ODDITY Tech Q2 2025 Earnings Report

ODDITY Tech EPS Results

• Actual EPS: $0.92
• Consensus EPS: $0.88
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $0.82

ODDITY Tech Revenue Results

• Actual Revenue: $241.14 million
• Expected Revenue: $237.44 million
• Beat/Miss: Beat by +$3.70 million
• YoY Revenue Growth: +25.10%

ODDITY Tech Announcement Details

• Quarter: Q2 2025
• Date: 8/4/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:30AM ET

ODDITY Tech (NASDAQ:ODD) operates as a consumer tech company that builds digital-first brands for the beauty and wellness industries in the United States and internationally. It serves consumers worldwide through its AI-driven online platform, which uses data science, machine learning, and computer vision capabilities to identify consumer needs, and develop solutions in the form of beauty and wellness products. The company sells beauty, hair, and skin products under the IL MAKIAGE and SpoiledChild brands. In addition, it operates ODDITY LABS, a biotechnology center, which develops various ingredients, including novel molecules, probiotics, and peptides for beauty and wellness products. Oddity Tech Ltd. was incorporated in 2013 and is headquartered in Tel Aviv, Israel.

ODDITY Tech Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Auditia beat its Q2 revenue, profit and EPS targets for the ninth consecutive quarter, delivering 25% year-over-year net revenue growth to $241 million and generating $122 million in adjusted EBITDA and $99 million in free cash flow in the first half of 2025.
• Positive Sentiment: Existing brands remain key growth drivers, with Il Makiage on track for $1 billion revenue by 2028 and Spoiled Child poised to surpass $200 million in 2025, while online and international expansion accelerate performance.
• Positive Sentiment: Auditia is on schedule to launch Brand 3 in Q4 2025, its first medical-grade teledermatology offering featuring personalized OTC and prescription products, a mobile compliance app, and custom treatment cohorts backed by Auditia Labs R&D.
• Negative Sentiment: New US tariffs are expected to reduce gross margins by under 100 bps in 2025 and remain a manageable headwind in 2026, introducing modest cost pressure.
• Positive Sentiment: Liquidity was strengthened with a $600 million zero-coupon exchangeable note, ending Q2 with $815 million in cash and investments plus $200 million in undrawn credit, and maintaining over 80% free cash flow conversion.

Presentation

[Operator]

Good morning, and welcome to Auditia's Second Quarter twenty twenty five Earnings Conference Call. Today's call is being recorded, and we have allocated time for prepared remarks and Q and A. At this time, I'd like to turn the conference over to Maria Likuris, Investor Relations for Auditi. Thank you. You may begin.

[Maria Lycouris, Investor Relations at Oddity Tech]

Thank you, operator. I'm joined by Ron Holtzman, Auditi's Co Founder and CEO and Lindsay Druckerman, Auditi's Global CFO. Niv Price, Audity's CTO, will also be available for the question and answer session. 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.

[Maria Lycouris, Investor Relations at Oddity Tech]

Forward looking statements involve risks and uncertainties, and actual results could differ materially due to a variety of factors. These factors are described in our 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 on 02/25/2025. 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 included in our earnings press release, which we issued yesterday. I'll now hand the call over to Aron.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Thanks, everyone, for joining us today. OIBDA's momentum in 2025 continues with another strong result this quarter and great progress on our long term growth initiatives. Our financial performance year to date is another proof point of our success. For the 2025, we grew revenue of 26% to $5.00 $9,000,000 generated adjusted EBITDA of $122,000,000 and free cash flow of $99,000,000 This is more EBITDA and more free cash flow in the first half of the year than we delivered for the entire full year of 2023, the year of our IPO. In Q2, we once again beat our financial targets on revenue, profit and earnings per share as we have every quarter for the ninth quarter since our IPO.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

