Financial Data and Key Metrics Changes - ODDITY reported a record revenue of $810 million for 2025, representing a 25% increase year-over-year [4][21] - Adjusted EBITDA reached $163 million, with an adjusted EBITDA margin of 20.2%, consistent with long-term targets [21] - The company experienced a gross margin of 72.7%, which expanded by 30 basis points year-over-year [21] - Advertising costs increased approximately 50% year-over-year, impacting profitability [21] Business Line Data and Key Metrics Changes - IL MAKIAGE generated approximately $560 million in revenue, with low double-digit growth, and IL MAKIAGE SKIN accounted for about 40% of brand revenue [6][7] - SpoiledChild achieved revenue of approximately $250 million, marking strong growth for a brand launched only four years ago [7] - METHODIQ, the newly launched brand, is positioned in the medical-grade space and is off to a promising start [8] Market Data and Key Metrics Changes - ODDITY's international revenue grew by 42%, representing 17.5% of overall net revenue for 2025 [7] - The company noted that many competitors generate over 65% of their net sales from international markets, indicating a potential growth opportunity for ODDITY [7] Company Strategy and Development Direction - ODDITY is focused on leveraging its platform, brand, and technology to drive growth in the beauty and wellness categories [5] - The company is committed to investing in ODDITY Labs and new product development, maintaining a long-term growth strategy despite short-term challenges [9][25] - The management emphasized that the current user acquisition cost issues are technical and not indicative of a structural problem in the business model [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged unprecedented increases in user acquisition costs due to algorithm changes from a major advertising partner, impacting new user acquisition efficiency [12][13] - Despite these challenges, management remains confident in the company's ability to return to growth and does not plan to change its long-term strategy [17][25] - The company expects a negative impact on 2026 financial results, particularly in the first half, but anticipates normalization in the second half of the year [23][24] Other Important Information - ODDITY ended the year with a strong liquidity position, holding $776 million in cash and cash equivalents [22] - The company plans to opportunistically return cash to shareholders through stock buybacks [22] Q&A Session Summary Question: Inquiry about LTV change and its relation to Google's Andromeda - Management observed the issue starting in the second half of 2025, worsening into 2026, and is working on solutions while maintaining the try before you buy model [28][29][30] Question: Concerns about guidance and user acquisition shifts - Management confirmed no change in strategy, emphasizing confidence in online growth and the temporary nature of current challenges [34][35][36] Question: Discussion on advertising spend strategy post-normalization - Management intends to balance advertising spend to maintain algorithm signals while avoiding overspending at high CPA levels [41][43] Question: Clarification on changes within the acquisition funnel - Management noted that the dislocation affects multiple brands and is working on adjustments to improve performance [51][52][54] Question: Impact of dislocation on METHODIQ launch - The launch of METHODIQ is expected to continue growing without significant negative effects due to its smaller scale compared to other brands [68]

Core Insights - The online skincare market in China is transitioning from a "traffic-driven" model to a "value-driven" approach, with a market size exceeding 190 billion yuan and a year-on-year growth of nearly 10% from January to September 2025 [1][16]. Market Overview - The overall sales in the skincare market are steadily increasing, with a total sales figure of 190.8 billion yuan (+9.3%) and a volume of 1.62 billion units (+0.6%) during the specified period [15][16]. - Despite the growth in sales, the volume of skincare discussions on social media has slightly decreased, indicating a shift from generalized discussions to more specialized and refined consumer needs [2][16]. Consumer Focus - Ingredients and efficacy remain the core selling points for skincare products, with Chinese consumers showing significantly higher attention to these aspects compared to overseas markets [2][17]. - The competition among brands is increasingly centered on ingredient research and efficacy validation, as traditional marketing strategies are becoming less effective [2]. Brand Landscape - The market is witnessing a stable head brand landscape, with domestic brands performing well. The top ten brands have only seen a slight increase in market share, while mid-tier brands (ranked 11-20) have achieved over 20% sales growth, indicating strong growth potential [3][18]. - Notably, Douyin has emerged as a key growth engine for many high-growth brands, with most of them pricing their products between 100 to 200 yuan [3][21]. New Product Strategies - The logic behind new product launches has fundamentally changed, with a decline of over 10% in the number of new products registered in 2025. However, the average price of launched new products has significantly increased, indicating a shift towards fewer, more specialized, and higher-value core products [4][21]. - Interest e-commerce platforms like Douyin are becoming crucial for product launches and market testing, while traditional e-commerce platforms focus on long-term brand value and stable sales of classic high-priced products [4]. Ingredient Trends - The ingredient landscape is evolving with diverse trends, including the maturation of "acid" skincare concepts and the cross-border migration of high-growth ingredients from oral beauty to skincare markets [5]. - "Food-grade" ingredients are gaining attention due to their natural and safe perception, although they currently dominate basic product categories [5]. - Traditional Chinese herbal ingredients are becoming popular in high-end anti-aging and repair products, helping brands establish differentiated images [5]. Protein Ingredients - Protein-related ingredients such as hexapeptide and collagen are closely associated with anti-aging effects, with hexapeptide seeing significant growth driven by leading domestic brands [6]. - The market for collagen is relatively fragmented, while the restructured collagen segment shows higher market concentration [6]. Conclusion - The online skincare market is entering a phase of deep value competition, driven by precise responses to consumer core needs through ingredient innovation, efficacy focus, and product refinement. Brands that can continuously delve into core technologies and express differentiated value while flexibly utilizing channel strategies are likely to achieve sustained growth in an increasingly rational and professional market [6].

Investment Rating - The report rates the industry as "Overweight," indicating a positive outlook for the sector compared to the overall market performance [2][14]. Core Insights - The South Korean beauty market has undergone several phases of growth and decline, providing valuable lessons for domestic brands. The report outlines four significant cycles of growth and recession in the industry, highlighting the importance of strategic adjustments in response to market changes [4]. - The current phase (around 2023) marks a new growth opportunity as the industry diversifies its export strategies and reduces reliance on the Chinese market, thus revitalizing growth [4][5]. - The report emphasizes the stark contrast in stock performance between traditional beauty giants and emerging brands, with companies like APR and Silicon2 showing significant growth in overseas markets [5][6]. Summary by Sections Industry Development Phases - The first phase (1980-1999) saw initial growth followed by a recession due to economic downturns, with foreign brands dominating the market [4]. - The second phase (2000-2009) experienced recovery with the rise of affordable brands like Etude House, leading to market expansion [4]. - The third phase (2010-2019) was characterized by a boom driven by Chinese tourists, but later faced decline as visitor numbers fluctuated [4]. - The fourth phase (2023 onwards) focuses on global market expansion and strategic diversification to mitigate risks associated with reliance on China [4]. Stock Performance Analysis - Traditional giants like Amorepacific and LG Household & Health Care have seen stock price pressures due to slowing demand from China and the rise of local brands [5]. - In contrast, emerging brands such as APR and Silicon2 have thrived, with APR's market value surpassing that of traditional players by 2025 [5]. Innovation and Market Trends - South Korea leads in product innovation, particularly in formulations and packaging, such as cushion compacts and advanced skincare ingredients [6]. - The integration of medical aesthetics with beauty products is highlighted as a key trend, enhancing consumer experience and driving industry growth [6]. Investment Recommendations - The report recommends several companies for investment based on their market positioning and growth potential, including brands with strong channel and brand matrices like Shiseido and Proya, as well as those with promising product pipelines like Aimeike [7][8].