effective delivery is essential to translating scientific breakthroughs into real world performance. We are investing in delivery systems, building internal capabilities and partnering with third parties to optimize how different compounds reach their targets. It is still early to know what will work as we are doing it for the first time, but I can assure you, we push out 20 fourseven on multiple areas to increase the chances of success.

As I already said in previous calls, we don’t need OLED Labs to meet our financial targets, but what we are building in Labs is for total disruption. If we do it right, OIT Labs will change our company and our industry forever. I truly believe it. Finally, a few words on our investment in tech before I hand it to our CTO, Nees Price. Our big and early investments in tech are paying huge dividends for us today, allowing us to be ahead of our competitors in winning online.

This is why we continue to double down on our investments in tech talent and capabilities. This year, with acquisition of Phionic IP, we brought in house an elite AI research team with experience from Israel Intelligence Units. This team will focus on solving all of these high impact missions, enhance our current models and help us preserve our lead. I will now hand it to Nev to talk through what we are building in tech in more detail.

Niv Price, CTO, Oddity: Thanks, Aran. Indeed, we believe the Audity platform today is the most advanced AI based commercial engine in our industry, and we continue to push our capabilities to new heights. Our technology mode allows us to deliver a better experience to customers than what is possible in its store. In order to do that, we need great data and the ability to hyper personalize the user experience. These are problems that machine models are especially well suited for and why we have from an early stage focused on building these capabilities.

Let’s start with product matching. The ability to understand each user and deliver them the perfect product match based on her needs. The vast majority of our first purchase revenue comes through one of our AI based matching algorithms. We’re continuously improving these models in order to reduce returns and increase satisfaction and repeats. As one example, our latest version of Ilmachiage’s Power Match, which we recently released, is our best performing shade matching model ever.

It’s a multimodal architecture training on both images and text and it’s reduced returns of our best selling shades by more than 10%. Turning to our user journey and how we personalize every experience to the individual in order to maximize conversion and LTV. I like to think of these models as a virtual personalized store that is being built around our users as they walk through based on the information we gather about them. One example is a new model we introduced recently for spoiled child targeting post purchase upsell. Instead of offering a random product after purchase or one pre chosen by a human, we use machine models to make the decision.

This drove a 30% plus improvement in upsell conversion and a 15% plus improvement in upsell AOV. For Brand three, we’re taking product matching and hyper personalization to a new level with a full suite of AI models. These include severity assessment for different skin conditions as well as lesion classification and predictive view, where we combine generative AI models with our unique data and algorithms in order to predict and show users at day one, how they should expect to look like across the treatment journey all the way to clarity. These capabilities are critical to aligning expectations with users, increasing their satisfaction and compliance and reducing churn. Working closely with top dermatologists, we were able to show that our acne models have reached this year a level of accuracy that matches or beats that of a single dermatologist.

Breakthrough foundation models from OpenAI, Meta (NASDAQ:META), Google (NASDAQ:GOOGL) and others have been a huge win for us. We can take these models, combine them with our unique data and algorithms and build new tools faster and way more efficiently than what was possible before. I’ll give an example in the acne domain. We’ll start with a foundation model that knows how to identify circles, colors and texture. We then teach the foundation model, if you see a circular red bump, that’s a lesion, and teaching it means showing it many ground truth examples using our proprietary data of more than 10,000,000 unique images from our users, which we believe is one of the largest datasets of this nature in the world.

Then we do another final step of additional training with our data and boom, you have a domain expert. This approach has two important advantages. One, speed. Since the starting point was DASP of a foundation model that knows the world quite well, turning it into an expert is faster than if you had to teach it from scratch. Two, quality.

The results are usually better than if you started from scratch. But the precondition for this is you must have the data. So for us having the unique proprietary data, we can now move much faster, save on costs and get more accurate results. Turning to the platform, it’s important to emphasize, especially as we’re rolling out more and more brands. We’re building Audity’s technology with the modular and extensible design, which makes it usable across all brands and makes it plug and play for all new launches.