We have a business at ODT to become one of the biggest beauty companies in the world and to lead this huge profitable and underserved market. And we are moving at high speed towards this goal. In just seven years since launching our first beauty brand in The U. S, ODT has transformed into a platform of soon to be three brands spanning four categories and six close markets. We have done from pure makeup to dense skin and hair, and now offering medical grade prescriptions and OTC products with our upcoming launch of Brand three.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And just as we unlock beauty online, we are now turning our sights to healthcare, another huge market where the consumer is unhappy and the opportunity is massive. I will share more on our plans for brand three in a moment. Every year we push our teams to innovate, to extend our capabilities, and grow the reach of our business. And you can see based on the results that we are doing a good job so far. It starts with the fact that we operate in a healthy attractive market, huge in size, where technology can drive big improvements for consumer, and where the unit economics are strong.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And it continues to our deliberate focus on the most attractive and durable vectors of growth. First, the expansion of online, which we expect will grow to be the largest channel in our industry. The investments we made years ago in data and technology allow us to be a leading direct to consumer company in beauty today. And we continue to invest in technology to strengthen our future. Second, consumer demand for high efficacy products.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

On that front, we are making big investments in pharma grade technology at Oilti Labs to discover breakthrough molecules and delivery systems. Beyond the sheer magnitude of our growth this year is the quality of that growth. It comes alongside strong profitability and cash flow, and it's fueled by each of our growth pillars. This includes double digit online growth in both in my care and spoiled child, generating growth both in The U. S.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And international, and scaling our skin portfolio, which remains on track to approach 40% of in my care's revenue this year. These drivers taking altogether allow us to sustain market share gains and outperform our competitors. The excellent first half financial performance we delivered this year set the stage for a strong finish to 2025. As we have discussed, the second half of the year is highly driven by our large backlog of repeat, where we have good visibility. Therefore, it is customary for us at this time of the year, our teams have pivoted their focus into 2026.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

We are once again preparing, testing and iterating our incremental growth drivers for another strong year. While many of our teams work hard on 2026, the biggest focus for me and my sister are long term initiatives that will allow us to continue compounding for the decades to come. This includes investments in technology, new brands and Audit Labs. So let's dive deeper into our multiyear growth drivers. The first is growing our existing brands.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Ilmakkiage remains on track to reach $1,000,000,000 revenue in 2028. International continued to be a highlight for us as we put increased focus on scaling this big opportunity, even as we continue to grow in The U. S. International represented 15% of OTT business in 2024, driven by Ilmakiage, but for our competitors, it is closer to 70 of their business. In addition, we continue to win with Ilmakiage Skin, which as I mentioned, is expected to approach 40% of Ilmakiage revenue this year with more growth ahead.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

SportsCel is also having great year so far in 2025 with more runway ahead. The brand remains on track to cross $200,000,000 of revenue this year after launching only three years ago in 2022. Our second key growth driver is new brand launches, and we are on schedule to launch Brand three this year and Brand four next year. Brand three will mark our first entrance into the medical grade space, starting in dermatology and giving our users access to OTC and prescription products. This unlocks an entirely new market for OTT.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

