Oddity Tech .(ODD) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, the company achieved a revenue growth of 27% to $647 million and delivered adjusted EBITDA of$ 150 million at a margin of 23.3%, representing a 40% year-over-year increase in adjusted EBITDA [7][8] - The company generated $134 million of free cash flow, converting over 130% of net income into cash, and maintained strong momentum with revenue growth of 27% in Q4 [8][56] - The gross margin expanded to 72.7%, up 330 basis points year-over-year, exceeding guidance of 68% [53] Business Line Data and Key Metrics Changes - Both brands, Il Makiage and Spoiled Child, experienced double-digit revenue growth in 2024, with Il Makiage surpassing$ 500 million in revenue and Spoiled Child reaching $150 million [9][10] - The repeat sales metric increased significantly, with repeat revenue accounting for over 60% of total business revenue in 2024, up from less than 50% in previous years [12][82] Market Data and Key Metrics Changes - The company noted a shift towards online sales, which is expected to continue growing, with the belief that online penetration could double from current levels [14][77] - The company is strategically expanding its international presence, particularly in markets like the UK, Germany, and Australia, with positive early indications [25][26] Company Strategy and Development Direction - The company is focused on investing in growth areas such as Oddity Labs, new brands, and AI technologies to drive future growth [7][24] - The launch of brand three, a telehealth platform, is set for the second half of 2025, targeting medical-grade skin and body issues [28][100] - The company aims to leverage its direct-to-consumer model to maintain a competitive edge, avoiding excess inventory issues faced by wholesale brands [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to perform well despite macroeconomic challenges, citing strong repeat sales and a resilient business model [72][140] - The outlook for 2025 includes a commitment to achieving 20% revenue growth and a 20% adjusted EBITDA margin, despite planned investments in growth initiatives [59][60] Other Important Information - The company repurchased 3.6 million shares for approximately$ 147 million during 2024, with $103 million remaining on its buyback authorization [57][58] - The company exited 2024 with$ 169 million in cash equivalents and investments, maintaining a zero-debt position [58] Q&A Session Summary Question: Can you elaborate on your international strategy and why now? - Management indicated that the decision to accelerate international growth is strategic, focusing on smaller markets to spread growth effectively [71] Question: Are you seeing any weakness in consumer spending due to macro concerns? - Management noted that the shift to online sales is a significant factor, and they are not experiencing the same promotional pressures as competitors [75] Question: Can you provide insights on repeat purchases and growth from Il Makiage? - Management reported that repeat purchases account for over 60% of revenue, with a twelve-month net revenue repeat rate exceeding 100% [82] Question: What are the key milestones for brand three? - Management highlighted that brand three is set to launch with a focus on skin and body issues, with significant investments made to ensure a successful rollout [96][100] Question: How do you balance organic growth versus M&A for Oddity Labs? - Management stated that they are open to M&A opportunities to enhance capabilities, particularly in pharma, while also expanding their internal team [123]