ODD — Oddity Tech Ltd.

Summary of ODDITY Q1 2026 Earnings Call

1. Key Financial Results and Metrics:

• Net Revenue: Declined by 26% year-over-year, slightly better than the expected decline of 30%.
• First Orders: Down approximately 50%, significantly impacting overall revenue.
• Repeat Orders: Decreased by around 15%, with repeat sales constituting about 66% of net revenue, up from 56% in Q1 2025.
• Average Order Value (AOV): Declined in low single digits.
• Gross Margin: Compressed to 69.7%, down 520 basis points year-over-year.
• Adjusted EBITDA: Reported at negative $7 million, reflecting high customer acquisition costs (CPA) and operating deleverage.
• Adjusted Diluted EPS: Negative $0.17.
• Free Cash Flow: Negative $21 million.
• Cash Position: Ended the quarter with $667 million in cash and equivalents.

2. Strategic Updates and Business Highlights:

• Advertising Partner Issues: ODDITY is facing account dislocation with its largest advertising partner, impacting CPA and overall acquisition efficiency. However, there was a notable improvement in CPA in May, declining by 28% from April.
• Remediation Efforts: The company is actively working with its advertising partner to resolve CPA issues, with expectations of recovering 40% to 60% of CPA.
• Try Before You Buy Model: Successfully shifted 40% of acquisition revenue from this model to standard Buy without impacting unit economics.
• New Product Launches: METHODIQ, a medical telehealth platform, is on track to generate $25 million in revenue this year. ODDITY Labs continues to innovate with new products targeting skin conditions.

3. Forward Guidance and Outlook:

• Q2 Expectations: Anticipated net revenue decline of 25% to 30% year-over-year, with adjusted EBITDA projected between $8 million and $10 million.
• Full Year Outlook: Management remains hopeful for a return to positive adjusted EBITDA for the full year, contingent on improvements in CPA.

4. Bad News, Challenges, or Points of Concern:

• High CPA Levels: The company has experienced CPA levels that were sometimes double expectations, complicating unit economics and leading to significant revenue declines.
• Impact on Growth: The inability to acquire new customers in 2026 due to elevated CPA is expected to have long-term implications for 2027 revenue.
• Market Visibility: Ongoing media uncertainty makes it challenging to provide clear visibility on full-year financials.

5. Notable Q&A Insights:

• CPA Improvement: Management indicated that the sequential improvement in CPA observed in May is a positive sign, but the overall revenue growth remains under pressure.
• Marketing Strategy: There is a consideration to diversify advertising partners, but the current largest partner dominates the beauty market, limiting options.
• Future Product Development: Despite current challenges, ODDITY continues to invest in product development, particularly in ODDITY Labs, while maintaining focus on resolving advertising issues.
• Customer Base for METHODIQ: The new brand is attracting customers largely independent of ODDITY's existing brands, indicating potential for market expansion.

Overall, while ODDITY is facing significant challenges related to customer acquisition costs and revenue declines, there are signs of recovery and strategic initiatives in place to address these issues. The company remains optimistic about returning to growth and profitability in the latter half of the year.