The third growth driver is Oilti Labs, where we are working to create the world's highest efficacy products by bringing real science at high scale to our industry, and discover game changing molecules, ingredients and delivery systems. We continue to make progress building the team, the processes and the partnerships to achieve our goals. We have some proprietary molecules in development for brands three and four for near term rollout, while we are developing molecules and delivery systems for the long term with big potential. Turning now to more details on brand three, where we remain on track for our formal launch in Q4 of this year. Just as we use technology and the right to consumer model to transform beauty, we are turning our sights with brand three on healthcare.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Our goal is to help users solving their medical problems with minimal hassle and treatment alterations. Diagnosis, treatment matching, and tracking all online without going to doctor office and pharmacy. We are starting with dermatology and planning new expansion categories for the future. Dermatology is an attractive starting point for us. First, it's large with huge reach.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Around fifty million Americans are impacted by acne, around thirty million from eczema. These consumers were unhappy and underserved with attractive potential LTVs. And many of these consumers are already in our user base, which makes it a natural place for us to start. Around fifty percent of our sixty million plus users report suffering from skin issues like acne, eczema, and dark spots. And second, dermatology is an area with market failure that we believe our technology can fix.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Our data shows that consumers are unhappy with current solutions. Drugstores offer generalized low efficacy products that don't solve their issues. Dermatologists are a tough to access, high friction experience. It costs $300 for a dermatologist visit before even paying for the treatment itself. And the entire process is inconvenient.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Going to a dermatologist takes two hours of person's time on average. Over two thirds of American counties don't have a practicing dermatologist at all. Online is a huge opportunity, yet no one has done it in the right way in our view. So we are taking on the category written online model an entirely new playbook. When determining our strategy, we always start from the first principles on how to win the category rather than coping others.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Our direct relationship with consumers gives us better understanding into the problems they face, and an edge in finding solutions. As one example, we are investing in personalization to make it a big differentiator between us and our competitors. I will walk you through on how it comes together in the acne category. It starts with the product offering itself. Each consumer has unique problems and preferences.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Some have mild acne, others struggle with inflammatory papules and pustules, deep cystic acne or monal breakouts, or persistent truncal acne on their chest and back. Many of our competitors get this wrong, and offer most customers the same treatment. By contrast, we have 20 plus user cohorts with unique treatment recommendations. This customized offering shows a 50% improvement in the amount of satisfied testers compared to tretinoin alone based on internal work we have done. Next is our online experience, where we pair advanced computer vision technology with doctor developed protocols to deliver highly efficacious tailored treatments.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And finally, in coaching to ensure high compliance to our mobile progress tracking app, where users stay consistently supported and on track with personalized guidance, photo based progress monitoring, and dynamic treatment adjustments tailored to their evolving needs. Overall, we are introducing innovation and access that we believe dermatology hasn't seen in decades. It is a huge benefit to consumers, and we believe it will transform the category. We will have more to report on BRAND-three after we officially launch later this year. Before handing over to Lindsay, I want to take a moment to reflect on our two year anniversary as a public company.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

We are proud of our long term partnerships we have made with investors since our IPO. They are built on the trust that comes with consistently executing our plans no matter the market backdrop. As the founder, CEO and the largest shareholder of the company, the single most important thing for me is delivering on our promises to our shareholders. With that, I will turn it over to Lindsay.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Thanks, Aran. Let's turn to our second quarter results, which I'll refer to on an adjusted basis. You can find the full reconciliation to GAAP in our press release. Q2 was another strong quarter for us, capping off a great first half of the year, which is our most critical moment for user acquisition. These results set us up for another record breaking year in 2025.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We grew net revenue by 25% in the second quarter to $241,000,000 This exceeded our guidance for revenue growth of between 2224%. The strength was driven by double digit online growth at both Ile Macchiage and Spoiled Child. Net revenue growth was driven by an increase in orders, while average order value was down around 1%. Average order value was impacted by mix, including faster growth in international markets and an increase in the mix of repeat sales, both of which carry lower AOV. A bit more color on international.

[Lindsay Drucker Mann, CFO at Oddity Tech]

As Aran mentioned, our sales outside The United States represented around fifteen percent four net revenue. This is driven by Il Makiage where we have operations in The UK, Germany, Canada, Australia and Israel. We also conduct tests in prospective new countries and the revenue from these test markets flows through our P and L. On our Q4 twenty twenty four call, we discussed our plans to increase focus on Ile MacIage International. This has meant greater prioritization from our teams as well as increased acquisition spend.

[Lindsay Drucker Mann, CFO at Oddity Tech]

The strategic rationale for our increased focus is straightforward. International is a meaningful revenue opportunity for us with great unit economics and a key driver in building Ile Macchiage into a $1,000,000,000 revenue brand. The demand drivers for Beauty Online are similar overseas to what we see in The U. S. Market today.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Our technology platform works well in these countries. In fact, for markets like The UK and Australia, where we're already operating, we believe Il Makiage is already the number one or number two largest online beauty brand. And we can see from incumbents that there is a huge potential for us. As Aron mentioned, they generate around 70% of revenue internationally versus our 15%. Results from our international push have been very strong, both in existing markets and prospective markets like France.

