Oddity Tech Ltd. (ODD) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals mixed signals: strong financial performance and optimistic guidance, but concerns about new customer acquisition and the health of the U.S. consumer. The Q&A section highlights uncertainties around METHODIQ's financial impact and management's reluctance to provide specific guidance. While international expansion and new brand launches are positives, the lack of clarity on key metrics and potential external market softness tempers enthusiasm. Given the company's market cap, these factors suggest a neutral stock price movement over the next two weeks.
Key Financial Performance
Revenue $148 million in Q3 2025, a 24% year-over-year increase. Growth driven by double-digit online growth at IL MAKIAGE and SpoiledChild.
Gross Margins 71.6% in Q3 2025, expanded by 170 basis points year-over-year. Expansion due to cost efficiencies and favorable mix, despite higher tariffs.
Adjusted EBITDA $29 million in Q3 2025, exceeding guidance of $26 million to $28 million. Reflects investments in growth engines like METHODIQ and tech platform.
Adjusted Diluted Earnings Per Share $0.40 in Q3 2025, a 24% year-over-year increase. Excludes $9 million of share-based compensation expense.
Free Cash Flow $90 million for the first 9 months of 2025. Includes $16 million outflows related to inventory for METHODIQ and tariff planning.
International Revenue Increased around 40% year-over-year for the first 9 months of 2025. Growth driven by scaling in markets like U.K. and Australia, and tests in France, Italy, and Spain.
IL MAKIAGE Revenue Double-digit online growth in Q3 2025. Skin category on track to be 40% of brand revenue for the year.
SpoiledChild Revenue Expected to cross $225 million in 2025. Strong performance attributed to innovation lineup.
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Operating Highlights
Launch of METHODIQ: ODDITY launched METHODIQ, a telehealth platform and brand focused on dermatology, aiming to transform medical care with customized, high-efficacy treatments. The launch includes 28 prescription and nonprescription products, with plans to expand into other medical domains.
Product innovation: METHODIQ products include oral supplements, topical treatments, and medical-grade makeup. Four products formulated with proprietary ODDITY LABS molecules will address skin conditions like dark spots and eczema.
AI and tech integration: METHODIQ uses AI-driven vision tools and a tracking app for weekly check-ins, ensuring compliance and progress tracking for users.
International expansion: ODDITY's international revenue grew 40% year-over-year in the first 9 months of 2025. The company scaled in markets like the U.K. and Australia and tested new markets such as France, Italy, and Spain.
Growth in IL MAKIAGE: IL MAKIAGE revenue grew double digits online, with a target of $1 billion revenue by 2028. Skin products are expected to account for 40% of the brand's revenue in 2025.
Financial performance: ODDITY achieved 24% revenue growth in Q3 2025, with adjusted EBITDA of $29 million and gross margins of 71.6%. Full-year 2025 revenue is projected to reach $806-$809 million.
Cost management: Despite tariff headwinds, gross margins expanded due to cost efficiencies and favorable mix. No price increases are planned to offset tariffs.
Focus on durable growth: ODDITY is leveraging the consumer shift online and demand for high-efficacy products to drive growth.
Investment in innovation: The company is investing in METHODIQ, ODDITY LABS, and AI-driven tech platforms to sustain long-term growth.
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Risk or Challenges
Tariff Headwinds: The company experienced gross margin impact from higher tariffs during the period, which is expected to remain manageable but persist into 2026.
Average Order Value Decline: Average order value declined by around 1%, impacted by mix, including faster growth in international markets which carry lower AOV.
Media Costs: Higher-than-planned media costs were incurred during the quarter, although the media backdrop improved as the quarter progressed.
Inventory Outflows: The company experienced $16 million of outflows related to inventory, including building inventory for METHODIQ and modifying shipment timing for tariff planning purposes.
Dermatology Market Challenges: The dermatology market faces challenges such as lack of efficacy and personalization in drugstore products, high friction in accessing dermatologists, and declining standards of care for conditions like acne, hyperpigmentation, and eczema.
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Guidance & Outlook
Revenue Growth: Full year 2025 net revenue is expected to be between $806 million and $809 million, representing 24%-25% year-over-year growth. Fourth quarter revenue is expected to increase between 21%-23% year-over-year.
Gross Margin: Expected to be approximately 72.5% for the full year 2025.
Adjusted EBITDA: Expected to be between $161 million and $163 million for the full year 2025.
Adjusted Diluted Earnings Per Share: Expected to be between $2.10 and $2.12 for the full year 2025, assuming no share buybacks.
METHODIQ Launch and Expansion: METHODIQ, a new brand, has been launched with plans to expand into additional medical domains beyond dermatology. Within the first 6 months, 4 products formulated with proprietary molecules will address skin conditions like dark spots, eczema, and scarring. Future expansion into other medical domains is under development.
IL MAKIAGE Revenue Target: The brand remains on track to achieve $1 billion in revenue by 2028. International revenue increased by 40% year-over-year in the first 9 months of 2025, with plans for further scaling in 2026.
SpoiledChild Revenue: The brand is expected to cross $225 million in revenue in 2025, with new product innovations planned for 2026.
ODDITY LABS Product Development: At least 8 products with proprietary molecules are planned for 2026, including 4 for METHODIQ and 4 for IL MAKIAGE and SpoiledChild.
Technology and AI Initiatives: Continued investment in AI-driven commerce agents, advertising creative, and customer-facing initiatives to enhance direct-to-consumer engagement.
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Shareholder Return Plan
Share Buybacks: The company expects adjusted diluted earnings per share will be between $2.10 and $2.12, assuming no share buybacks in 2025.