This allows us to be super efficient in terms of time, resources and capital. These modular Audity core libraries span across every aspect of our platform from user facing interactions like our funnels and checkout to video on demand with Kenza to our computer vision diagnostics and tracking core capabilities, product recommendations, tons and tons of applications, which will be expensive to build separately. But on our platform, we leverage these core libraries to drive speed, results and efficiency for each brand. With that, I will turn it over to our global CFO. Lindsey?

Lindsey Druckerman, Global CFO, Oddity: Thanks, Nev. Let’s turn to our Q4 results, which I will refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Oddity delivered another record breaking quarter to cap off a record breaking year. We grew net revenue by 27% in the quarter to $97,000,000 The strength was driven by both Il Makiage and Spoiled Child across a range of product categories.

Net revenue growth was driven primarily by an increase in orders, while average order value increased 12% year over year. Average order value growth continues to be driven by mix, in particular the increased proportion of Il Makiage skin, as well as higher items per order. The 27% revenue growth we delivered this quarter beat our 22% to 24% guidance. The upside stands in contrast to the concerns we hear from investors about weakening sales trends in other beauty businesses, including both wholesalers and retailers. As Aran said, our results are a testament to the strength and resilience of our direct to consumer model and how we’ve positioned our business to win in the most important vectors of industry growth.

Moving down the P and L, gross margin of 72.7% expanded three thirty basis points year over year and exceeded our guidance of 68%. The delta versus our outlook was driven in part by product mix. We delivered adjusted EBITDA of $15,000,000 in the quarter and adjusted EBITDA margin of 12.3% above our guidance in absolute dollars and in margin percentage terms. Adjusted EBITDA margin compressed by four fifty three basis points as we incurred planned incremental expenses in the quarter to drive future growth initiatives, including Brand three, Brand four and Oddity Labs. We delivered adjusted diluted earnings per share of $0.2 compared to our guidance of between $0.11 and $0.13 Our adjusted EBITDA and EPS excludes $8,000,000 of share based compensation.

We continue to deliver very strong free cash flow and free cash conversion, a clear reflection of the strength and quality of our business model. We generated $134,000,000 of free cash flow in 2024, an increase from the $85,000,000 we generated in 2023. In fact, our free cash as a percentage of revenue was 21% in 2024 and seventeen percent in 2023, leading among other beauty companies based on reported results. We believe the strength in our cash flows is just one more indicator of our model’s advantages relative to our competitors. We continue to put that cash to work and create value for our shareholders.

During the full year 2024, we repurchased 3,600,000.0 shares of our stock for hundred and $47,000,000 This includes 2,400,000.0 shares we purchased in the fourth quarter via direct buyback of a portion of Caterton’s shares for approximately $100,000,000 We have $103,000,000 remaining on our buyback authorization. We will stay opportunistic on share buybacks going forward based on our strong cash flows, ample cash reserves and attractive share price. We exited the year with $169,000,000 of cash equivalents and investments on our balance sheet and zero debt. Turning to our outlook for 2025, Q1 is off to a strong start with good momentum in January and February. The size of the quarter combined with the high predictability of cohort repeat gives us good visibility to meet our long term algorithm of 20% revenue growth and 20% adjusted EBITDA margins.

Some specific drivers impacting our full year P and L include: During 2025, we plan to incur incremental expenses associated with growth investments in Brands three, four and Oddity Labs. This is principally to cover costs associated with people, tech infrastructure and product development. Even with these investments, we’re firmly committed to delivering a 20% adjusted EBITDA margin for the full year and beyond. Brand three launch, as Aron said, we’re on track for the second half of this year and continue to expect no material revenue contribution in 2025. Brand four will be ready for launch this year, but we’ve decided to move it to early twenty twenty six to give more focus to Brand three, more leadership focus and more capital allocation to one brand versus splitting it in the same year for two brands.