[Lindsay Drucker Mann, CFO at Oddity Tech]

More from us in international to come. Back in The U. S, Ile Macchiage remains strong, continues to grow, and we expect more growth in the future. Moving down the P and L, gross margin of 72.3% expanded 10 basis points year over year and exceeded our guidance of 70.5%. The delta versus our outlook was driven in part by better mix.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We did see some initial flow through of tariffs this quarter, which as expected were small. Based on the information we have today, we continue to expect that tariffs will be less than 100 basis point headwind to our gross margin this year and will be a similarly manageable headwind in 2026. We delivered adjusted EBITDA of $70,000,000 in the quarter, above our guidance of 65,000,000 to $68,000,000 Adjusted EBITDA margin of 28.8% compressed by around three fifty basis points, driven by planned growth investments. We remain focused on reinvesting in our business to support our long term growth initiatives, including Brand three, Brand four, Oddity Labs and our technology innovation. We delivered adjusted diluted earnings per share of $0.92 compared to our guidance of between $0.85 and $0.89 Our adjusted EBITDA and EPS excludes approximately $10,000,000 of share based compensation.

[Lindsay Drucker Mann, CFO at Oddity Tech]

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 $99,000,000 of free cash flow in the first six months of twenty twenty five, converting more than 80% of our adjusted EBITDA into free cash. During the quarter, we issued our first ever convert as an exchangeable note through a U. S. Subsidiary.

[Lindsay Drucker Mann, CFO at Oddity Tech]

The transaction was upsized on strong demand to $600,000,000 inclusive of the greenshoe. The note is zero coupon with a five year maturity, and we purchased a cap call at a cost of 10.5% of the offering size that limits dilution until the stock price approximately doubles. This offering allowed us to significantly increase our cash position, and we finished the quarter with $815,000,000 of cash, cash equivalents and investments on our balance sheet with an additional $200,000,000 available on our undrawn credit facilities. Our capital allocation strategy continues to be patient and opportunistic. As a reminder, our capital priorities are number one, reinvesting in the business number two, M and A and number three, opportunistic buybacks.

[Lindsay Drucker Mann, CFO at Oddity Tech]

On that front, we have $103,000,000 remaining on our buyback authorization with no share repurchases year to date. Turning to our outlook for 2025. With our strong first half behind us and the high visibility we have to our backlog of repeat sales for the rest of 2025, we are on track for another outstanding year, better than our long term algorithm of 20% revenue growth with 20% adjusted EBITDA margin. We now expect full year 2025 net revenue will be between $799,000,000 and $8.00 $4,000,000 representing around 23% to 24% year over year growth. We expect gross margin will be 71%, which includes the full impact of tariffs expected in 2025 based on the information we have today.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Adjusted EBITDA is expected to be between 160,000,000 and $162,000,000 and we expect adjusted diluted EPS of between $2.6 and $2.9 assuming no share buybacks in 2025. For Brand three, we're focused on a successful launch and are on track to hit our Q4 official timing. As a reminder, there is no revenue contribution from Brand three baked into our 2025 outlook, and we are not reliant on the brand to achieve our revenue objectives this year or next year for that matter. Turning to 2026, it's too early to issue formal guidance at this stage. Based on what we know today, we expect 2026 financial performance will be in line with our long term earnings algorithm of 20% revenue growth with a 20% adjusted EBITDA margin.

[Lindsay Drucker Mann, CFO at Oddity Tech]

A note for your models, we plan to front load our investments in the 2026, which could equate to a 700 basis point drag on first half EBITDA margin next year with most of the impact weighted to the first quarter. This planned spending should be offset by a margin benefit from lower relative spending in the second half of the year. All of this results in neutral impact to adjusted EBITDA margin in 2026, which again is expected to land at 20% consistent with our long term algorithm. Turning to the third quarter outlook. We're off to a good start with momentum following through from the second quarter.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We expect year over year net revenue growth in the quarter to be between 2123%. You can find more details on our Q3 outlook in our press release. And with that, I'll turn the call back to the operator for questions.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two.

[Operator]

If you are using a speakerphone, please lift the handset before pressing any keys. Please note that each person are only limited to one question and one follow-up. One moment please for our first question. Our first question comes from Youssef Squali of Truist Securities. Please go ahead.

