Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ODDITY Tech Ltd (ODD, Financial) reported a 28% increase in first-half revenue to $404 million, showcasing strong business performance.
- The company achieved $110 million in adjusted EBITDA in the first half of 2024, surpassing the full-year EBITDA of 2023.
- ODDITY Tech Ltd (ODD) has a robust online presence, being the largest direct-to-consumer platform in its category, with plans to expand online market share to 50%.
- The company's investment in technology, including machine learning and vision technology, has improved product matching accuracy and reduced return rates.
- ODDITY Tech Ltd (ODD) is developing new brands, with Brand 3 and Brand 4 set to launch in the second half of 2025, indicating future growth potential.
Negative Points
- ODDITY Tech Ltd (ODD) faces risks and uncertainties with forward-looking statements, which could impact actual results.
- The company is heavily investing in ODDITY LABS, which is not expected to contribute to near-term growth, posing a potential financial risk.
- There is a significant step-up in SG&A spending anticipated in the second half of the year, which may impact profitability.
- The departure of Dr. Evan Zhao, Co-Founder of Revela, could affect the continuity and progress of ODDITY LABS.
- ODDITY Tech Ltd (ODD) is not planning to benefit from material revenue contributions from new initiatives in 2025, which may limit short-term revenue growth.
Q & A Highlights
Q: Can you discuss the revenue upside in the quarter, particularly regarding SpoiledChild and IL MAKIAGE, and the future outlook for SpoiledChild?
A: Both IL MAKIAGE and SpoiledChild experienced double-digit growth, with significant contributions from skin products in IL MAKIAGE, which are expected to account for 25% of the brand's revenue in 2024. Revenue growth was driven by increased orders and higher average order value (AOV), with a positive shift towards higher-priced products. The majority of revenue came from repeat customers, enhancing profitability. The company is managing growth to align with its 20% growth algorithm, maintaining strong profitability with a 32% adjusted EBITDA margin. (Oran Holtzman, CEO)
Q: Regarding ODDITY LABS and new product launches, will there be unique molecules in Brand 3 and Brand 4? Also, why is there a step-up in SG&A spending in the second half?
A: ODDITY LABS is focused on building a platform for science-backed products, with the first significant contributions expected in Brand 3 and Brand 4. Some products will launch in IL MAKIAGE and SpoiledChild within the next 6 to 12 months. The SG&A increase is due to investments in product and brand development, as well as scaling LABS. The company is front-loading costs to support future growth initiatives. (Oran Holtzman, CEO and Lindsay Mann, CFO)
Q: Can you elaborate on the investments for Brand 3, Brand 4, and ODDITY LABS, and the leadership change at LABS?
A: ODDITY LABS is a long-term investment aimed at building a platform for science-backed products, with a focus on hiring and infrastructure. Brand 3 and Brand 4 involve more traditional brand-building efforts. The leadership change at LABS is to accelerate progress and bring in expertise for rapid development. The direction remains unchanged, with a focus on innovation and speed. (Oran Holtzman, CEO)
Q: How are you achieving media spend efficiencies, and what is the expected revenue growth composition?
A: Despite increased media spend, the company maintains strong return on ad spend (ROAS) and profitability. The focus is on acquiring users rather than customers, which enhances efficiency. Revenue growth is driven by both order volume and AOV, with no specific target for AOV growth. The strategy is to optimize revenue relative to acquisition costs. (Oran Holtzman, CEO and Lindsay Mann, CFO)
Q: What factors determine the launch timing for Brands 3 and 4, and are there any regional strengths or weaknesses in the current business?
A: The launch timing for Brands 3 and 4 is based on product readiness and strategic pacing to maintain 20% growth. The company is not experiencing regional weaknesses or consumer spending softness, benefiting from broad demographic reach and market share gains in a growing channel. (Oran Holtzman, CEO and Lindsay Mann, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