This has no material impact on our 2025 outlook as we are still incurring significant pre launch expenses and have not contemplated any revenue contribution from Brand four in the year. Gross margin for the year is expected to be around 70% as our product mix normalizes, which we discussed in our last earnings call as well. We will also incur higher cost of goods expense this year for Brand three, which will operate at a lower gross margin at launch than the company average. As we said before, we continue to see minimal impact on our business from changes in tariff policy. Speaking with the topic of policy uncertainty, let me address TikTok.

TikTok is one of many platforms that we use for acquisition and we have no over reliance on it. The expected impact to our business is TikTok’s thesis operating in The U. S. Is not material. Moving down the P and L, we expect adjusted EBITDA margin of 20% in line with our long term algorithm.

We continue to plan to reinvest any EBITDA dollar upside back into the business. Adjusted EPS of $1.94 to $1.98 assumes a blended tax rate of 20% and does not incorporate the potential benefit from additional share buybacks. Turning to the first quarter outlook, we’re off to an excellent start and are pleased with the composition of our growth across both brands and categories, as well as our cohort repeat rates. We expect year over year net revenue growth in the quarter to be between 2224%. You can find more details on our Q1 outlook and our press release.

With that, I’ll turn the call back to the operator for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. Our first question is from Cory Carpenter with JPMorgan. Please proceed.

Cory Carpenter, Analyst, JPMorgan: Good morning. Thanks for the questions. I had two. Maybe one international, Ron, I think you mentioned in the prepared remarks you’re starting to push more in 1Q. So could you just go a little deeper on your strategy and kind of what you’re doing on the international side and why now?

And Lindsey, I think for you, just 1Q, I understand that’s your highest customer acquisition quarter. So could you just talk about what you’ve seen in the first few months on the customer acquisition side in ROAS and payback on ad spend? Thank you.

Ron Holtzman, Co-Founder and CEO, Oddity: Hi, good morning, Corey. As for international, the teams are working hard to accelerate international for many years as you know. And what I wanted to achieve now is to showcase that it is our decision when and how much we want to grow there. I also decided it’s important to spread the growth across more markets and instructed the teams already back in 2024 to allow for more growth international in 2025. So we began slowly accelerating the growth outside of The U.

S. In the first quarter of this year, both by increasing scaling existing markets like UK, Germany and Australia, as well as larger scale testing in new markets. So far, it looks very good as expected, and we continue to believe international will grow to huge numbers for us. As you know, it’s massive opportunity. Our competitors internationally, I think, like two thirds of their business.

And we are building like truly localized experience for each international market we enter, which gives us strong performance from day one when we launch those new international markets. And this is like one of our biggest levers, and we can use it whenever we want. Like the reason that we pushed international is not because softness in The U. S. I instructed the teams last year that I want to push more in 2025, and that’s what we did as planned.

And it’s our decision how quickly we want to pace the growth in those new markets and to prioritize it. I hope it answered that question. Lindsay?

Lindsey Druckerman, Global CFO, Oddity: Yes. Thanks, Corey. So Q1 is off to a great start as we mentioned in our prepared remarks. As you know, Q1 is a really important quarter for us. It’s when we turn the engines back on for our acquisition and we exited the fourth quarter with really good momentum, nice performance across both brands and multiple products, product categories.

You heard Oran talk about skin now for 2024 reaching 30% of Il Makiage brand revenue. That’s been a big highlight for us even as the color business continues to grow double digits and spoil child has good momentum. So all of those things really carried forward for us in the first quarter. In terms of ROAS, media gets more expensive every year consistently, we’re able to offset it with all the very strong repeat rates that we have and that trend of course, Aran mentioned it for 2024, but it continued into the first quarter as well that were repeated as a larger portion of our business, which allows us to get a nice overall return on our ad spend.

Niv Price, CTO, Oddity: Thank you both.

Conference Operator: Our next question is from Youssef Squali with Truist Securities. Please proceed.

Youssef Squali, Analyst, Truist Securities: All right. Thank you very much. Good morning, guys. So, Oren, I know you talked a little bit about this in your prepared remarks, but at a high level, in terms of your growth relative to peers, are you seeing any weakness or trade down across your consumer base from ongoing macro concerns? It looks like consumer confidence, at least in The U.