[Youssef Squali, MD & Head of Internet and Digital Media Research Group at Truist Securities]

Great. Thank you, guys, and congrats on that solid quarter. So maybe just at a high level, maybe on the gross margin for Q3, Lindsay, the guide, you came in slightly below consensus expectations. Can we be impacted that a little bit? What's driving sequential compression there?

[Youssef Squali, MD & Head of Internet and Digital Media Research Group at Truist Securities]

Is it volume mix investments associated with brand three, etcetera? And just to clarify in your prepared remarks, I think you just said something to the effect that the 20% you believe you can grow 20% next year even without any contribution from Brand three. Can just confirm that? Thank you so much.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Yes. Thanks for the question, Youssef. So on gross margin, as you know, this is not a metric that our teams manage to, they manage to DC margin, which is contribution margin, it's gross margin after media spend. And we have a pretty decent range of gross margin profiles across products that the teams are selling, which they're not managing to, they're only managing to contribution. And as a result, when we issue guidance, we do it in such a way that we give the teams a lot of flexibility to go after whatever it is that makes the right sense from an LTV perspective.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We've also, as you know, since you've been covering us since our IPO, we've over delivered on that metric consistently every quarter as a result of wanting to embed enough conservatism to give the flexibility and not be in a position to disappoint the Street. That being said, we do have a little bit of seasonality in our gross margin in the back half of the year. We're much more of a repeat business as you know that tends to have a bit more a bit lower gross margin profile. And also because the revenue dollars themselves are smaller in Q3 and Q4, we don't get as much leverage on the fixed part of our COGS. So sequentially you do see a little bit of that in the back half.

[Lindsay Drucker Mann, CFO at Oddity Tech]

There's nothing else to make of it. From a business perspective, in Q2 gross margin behavior was flattish year over year. We had some puts and takes. We had some higher supply chain expenses that were offset by lower supply chain expenses to end up with a pretty flattish outcome that we were happy with as it exceeded our guidance for the quarter. The next question was on Brand three contribution, that's correct.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We don't need Brand three for our 2025 outlook and we don't need it for our 2026 outlook. We're obviously doing everything in control to make sure Brand three is an unbelievable success and we believe that it will be. But we have plenty of growth remaining in both Il Makiage and Spoiled Child. Il Makiage is still on track to achieve $1,000,000,000 of revenue in 2028 as Aron mentioned in his remarks. Spoiled Child is having an unbelievable year as well that will cross $200,000,000 of revenue this year.

[Lindsay Drucker Mann, CFO at Oddity Tech]

So we don't need our new brands because we have a lot of growth left in our existing brands. Anything that we deliver is incremental. That being said, our commitment is 20% revenue growth and 20% adjusted EBITDA margin. So if we got more from Brand three, we wouldn't be changing our guidance.

[Youssef Squali, MD & Head of Internet and Digital Media Research Group at Truist Securities]

Got it. Okay. Thank you. That's helpful.

[Operator]

Thank you so much. Next question from Lauren Lieberman of Barclays. Please go ahead.

[Lauren Lieberman, Managing Director at Barclays]

Good morning. Two questions. One was just a follow-up, Lindsay, on the end of your answer to that last question, that you wouldn't up your guidance or commitments if Bransbury comes through strongly and will be incremental. Should we take that as to mean that you'll kind of pull back and constrain the growth on Ilmakiage and Spoiled Child to try to manage the business in 'twenty six and beyond to something as close to that 20% as possible? Because I know that to some extent, way we're on talks about the businesses, we want long term, predictable, very strong growth. And some of that is about managing the pace of growth. I just wanted to understand how to think about that for '26 and beyond as Brand three comes in as incremental. And then the other thing, which is just shorter term, I think previously you talked about a soft launch for GRAND three in the third quarter, and now it's just, you know, full committed launch in Q4.

