Oddity Tech .(ODD) - 2025 Q4 - Earnings Call Transcript

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]