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Key Q&A
Q:What are the key geographic drivers of the 40% year-to-date growth in international markets, and what are the plans for further scaling the international business by 2026?
A:The 40% growth in international markets is primarily driven by existing countries like Canada, U.K., Germany, Australia, Israel, and France, which contributed 15% of revenue. New geographies like Italy, Spain, Netherlands, Ireland, Sweden, and Denmark are being added, while markets like Japan, Mexico, Korea, and Belgium are being tested. Only 2% of revenue came from new countries. The company plans to scale international markets responsibly, focusing on opportunities rather than just growth for growth's sake.
Q:What are the initial thoughts on METHODIQ's ability to bring in new customers and drive beauty sales?
A:METHODIQ is expected to bring in a mix of new customers and existing IL MAKIAGE and SpoiledChild users. The company is conducting user acquisition to expand its base, and over time, as the brand grows, more acquisitions are expected. Early signals are strong, but the company is still in the early stages of scaling.
Q:How should we think about new customer acquisition for METHODIQ and its investments in 2026?
A:METHODIQ is expected to scale faster than SpoiledChild, which achieved $25 million in its first year. However, its contribution to overall revenue will still be small compared to the company's revenue goals. The company is bullish on METHODIQ but has not provided specific plans for 2026. Investments in SG&A for Q4 and early 2026 are planned to support growth initiatives, including METHODIQ.
Q:What is the company's view on the health of the U.S. consumer and its impact on ODDITY's performance?
A:The company acknowledges external softness in the U.S. consumer market but has not been impacted due to strong repeat rates and higher acquisition costs being offset by increased repeat business. Revenue and margins remain strong and in line with plans.
Q:Is the growth algorithm for 2026 different from the current expectations?
A:No, the growth algorithm remains the same, targeting 20% top-line growth and 20% adjusted EBITDA margins. The company reiterated its medium-term guidance for IL MAKIAGE to deliver $1 billion by 2028.
Q:What should be considered regarding METHODIQ's financial profile and ODDITY LABS' proprietary molecules?
A:METHODIQ is expected to have a similar long-term financial profile as IL MAKIAGE and SpoiledChild, with 20% revenue growth and 20% adjusted EBITDA margins. Prescription products will have lower gross margins initially due to third-party physician networks and compounding pharmacies. ODDITY LABS expects to launch 8 products in 2026, including 4 for METHODIQ, with plans for more innovative molecules in the pipeline.
Q:What are the company's capital allocation priorities?
A:The company has a strong cash position of nearly $800 million and plans to use it for buybacks, M&A, or other strategic initiatives. The convertible earlier this year provides flexibility for capital deployment.
Q:How replicable is the data model for international markets, and will METHODIQ launch internationally?
A:The data model for international markets involves localized websites and media spending to test satisfaction, repeat rates, and unit economics. METHODIQ will initially focus only on the U.S. market, similar to SpoiledChild's launch strategy.
Q:What are the plans for METHODIQ's launch and TikTok activation?
A:METHODIQ's launch includes offline activations and the largest TikTok campaign the company has done, running until the end of Q1. The company plans to use these strategies to build brand awareness and drive user acquisition.
Q:What is the TAM for METHODIQ, and how will success be measured?
A:The TAM for METHODIQ includes around 50 million Americans with acne, 30 million with dark spots, and 30 million with eczema. Success will be measured by user acquisition, repeat rates, app downloads, open rates, and weekly check-ins.
Q:What is driving growth for IL MAKIAGE and SpoiledChild in the U.S., and are repeat rates moderating?
A:Growth is managed at the ODDITY level, targeting 20% overall growth. IL MAKIAGE aims for $1 billion by 2028, with international markets playing a key role. Repeat rates remain strong and are not moderating.
Q:What is the composition of growth for the quarter in terms of volume, pricing, and mix?
A:The majority of revenue growth is driven by order volume, with AOV essentially flat, down around 1%. Order growth is the dominant driver of revenue growth.
Q:What is the composition of METHODIQ's product offerings, and how is the physician network being utilized?
A:METHODIQ's offerings include a mix of nonprescription and prescription products, with prescription being a smaller part. The company uses third-party physician networks with board-certified physicians and plans to leverage technology for better treatment outcomes.
Q:Review of Unclear Management Responses
A:Management avoided giving specific guidance for METHODIQ in 2026, stating it is too early to provide detailed plans. They also used vague language regarding the timing of scaling and the exact financial impact of METHODIQ and ODDITY LABS' proprietary molecules. Additionally, they did not provide clarity on the specific milestones or KPIs for METHODIQ's success beyond general metrics like user acquisition and repeat rates.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI set
Advances language
Artificial intelligence
City activation
Drugstore product
IL MAKIAGE
Industry Americans
LABS product
LABS tech
LABS work
MAKIAGE IL
MAKIAGE SpoiledChild
MAKIAGE digit
METHODIQ IL
METHODIQ accomplishment
METHODIQ brand
ODDITY LABS
acne
challenge
dermatologist
dermatology
doctor
domain
expansion
image
kind
lineup product
milestone
skin condition
standard care
system
term goal
test
week launch
ODD Transcript
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The earnings call summary reveals mixed signals: strong financial performance and optimistic guidance, but concerns about new customer acquisition and the health of the U.S. consumer. The Q&A section highlights uncertainties around METHODIQ's financial impact and management's reluctance to provide specific guidance. While international expansion and new brand launches are positives, the lack of clarity on key metrics and potential external market softness tempers enthusiasm. Given the company's market cap, these factors suggest a neutral stock price movement over the next two weeks.
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