[Lauren Lieberman, Managing Director at Barclays]

Is there any soft launch activity in Q3? And if that's a shift in the launch plan, how come? Thanks.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Yeah, I'll take it Lindsay, and then if you have something, please do. First of all, regarding BREND-three, and the reason that we said it's not baked in, it's already baked in 2026, is that even if Brand three is as successful as spoiled child, by the way, was the biggest, the best launch of all time based on our knowledge to D2C, see 25,000,000 and it's not material. And therefore we didn't take it into account when building our next year algorithm. But it doesn't mean that we are not bullish. We are very bullish on brand three.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

We are working with for the past almost four years. As for a soft launch, soft launch for us, it's a lot of trial runs at smaller scale, smaller acquisition spend to drive some traffic for testing. It's a way for us to identify issues that need to be solved and do a lot of applications. Therefore we will start doing some tests in Q3, and official launch is where we begin spending real dollars, both on brand and user acquisition. We are planning to make a big push in Q4 and in Q1 next year.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

So it means more investments, and this is part of the reason that Lindsay was referring to in H1 next year around margins.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Hey Lauren, just to follow-up on the final part of your one of your questions, which was about will you constrain? And the answer is that, yes, we constrain all the time. We have the ability to grow faster than the actual numbers that we deliver. And our approach is to make sure that every single year we can compound a 20% revenue growth with 20% adjusted EBITDA margins for many, many years to come as opposed to pulling any of that growth forward when we don't need it. So the right way to think about your models as you build in the out year is that we will have many, many levers of growth, we'll consistently deliver on that algorithm and that you can feel confident in our ability to sustain that growth and compound in the future.

[Lauren Lieberman, Managing Director at Barclays]

Great. Thanks so much.

[Operator]

Thank you. Our next question comes from Anna Lezuk of Bank of America. Please go ahead.

[Anna Lizzul, VP - Equity Research at Bank of America Merrill Lynch]

Hi, good morning, and thank you so much for the question. I was wondering if you could just elaborate a bit more on your investment in the business here with the launch of Brand three later this year and then Brand four next year. And then when do you expect we'll start seeing some returns here on just the investments with those launches? Thank you.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Sure. Lindsay, I'll start. We continue to invest a lot of our margin dollars in the future. And going back to the previous question, there is no reason in my view to deliver higher margin than 20%, especially when we believe those investments could be massive unlocks for the business performance and for the growth in the future. And when we think about investments, there are mainly three pillars.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Number one is new brands, brand three, brand four, each has its own team. Many years already spending a lot of money and a lot of time on building those brands. Number two is OIT Labs, which we continue to build. We have around 70 scientists there in Boston. We continue to invest a lot in infrastructure and building this machine.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Unless this technology continues to be the largest team in the company, we acquired a small company this year, we expand the team, and we believe this is the right thing to do. As for like, what about the future? Like in my point of view, we invested $25,000,000 or $20,000,000 in this polished child, and today, three years later, it's $200,000,000 of revenue and very, very healthy margin. So I hope that we'll continue to invest in this space and we will see the margins and the growth coming.

[Anna Lizzul, VP - Equity Research at Bank of America Merrill Lynch]

Great, thanks so much.

[Operator]

Thank you so much. Our next question comes from Andrew Boone of Citizens. Please go ahead.

[Andrew Boone, Managing Director at Citizens JMP]

Thanks so much for taking the questions. I wanted to ask about international and just the drivers of growth going forward there. Can you guys just talk about whether that includes new markets, deeper penetration or anything else we should be thinking about as we think through the international opportunity? And then, Lindsay, I want to go back to just a reoccurring theme of just repeat rates. Is there anything you guys can share either on cohorts, repeat rates to help us better understand how kind of the existing customers are progressing on the platform? Thanks so much.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Sure. I'll take the international piece. International is an area we're super excited about. This is part of the business we've been, as you guys know, laying the foundation for years now, preparing the markets and getting them ready. And now as of we talked to you guys on the Q4 call that we were taking a step forward to move this like even further down the field in terms of executing on those markets.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Very happy with our first half performance. This is a business that could easily be as large as our U. S. Business. As you know, for our competitors, it's something like 70% of their business comes from international markets.

[Lindsay Drucker Mann, CFO at Oddity Tech]

And everything that we see is that the markets behave very similarly outside The U. S. To what we have already accomplished in The U. S. But just to give you put a little bit of numbers around it, in the first half sales outside The U.