S, continues to deteriorate. Do you think this business continues to perform well regardless of what how the macro does over say the next twelve months, twelve to eighteen months? And then Lindsay (NYSE:LNN) on TikTok, was TikTok impacted at all as a marketing channel for you guys by the brief shutdown in January? And if the platform does go away, what’s the best substitute with comparable ROAS for you guys? Is it Instagram?

Ron Holtzman, Co-Founder and CEO, Oddity: Is it we’d

Youssef Squali, Analyst, Truist Securities: love to just see if there is a substitute.

Ron Holtzman, Co-Founder and CEO, Oddity: Good morning, Joseph. I will take both. Let’s start with easy one. TikTok is being shut down tomorrow, nothing happens to the business. It is like we already saw it in one day and we are the fact that we do everything internally without agencies allow us to move very fast and to shift spend to other platforms and therefore no impact.

And for the market, look, we said it before, the consumer is moving online. I said it multiple times. I believe this is the case. I believe it will be more than 50%. We know the challenges some of our competitors have, and it’s really not surprising us when you consider how much the consumer is moving online and how much their focus is going into brick and mortar with over 1,000 new points of distribution in just the couple of last year.

We did see a lot of promotions from other brands in Q4, which was probably to drive demand. This isn’t an issue for us, thankfully, because we don’t run the business this way. We are not participating in holiday sales. But for other brands, it can be very damaging as part of their consumers are conditioned to shop only during sales and promotion. And so it makes it very tricky for Q1 for them.

Overall, it’s like what we see out there now is a big opportunity for us because we believe this transformation is still in early days. Online penetration can double from where we are today. And that’s what keeps us very bullish about the future.

Youssef Squali, Analyst, Truist Securities: Okay. Thanks a lot.

Conference Operator: Our next question is from Javier Escalante with Evercore ISI. Please proceed.

Javier Escalante, Analyst, Evercore ISI: Laurent, Lindsey, nice talking to you. My question has to do more on the consumer side. If you can expand on repeat purchases, which I understand you define it more as conversion within the same cohort. And perhaps if you have visibility on that with whether you can discuss El Mach EAS in terms of which areas you see the strongest repeats within existing products, I believe should be foundation, but this is my guess. And how much of the El Mach EAS growth is coming right now from consumer trial of the skincare extensions?

Thank you.

Ron Holtzman, Co-Founder and CEO, Oddity: Good morning. I’ll start with repeat. Unlike most D2C companies, we generate most of our revenue from repeat, and this is although we grew over 25% so far this year. So this is why the business is so profitable. Repeat in 2024 grew to more than 60% of the business revenue, way higher than 2023%.

Again, this is although we grew over 25%, actually 27% in revenue. This is an important metric for us because it really shows how strong the satisfaction and happiness is. And if I dive deeper, our twelve month net revenue repeat rate is more than 100%, which we believe is among the best there is in D2C. And this metric was less than 50% compared to more than 100% just few years ago. We drive repeat by three main ways.

One is more repeat from the same product, foundation, concealer, hair, skin. Number two is expanding wallet share with new products. If I sold her a foundation or concealer before, now we are offering her skin product, which is a repeat. And number three, we are getting cross selling from ill maturge to spoil child in the future for new brands. So this is the way that we view it.

And repeat is very strong, Like the core that we see, we don’t see any softness.

Javier Escalante, Analyst, Evercore ISI: Oran, if I can squeeze the second one, if you don’t mind.

Ron Holtzman, Co-Founder and CEO, Oddity: Yes, of course.

Javier Escalante, Analyst, Evercore ISI: The strong growth in Q1 is certainly a stark contrast with most traditional beauty companies. Could you talk about customer acquisition kind of like in growth rates? Say, Q1 twenty twenty four, I have these many millions of users. And as of now, in Q1, I have these many more in a growth rate. If you can tell us how much of the 20%, twenty three %, I believe, growth would be the midpoint of your guidance come from new users versus existing users buying again?

