Oddity's Q4 Earnings Beat Estimates, Margin Remains Under Pressure

Core Insights - Oddity Tech Ltd. (ODD) reported fourth-quarter 2025 results with revenues and earnings exceeding Zacks Consensus Estimates, showing year-over-year revenue growth while earnings remained flat compared to the previous year [1][4] Financial Performance - ODD's quarterly earnings were $0.20 per share, surpassing the Zacks Consensus Estimate of $0.14 per share and exceeding the guided range of $0.11 to $0.13 [4] - The company's net revenues reached $152.7 million, a 23.5% increase from $123.6 million year-over-year, and also beat the Zacks Consensus Estimate of $151 million [5] - Gross profit increased by 20% year-over-year to $108 million, with a gross margin of 70.5%, down 220 basis points from 72.7% [6] - Selling, general and administrative expenses rose to $106 million, a 23.4% increase year-over-year [7] - Adjusted EBITDA declined 17.4% year-over-year to $12.5 million, although it was above the expected range of $10 million to $12 million [7] Cost and Margin Analysis - The adjusted EBITDA margin fell to 8.2%, down 410 basis points year-over-year, primarily due to planned investments for future growth [8] - The company is managing costs actively to offset EBITDA pressure while continuing to invest in growth initiatives [16] Customer Acquisition and Future Outlook - A significant increase in customer acquisition costs, driven by algorithm changes at a major advertising partner, has led to concerns about profitability and revenue decline, with expectations of a 30% sales drop in Q1 2026 [2][11] - The company has withdrawn its full-year guidance for 2026 due to uncertainty regarding the normalization of customer acquisition costs [15] - ODD anticipates that the first half of 2026 will experience the most significant financial impact, with hopes for improvement in the second half [15] Financial Health - ODD ended 2025 with a strong liquidity position, holding $776 million in cash and investments, bolstered by a successful exchangeable note offering and free cash generation of $84 million [9] - The company amended its credit facilities in January 2026 to expand borrowing capacity to $350 million, which remains undrawn [10] Shareholder Returns - ODD plans to return cash to shareholders through stock repurchases, with $103 million remaining under its $150 million repurchase authorization [12]