[Lindsay Drucker Mann, CFO at Oddity Tech]

S. Grew over 40%, that's around $85,000,000 Of that $85,000,000 75,000,000 were markets that were already established in, so for example, UK, Australia. But we have around $10,000,000 from these new kind of testing markets where we see a lot of potential. I say all this just to illustrate how much runway there is. So for emerging markets for us, or I should say prospective markets for us like France, Italy, Spain, where the metrics are really positive, it's nice the teams have been in preparation mode to finally actually be executing on it.

[Lindsay Drucker Mann, CFO at Oddity Tech]

We're still very early stages, there's still a lot of runway, but it's been fun to see that take shape this year. And as we look into 2026, we have even more going on. In terms of what that's involved, of course, it's been more spend, more actual user acquisition activity in those markets, ad sets, creative, all that kind of stuff, but it's also been a lot of focus on the teams, physical Because

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

we don't have users there and we still don't have repeats, therefore it's more costly for us at the beginning.

[Lindsay Drucker Mann, CFO at Oddity Tech]

Yeah, but also focus from the teams, availability of products, technology products, funnels, all those things. So putting those in place, generating a really nice return on them and executing on that market. In terms of your next question was on repeat, repeat remains very strong for us. Repeat continues to increase as a percentage of the business year over year. And as we look at our twelve month repeat cohorts, those remain very strong over 100% and performing well for both brands.

[Andrew Boone, Managing Director at Citizens JMP]

Thank you.

[Operator]

Thank you so much. Our next question comes from Mark Mahaney of Evercore. Please go ahead.

[Mark Mahaney, Senior MD at Evercore ISI]

Okay. Thanks. I just wanted to ask about the brand three go to market strategy. I think given the the type of offering, it's it's probably gonna require a different go to market strategy than what you've had with the first two brands. Could you just talk about your ability to execute well against that?

[Mark Mahaney, Senior MD at Evercore ISI]

How different the planning is? How do you mitigate some of the operational risk involved? Thank you very much.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Sure. I'll start. Look, in terms of it's still deep sea, it's still using our user base, still using our technology. But in addition to that, we have our vision technology that we built for the past, I want to say, two and a half years. And there is nothing that different except the infrastructure itself for the pharmacy and the third party we work with.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

One thing that I would say about Grand Prix, and our distinctive approach, mostly around personalization. Our team spent almost two years developing the critical personalized treatments, and developed almost 25 customer cohorts with unique treatment combinations based on our testing. It shows material improvement and satisfaction, some numbers are above 50% compared to what exists in the market. And I think that the combination here is something that most other companies cannot do, it's both like building the product, but also building the tech products. So the combination, that's what brings us to those numbers.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

So we are very bullish, and in terms of go to market, it's pretty much the same.

[Mark Mahaney, Senior MD at Evercore ISI]

Thank you very much.

[Operator]

Thank you. Our next question comes from Dara Mohsenian of Morgan Stanley. Please go ahead.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Hey. Good morning. Just on brand three, can you just take a step back and give us an update on exactly what the brand sort of entails longer term from a consumer standpoint? Obviously, there's the product itself. You also mentioned monitoring.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

How does the professional recommendation fit in also potentially? And just basically how we think about revenue from Brand three? Is it essentially mostly the product itself? Or are you thinking there's substantial opportunity around charging for monitoring or other revenue streams, just given commercialization potential in the derm area goes well beyond the product potentially unlike traditional beauty products? So just what's your approach there and how do you think about the long term revenue streams?

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Sure. So as I mentioned on the call before, Brantry is a telehealth platform with medical grade products. We are starting with dermatology, but we have already planned for the next categories, because we already have the infrastructure of shipping OTC and Rx products for the first time. This is a huge opportunity for Audit, and in my view, we are addressing it differently than anyone else. We developed, as I mentioned before, already the most customized and comprehensive line that we did so far.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And in addition to that, it's the first time that we are doing something that deep in a new area of OTC and RX, all to be sold online under our own brand, and most products are formulated with existing ingredients, but for the first time we are going to launch products coming from ODT Labs, new molecules. So this is another area where we are very excited about. What else we did here that is different, we were building a mobile app to ensure that compliance is high, based on our study and our research. One of the main problems in this category is compliance. We need someone there to coach her and to make sure that she is on track for cure.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