Thank you.

Ron Holtzman, Co-Founder and CEO, Oddity: Sure. Our biggest push in user acquisition is H1. Like every year, Q1 is the biggest than Q2, then we slow down because we don’t want to grow more than that, and we enjoy the repeat. But it doesn’t mean that we don’t have very strong repeat in Q1. If I had it, I wouldn’t like if I didn’t have it, I wouldn’t be able to land on those EBITDA margins because, as you know, acquisition is not super profitable.

So we are pushing and we are acquiring new users, but at the same time, we are landing on a very healthy EBITDA margin, which is a testament of the strong repeat rate as part of revenue, although we grow the new user by acquisition. As for Media, as Unis said, we continue to generate attractive returns on our marketing spending. And again, you can see it by our strong margin that we forecast for Q1 and for 2025 full year. Q1 media is getting more expensive, but as expected, but due to the super healthy repeat, as I mentioned before, it’s being offset and we can see healthy margins.

Javier Escalante, Analyst, Evercore ISI: Thank you very much.

Conference Operator: Our next question is from Andrew Boone with Citizens. Please proceed.

Andrew Boone, Analyst, Citizens: Thanks so much for taking my questions. I’d love to understand the key product milestones as we think about Brand three coming to market later this year. What do you guys need to accomplish and kind of knock down to set Brand three up for growth and for it to scale into ’25 and ’26? And then, Lindsey, just stepping back from a bigger picture perspective, as we do think about the P and L, you guys are making significant investments across multiple growth factors that really aren’t contributing in 2025 materially. How do we think about sizing those growth investments to better understand your inherent underlying profitability?

Thanks so much.

Ron Holtzman, Co-Founder and CEO, Oddity: I will start with the second question. Of course, Lindsey, you can elaborate. We are, I want to say, more than doubling our investments in Q1 versus Q1 last year around Labs, Brand three and Brand four. So when you think about the magnitude, just like it continue to grow and although it continue to grow, we still land on our margins that we are committed to. Brand three is a telehealth platform with medical grade products.

We are starting with skin and body issues like, acne, eczema and other implementation and then we’ll add additional health domains already in 2026 next year. I can’t elaborate more for competitive reasons. But for where we are today, we start with body and skin. We see these issues as huge pain points that impact big portion of our user base. And satisfaction with current solution is terrible, either inconvenience visits to the doctor office or picking an ineffective treatment blindly at the drugstore.

This is your opportunity for Oddity. We would never launch it this year unless I had a very good read that we know how to win around those areas. We tested a lot. We are building this brand for more than two years, and we are in a good position to launch it. We are developing Otiti’s most personalized and most comprehensive line of product comprised of OTC and RX products, all to be sold online under our own brand.

Most products formulated with existing ingredients on the market and some OTC products will include exclusive ingredients from OTC Labs. And two is we are building first of a kind, as I mentioned the call, mobile app experience to increase compliance and drive higher repeat comparing to the market today. And three is leveraging the best thing of Oity, which is our platform, our user base and marketing to them and developing product to address their needs. As I mentioned in the call, Soft Lounge Q3, Official Lounge Q4, we are actively scaling the teams, which is a significant investment for OTT. We completed developing the product line and branding.

We set up the telehealth infrastructure to streamline user experience and support the delivery of our personalized treatments. And as we’ve discussed, major breakthrough for us around vision. The numbers that I saw are very compelling in terms of diagnosis and matching, and I’m very excited to launch this brand.

Lindsey Druckerman, Global CFO, Oddity: Andrew, just to give you a little bit more perspective maybe on the amount of spend, I’ll highlight two things for you. Number one, if you look at our profitability, first half of twenty twenty four, which was essentially just Il Maquillage spoil child and then just beginning to ramp on our investments. We did have Adity Labs, of course, in the base, but there’s a small there’s some investments there, but not as much as you saw for the full year or in the back half of the year as we ramped and what we’re guiding to in 2025, you can get a sense looking at first half of twenty twenty four, how profitable the underlying business is. And remember 2024 is our highest dollar level of marketing spend And it’s so we’re at our largest scale and it’s our lowest portion of repeat. So this is that profitable despite the fact that it’s kind of it’s a period where we actually are doing a lot of investment inherent in the D2C business.

