ODD Q4 2025 Earnings Call Summary

Summary of ODDITY's Q4 2025 Earnings Call

1. Key Financial Results and Metrics

Q4 Revenue: $153 million, up 24% year-over-year, exceeding guidance of 21% to 23%.
Full Year Revenue: $810 million, a 25% increase, surpassing long-term growth target of 20%.
Gross Margin: Q4 gross margin at 70.5%, down 220 basis points; full year gross margin at 72.7%, up 30 basis points.
Adjusted EBITDA: Q4 adjusted EBITDA of $13 million (8.2% margin), above guidance; full year adjusted EBITDA of $163 million (20.2% margin).
Adjusted EPS: Q4 adjusted diluted EPS of $0.20; full year adjusted diluted EPS of $2.21.
Cash Position: Ended the year with $776 million in cash and equivalents.

2. Strategic Updates and Business Highlights

Brand Performance:
- IL MAKIAGE generated approximately $560 million, with IL MAKIAGE Skin accounting for 40% of brand revenue.
- SpoiledChild achieved about $250 million in revenue, reflecting strong growth for a relatively new brand.
Launch of METHODIQ: A new medical telehealth brand focused on dermatology, showing promising early success.
Investments: Continued investment in ODDITY LABS and new product development, with a focus on high-performance products addressing consumer pain points.

3. Forward Guidance and Outlook

2026 Guidance: No full-year guidance provided due to uncertainty around user acquisition costs. Expected Q1 sales to decline approximately 30% due to elevated acquisition costs.
Long-Term Vision: Despite current challenges, management remains committed to growth and does not foresee a structural issue impacting the business model.

4. Bad News, Challenges, or Points of Concern

User Acquisition Costs: Significant increase in new user acquisition costs attributed to algorithm changes from a major advertising partner, leading to a projected decline in Q1 and Q2 sales.
Impact on Profitability: Current acquisition costs are unsustainable, with first-order profitability negatively affected. However, the company remains profitable on a 12-month contribution margin basis due to strong repeat sales.
Market Positioning: The elevated costs are not reflective of broader market trends, presenting a unique challenge for ODDITY.

5. Notable Q&A Insights

Algorithm Changes: Management acknowledged the difficulty in adapting to recent algorithm changes, which have disproportionately affected user acquisition strategies, particularly the Try-Before-You-Buy model.
Retention Rates: Despite challenges, repeat sales accounted for 70% of revenue, with strong retention metrics indicating customer satisfaction and brand loyalty.
Strategic Focus: Leadership emphasized the importance of addressing current acquisition challenges while maintaining investments in growth initiatives, including the ongoing development of new brands and products.

Overall, while ODDITY reported strong financial results for 2025, it faces significant challenges in user acquisition costs that may impact short-term performance. Management remains optimistic about long-term growth and brand strength.

ODD — Oddity Tech Ltd.