If it means that we need to change her regimen, we will do it automatically, everything with vision technology and doctor setup. And number three is leveraging our 60,000,000 users, as Lindsay mentioned on her part, huge part of our user base is already suffering from those problems, and therefore we are planning to leverage it and to offer them the product. Don't forget, we use them as design partners to build this line. So we are pretty confident that this is something that is gonna be excited also for them.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Great, that's helpful. And you mentioned some of the metrics, which have you excited in your testing for BAND3. Just take us back versus where you were three months ago and what have you learned in the last three months in that testing? Has that changed? Are you thinking about the commercial Yeah, process going forward or

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

three months is a short cycle. It takes us like three months to get a read.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Fair enough.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Okay, but I can tell you that compared to two years ago, comparing to a year ago, we are in a better position substantially, and I think that the key here was to unlock both, first of all, the diagnosis, and in addition to that, to make sure that we are shipping the right customized product. So even if we had the right product, or the right molecule a year ago, if we sent it to the wrong tester, therefore the satisfaction was low. And I think that we made a big progress in matching the right patient with the right treatment.

[Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley]

Great. Thanks. That's helpful.

[Operator]

Thank you so much. Our next question comes from Scott Schoenhaus of KeyBanc Capital Markets. Please go ahead.

[Scott Schoenhaus, Managing Director at KeyBanc Capital Markets]

Hey, team. Thanks for taking my question. Oran, as a health technology analyst, I think this branch you launched is a really exciting expansion opportunity. Everyone knows in healthcare dermatology providers are supply constrained and waiting for an appointment can take months to a year. I guess it seems like the launch is centered around initially around acne and offering topical treatments and prescriptions that are showing better efficacy than Tredsunoin currently.

[Scott Schoenhaus, Managing Director at KeyBanc Capital Markets]

But I guess maybe talk about the opportunities with more acute conditions. I think you mentioned eczema. This could be an entirely different platform bringing in a whole new customer set and people coming to your platform with really severe skin conditions. So kind of just walk me through the trajectory of how you view BAND3 and the opportunities there as you emerge as a healthcare technology company.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Sure. Thank you for that. And I'm happy agree with us, and that's the reason why we launched it, to be honest, because it's such a headache and with very low satisfaction. We thought the main focus for the beginning of the launch will be around acne and hyperpigmentation. Those are two areas that we believe that we have very strong breakthrough around both the technology and the offering itself.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

We are ready also with eczema, I think that we're going to have great products out there, but it's a smaller, like a smaller prevalence, and therefore the main push will be around acne and hyperpigmentation at the beginning. We are going to launch also other body products in Q1 next year, and in addition to that, we are working on additional categories. As for your question, yes, new users, it's something that we are happy about because it's going to diverse our user base. But you may be surprised, but many of our user base today is suffering from those problems, and this is why we started with it like solving it. We saw at least 20%, 25% in each problem that we are about to launch, and we started to ask questions, what is wrong there?

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

And they answered us, and in this way we built this line, and I think that that's a very good start for launching the brand.

[Scott Schoenhaus, Managing Director at KeyBanc Capital Markets]

Thank you.

[Operator]

Thank you so much. There are no further questions at this time. I would now like to turn the call back over to Oren Haltzmann for his closing remarks. Oren, thank you.

[Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech]

Guys, thank you very much. See you next quarter.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Analysts

• Maria Lycouris, Investor Relations at Oddity Tech
• Oran Holtzman, Executive Chairman, CEO & Co-Founder at Oddity Tech
• Lindsay Drucker Mann, CFO at Oddity Tech
• Youssef Squali, MD & Head of Internet and Digital Media Research Group at Truist Securities
• Lauren Lieberman, Managing Director at Barclays
• Anna Lizzul, VP - Equity Research at Bank of America Merrill Lynch
• Andrew Boone, Managing Director at Citizens JMP
• Mark Mahaney, Senior MD at Evercore ISI
• Dara Mohsenian, Managing Director - US Beverage/Household Products Sectors at Morgan Stanley
• Scott Schoenhaus, Managing Director at KeyBanc Capital Markets