So I think that’s one factor. And the second thing that I would mention in terms of cost is we have had very material increase in investments in these growth initiatives. We talked about Spoiled Child being a brand that we spent $20,000,000 upfront to launch. So Brand three is more involved for us than what Spoiled Child was, but it gives you a bit of a sense of kind of what the upfront investment is that we’ve of course layered over a couple of years.

Ron Holtzman, Co-Founder and CEO, Oddity: I would just say like, tens of millions in terms of investment this year. So we can’t elaborate more, but big investment for us across labs, Braintree and Braintree.

Andrew Boone, Analyst, Citizens: That’s very helpful. Thank you so much guys.

Conference Operator: Our next question is from Dara Mohsenian with Morgan Stanley (NYSE:MS). Please proceed.

Youssef Squali, Analyst, Truist Securities: Hey, good morning. So maybe we can stick to Brand three. I was just hoping to get a bit more specifics on the consumer needs states you’re targeting with Brand three, the total addressable market that you see and maybe just a bit of an update to the extent you’d like to share on sort of effectiveness of the product so far in Brand three and you’re testing for those consumer needs states versus the existing competing products that are out there?

Ron Holtzman, Co-Founder and CEO, Oddity: Yes, sure. I think that I said, but I will say it again. We start with acne, eczema, hydropigmentation and body issues. As for trial, I want to say that we did close to 100 groups of trials like for the personalization and customization. We see numbers that are better than anything other that we saw so far in terms of matching and satisfaction.

Truly like more than two years in the world just that part. So we wouldn’t launch it unless we were very confident that we have strong offering. And just as in the magnitude, we’re launching like dozens of new products for Brent three after testing and it’s a huge lift for us. But thank God, the majority of the work is behind us and we are gearing up for launch.

Youssef Squali, Analyst, Truist Securities: Great. That’s helpful. And then on the Oddity Labs front, can you just give us an update on commercialization of products there in 2025, both on existing SKUs, some more upgrading existing products, but also in terms of new products and molecule how you see that developing in terms of new products going forward and commercializing some of that molecule discovery in 2025?

Ron Holtzman, Co-Founder and CEO, Oddity: Yes. You know, like it’s still early with labs, not because we are not confident, just because we are building something really meaningful there in terms of infrastructure and processes. The good news is that you will see new products coming from lab for Brand three and Brand four, which is very short term. And in addition, we work very hard to build around, I want to say, more than 10 programs to launch more products from labs. That will take a bit more time because we want to ensure that we are not just launching for the sake of launching to make sure that we are launching for way higher efficacy than what exists in the market.

We are scaling the teams. We now have around 60 scientists there, building to 100. We’ve built a lot of infrastructure needed to make it high scale commercial engine for us, including systems, processes and controls. We are constantly partnering with other platform to help us accelerate target and heat discovery. In addition, we were working on biology delivery systems to optimize how different compounds can reach their target.

And as I mentioned, short term focus, Brand three, Brand four. Long term is way broader than that. And again, for competitive reason, we are not sharing what exactly we work on there. Lastly, we are constantly exploring M and A opportunities to strengthen OIT Labs capabilities and looking for strong teams with advanced technologies, all new discoveries that are aligned with our target space. I hope it’s helpful.

Youssef Squali, Analyst, Truist Securities: Thanks.

Conference Operator: Our next question is from Scott Schoenhaus with KeyBanc Capital Markets. Please proceed.

Cory Carpenter, Analyst, JPMorgan: Thanks team for taking my questions. My first one is on Brand three launch and the telehealth platform. Lindsay, I think you mentioned that gross margins would be a little bit compressed versus your legacy brands here. Is that related to sort of the healthcare providers, the dermatologists that you have access to that will weigh on the gross margins? Just kind of wanted to drill into the workflows of this telehealth platform and in dermatology.

Obviously, there’s a shortage of dermatologists and there’s a long wait time. So there’s a huge opportunity I feel like in this market segment for telehealth as well as diagnosis, and kind of want to work through the workflow platform with the telehealth versus the vision technology? Thanks.

Lindsey Druckerman, Global CFO, Oddity: Hey, Scott. Thanks. The gross margin comment is really specific to as we’ve talked about for Brand three, users will have access to both over the counter and prescription. The callout is really on the prescription side where there’s higher cost of goods associated with doctor networks, compounding pharmacies and that kind of thing. That being said, even with a lower gross margin profile, this is a business where we expect to have great frequency and repeat.

And so as for all of our brands, we demand a threshold of contribution margin, EBITDA margin and we’re really, really, really excited about the unit economic profile and financial model for Brand three.

Ron Holtzman, Co-Founder and CEO, Oddity: I would just add that we need the infrastructure for Doctol just for the RX part, which is going to be less than 50% of our offering, and everything is in place to meet our deadline for launch.

Cory Carpenter, Analyst, JPMorgan: Thanks. Oran, and my follow-up, you just actually talked about Oddity Labs and you talked about M and A. So interesting perspective here or question, how do you balance expanding your team at ODDI Labs organically versus M and A? I think you also mentioned you’re partnering for target optimization as well. Can you just dive into that more, Oren?

Thanks.

Ron Holtzman, Co-Founder and CEO, Oddity: Yes. So there is like a limitation of what we can do internally in terms of like I believe it’s a race and we need to move really fast and there is limitation of capacity and resources. And in order to make sure that we can double our power, we try to get help from others. And if we see something that is very promising for pharma, we reach out to them and we check if we can they can help us developing something with us for certain areas that we don’t have expertise in. And this is one example.

As for M and A, we acquired ReVela for the same reason and we’re constantly looking for strong teams, mostly in pharma because there is like in our industry it’s not that common. And if we see a strong TIM, we will not hesitate to acquire them. Thank you.

Conference Operator: Our next question is from Lorraine Hutchinson with Bank of America. Please proceed.

Lindsey Druckerman, Global CFO, Oddity: Can you talk about the product you’ve launched in 1Q at each of the brands? What you’re excited about? And then what’s in the pipeline for the next several months? Hi, Lorraine. Sure.

So, Arun talked about this a bit in his prepared remarks about how important product innovation has been for us as a way to continue to drive revenue repeat and convert our users who had never found what they were looking for into customers. So it’s important in order to drive that conversion from users to customers and then to convert customers into repeat customers. And we can see the benefit of that based on number one, just how much contribution we’re getting to the business today from new product innovation. So skin is a great example. There was no skin spoiled child.

There was no skin or a spoiled child until 2022 and you can see how large those businesses have become. And then you can also see with our AOV up 12% in the quarter and it was up nicely all year. We are getting in that instance a nice benefit from both the higher price points of those products, but also the fact that people are adding more items to order, more items to order because they’re finding more of what they want. It allows us to do better job of upsells, bundles and other things like that, which ultimately drives revenue. We do have some nice products in the pipeline, for that we tested.

We always before we launch anything, we do a lot of testing to make sure that we feel really good about the product’s ability to work. Of course, we’re always testing our products themselves, but even before the product efficacy, just understanding ad sets and funnels and that kind of stuff. And so we’ve had some nice products that were tested in 2024. We have one product I’ll highlight, IL MAKIAGE, which is our neck cream that’s going, it’s in Q1 twenty twenty five. Maybe I find that they target me often on my social platform, so maybe that’s a hint for me personally on what I need.

But also we have liquid magnesium, we have some eye creams and other items. So it’s about 5 for each brand this year for the full year across the year that will be that’s not even counting the really robust product set that we’ll be launching with Brand three.

Ron Holtzman, Co-Founder and CEO, Oddity: Like any other year, around five products from each brand have been launched.

Lindsey Druckerman, Global CFO, Oddity: Thank you.

Conference Operator: Our next question is from Lauren Lieberman with Barclays (LON:BARC). Please proceed.

Lindsey Druckerman, Global CFO, Oddity: Great. Thanks. Good morning, guys. I was curious to talk a little bit about the consumer environment. So obviously, I understand that you don’t have any exposure to traditional retail and some of the inventory destocking dynamics that are going on.

But you talk about how your consumer base is very broad across age cohorts, demographic cohorts, socioeconomic cohorts. And I was just curious if there’s anything you are seeing from the consumer environment because we hear a lot about the kind of cautious consumer, things not getting worse, but certainly not getting better, strength at the high end, but kind of everyone, let’s call it below $100,000 of income, household income kind of struggling. So it’s amazing how resilient your business has been. And so I was just curious if you could comment again on anything you’re seeing or not seeing from a consumer environment. And if you’re not seeing, why do you think that is?

Thanks. Thanks, Lauren. I guess I’ll take it. I mean, listen, we hear what other companies talk about. We certainly follow what our competitors are saying.

You know, as you’ve been covering this industry for a long time that beauty is a really resilient category, in and out of economic cycles. I suppose what’s different about beauty this cycle is just the secular channel shift. And I know for many of those all the companies that I listen to, even if their businesses were challenged, they every single one of them called out online as a bright spot. And you can see from our business how strong the performance is. And of course, it feels like Amazon (NASDAQ:AMZN) has hit a bit of a critical mass or a groove, where they’re getting more great brands, on their platform and you’re seeing that benefit.

So, I think it’s you rightly point out that we have a very broad demo, broad across ages, broad across income as far as we can see just based on the wide range of brands that people trade into us from. So from prestige beauty, to mass stage, to mass, there’s a lot of different customers that trade into us. And to us, it’s a reflection of the value that we deliver. What is it they say price is what you pay, value is what you get. A consumer is willing to pay significantly more for the same type of product because the product is great and because we’re delivering them something that they just cannot get outside of the Audity platform.

So I think we’re not necessarily the right place to look. We have a broad demo. We’re really tiny in the midst of a very, very large industry and we’re right at the center of all this sort of excellent secular growth without anybody really doing anything close to what we are.

Ron Holtzman, Co-Founder and CEO, Oddity: And I would just add one more thing like what we did have three or four years ago is the diversification of offering. Now we already have color, we have skin, we have hair, we have wellness with spoil child, we are explaining to dermopharma with their brand three. And I think it helps a lot like meeting our goals if some area is softer. But needless to say, as we mentioned that so far, we see very strong Q1.

Lindsey Druckerman, Global CFO, Oddity: Great. And if I can just sneak in one more, really small. I was just curious, cross selling between Spoiled Child and Il Makiage. Do you have any way of kind of quantifying that or what the crossover on the customer base is at this point? Yes.

At the beginning of a new brand, often you see a lot more cross selling, crossover I should say, of users from Il Maquillage that we then convert into customers for Spoiled Child. By the way, that was true for skin also initially for Il Maquillage Skin. We started off mostly with color on customers who then ultimately would convert to skin. But now as the brand scale, as well child has scaled and as Ilmaki Skin as another example has scaled, they stand on their own more. I think in general, we’ve talked about something like half of SpoilChild revenues, came from Ilmakiage users, not necessarily customers, but users.

So folks that had come through our Il Makiage platform, given us a bunch of information, taken a quiz, we learned about them, didn’t find what they were looking for, but then converted over into Spoiled Child in addition to Il Makiage customers who actually crossed over the two brands. Yes. Okay, awesome. Thank you so much.

Conference Operator: We have reached the end of our question and answer session. I would like to turn the conference back over to Eran for closing remarks.

Ron Holtzman, Co-Founder and CEO, Oddity: Thank you very much guys. See you next quarter.

Conference Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.